Export Distribution and Promotion

Introduction

We all know that Export Marketing is a wide concept. It is not just making goods available to the importer but also arranging intermediaries for effective distribution and promotion. It is a process that starts with a customer order and ends with delivery and after sales services. Here, we' ll learn the process of handing over goods to the final consumers through a channel of middlemen which is called distribution. 

There is always a misunderstanding between Logistics, Distribution and Supply Chain. A lot of people assume them to be the same. But in reality, there do exist a lot of difference. The term logistics refers to management of information and activities from time to time. Events like receiving a customer order and it's processing, warehousing, packaging and dispatch, transportation to the destined location and delivery. In short, it's the process of managing acquisition, storage, transportation and delivery of resources at a particular destination. Whereas, distribution channel refers to making use of middlemen so as to make the goods reach to the final consumer thereby, adding value to accessibility. On the other hand, Supply Chain is the mechanism of effective acquisition of materials, production of goods and it's distribution in the markets. In short, the chain of management of raw materials to final delivery to the customer is called Supply Chain.

In reality, there exist a lot of factors affecting such supply chain channels. Let's understand them in detail.

Factors Influencing Distribution Channels

A distribution channel is a mechanism of getting goods delivered for further supply or final consumption. It's an act where one or more intermediaries are involved in receiving the goods from the manufacturer and then marketing it to final consumers. Eg. Mahashian Di Hatti Pvt. Ltd. (MDH Masala) is an Indian packaged spice manufacturing company having fully automated manufacturing plants in Delhi, Gurugram, Nagaur (Rajasthan), Sojat (Rajasthan), Ghaziabad (UP), Amritsar and Ludhiana (Punjab). This company sells it's products not only in India, but also in other countries like USA, Canada, UK, Europe, South East Asia, Japan, UAE and Saudi Arabia. The company undertakes its distribution in US and UAE through it's own offices located there. But in other countries, it's goods are sold via distributors. The company has managed to set up a good number of dealers in USA, Canada Japan and South East Asia so as to market and sell their products there. 

So, let's understand some factors influencing distribution channels.

1. Customer Background: Deciding upon distribution channel depends heavily on customer placement and background. In countries where consumers are widely spread across, the exporter may have to appoint dealers so as to make the goods reach to the final consumers. This task could be very difficult for the exporter himself to handle solely as he may end up injecting more time, resources and efforts. 

2. Product Features: Nature of the product also plays a vital role in adopting the most appropriate supply chain. An manufacturer exporter may set up dedicated showrooms abroad to sell high involvement goods along with maintaining close engagement with the audience. Whereas, general FMGC category goods can be traded through channel intermediaries as they are most low involvement goods. 

3. Corporate Philosophy: Selection of export distribution also depends on distribution philosophy and availability of resources within an organization. This includes financial resources, human resources, corporate image, international relations, foreign policies, etc. A company with sufficient resources targeting a country with high potential in buying would surely step without channel intermediaries so as to generate an engagement with the consumers. Whereas, a company with insufficient resources may have to resort to channel intermediaries and agents.

4. Area of Operations: The trade area is also an important factor is deciding upon the selection of appropriate distribution management. An organization can go with worldwide authorized dealership in case of wide operations across many countries. Eg. Bajaj Motors India exports two and three wheeler vehicles to several countries through authorized dealers. It may be difficult for Bajaj to open a dedicated showrooms in all such countries as it may escalate the company cost.

5. Quality Intermediaries: Availability of reliable intermediaries is very essential for developing an external chain. An agent should have facilities and collaborative contacts with Government agencies so as to provide the best services. A agent should have good connect with respect to warehousing, showroom, marketing, advertising, taxation, delivery, etc. 

6. Global Economic Factors: Various countries have various economic and trade policies. An exporter has to abide by such policies and accordingly take care of distribution. Generally, most of the exporters consign goods to foreign agents so as to save duties and costs.

7. Order Size: Another important point to be considered while deciding upon distribution channel is the size of the order. Huge orders need huge distribution and hence, the exporter may opt for a long distribution chain. But in case of limited buyers in limited market, the exporter may opt to sell by himself.  

Direct Exporting

Many manufacturers undertake export, marketing and distribution work themselves without appointment of any agent or middlemen. That's direct exporting. Here, the manufacturer absorbs not only manufacturing risk, but even marketing and distribution risk. Manufacturers wanting to create a deep engagement with their audience generally prefer this method. This gives a great chance for the manufacturer to personally explore international market, grab international opportunities and even create a lot of long term opportunities for many abroad. Direct exporting enables a manufacturer to establish showrooms and offices in overseas market scattered in various areas thereby creating a good competition. 

