The term export refers to the sale of a good or service to a buyer in another country. The product subject to export is called a commodity. Another commonly used definition for export is as follows: A commodity conveyed from one country to another for international trade purposes. Export is the essential component of international trade.
Basically, exports referred to the sale of commodities, tangible goods. In the meantime, the export business also includes the sale of both services, which are not tangible and cant be shipped. In short, consultancy service to be provided to a company abroad, transfer of know-how, software codes of software, and sales of similar digital products are also included in the scope of export.
Trade between companies operating in two different countries in international trade. In this type of business, the selling company is the exporter, and the exporter’s trade-in terms are export.
The popularization of Exports, Increasing Demand for Export Business:
The interest in exports, the initiatives, and the efforts of individuals and companies to export has increased rapidly. The transformation of social media into a global marketplace increased B2B platforms, and global communication facilitation has made international trade more comfortable than ever.
Thanks to social media channels and virtual marketplaces, even a person who manufactures something in his home with his hand labor can find a customer from the other side of the world and sell his products without even having a company. As we mentioned at the beginning of our article, the product or service being sold to another country falls under the definition of export. Therefore, your business does not have to be large or corporate to be an exporter. If you are selling something in demand in the global market, there are no obstacles that can stop you.
Export offers small entrepreneurs opportunities to do business globally with minimal costs and growth opportunities for small companies. Export creates a chance for large companies to overcome the economic crises and recessions in the local market by selling to countries located in different geographies.
Who Can Do An Export Business
Any company or an entrepreneur who carries out marketing and sales activities to sell to a different country, whose products or services are requested by buyers in another country, can export. Sometimes companies create export potential by attending fairs, identifying and visiting potential buyers abroad. These are classical international trading methods.
Today, the conditions for being an exporter have become easier. A customer who visits your website and puts your products in the shopping cart will indirectly cause you to be an exporter if you have been offered an international shipping option. E-commerce has changed the classical definitions of exports.
Until recently, the biggest problem to export was to reach a buyer in another country. In other words, you are going and finding customers in a different market in a foreign country. The internet facilitates communication, and virtual marketplaces on a global scale made it easier to sell abroad. For example, there is no difference between selling to a customer in the US and selling to a customer in France for a seller with a store on the Amazon site.
Developments in the logistics industry made international shipments fast, practical, and cost-effective. The integration provided by express courier companies with digital platforms and the acceleration of the customs processes of small-scale shipments enabled hundreds of thousands of web-based companies that only sell online.
Is it necessary to establish a company to export?
It is not possible to answer this question by covering all countries and all product groups. To be able to sell goods in many countries, you need to establish a commercial business. In other words, this condition is sought not only for export but also for domestic sales. However, in some countries, individuals can report their income to the state by submitting a personal statement. Now, there are practical pocket applications that allow you to prepare invoices. Most virtual marketplaces offer their users the opportunity to create e-invoices during the sales phase. In this way, it is possible to sell products abroad even if you do not have a company in some countries.
As the number of products sold increases, it may be inevitable to establish a company due to various factors such as tax exemptions, the need for documents such as a certificate of origin to be sent abroad with the product. On the other hand, if you intend to grow your business, if you do not produce and sell something as a hobby or an extra job, it is the best option to professionalize your business by establishing a company.
What Is An Example Of Export?
The best way to reinforce the answer to what is export and the explanations made is to explain the export with an example.
There must be a buyer and a seller in 2 different countries for international trade to take place. The company that will sell the good or service is the exporter and the sales transaction export it makes. In the other country, the company that purchases the goods or services is the importer, and the purchasing process is called import.
The company “X,” which produces electronic home appliances in China, exhibits its products in the Alibaba virtual marketplace and opens stands at popular international fairs such as Canton. Company “Y,” which has many stores selling electronic products in the USA, deals with the “X” company’s products.
At the end of the negotiations between the two companies, an agreement is reached for a shipment that will fill 40 “containers, including approximately 2000 electronic devices. US firm” Y “will pay half in cash and half after the shipment. The shipment will be organized by the Chinese company “X.”
Products whose production and packaging processes are completed are loaded into the container. The exporter company prepares the sales invoice, packing list, and Certificate of Origin documents showing that the products are produced in China.
Bill of lading and customs documents are prepared based on the container information reaching the port where the ship will depart. Shipment takes place after the customs procedures are completed. After this stage, the process is completed based on the ship’s arrival to the US port and the completion of the customs procedures in the USA.
Transactions in China are export customs clearance. The Chinese company “X” realizes the export from when the container is loaded on the ship, and customs declaration procedures are completed. Customs procedures to be carried out by the US firm “Y” in the US port are called import customs procedures, and the process experienced is imported.
The US company “A” is a startup founded by a young entrepreneur, producing trinkets and 3D wall decorations with 3D printers. Company “A,” which exhibits its products on Amazon and receives special orders, gets an order for 20 3D canvas paintings from a store called “B,” operating in the UK.
