Export Marketing

Export
• Export is when you trade something out of the
country.

• In economics, an export is any good or

commodity, transported from one country to
another country in a legitimate fashion, typically
for use in trade.
 Export
• The term "export" is derived from the conceptual meaning
as to ship the goods and services out of the port of a
country. The seller of such goods and services is referred to
as an "exporter" who is based in the country of export
whereas the overseas based buyer is referred to as an
"importer".

• In International Trade, "exports" refers to selling goods and

services produced in home country to other markets.

• Export goods or services are provided to foreign consumers

by domestic producers.
 Reasons to export
• Reasons to export
– To serve markets where the firm has no or
limited production facilities
– To satisfy a host government’s requirement
that the local subsidiary have exports
– To remain price-competitive in the home
market
– To test foreign markets and foreign
competition inexpensively
 Reasons to export

– To achieve additional sales

– To extend a product’s life cycle
– To respond strategically to foreign
competitors
– To improve the efficiency of manufacturing
equipment
 Reasons not to Export
• Reluctance to become involved in a new,
unknown and therefore risky operation

• Not active in international markets due to

– Lack of knowledge
• Locating foreign markets
• Payment and financing procedures
• Export procedures
 Export Marketing
• Exporting is one of the Market Entry Strategies

• Where as the options are

– Licensing
– Franchising
– Joint ventures
– FDI
 Ownership and Control

100%
Strategic Alliances
Ownership

Equity Joint Venture

Management
Licensing Franchising Contract
0
0 100%
Control
 Export Decision Criteria
• Export marketing is the integrated marketing of
goods and services that are destined for the
customers in international markets

• Export marketing requires

– An understanding of the target market environment
– The use of marketing research and the identification of
market potential
– Decisions concerning product design, pricing, distribution
and channels, advertising and communications
 Export-Related Problems
• Logistics • Legal Procedures
– Arranging transportation – Government
– Transport rate determination – Product liability
– Handling documentation – Licensing
– Obtaining financial – Duty
information
• Sales Promotion
– Distribution coordination
– Advertising
– Packaging
– Sales force
– Obtaining insurance
– Marketing information
 Export-Related Problems
• Servicing Exports
– Providing parts availability
– Providing repair service
– Providing technical advice
– Providing warehousing
• Foreign Market
Intelligence
– Locating markets
– Trade restrictions
– Competition overseas
 Export Costing & Pricing

• Price is what an exporter offer to a customer on

particular products.

• Cost is what an exporter pay for manufacturing

the same product
 Determining Export Pricing
• Range of products offered.
• Prompt deliveries and continuity in supply.
• After-sales service in products like machine tools, consumer durables.
• Product differentiation and brand image.
• Frequency of purchase.
• Relationship between quality and price.
• Speciality value goods and gift items.
• Credit offered.
• Preference for products originating from a particular source.
• Aggressive marketing and sales promotion.
• Prompt acceptance and settlement of claims.
• Unique value goods and gift items.
 Factors for Export Costing

• Product modification cost

• Promotion cost
• Packaging cost
• After-sales service cost
 Pricing Strategies
High pricing strategy
– Unique or new products
– Brand name products: BMW, Rolex
– High profit margin
– Limits market to well-to-do customers
– Attracts competition
– Higher price at the beginning and lower
price later
 Pricing Strategies
Low pricing strategy
– To penetrate foreign markets
– To increase market share
– To dispose of excess or obsolete
inventory
– To discourage new competition
– Cannot be a long-term strategy
 Pricing Strategies
Moderate pricing strategy
– Adequate profit margin
– Can meet competition and maintain market
shares
– Should be long-term strategy
 Export Pricing Methods of
Manufacturer
Marginal Cost Pricing Method
– Assumes that indirect fixed costs are fully recovered
from domestic sales
– Cost for manufacturing additional unit for export and
exporting cost
– Includes direct cost of material and labor only
– General & Administrative (G & A) expenses not included.
– Floor price
 Export Pricing Methods of
Manufacturer

Cost-plus pricing method

– Adding exporting costs to domestic
production cost
– Include G & A expenses
– Too high to compete in international
market
 Trade Policies in India
• Exim Policies
– Streamlined trade procedures
– Liberalised import regime
– Thrust on export orientation
• Medium Term Export Strategy, 2002
– 1% share in global exports by 2007
• Foreign Trade Policy 2004-2009
– To double India’s share in global merchandise trade by
2009
– use trade expansion as an effective instrument of
economic growth and employment generation.
 Basic concepts and definitions
• The “foreign trade policy” of a country refers to policies
and practices that affect and regulate import and export
operations.
• Foreign trade policy includes many laws, decrees,
regulations and procedures that are often adopted for
different purposes. Such policies will affect foreign
exchange, imports, exports, foreign investment, and
international relations.
• A foreign trade policy should include trade promotion
policy and lead to the design and implementation of
successful trade promotion and development
programmes.
 Basic concepts and definitions
• The “trade promotion policy” of a country is comprised of
programmes and measures that promote and develop trade
with other countries.