Some benefits of Direct Exporting

• More control on operations and export pricing

• Close relationship with overseas buyers

• Elimination of intermediaries, thus controlled time and cost

• Chances to learn and improve

• Better understanding about foreign marketplace

• Create, manage and maintain reputation

• Claiming benefits under various schemes

• More flexibility in transactions 

• More transparency in transactions

• Provision of effective after sales service

• More chance of gaining expertise

Disadvantages of Direct Exporting

• Requirement of human and physical resource for work which can be expensive

• The manufacturer exporter has to bear manufacturing, marketing and distribution risk. Thus, risky.

• Added cost to be paid for distribution services

• Requires excessive investment for procuring land, building, services and man power.

• Not suitable for small and medium economy exporters

Indirect Exporting

Indirect exporting is a scenario where the manufacturer exports goods through agents or middlemen. Such middlemen are intermediaries like export houses, trade merchants, trade house, authorized dealers, state trading corporations, etc. who assist manufacturers in exporting their products in foreign markets. Basically, it's a process of selling goods to those who export. The manufacturer takes up only the manufacturing risk and passes on marketing and distribution risk to the middlemen. It becomes the duty of the middlemen and distributers to make the goods reach to the final consumers. 

Some benefits of Indirect Exporting

• Only manufacturing risk and no marketing risk.

• No huge expenses for developing a supply chain. Hence saving of financial and human resources and most importantly, time.

• Focus driven operation on research and development based manufacturing, thereby leading to specialization and quality upkeep.

• Appropriate for small scale organizations as goods can be titled to merchants and export related work and costs can be avoided.

• Technical support and guidance can be obtained from Export Houses and other State Trading merchants with respect to manufacturing scale for no fees.

• Allows importation of input goods like raw materials, spare parts, etc. through merchant export houses for manufacturing of exportable goods. 

Some dis-advantages of Indirect Exporting

• Shortage in profits as indirect export involves charges to be paid to the middlemen.

• Less control over goods being sent through intermediaries.

• Lack of control over prices of the goods being sent on board in foreign markets.

• Claiming of export incentives becomes questionable as actual export is carried out by the export houses or the intermediaries.

• Lack of contact and engagement with consumers and supply chain abroad which can create demand supply gap. Hence, dis-engagement of understanding between the manufacturer and the consumer.

• Loss of opportunity to research, explore, learn about foreign markets and contact building.

• Fear of trust issues and lack of support services from the export houses / intermediaries with respect to continuity in business.

Indirect Export Channels

1. Export Buying Agent: Export Buying Agents are international representatives carrying agency business in exporter's country. Such Export Buying Agents are hired by international dealers to work in the exporter's country as per their orders. Such Export Agents are entitled to a commission which is paid by the foreign company. Such Export Buying Agents are actually domestic buyers who scan markets for the required merchandize. Buying Agents Association for Handicrafts is an example of such association of buying agents operating in India.

2. Trade Brokers: These are organizations working as export import agent in the exporter's country who connect the exporter with the importer. The broker takes care of the contractual task and does not take up any handling of goods. The broker is paid commission by the consigner. 

3. Export Management Company (EMC): Also known as Export Houses are specialists in export of goods belonging to certain sectors. Such EMCs conduct business in the name of the manufacturer only as per manufacturer's confirmation. EMCs carry large range of goods of several manufacturers at one time which helps them to reduce their transportation cost. They deal with all necessary documentation and they posses good knowledge about local purchases and Government regulations. Certain EMCs are specialized in specific geographical area, product or market type. This specialization at times becomes a basis for selecting external markets rather than being decided by the manufacturer. In India, Clerbulk Export is a leading export management company providing export-import services to the MSMEs with complete export consultancy as their own Export department. 

4. Piggybacking: Piggybacking is a system where one organization carry goods on behalf of a small organization and represents them in the foreign markets. Here, the seller company is called ‘rider’ and the large company carrying the goods on behalf of the sender is called ‘carrier’. The carrier company already operates in certain foreign markets and is willing to act on behalf of the rider that wishes to export to those markets. The carrier is either paid by commission and so acts as an agent. Also, the carrier buys the product outright and so, acts as an independent distributor too. Piggyback marketing is typically used for products sold by unrelated companies which are non-competitive, but related or complementary.