Payment is made through Amazon, and the products are arranged with e-documents issued by DHL express courier service. The products that reach the UK are delivered to the store address of the “B” company after DHL completes the customs procedures. This process, completed within 3 days, is a small-scale international trade example demonstrating the speed and convenience of e-commerce.
The process carried out by the express courier firm on behalf of the US firm “A” is export. “A” firm exports, making a special effort to export.
What Are The Different Types of Export?
A- Direct Export
If the exporter company manages the sale of goods or services, we call it a direct export cause without an intermediary.
Indirect export, the exporter does not use any intermediaries and performs all export transactions on its own. Naturally, indirect exports, processes such as customer acquisition, international promotion, and marketing strategies, shipment, and collection of the sales price are carried out by the exporting company.
Advantages and benefits of direct export:
1) The company can control all export stages.
2) It increases profit margin by eliminating intermediaries.
3) The company can establish closer and longer-term relationships with its buyer.
4) As the exporter and importer trade directly, they can solve the problems faster and more effectively.
Disadvantages and Risks of Direct Exports
1) In order to be successful, the exporter may have to spend more time and resources than it will provide. In particular, the sales and marketing processes of some product groups may involve long and costly procedures.
2) If the export potential does not reach a sufficient volume on an annual basis, the cost of the foreign trade department created and the costs of organizations such as fair participation can significantly reduce the company’s profit margin.
2) Exporter is more exposed to direct risks. It should closely follow both the country’s market, exports to, and global developments and pursue strategies that can develop measures and reactions according to economic and political consequences.
B- Indirect Export
Companies that want to export but do not have the necessary personnel and resources or wish to get support during the startup process can get help from different companies to find customers abroad and export. These may be various intermediaries such as brokers, agents, Sectoral Foreign Trade Companies, Sourcing companies – local purchasing offices.
Getting support from companies that specialize in international trade or companies that provide sourcing, distributing, and consultancy services in a particular country market can save exporter companies from wasting resources, staff, and time.
Collaborating with a company with experience, knowledge, portfolio, or various advantages in trading on a global scale or with individual countries can be the most advantageous and safe way to enter a new market, not only to increase profitability.
The contracting company can export by cooperating with different types of intermediary companies listed below. B2B sites and web-based marketplaces also could be listed among indirect export types.
- Export agents.
- Foreign sales representative and agents.
- Foreign based distributors and retailers
- Sourcing & Purchasing Agents
- Foreign-based state trading corporation.
- Commission agents.
- Export trade companies.
- Export management companies.
- Cooperative organizations.
- Overseas sales branches.
- B2B websites
- Web marketplaces
Advantages of Indirect Exports
1) Especially manufacturing companies can use their resources to develop and increase production, rather than establishing an export department and investing in developing exports.
2) The company benefits from the intermediary’s experience in this field.
3) Expenses spent on export marketing can be a significant negative cost item if the sale is not realized. An intermediary that sells in another country on behalf of the exporter eliminates all these costs and risks.
4) Trading with some countries involves various risks. Brokerage firms are sometimes the only way to trade with that country by eliminating these risks safely.
Disadvantages of Indirect Exports
1) The deterioration of relations with intermediaries or the preference of different sellers by intermediaries may cause a sharp decline in export figures.
2) Commission payments to be made to intermediary companies must be made based on the collection of export prices. Otherwise, the exporter may be defrauded or paid for an unsuccessful sale.
3) It is important that agreements with intermediaries are based on a legal basis and that exporters avoid risky transactions. Exporters should avoid risky sales methods against goods and transactions where ownership of the export good is transferred to the intermediary.
The disadvantages of indirect exports, on the other hand, create the possibility of sudden decreases in export capacity due to the attitudes of intermediaries and the inability to maintain healthy relations with intermediaries, and the loss of the existing customer portfolio and market suddenly.
Direct Export vs. Indirect Export
The main difference between direct and indirect export methods is that the exporter fulfills some or all of the export processes by himself or transfers them to a different company.
As a result, the costs and risks related to indirect exporting are less than direct exporting, but the exporter waives the profit to the extent of the risks it transfers and the know-how that it can create in the field of export.
Export strategies vary according to the size, capacity, goals, and market conditions of the company. For example, a startup company may pursue a purely export-oriented strategy rather than fighting in a domestic market with strong competitors. For a large company with a nationwide network and an international sales capacity, the export can be a strategy both to increase its capacity and create alternatives to the local market in a possible crisis.
When determining the export strategy, the advantages of exports and the extent to which the company’s existing resources will be transferred to exports should be well calculated. Creating a strategy with the goal of export can occur in different ways, such as investing in a factory to establish new production lines, investing in an intermediary firm to serve more exporters, and increasing the number of export specialist employees.
There are five main pillars of developing an effective export marketing strategy.
- Determining the markets where the company can be successful and grow (Determining in which countries your products can be sold with less competition and greater profits)
- Ensuring standardization in products, establishing a quality line for the company and its products. (Returning an export item is very costly and sending a replacement product is a long process)
- Managing the storage, shipping, and customs processes in the most efficient way constitutes additional exports.
- Implementing a uniform marketing program
- Integration of competition strategies between countries.