Direct Export in International Management

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Questions and Answers

What is the main advantage of direct export?

Greater control over export operations

Why might a company choose indirect export over direct export?

Lack of necessary infrastructure for direct exporting

What does indirect export involve?

Selling products/services to an intermediary in the domestic market

Who is responsible for logistics and transportation in indirect export?

Intermediary in the domestic market Signup and view all the answers

What is a disadvantage of direct export?

Increased workload Signup and view all the answers

How does indirect export benefit companies?

Intermediary takes care of export process Signup and view all the answers

What are the advantages of brownfield investment?

Lower staffing and training costs, existing approvals and licenses, cost-effective compared to greenfield investment Signup and view all the answers

What are the disadvantages of brownfield investment?

Major upgrades may be required, operational inefficiencies if facility cannot be adapted Signup and view all the answers

What determines the entry mode for a firm in international business transactions?

Various factors such as cost, resources, market conditions, and strategic objectives influence the entry mode decision. Signup and view all the answers

What are the advantages of indirect export?

Access to local market knowledge, reduced financial risk, lower investment costs Signup and view all the answers

What are the disadvantages of direct export?

Higher financial risk, need for significant investments in infrastructure and marketing Signup and view all the answers

How can brownfield investments be more cost-effective than greenfield investments?

If the facility is already fit for use, does not require major modifications, or can be utilized without significant upgrades. Signup and view all the answers

What are the advantages of indirect export?

Advantages of indirect export include leveraging expertise and networks of intermediaries, and smaller financial risk. Signup and view all the answers

What are the disadvantages of direct export?

Disadvantages of direct export include lower profit margin, dependence on commitment of the partner, and lack of full control over foreign sales. Signup and view all the answers

Define countertrade in international trade.

Countertrade is a type of international trade where goods and services are exchanged between countries without using cash or financial instruments. Signup and view all the answers

Why might a company opt for indirect export?

A company might choose indirect export to benefit from intermediary expertise and networks, and to reduce financial risk. Signup and view all the answers

What risk is associated with indirect export?

One risk of indirect export is the dependence on the commitment of the intermediary. Signup and view all the answers

How does indirect export help companies with limited resources?

Indirect export assists companies with limited resources by allowing them to access the expertise and networks of intermediaries. Signup and view all the answers

Study Notes

Entry Modes

Direct Export

Direct export allows companies to establish a direct relationship with customers in the foreign market
Advantages:
- Greater control over export operations
- Better communication with customers
- Increased profit
Disadvantages:
- Increased workload
- Limited market knowledge

Indirect Export

Indirect export involves selling products or services to an intermediary in the domestic market, who then resells them in the foreign market
Examples of intermediaries include trading companies, wholesalers, or EMCs (export management companies)
Advantages:
- Beneficial for companies with limited resources or experience in international business
- Smaller financial risk
Disadvantages:
- Lower profit margin
- Dependence on commitment of the partner
- Not a full control of foreign sales

Countertrade

Countertrade is a type of international trade that involves the exchange of goods and services between two countries
Instead of paying with cash or financial instruments, buyers offer goods or services in exchange for desired products or services

Foreign Direct Investment (FDI)

Advantages of Brownfield Investment (BI):
- Lower staffing and training costs
- May include existing approvals and licenses from the government or regulators
- Can be a cost-effective option compared to greenfield investment
Disadvantages of BI:
- Facility or infrastructure may require major upgrades, increasing foreign investment cost
- Operational inefficiencies if the facility cannot be adapted to new production needs

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Description

Learn about direct export as an entry mode in international management, including the advantages it offers to companies. Explore the ways companies can establish a direct relationship with customers in foreign markets.