5. State Trading Corporations: These are organizations established by the State / Central Government so as to pull goods from small scale exporters and make them reach overseas. There are bundles of facilities provided by such State Trading Corporations. In India, the State Trading Corporation of India (a Four Star Export House) predominantly deals in import and export of agro product, minerals & metal ores, coal & coke, engineering items, pharma, petro chemicals, fertilizers, precious metals, etc. The STCI was set up in 1956 with an aim to develop trade with the European countries. 90% of it's equity is owned by the Government of India.

Logistics

Logistics is a continuous process of acquiring, storing and transportation of resources from the place of manufacturing to the place of consumption. Such resources can be materials, inventory, equipment and even people. The term 'logistics' have been primarily used in military which referred to movement of food, arms, equipment from defense warehouse to defense base and war zone. With increase in trade and business, the term Business Logistics has derived momentum in the 1960s and has spearheaded in to global markets since then. 

Looking into Business Logistics from an organization's perspective, it involves a high level understanding of consumer needs and making appropriate arrangements to make their product to reach them on time and in good condition at a lesser cost. Hence, Logistics falls within the scope of Supply Chain. It includes activities such as processing customer order, acquiring inventory, managing inventory, warehousing and transportation. People involves in Business Logistics are called Logisticians and are responsible for coordinating the above activities with available resources. 

Types of Logistics

Based on the movement of goods from phase to phase, logistics can be of three types:

1. Inbound Logistics: Inbound logistics refers to arrangement of resources at the time of inflow of materials. This is related to procurement of inventory by a manufacturer who is about to convert it into a usable product. When a manufacturer places an order with a supplier for supply of materials, the supplier makes arrangement of such materials and ships them to the manufacturer's premises. The materials undergo storage, transportation, inspection, etc. so as to reach the manufacturer on time, in the best of it's condition. This entire process is inbound logistics. Eg. Kaushik Cotton Corporation is a leading Cotton Yarn exporting company based in Rajkot, Gujarat, India. The company has been exporting Cotton Yarn, Yellow Cotton, Cotton Waste and Raw Cotton to countries like China, Vietnam, Thailand, Taiwan, Germany, Italy, Belgium, France, Spain, Portugal, Russia, Bangladesh, Peru & Pakistan and is an approved Export House. For fulfilling such export orders, the company will have to first procure raw cotton from cotton cultivators or Government supply agencies through appropriate transportation and timely stock them in the warehouses. The company will have to inspect the inward materials and allocate for manufacturing. This entire process of acquiring materials including it's storing and transporting from the place of cultivation to the place of production is called inbound logistics. 

2. In Process Logistics: Movement of materials within the factory premises adding value to the materials at every stage is called in process logistics. This process involves usage of variety of equipment like pallet trucks, forklift trucks, belt conveyors for horizontal movement and cage lift, heavy goods and passenger lifts, etc. for vertical movements. A good example here can be a milk processing unit. In India, AMUL acquires milk from various distributors across Indian villages and towns through their inbound logistics support through the use of trucks and containers. The collected milk is weighed and inspected and are taken for pasteurization (heating milk at 72 degrees and cooling immediately) and later passed for homogenization to develop a better consistency, texture and taste. This equipment used for such internal passing is called inbound logistics. Similarly, the final toned milk is packed in bottles through nozzle pipes and all these milk bottles get assembled and move for labeling and quality checking through belt conveyors. 

3. Outbound Logistics: Outbound logistics is related to making arrangements for getting the right product reach the right customer at the right time. This logistics type is more at consumption level as products move from manufacturer to the final consumer through a distribution chain. Outbound logistics involves storing of marketable goods, loading them in appropriate mode of transport for supplying either to a wholesaler or a retailer or even final consumer. Eg. Manan Prakashan, a book publisher in Mumbai converts content into to a readable book and supply them to various book stores across Mumbai. Here, Manan Prakashan has to look after storing of the books (post publishing), effective packing and transporting them to the market through trucks and tempos. 

4. Reverse Logistics: Reverse logistics is applied when goods go back to the manufacturer from the consumer. There may be circumstances where a consumer may want to return the product to the manufacturer out of dissatisfaction or any other reason. Such arrangement of services of picking up the product from the consumer and delivering it back to the manufacturer is reverse logistics. A good example can be returning of empty LPG gas cylinders to the gas service provider which passes through an organized chain. Another example can be returning of glass bottles of aerated drinks like Pepsi, Coke, Thumbs Up, etc. to the retailer which heads back to the manufacturer for re - utilization. Such events and activities of return movement of goods towards the manufacturer is called reverse logistics.