• It includes all regulations and practices that will increase

exports.

• Trade promotion policies are part of the overall foreign trade

policy, and cannot be considered alone.

• The country's foreign trade policy must make it possible to

achieve trade promotion policy objectives.
 Aspects of foreign trade policy

Foreign Trade Policy

Trade International
Trade Promotion Trade
Development
Infrastructure Relations

Export promotion Trade facilitation Bilateral relations

regulation

International
Trade finance trade forums
Import Regulation

Trade enterprises Regional trade

 Foreign Trade Policy 2004-2009

• Agriculture and industry has shown remarkable resilience and

dynamism in contributing to a healthy growth in exports
• In the last five years our exports witnessed robust growth US$ 168
billion in 2008-09 from US$ 63 billion in 2003-04.
• India’s share of global merchandise trade was 0.83% in 2003; it
rose to 1.45% in 2008 as per WTO estimates.
• India’s share of global commercial services export was 1.4% in
2003; it rose to 2.8% in 2008.
• India’s total share in goods and services trade was 0.92% in 2003; it
increased to 1.64% in2008.
• On the employment front, studies have suggested that nearly 14
million jobs were created directly or indirectly as a result of
augmented exports in the last five years.
 Foreign Trade Policy 2009-2014

• The short term objective of the policy is to arrest and

reverse the declining trend of exports and to provide
additional support especially to those sectors which have
been hit badly by recession in the developed world.

• To set a policy objective of achieving an annual export

growth of 15% with an annual export target of US$ 200
billion by March 2011.
 Foreign Trade Policy 2009-2014

• In the remaining three years of this Foreign Trade Policy

i.e. upto 2014, the country should be able to come back
on the high export growth path of around 25% per
annum.

• By 2014, to double India’s exports of goods and

services.

• The long term policy objective for the Government is to

double India’s share in global trade by 2020.
 Foreign Trade Policy 2009-2014

• In order to meet these objectives,

– the Government would follow a mix of policy
measures including fiscal incentives, institutional
changes, procedural rationalization, enhanced market
access across the world and diversification of export
markets.
– Improvement in infrastructure related to exports;
– Bringing down transaction costs, and providing full
refund of all indirect taxes and levies,
 Terminology
• Focus Product Scheme:
– Objective is to incentivise export of such products, which
have high employment intensity in rural and semi urban
areas, so as to offset infrastructure inefficiencies and other
associated costs involved in marketing of these products.

• Focus Market Scheme:

– Objective is to offset high freight cost and other externalities
to select international markets with a view to enhance our
export competitiveness in these countries.
 Highlights of
FOREIGN TRADE POLICY 2009-2014

1. Higher Support for Market and Product

Diversification
– 26 new markets have been added under Focus
Market Scheme. These include 16 new markets in
Latin America and 10 in Asia-Oceania.
– The incentive available under Focus Market Scheme
(FMS) has been raised from 2.5% to 3%.
– The incentive available under Focus Product Scheme
(FPS) has been raised from 1.25% to 2%.
 Highlights of
FOREIGN TRADE POLICY 2009-2014
• A large number of products from various sectors have
been included for benefits under FPS. These include,
– Engineering products (agricultural machinery, parts of trailers,
sewing machines, hand tools, garden tools, musical instruments,
clocks and watches, railway locomotives etc.)
– Plastic (value added products),
– Jute products
– Green Technology products (wind mills, wind turbines, electric
operated vehicles etc.),
– Project goods, vegetable textiles and certain Electronic items.
 Highlights of
FOREIGN TRADE POLICY 2009-2014

2. Technological Upgradation:
– To aid technological upgradation of our export sector,
EPCG Scheme at Zero Duty has been introduced.
– This Scheme will be available for engineering & electronic
products, basic chemicals & pharmaceuticals, apparels &
textiles, plastics, handicrafts, chemicals & allied products
and leather & leather products
– The scheme shall be in operation till 31.3.2011.
 Highlights of
FOREIGN TRADE POLICY 2009-2014
• Gems & Jewellery Sector
– To neutralize duty incidence on gold Jewellery exports, it
has now been decided to allow Duty Drawback on such
exports.
– A new facility to allow import on consignment basis of cut
& polished diamonds for the purpose of grading/
certification purposes has been introduced.
– To promote export of Gems & Jewellery products, the
value limits of personal carriage have been increased from
US$ 2 million to US$ 5 million in case of participation in
overseas exhibitions.
 Highlights of
FOREIGN TRADE POLICY 2009-2014
• Agriculture Sector
– To reduce transaction and handling costs, a single window
system to facilitate export of perishable agricultural
produce has been introduced.

