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Manufacturer or exporter sells directly to an
importer or buyer located in the foreign market
area.
Exporter take a more direct approach to exporting
may choose to transport the goods into a foreign
market themselves.
This proactive approach gives the company greater
controls on issues such as the finished product, the
selling and marketing methods
The actual transaction flow between nations is
handled directly by a dependent organization of
the manufacturer or a foreign-based marketing
organization or customer.
5.2
DIRECT
EXPORT
5.2.1
HOME-COUNTRY
BASED
DEPARTMENT
5.2.2
FOREIGN
SALES
BRANCH
5.2.3
STORAGE OR
WAREHOUSE
FACILITIES
5.2.4
FOREIGN
SALES
SUBSIDIARY
5.2.5
TRAVELING
SELASPERSON
5.2.6
FOREIGN-BASED
DISTRIBUTORS
&
AGENTS
(REPRESENTATVES)
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Export department or division in the home
country.
Also known as dependent organization.
Involved directly in making export sales.
Serve as the home-based export marketing
department to coordinate and control the activities
of other dependent organizations located in
foreign markets.

Three different types of home-country based
export organizations:
(i) Built-in export departments
(ii) Separate or self-contained export department
(iii) Export sales subsidiary
5.2.1
HOME-COUNTRY
BASED DEPARTMENT
(i)
BUILT-IN
DEPARTMENT
(ii)
SEPARATE EXPORT
DEPARTMENT
(iii)
EXPORT SALES
SUBSIDIARY
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The simplest form of export organization.
Easiest to establish.
Consist of an export sales manager with some
clerical help.
Primary job of the sales manager is to do the actual
selling or directing of selling.
All functions connected with export transactions
e.g. advertising, logistics, credit, shipping done by
appropriate domestic department.
May have problems getting support from other
units and in carrying out technical functions.

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Built-in form is best suited for direct export for the
manufacturer who operating under any of the
following conditions:
Small in size;
New or relatively new to export marketing;
Expected foreign sales volume is moderate to
small;
Management philosophy not oriented toward;
growth of foreign business;
Company resources are limited.
As overseas business increases, separate export
department may be established to take care of it.
 Essentially self-sufficient unit and well equipped
to handle export activities (advertising, logistics,
etc.).
 In other words - complete export marketing
department.
 Structured internally upon the basic of functions,
geographic region, product, or a combination of
these.





Characteristics of separate export department:
No inherent possibility for clash between the
international and domestic sides of the firm
regarding the time to be spent by domestic
marketing personnel on foreign business matters.
Export operations can be conducted on a full-time
basis by personnel knowledgeable and trained;
specifically committed to exporting.
Has a fairly high degree of flexibility in terms of
where it is located.

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Much more complex and almost completely
independent organization.
Wholly owned and controlled by the parent
company.
Functions same as SED but differs significantly in
financially and organizationally.
ESS purchase goods from parent company and
resell in foreign countries.
Benefit: total and independent control of their
activities.

Advantages:
◦ provides unified control;
◦ profit center;
◦ can more easily allocate orders and supervise
traffic management;
◦ ease of financing;
◦ wider product line;
◦ tax advantages in some countries.

Serious involvement in international trade.
Primary purpose:
 Closer supervision of foreign sales by manufacturer
in home country.

Secondary purpose:
A foreign facility for manufacturer to display its
product line (Display center).






Responsibility:
Provides control, service, dedicated staff for your
products; costly.
Handles all of sales distribution and promotion in a
designated market area.
Storage or warehouse facilities
Used when inventory in foreign markets is
necessary or profitable.
May be for one country or regional.








May be the complementary action to the set up of
ESS and may be part of a sales branch.
Due to the exporter decisions to invest in foreign
country.
Operates as a separate entity and set up to fill
orders made by foreign distributors.
Reasons:
Faster and more secure flows of goods;
Create consumer trust and satisfaction;
Facilitates easier trading with wholesalers and
retailers.
Best set up in a free port or trade zone.








Similar in operation to the ESS and FSB.
Differences: greater autonomy in decision making.
Has its own organizational structure, separate
financial accounts and marketing division.
They purchase goods from parent-company and
resell it to foreign buyer.
Using transfer pricing.
Why establish foreign sales subsidiary?
Potential tax advantages
Business practices


Functions: selling activities, customer relations,
information gathering.
May act as a chain between manufacturer and end
users.
Traveling export salesperson:
 A person who lives in one country, often the home
country of the employer, and travels abroad to perform
the sales duties.
Resident sales person:
 A person who is sent out of the home country to
live and work in a foreign market.

Basic functions of traveling sales personnel:
(i) Communication of product information to
customers, and obtaining orders.
(ii) Customer relations: maintaining and improving
the company’s position with customers and
general public.
(iii) Gathering and communicating information.
(iv) Arranging the delivery of products.




A distributor is a customer of the manufacturer,
who purchases the goods and earns their profit
through a profit margin when it’s resold.
An agent is a representative of the manufacturer
who earns commission for finding foreign
purchasers of the manufacturers goods.
Unfortunately, terms are often used interchanged.
In direct exporting, use of exclusive agents or
distributors is easiest and least costly; also has
potential for development.
Conditions required the uses of
distributors/agents:
 Little knowledge of foreign market;
 Do not wish to make greater investments; not
sure the product will be successful or not;
 Do not have personnel capable of being a
traveling salesperson;
 Order small in quantities or size.
 More importantly, the uses of
distributor/agent is less risks and less costs.
