What is exporting?

Since India is such a large county, with so much diversity, "exporting", is just like selling in India! The basic steps are almost the same.

Basic Steps

You have a product or service to sell.

Your customers vary in their race, religious, culture and language.

Your have to market to different regions with different seasons and physical environments.

You do market research to understand your customers.

You develop a marketing plan to decide your distribution, pricing and promotion strategy.

You market and promote through the Internet, direct E-mail and postal mail, Fax, phone, brochures, press releases, the ad media, trade shows, etc.

You set up sales and distribution networks.

You provide the required service to your customers.

You respond to inquiries.

You invoice purchasers and get paid!

Note: In the above explanation, we talked about many marketing terms. To understand these better, you can read our, “How to market?” article. We use these marketing terms thoughout this article, so reading the marketing article would be a good idea.  

However there are some major differences between selling in India, and exporting outside India. Let us try to understand them!

Difference In Exporting

Exports are often done through "intermediate players" in each country, not directly to end-users:
In most countries, “imports” are generally handled by “local agents” (on commission basis). Another way in which imports are generally handled is by “importer-distributors”, who buy (with their own money) from the exporters of other countries, and resell to end-users in their country. These intermediate players, know the market and have contacts with the end-users.

It many seem that having another “distribution layer” between you and your end-users will increase the cost and be bad for sales. However, good local agents and distributors are actually very valuable when you are going in for export. 

Because of their experience and knowledge in the local market, they are able to develop and send you sales orders, arrange for payment, prepare required import documents, and clear the delivered goods through customs and other import formalities. Many are equipped to stock, install and service the goods too. 

The end-users know and prefer to deal with these local agents and distributors, rather than buy direct from you or other foreign suppliers.

As a new exporter, your best option is to find good agents or distributors to represent you abroad. This is the best way to start off, at least in the beginning.

Exports usually involve an exchange of currency to pay for the purchase:
The importer pays in his local currency. However, exchange rates between currencies are constantly fluctuating. If, after he pays you, the value of his currency reduces with respect to your currency, you will loose money!

To protect against exchange rate fluctuations, you should quote your selling price in a strong currency. You could also quote your selling price in “Rs.” That way, you get the full amount you quoted, regardless of currency fluctuations.

However, this is not always possible. If all your competitors are willing to except payment in the local currency then you have no option but to do the same. This is generally the case in a “sellers market” where there is a lot of competition.

Export sales use different payment methods:
Exporters usually receive payment through a process handled by banks in your country and the importer's country. The most common method is called the “Letter Of Credit”. It insures prompt payment with minimal free. It’s a very simple concept; the importer gives the money in advance to his local bank. The importer’s bank sends these funds to a bank in your country, which pays you, the exporter, when the goods are delivered.

You can also purchase “export credit insurance” to reduce risks of non-payment.

Different laws and business practices exist in other countries:
Trade, monetary policy; pricing, distribution and promotion; treatment of intellectual property; health, safety and technical standards, etc. are different from country to country. These laws and practices affect what you're allowed to do and what you are not allowed to do. 

Although many practices are “business friendly” and similar to those in your country, some are obstacles and risks for exporters. It's best to research each country and look for advise from an international law firm if needed.

Linguistic, demographic and environmental variations:
These differences, if ignored, can break your sales efforts abroad. Take care not to offend your foreign customers in the words, symbols and body language you use in your advertising and promotion material and business negotiations.

In addition, your products must "fit" the market environment -- the climate, terrain, sizes of people and things, consumer tastes and preferences, etc.

Exporting usually involves many added costs for shipping and insurance of the goods to the importing country

Exports are subject to customs duties and taxes in the importing countries

The above explanation must have given you a basic idea about what exporting is all about. However, many companies choose not to export because of certain "wrong ideas" or myths they have about exporting. Let us confirm that you do not have these wrong ideas...

Next - Myths about exporting! >>

<< Previous - Is exporting for you?

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Table Of Contents

  1. Is exporting for you?
  2.    >> What is exporting?
  3.    >> Myths about exporting!
  4.    >> What is the possibility of success?  
  5.    >> Do you have the money to export?
  6.    >> Can you handle the "risks" of exporting?
  7. Developing an "export marketing plan"!
  8.    >> Market Research
  9.    >> Export Market Entry Strategies
  10. The process of Exporting
  11.    >> Finding over-seas "buyers" and "distributors"
  12.    >> Responding to inquires
  13.    >> Preparing goods for delivery
  14.    >> Getting Paid!