Components of Logistics

1. Logistics Network: Every organization dealing in inward and outward of materials and goods should have a legit plan with respect to number of warehouses, location of warehouses as per demand and distribution, number of equipment required in house and out house to handle materials and goods. Logistics network planning enables an organization to operate efficiently with respect to managing inventory, processing order, transportation, inspection, packing and delivery. 

2. Material Acquisition: This stage in logistics falls under inventory management where necessary negotiations and arrangements are made to obtain materials from suppliers. In covers activities like determining quantitative requirement of materials, placing order, price negotiation, inbound logistical arrangements, receiving of materials, inspection of materials, storing of materials and internal handling of materials.

3. Information and Order Processing: One of the primary components of logistics is gathering information about geographical location from where materials / goods need to be picked up and delivered to. This information enables the logistics team to understand what kind of timely arrangements need to be made so as to store the materials / goods so as to remain safe and even get delivered on time. With this information, an order can be easily processed, which means catching hold of the right means to get the goods delivered to the right person, in the right location, in the right way at the right time. 

4. Materials Handling: One of the most important activity in logistics is material handling which be internal (within a  factory) or external (outside the factory). In simple terms, it can be movement of materials from one unit to another unit in a factory or can movement of semi processed materials from factory to warehouse or even from warehouse to wholesalers and retailers. In process logistical techniques are applied when it comes to managing materials within a factory. But handling such materials and goods outside the factory may require other means.  

5. Inventory Management: Inventory Management is one of the key components in logistics business. It involves wide range of activities like procuring materials, storing them in the right order - right condition and right environment, recording them as per inwards and outwards, packing, inspection and dispatching them from the production house when an order is received.

6. Logistical Packaging: Logistical packaging is required when goods are on the verge of getting dispatched for delivery. This packaging involves all measures to protect the goods like bubble wrapping and thermocol protection. Activities like marking of information with specific marks and barcodes comes under logistical packaging. Such focused packaging is required as goods are to be reached overseas in the best of it's condition. Eg. warehouses of Amazon based in India makes sure that every product undergoes inspection and special packaging before it gets dispatched. 

7. Storage and Warehousing: One of the most important components of logistics is storing goods. Warehouses can be of two types namely storage and distribution. In storage warehouses, materials are stored for further processing whereas in distribution warehouses, goods are stored for distribution purpose. 

8. Transportation: This is the final stage in logistics management where appropriate transportation facility is arranged to make the goods reach to the final consumer. This is a derivative of customer order and is based on factors like nature of goods, location of the delivery and deadline, if any. This stage involves engaging with the best logistics partner so as to get the goods picked up from the warehouse and get them dropped at the destination safely. 

Factors to be considered while selecting the most appropriate mode of transportation with reference to Logistics

Determining the best transportation for sending and receiving goods is not a random deal. It requires extensive understanding about goods, timeline, urgency, cost, security and many other factors. Let's check out some factors to be considered while selecting the most suitable transportation for movement of goods.

1. Service Availability: First and foremost, a transport logistics company should be available providing services as per the trader's wants. 

2. Destination: Selection of transportation company depends on the location where goods are to be sent. It's a lot up to availability of transportation services.

3. Characteristics of goods: Goods can be of any kind. They can be solid, liquid or even gaseous state. Hence, transportation highly depends on the kind of goods being transported. For eg. printed books can be transported by roadways loading in a normal tempo but fresh milk has to be transported in cold container van.

4. Capabilities: Capabilities of the transportation company should be seen before sending goods along. Past experience of handling goods should be seen so as to decide upon. 

5. Customer Service: A transportation company should provide quick and efficient customer service so that queries can be solved in no time.

6. Stability of the Transportation Company: How organized and efficient the transportation company is something that decides the stability of the organization. An organization can be stable when they have a strong history of perfect and on time delivery.

7. Agility: Urgency of getting goods delivered as per time bounds or deadlines also play an important role in deciding upon the mode of transportation. Flight cargo is usually preferred for long distance delivery when it comes to urgency.

8. Cost of transportation: When there is no time bound implication, cheap and cost effective transportation be selected for sending goods. In reality, water ways are the cheapest. 

9. Regular services: Regular and frequent services is also factor while selecting transportation mode for regular traders. 

10. Safety and security: Most importantly, safety and security are one of the biggest factors influencing transport selection. A trader would always want his goods to get delivered in the best condition possible. 

11. Flexibility: Transportation should be flexible. And this is possible only when they run without much barriers. Air carriers and water carriers have time and operation restrictions, but the same doesn't apply for road movement.

