Difference between Direct Exporting and indirect exporting: A comparison

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Difference between Direct Exporting and indirect exporting: A comparison drawn in tabular form. When the export activity is directly carried out by the manufacturer of the goods, it is called as direct exporting and In indirect exporting the manufacturer hires the services of an export intermediary agency to export his goods through the intermediaries.

Difference between Direct Exporting and indirect exporting

Difference between Direct Exporting and indirect exporting

Direct exporting Indirect exporting
Meaning:
When the export activity is directly carried out by the manufacturer of the goods, it is called as direct exporting. In indirect exporting the manufacturer hires the services of an export intermediary agency to export his goods through the intermediaries.
Control:

Since all the activities such as packaging, promotion, shipment and distribution are carried on own, manufacturer enjoys the control over entire export activity.

 

As the services are outsourced to export intermediary agencies, no control exists at the manufacturer’s end. All the activities are executed by export agencies.

Customer interaction:

In direct exporting, exporter directly contacts the customer. This helps the customer know the seller better and his faith and confidence in the exporter will be better. Direct interaction with the customer helps the exporter know the market pulse better.

 

No direct contact exists between the manufacturer and the customer. Intermediaries engaged by manufacturer contact and communicate with the customer. So, there is no opportunity to the original exporter to engage with customers abroad

Reputation overseas:

Direct exporter engages with the foreign customer directly. This will help him earn the goodwill of the in the overseas market.

 

Since the original exporter does not directly brand his products in the overseas market by outsourcing the same to exporting agencies, It’s not possible for him to earn the reputation overseas.

Risks involved:

Direct exporter himself has to bear all the risks involved from production to distribution.

 

Post shipment of goods, export agency will have to bear all the risks involved.

Investment involved:

To export the goods directly, manufacturer has to invest in building up the overseas network and setting up necessary export infrastructure.

 

No need to invest in building up export infrastructure. Exporting intermediary will already have developed network and necessary infrastructure.

Pricing decisions:

Since the manufacturer carries out the exporting activity, he is entitled to make his own pricing decisions that determine the overseas price for his products.

 

Pricing decisions are made by exporting intermediaries. Original manufacturer will not have any right to determine the price for his products.

Export incentives:

Direct exporter can claim all the available export credits and duty draw backs as all the relevant documents and invoices are in his name.

 

Original manufacturer may not be able to claim the credits and incentives unless the invoices and relevant documents are in his name.

Suitability:

This method is suitable for large enterprises as it involves more costs and resources.

 

This method is best for startups and small scale enterprises as they may not be able to invest additional amount for setting up necessary export infrastructure.

Future oriented:

Direct engagement with the overseas customers will provide the first hand market information may help in future expansions in foreign markets.

 

First hand market information is available to the export intermediaries and not to the original manufacturer. So, relatively it is not a future oriented in case one wants to directly expand in the overseas in future.

Technical inputs:

In case you are novice to the exporting activity, you have to depend on the external agencies for every input that is necessary to ensure successful execution export transactions.

 

Exporting intermediaries possess a lot of experience and specialized knowledge as they wholly engage in the exports and imports. So, one can seek their technical advice whenever necessary.

More transparent:

Direct dealings between the manufacturer and the foreign customer ensure complete transparency in terms of product authenticity, post-sale services and usage of patents and trademarks.

 

No scope for such transparency as the deals with the customers are done through export intermediaries.

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