Different ways to enter into an overseas market

The way you choose to enter into your target market is very important to succeed in export business

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Writuparna Kakati | 14 Apr, 2008
In export business, the way you choose to enter into an overseas market plays an important role in determining the success of your business. There are different ways, and which will be appropriate among them depends upon several factors such as market characteristics, time and money you can afford, your business goals and requirements, etc. In this article, our attempt is to give you some basic idea how to identify the best way to enter into an overseas market.

A. Selling directly from India
It is the easiest and cheapest way you can choose to enter into an overseas market. What you need for it are a few sales visit to the overseas country. Registering yourself with a reputed B2B portal like Tradeindia.com will enable you to accept online orders from overseas clients. This method is ideal for an SME with limited budget and resources to support extensive export operations. Although it may leave you remote from your customers, this method has become very popular due to increasing popularity of the Internet technology.

B. Business in the overseas market
This conventional method is suitable for a company which can afford enough time and money to set up and maintain the activities required for operating business activities in a overseas market. You can do it using a-

I. Overseas sales agent: An overseas sales agent sales products on your behalf and takes commission for it.

Advantages

You can avoid the additional for setting up a new office, recruiting new staff, their training payroll costs of using your own existing employees.
An smart overseas agent with solid relationships with potential buyers can speed up your sales.
Using an overseas sales agent enables you to exert better control over matters such as final price, brand image, etc.

Disadvantages

When you hire an overseas sales agent, you are the one who will be responsible for all shipping and trade related logistics.
You will get less control over marketing and brand image
Offering after sales services become very difficult when exporting through a sales agent.

II. Overseas Distributor: A distributor buys your products. You have nothing to worry about whether they can sell the products or not.

Advantages

You need not require to spend on marketing your products
You do not not require to issues like logistics and shipping
The distributor is responsible for handling custom formalities and other paperwork
If you are thinking of launching a new brand, a reputed distributor with its established business relationships can help you the most
A distributor generally takes care of warehousing and inventory control.

Disadvantages

You lose your control over marketing and pricing of your products
You may have to pay a good amount in terms of credit and discount
It is not easy to find out a good distributor which has experience in selling your type of products.

C. Setting up business in an overseas market

Subsidiary: You can also set up a locally registered subsidiary company and hire local staffs to business operations in a overseas country.
Joint Venture: You can partner with a local company and start a shared business to explore an overseas market.
Do business yourself: You can set up a office in an overseas country and start your business activities all by yourself.

Advantages of subsidiary, joint venture and doing business by self :

Suitable for long term export business plans.
Better customer care and after sale services are possible to offer
A joint ventures enables you to use your partner's knowledge and share risk.
In case of local subsidiary company, there remain limited liability
Operating alone may be risky, but it gains some profit, it gains alone.

Disadvantages of subsidiary, joint venture and doing business by self :

Require in-depth corporate knowledge, involves extensive operational burden, money and time.
Risky. You may gain more but you may also lose more if things go wrong.

Never be persuaded to think that export business is nothing more than selling your products in a foreign land. International business always involves important legal and financial considerations as well as critical issues like shipping, customs, paperwork, warehousing, etc. You need to to have in-depth corporate knowledge to setting up a business in an unknown country. Therefore, if you are new to export business, or you have a limited budget, it is better to try selling your products using a e-commerce website or a B2B portal.