• EOUs
– EOUs have been allowed to sell products manufactured by
them in DTA (Domestic Tariff Area)upto a limit of 90%
instead of existing 75%,
– EOUs will now be allowed to procure finished goods for
consolidation along with their manufactured goods, subject
to certain safeguards.
 Highlights of
FOREIGN TRADE POLICY 2009-2014

• Waiver of Incentives Recovery, On RBI

Specific Write off
– RBI specifically writes off the export proceeds
realization, the incentives under the FTP shall now
not be recovered from the exporters subject to certain
conditions.
 Export Promotion Measures
• International marketing is a much more complicated
process than marketing and selling in the domestic
economy.

• To encourage growth of exports, government step in and

provide business communities with needed support in
various ways.

• Government have many different policies, programmes

and activities to help develop competitive products and
increase export sales
 Trade Promotion Policy
• The “trade promotion policy” of a country is comprised
of programmes and measures that promote and
develop trade with other countries. It includes all
regulations and practices that will increase exports.
• Trade promotion policies are part of the overall
foreign trade policy, and cannot be considered alone.
• The country's foreign trade policy must make it
possible to achieve trade promotion policy objectives.
 Export Promotion
• Export Promotion
– Government assist businesses in the private sector
with a wide range of services, from simply providing
information about current opportunities in the world
market to giving specialized assistance to design and
implement marketing programmes and sales
campaigns abroad.

– The activities are usually carried out by a

trade Promotion Organization (TPO).
 Objectives
• Promoting export of the country's existing
production.
• To encourage increased sales of products that
are currently available for export.
• concentrate on product adaptation; that is, use
of existing production capacity to manufacture
new products when better markets are found for
those products than for traditional products
 Objectives
• Most developing countries make export
promotion and development a priority in order to
achieve economic development goals.

• Government expect that sustained export

promotion and development efforts will help earn
additional foreign exchange needed to cover the
cost of imports, solve balance of payments
problems and create additional employment for
people.
 Implementation of Export
Promotion Measures
• The key to successful national export promotion are
government policy decisions that affect export
trade.

• Two sets of policies affect foreign trade

management
– Foreign trade policies and other policies with direct
influence on foreign trade,
– Policies that regulate other economic activities, but at the
same time influence the general performance of foreign
trade.
 Promotional measures and their
implementation
• The range and intensity of a country's
export promotion activities will depend on a
number of factors:

– Human and financial resources,

– The nature of products that can be exported,
– the characteristics of foreign markets,
– the experience of organizations responsible for
implementing these activities.
 Export promotion strategies

• Export promotion strategies are part of trade

promotion
– Enterprise Level
– Industry Level
– National level
 Export promotion strategies

• Enterprise Level:
– A limited number of commodities are available for
export, so export sectors depend on international
developments affecting the world market.
– Industrial production of goods is limited by the lack of
downstream activities, which does not allow
enterprises to produce differentiated products for
export or provide some form of export diversification.
 Export promotion strategies

• Enterprise Level:
– There is dependence on one or two key export
markets and supply sources, and this does not give
enterprises an opportunity to develop products
according to the standards of more developed
markets. This also results in lack of knowledge about
marketing abroad.

– Enterprises lack export readiness, which might be due

to unwillingness to venture overseas because the
domestic market offers comfort and security
 Export promotion strategies

• Industry level:
– Two kinds of export dimensions to consider
a)increasing the export of existing products
• looking at what industries currently produce for export
to the world market
• For many transitional and emerging economies,
exports are mainly commodity and primary products.
• Therefore an initial export strategy should focus on
enhancing and consolidating the volume of export into
existing markets as well as diversifying to other
exports markets.
 Export promotion strategies
• Industry level:
b) developing new exportable products,
– dimension involves making an assessment of what new
products could be developed for export markets.
– These new products often originate from spin-offs or
downstream activities from existing core industries.
– For example, the oil industry supports petrochemical industries
and oil equipment manufacturing.
• Strategies should be based on comprehensive study of the
export potential for select products.

