What is Indirect Exporting and how does it Differ from Direct Exporting?

What is indirect exporting and how does it differ from direct exporting? What are the main types of indirect exporting, and what are the primary strengths and weaknesses of each type?

Indirect exporting refers to the process in which products are exported through local or domestic export intermediaries such that local exporters have no direct control over the products in the foreign market, thereby losing control over the marketing process. In simple terms, domestic exporters outsource exporting processes to third party companies or agencies that bear the risk of finding the market for the product but enjoys control over the product. Indirect exporting differs from direct exporting in that direct exporting involves selling the products or services to the final user in the supply chain. The direct exporter builds relationships, negotiates with potential buyers, finds market for the product and carries out marketing activities unlike an indirect exporter who uses intermediaries to sell their products.

The main forms of indirect exporting include export agents, export management companies, confirming houses, and export trading companies among others (Westwood 104). Export agents have an advantage in that they buy unpackaged products from suppliers and sell them in foreign markets under their names. However, they have a disadvantage in that they may deliver identical products but under different names and prices, thereby undermining the manufacturers’ exporting efforts.  Export management companies trade on behalf of their suppliers as if they are their trading department and do not export competing products, thereby reducing the export credit risks (Seyoum 90-4). Despite this fact, they only carry one type of products thereby putting themselves at risk in case of drawback in their line of export. Export trading companies provide services to the whole export process and deal with many suppliers. Their drawback is that in case of competing products, they may be at greater risk if the products are not accepted in the market.

5. What are the distribution options that a direct exporter can use?  What are the primary strengths and weaknesses of each type?

A direct exporter has various distribution options that he/she can use to reach the target market. These channels includes sales representatives, agents, distributors, foreign retailers, direct sales, internationalization among others (Gouws 125-7). A company can use sales representatives to reach the target customers. One advantage of sales representatives is that they can promote the company through direct selling. The disadvantage of sales representatives (agents) is that they may be limited by the consistence in distribution and location, thereby hindering effective selling. Lack of involvement in risk taking may also lead to their under-performance.

Distributors, on the other hand, may buy goods from suppliers and sell them at a profit. They provide support for the product and ensure sufficient supply. Despite this fact, the presence of risk may affect the business during the times of uncertainty. Foreign retailers can also be used as distribution channels through direct sales. However, the retailers may only buy in limited quantity, thus limiting sales of the exporting company. International franchising may also work well as it may enable products of a company be manufactured in a foreign country (Donnelly and Colin 88). However, legal implications may arise as a result of the agreement and the profit sharing patterns.

 7. Under what circumstances might piracy be beneficial to an exporter?

Piracy is considered illegal and an unethical undertaking practiced by people with the intention of reaping benefits from other peoples’ work (E-commerce and Development Report 173). Recent studies have indicated that to a great extent, piracy may be beneficial to an exporter. Remember that an exporter may be taking his products to a foreign country for the first time. This would call for marketing costs, acceptability fears among other challenges that the export market has. If the company products in this case, for example music or software including games is pirated, the costs of marketing the products are reduced and  people may therefore buy the products after getting to know of their existence. Reports have indicated that although a significant financial commitment is made to fight piracy, companies like Microsoft benefit more from piracy since it helps the companies establish themselves in the emerging markets.  This eliminates competitors and threats that could arise as a result of free software. The presence of pirated products therefore establishes a company’s products and positions them in the market such that as economies improves, the able consumers buy the reputable original products. This increases sales of original products. At the same time, taking an example of the music arena, theft of pirated music may lead to many people watching its videos. As a result, there could be live concerts that many people would attended because of exposure to the pirated music. This would e increase sales for the concert group. Taking the discussion from another angle, piracy would help companies develop more anti pirate goods that are of high quality to the users. As a result, the consumer would opt to buy the original products rather than the counterfeits as the latter lasts for a short period.

Works cited

Donnelly, Ray, and Colin Linton. Delivering Customer Value Through Marketing. Oxford: Butterworth-Heinemann Ltd, 2009. Print.

E-commerce and Development Report 2002. New York: United Nations, 2002. Print.

Gouws, André. Export Issues for Entrepreneurs. Lansdowne [South Africa: Juta, 2004. Print.

Seyoum, Belay. Export-import Theory, Practices, and Procedures. New York: International Business Press, 2000. Print.

Westwood, John. Building Your Business through Export. London: Kogan Page, 2012. Print.