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How To Do Export Import Business? < Business Articles By Mast Business Directory

Introduction

In this millennium, the business in which international trade is involved is perhaps considered as the in thing and hot. But international trade is not new. Take an example of Marco Polo. Even the prehistoric man used to trade food, shells and wood with the tribes from a distant community. Trade arises because there is a demand for a substance or product that one party has in abundance, but there is a mere shortage of the same for the other party. International trade is becoming more popular with the days that go by owing to the profit and personal satisfaction that is derived from it. Everything can be traded as global merchandise, be it food and beverages or be it water closets. There is a demand for everything in any part of the world which opens the market for international trade and transactions.

The Import industry

Imports are known to be big and established businesses around the world, including for the countries like United States that are most powerful and considered as developed. The three main reasons behind this fact are stated below :

Availability

There are some things those are simply impossible to be grown in certain parts of the world owing to its climate, temperature, flora and fauna etc. For e.g. United States being the most advanced in the world, cannot produce rice in Alaska!

Cachet

Some things, if imported, possess more value than if grown in the home country, even though there may be a possibility to grow the same in one’s country. But certain regions of the world are known to produce the best of the brands in the industry. For e.g. importing whiskey from Scotland, Champagne from France, wine from Italy carries more value than the home production.

Price

Some products are simply cheaper if they are bought from a country which produces them in bulk. For e.g. toys from China, Electronic devices from Taiwan, etc. cost you much cheaper if imported. If the items to be imported are huge in size, perhaps they can be imported by dismantling them and the re-assembly work can be carried out in one’s home country. This is capable of saving millions of dollars compared to production at home.

A trend is seen such that the countries export goods and services that can be manufactured or provide inexpensively with a least cost incurred and import things that carry value when produced in only certain parts of the world. Resources and technology are the main factors which cause one nation to produce certain goods at a far cheaper rate than others. In this way, production can be effective and with ease. Taking example of the gulf countries, they are known to export one of the costliest commodities of the world i.e. oil and import basic commodities like clothing which is not manufactured or grown in those countries.

Types of export industry

In the following section, we shall have a look at the different types of export/import businesses that are run in the world.

Export Management Company or EMC

Sometimes, cases come into picture where a domestic company is manufacturing certain product or availing certain type of service which has a great demand universally. However, the major discouraging factor that comes in the way of these companies is that they do not know the aspects of international trade and hence cannot sell worldwide. In these type of situations, an EMC comes to the rescue and helps the domestic companies to sell their goods and service into the overseas’ markets. The EMC is responsible for everything: hiring of the dealers and distributors, advertising products into international markets in perhaps international languages, marketing and promotions offered etc. It also helps in shipping of merchandise and its packaging and sometimes right from arranging adequate financing for the same. EMCs are categorized by expertise on certain types of goods, foreign markets etc. They usually derive their income on the commission basis. Sometimes salary is also accepted for their services.

Export Trading Company (ETC)

An ETC performs business that is opposite to that of an EMC. An ETC hunts down for buyers internationally. Once it finds certain buyer and understand the type and nature of the demand from them, they carry on their search for the domestic suppliers of the goods and services that are in demand. An ETC, just like EMC works on the commission basis. Thus, both EMCs and the ETCs are responsible in striking the deals between the buyers worldwide and local suppliers who are willing to export their products and services.

Import/export merchant

There is a free agent in every entrepreneur who conducts his business on the international platform. The client base of such personality is not defined to be specific. He does not have expertise and specialization in any one industry or international market. Such kind of businessman purchases goods in bulk from the local markets on his own checks the international market to study its demand and then packs to goods and ships it accordingly to different parts of the world on his own. This is of great risk since there is a huge investment involved in purchasing of goods from local market and buffer period before the demand arises in the international market. Such businessmen take a lot of risk; however, the profit involved is also very huge and kept it to him. He has the liberty to fix the prices before selling owing to the nature of demand.

The trade channel

Let us have a look at the trade channel which is the means by which the goods travel from the manufacturer to the end user. Manufactures generally use three tiers of distributors who are the middlemen for distribution and selling of goods from one part of the work into another. Depending upon the configuration of the trade channel, the following sets of persons can be considered as important and play a major role in international trade:

Manufacturer’s representative

Manufacturer’s representative is a type of salesperson who has expertise in marketing a particular range of products. At the maximum, a manufacturer’s representative can specialize in products that are complementary to the products what he has gained expertise in. He often does specialize in providing value added service; be it either providing technical assistance and helpdesk or warehousing.

Distributor or wholesale distributor

These types of middlemen in the trade channel establish a company that is responsible of selling goods to the retailers or pass it down to the lower person in hierarchy i.e. a small to a medium distributor. The process of distribution continues till lower levels in hierarchy till it product finally reaches the retailer who sells the product in the local market owing to the demand from the consumers.

Representative

A person who is hired for achieving sales target of a company from time to time. A representative mostly does the field work and goes door to door of a company formed by a retailer or local buyers, markets the products and takes orders from them. The order is then processed which ultimately leads to the sales for the manufacturer and hence the revenue. A sales person is mostly paid in commission basis. A salesperson is offered various incentives and bonuses so as to motivate him to drive sales.

Retailer

A retailer forms the tail end of the trade channel being discussed here. The retailer keeps the product ready to be sold to the intended consumers in his company/ showroom/ shop. Consumers visit the retailers and ask him questions about the product which they are interested in. Depending upon specific requirements, the retailer suggests some products to the end users to choose from. Once you make a choice and buy the product, the basic aim of the export is fulfilled i.e. the sale of a product is made and the deal is closed. It is not everyone’s cup of tea to perform trade on an international basis. This is not a career that anyone can take up, especially the people who are organizationally challenged. International trade is a risky business and should not be done unless you have full knowledge of the market worldwide.

It is advisable to work in an import and export industry for a long time to understand the market trends and the demands worldwide. Understand the seasons; because the demands in certain goods change a lot owing to specific times of a year. Understand which countries when included to trade, are profitable to your business. It is also necessary to understand the foreign exchange and how can you benefit from it before entering such industry. A research conducted by US indicates that the United States does its business mostly with following countries of the world: Canada, Japan, Singapore, Germany, Taiwan, South Korea, China, Mexico, France, The United Kingdom etc.

Thus in this article we have explored various aspects related to international trade and seen how to expand your business into the markets of the world internationally. Being a newbie in the international trade business, the utmost thing to be carried out is familiarize yourself with the ongoing transactions in the world and the factors impacting such transactions.

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