Sales Promotion Techniques used in Export Marketing

When it comes to international sales promotion, there are a lot of strategies which can be applied. Formulating and implementing a strong sales promotion depends on the organizational objectives. It depends on the extent of promotion a brand wants to conduct. A brand may have several objectives like penetrating markets, gaining market share, creating consumer engagement, gaining market share or even making profits. Based on these objectives, an organization can adopt the below techniques to it' product promotion:

1. Targeted Promotions and Discounts

• Local Currency Pricing: Pricing products or services in the target country's currency simplifies the purchase decision and removes concerns about exchange rate fluctuations for the customer.

• Region-Specific Offers: Promotions tailored to local holidays, seasons, or cultural events can strongly resonate with an international audience.

• Early-bird Discounts: Offering limited-time discounts for early adopters can generate initial buzz and encourage early purchases.

2. International Partnerships and Cross-Promotion

• Collaborations with Local Distributors: Partnering with established distributors in a target market allows businesses to leverage local knowledge, networks, and existing customer bases. Offering exclusive promotions or incentives can motivate distributors to push sales.

• Joint Promotions with Complementary Businesses: Cross-promotions with non-competing businesses that serve a similar audience in the target market can increase reach. For example, this may involve collaborations on social media, co-branded events, or bundled offers.

3. Free Samples and Trials

• Product Samples: Offering small samples or trial versions of low-cost, non-perishable products can introduce potential customers to the offering and build brand trust.

• Free Trials for Software/Services: Time-limited free trials of software or services let international customers try before committing, demonstrating the value proposition. A streamlined onboarding process is crucial for success with this technique.

4. International Trade Shows and Events

• Participation as an Exhibitor: International trade shows are ideal for showcasing products/services, generating leads, and networking with potential customers in a specific market.

• Speaking Engagements: Becoming a speaker at industry conferences or events raises visibility, builds credibility, and increases exposure to a targeted audience.

• Targeted Networking: Proactive networking in events where potential international clients are present can create valuable connections and a better understanding of their needs.

5. Utilizing Online Platforms and Digital Promotions

• Localized Websites and Content: Translation of websites and marketing materials into the language of the target market is essential. Beyond language, considering cultural adaptation can further enhance customer engagement.

• Search Engine Optimization (SEO): Implementing tailored SEO strategies that focus on keywords and search patterns in specific target markets increases visibility with potential customers.

• Social Media Campaigns: Targeted paid advertisements and organic social media campaigns on popular platforms within a specific country or region can increase brand awareness and drive traffic.

• Email Marketing: Geographic segmentation of email lists allows for personalized offers tailored to different international audiences, boosting the relevance of communication.

6. Cultural Sensitivity: Adapt promotional materials and messaging to align with local customs, avoiding anything that could be considered insensitive within the target market. Brands should adopt targeting countries as per the culture followed there. It is believed that people are heavily connected to several beliefs and practices and when a marketer drops information appreciating such cultures, it tends to create a positive image of the brand in the minds of international audience. For example, launching a reasonable product with a Hindi-Sanskrit name in Indian market can attract many individuals. Similarly, supplying Halal certified consumer products in Islamic nations can experience greater trust and engagement.

7. Regulations: Being aware of local sales promotion regulations is crucial, as some countries may have specific restrictions.

8. Logistical Feasibility: Ensure the capability to efficiently fulfill orders to international locations. This involves considering shipping costs, lead times, and potential return/exchange policies. So as to enter into the depth of markets, a brand can create a strong network among wholesalers and retailers thereby, gaining a chance to enter into the deepest markets. A good target can be made across country / village side areas and the brand can be expanded. This requires marketers to establish contacts overseas to get their products listed in their showrooms or websites. This networking can favorably help an organization to not only sell products in the short run but also in the long run.

9. Direct Marketing: Conducting targeted direct marketing campaigns through email, direct mail, or telemarketing to reach potential international clients and customers directly. Sending personalized email newsletters with product updates and exclusive offers to international subscribers. 

10. Branding Initiatives: Investing in branding initiatives such as sponsorships, events, or brand ambassadors to enhance brand visibility and recognition internationally. Sponsoring a major international sports event or partnering with a celebrity ambassador to endorse products.

11. Customer Relationship Management (CRM): Implementing CRM systems and strategies to maintain strong relationships with international clients and customers. This may involve sending personalized thank-you emails or offering exclusive discounts to repeat international customers.

12. Content Marketing: Creating informative and engaging content such as blog posts, videos, or infographics to educate international audiences about products or services. Publishing how-to guides or tutorials in multiple languages to cater to diverse international markets.