How to organize sales abroad

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Categoria:	Lingue
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Data:	17.12.2001
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HOW TO ORGANIZE SALES ABROAD

When an exporter is determined to expand his sales abroad he must devise the best strategy. An exporter may decide to act according to the two most common methods:
➢ Indirect exporting
➢ Direct exporting

INDIRECT EXPORTING

In this case the exporter places the export operation in the hands of intermediaries.
ADVANTAGES – The way of exporting has the advantages of low costs and limited risks. The intermediaries are able to take care of all the documentation for customs, currency conversion, transport etc. In addition, payment are made as for domestic transactions because, with this form of organization, the relationship with the exporter finishes with the delivery of the invoice for the goods to the intermediary, who then looks after all bureaucratic phases which follow.
DISVANTAGES – The exporter does not know the foreign markets and does not even know the prices his goods will be sold at.

The most common sales channels are the following:
➢ Buyer
➢ Export consortium
➢ Trading company

BUYER
He is the finder for foreign firms that want to import products from a foreign country. He knows the market very well. He visits fairs and exhibitions to find suppliers for his foreign buyers.

EXPORT CONSORTIUM
It is formed by a group of small or medium-sized companies which act in the same field of activity. The main advantage for the exporter is that even small or medium-sized companies can export their products at very reasonable prices.

TRADING COMPANY
Trading company is useful for large company which wish to penetrate markets in countries where is difficult organize direct channel through sales agent and branches.
They can act in two different ways:
1.They can buy and sell in their own name, bearing the risk of the transaction;
2.They can carry out the ancillary activity of putting in touch manufacturer and customer in different countries.

DIRECT EXPORTING
When experience is gained an exporter may choose to increase is level of activity and adopt more direct methods of exporting. The advantages of direct exporting for a company include:
- more control over the export process;
- potentially higher profits;
- close relationship to the foreign markets.
However with this methods of exporting there are many costs.
The proper channel of distribution can be chosen from the following:
➢ Salaried agent
➢ Agent on commission
➢ Distributor
➢ Overseas branch

SALARIED AGENT
In this case the agent is an executive of the parent company residing in the country of operation and is paid a salary by is employer. Such an agent keeps his head office in touch with conditions in his territory, and advises on local opportunities and official tenders.

AGENT ON COMMISSION
He may work for one or more than one company, provided they are not in competition. He acts by collecting orders, which he passes to his employers. He’s paid a commission at an agreed percentage on orders secured. He has no control of resale price.

DISTRIBUTOR
Is a company which buys and imports the product on its own account. It gets its income from the difference between the buying and the selling price.

OVERSEAS BRANCH
It is the branch opened by the parent company in a foreign country. The parent company decide the sales policy and the overseas branch imports and sells on its behalf.

THE ADVANCED PHASE

When an exporter has created a good presence on the foreign market, he can modify his choice of distribution channel. The most common form of joint productive investments abroad are:
➢ Assembly
➢ Manufacturing
➢ Franchising
➢ Licensing
➢ Joint venture

ASSEMBLY
This is a form of international collaboration in which an Italian exporter sends to a foreign company, with whom it has signed a specific agreement, components or ingredients manufactured in Italy to be assembled or transformed into finished products. By using this kind of contract, the company intends to avoid paying heavy customs duties in the foreign country, where the assembled goods will be sold.

THE MANUFACTURING CONTRACT
The manufacturing contract is an agreement between an Italian company and a company in a developing country with the purpose of making products which, because of lower labour costs, would be more competitive than those manufactured in Italy. The manufacturing contract usually lasts from one to three years. It enables the Italian company to keep the market under his control and to sell his products under is own brand name, and it does not need a high level of investment. One disadvantage is that, when the contract expires, the foreign manufacturer may not renew it, and become a competitor.

FRANCHISING
It consists in entrusting the sale to individuals who own or rent the premises of the shop and who are responsible for the progress of sales. They get a profit related to the amount of sales. For this right they pay a small percentage of their turnover, called royality, to the company. The company that gives the franchise is called the franchisor and the individual who is granted the franchise is called the franchisee.
Benefits of franchising to the franchisor:
The company can expand with confidence, knowing that the interest is in the hands of proprietors who will operate more enthusiastically and with greater commitment than employees.
Benefits of franchising to the franchisee;
The franchisee immediately becomes the owner of a small business which has all the big company advantages: a recognisable brand; national advertising; experienced management; the possibility of selling goods which have a proven track record of success.

LICENSING
The Licensing contract consist of an agreement between a licenser, the home party which transfers its right, and a licensee, the foreign party to which the rights are transferred for the use on its market of:
- patents
- copyrights
- know-how
- brand names.
As a reward, the licenser obtains royalities.
The Licensing contract normally lasts from three to ten years. Licensing makes a rapid expansion in foreign markets possible. No investments is required on the part of the home operator and an immediate source of profits is created through the transferring home of the royalities. However there is the risk of create a potential competitor on the foreign market, once the licensee has acquired the necessary knowledge and the contract has expired.

JOINT VENTURE
The Joint Venture is an agreement between several entrepreneurs to manufacture and/or sell one or more products. The partners all contribute money, activities, customers, technologies and knowledge. This associations gives birth to a company founded in conformity with the regulations of the country where the Joint Venture.