• This will involve:

– Clear identification of what is produced, planned production
in the near future and the most suitable markets for such
products;

– Concurrent study of what is being purchased in foreign

markets in order to suggest what could be produced in the
country to satisfy the needs and opportunities of foreign
markets;
 Export promotion strategies

• Clear indication of constraints or problems for exports

in terms of production or market conditions, which
should lead to recommendations about how to solve
problems or counteract any constraints.
• National level
– The government sets the overall economic direction
and trade development strategy.
– Establishing the export dimension of this strategy in
terms of appropriate economic instruments and
export promotion measures is critical to national
export performance.
– Therefore, the design of relevant trade policies is the
key to a successful national export promotion
programme.
 Importance of export promotion and
development strategies

• The national export strategy focuses on promoting and

developing those products and markets that offer the best
opportunities for a country.

• Formulation and implementation of a national export

strategy requires:
– A mechanism to co-ordinate policy formulation,
– Active participation and a sense of responsibility by the various
bodies, institutions and officials involved,
– Persistent application of regulations, since frequent changes in
regulations can be the one factor that is most detrimental (injurious)
to the success of export promotion and development programmes.
 The role of trade promotion organizations
in export promotion

• Governments establish TPOs to develop and implement the

country's export promotion and development programmes.
– To provide specialized support to the producers of products for export,
– to serve as a catalyst for related services provided by other entities in the
public and private sectors

• TPO acts as
– an adviser to the government on foreign trade and related matters.
– an effective bridge between the export community and the foreign
markets,
 Special Economic Zones (SEZ)
• India was one of the first in Asia to recognize the
effectiveness of the Export Processing Zone (EPZ) model in
promoting exports, with Asia's first EPZ set up in Kandla in
1965.

• Special Economic Zones (SEZ) were set up by the

Government of India to augment infrastructure facilities for
export production.

• The Ministry of Commerce and Industry launched the SEZ

scheme in April 2000 to provide an internationally
competitive and hassle free environment for export.
• SEZs are specifically represented for duty free enclaves
and are deemed to be foreign territories for the purposes
of trade operations, duties and tariffs

• The main objectives of the SEZ Act are:

– generation of additional economic activity
– promotion of exports of goods and services;
– promotion of investment from domestic and foreign sources;
– creation of employment opportunities;
– development of infrastructure facilities;
 INCENTIVE/ FACILITIES TO SEZ

• 100% Foreign Direct Investment (FDI) is allowed for townships

with residential, educational, recreational facilities and franchise
for basic telephone service in SEZs.

• Duty free import/domestic procurement of goods for

development, operation and maintenance of SEZs.

• Exemption from Service Tax and/or Central Sales Tax.

• Income of an infrastructure capital fund/company from

investment in a SEZ is exempt from Income tax.
 INCENTIVE/ FACILITIES TO SEZ

• Generation, transmission and distribution of power in

SEZs is allowed.

• Full freedom in allocation of space and built up area for

approved SEZ units on commercial basis.

• Authorization to provide and maintain services like water,

electricity, security, restaurants, recreation centers, etc
on commercial lines is allowed.
 Export Performances
Exports from the functioning SEZs during the last seven years

Year Value(Rs. Crore) Growth Rate (over

previous year)
2003-2004 13,854 39%

2004-2005 18,314 32%

2005-2006 22,840 25%

2006-2007 34,615 52%

2007-2008 66,638 93%

2008-2009 99,689 50%

2009-2010 220,711.39 121.4%

 Advantages
• The SEZ Act also provides a number of incentives to units proposed
to be set up in SEZs. SEZ units may be set up for carrying on
manufacturing, trading or service activity.

• A unit set up in SEZ has the following facilities and incentives:

– 15 year corporate tax holiday on export profit – 100% for initial 5 years,
50% for the next 5 years and up to 50% for the balance 5 years
equivalent to profits
– No licence required for import.
– Duty free import/domestic procurement of goods for setting up of the
SEZ units.
– Exemption from customs duty on import of capital goods, raw materials,
consumables, spares, etc.
 Advantages
• Exemption from Central Excise duty on the procurement of capital
goods, raw materials, consumable spares, etc. from the domestic
market.
• Exemption from payment of Central Sales Tax on the sale or
purchase of goods, provided that, the goods are meant for
undertaking authorized operations.
• Exemption from payment of Service Tax.
• The SEZ unit is permitted to realise and repatriate to India the full
export value of goods or software within a period of twelve months
from the date of export.
• No routine examination by Customs officials of export and import
cargo.
 Disadvantages

• Revenue losses because of the various tax exemptions.

• Most players are interested in setting up SEZ’s with an eye on

the real estate bounty so that they can acquire at cheap rates
and create a land bank for themselves.

• The number of units applying for setting up EOU’s is not

commensurate to the number of applications for setting up
SEZ’s leading to a belief that this project may not match up to
expectations.