Introduction to Export Marketing

• An attempt to explore foreign markets.

• Marketing across borders with a purpose of establishing brand, popularizing it and create demand for goods.

• Its a continuous process which involves application of both domestic and international marketing principles and strategies.

• Challenging due to invading a new country/market.

• Highly challenging as it involves dealing with different customers, their tastes and preferences, understanding them and their perception, experiencing their country's trade policy and competitors, obligating government and regulatory authorities and a lot more.

• Over and above, its a desire to spread your wings and taste the land of the other end.

1. Global Strategic Vision: A practical thought is first required to be generated in the minds of the exporter. There should be meticulous plans and strategies with immense research so that a company can set itself global.

2. Finance & Profits: A firm should scan it's financial standing first and think about entering new markets. Availability and existence of finance matters. The firm should should aim for profits as a reward for investing the finance.

3. Market Knowledge and Information: A firm intending to step into international business must posses high level knowledge about external markets. They should understand international needs and mould themselves accordingly.

4. Quality & Innovation: A potential firm should focus on quality and innovation. Focus can be made on acquiring patents through WIPO platform so as to develop a bright image in international eyes.

5. Promptness: A firm wanting to export should first value and  understand time. Orders must not only by dispatched on time but even other services must be taken well care of.

6. Technological Ability: Knowledge and application of cutting edge technology is essential before stepping into export business. A firm should have enormous focus and hold on technology being applied at work.

7. Stable Operations: Entering into international zone is also a derivative of operational stability. Right from getting materials for processing and production to arranging for the best supply chain is key area in getting a good business done.

8. Product Life Cycle: A firm wanting to preserve its old and existing product may try to supplying and rebuild it's life in overseas market. Apparently, such products can be settled at par in developing and under-developed nations.

9. Filling the Gap: A potential exporter should have the ability to produce and sell that item which can bridge the gap of demand and supply. Eg. OIL 

10. Research & Development: Research and development is that element which can take a firm one step close to overseas business. Proper R & D can lead to innovation thereby pushing the firm to stand class apart from international competitors.

An export business gets affected by several factors which are not an integral part of the business. Such factors may create a threat, opportunity or even a challenge for an exporter. Some of the external factors are listed below:

1. International Agreements: Agreements among various nations stands to be a very important factor in identifying successful markets. An exporter would choose those nations first with which his country holds a bilateral or a multilateral agreement.

2. Cooperation: Various nations can form close association and work together with common objectives which can become a positive factor for a potential exporter. An exporter may find it challenging to enter markets of those countries with which his nation holds no association.

3. International Barriers: Another external factor influencing export business are the tariff and non-tariff barriers imposed on specific non-member nations on certain trade.

4. Potential Growth: Analysis and study can make an exporter understand about potential growth and scope of trade in overseas market. Based on this analysis, the exporter can take a step ahead in promoting his goods overseas.

5. World Trade Organization: WTO is a supranational with membership of 164 nations. Due to this, they enjoy the status of Most Preferred Nation (MFN). This leads to reduction in import rates for member nations / MFNs thereby promoting import as well export. Well, another motivating and an influencing factor for a potential exporter to step into international markets.

6. Resources: Export business also depends on appropriate availability of physical, natural, financial and human resources. An opportunity can be grabbed if all these resources are well available with a potential exporter.

7. Benefits: One of the most important factors that motivate organizations to trade abroad are the various benefits been made available to exporters. In order to generate higher outward trade, Government bodies extend benefits and subsidies to exporters for their willful contribution towards the nation's forex. Benefits such as refund / waiver of GST on production, waiver of import duties on import of capital goods for manufacturing exportable goods, access and initiative schemes for merchants and services providers and duty credits. 

Commercial Risk

Commercial risk in export business refers to the potential financial and operational challenges and uncertainties that exporters face when conducting international trade. These risks can arise at various stages of the export process, from negotiating contracts and securing payments to shipping goods and receiving payment from overseas buyers. Understanding and mitigating commercial risks is crucial for the success and sustainability of an export business.

• Payment Risk: One of the primary commercial risks in international trade is the risk of non-payment or delayed payment by the foreign buyer. Exporters may face challenges in ensuring that they receive payment for the goods or services they export. Factors contributing to payment risk include economic instability in the buyer's country, currency exchange rate fluctuations, and the creditworthiness of the buyer.

• Credit Risk: Credit risk involves assessing the financial stability and creditworthiness of foreign buyers. Exporters need to evaluate the buyer's ability to pay for the goods or services. Extending credit terms without conducting proper due diligence can lead to non-payment and financial losses.

Political Risk

Political risk in export business refers to the potential adverse impact of political factors and events in foreign countries on an exporter's operations, investments, and profitability. These political risks can be unpredictable and can arise due to changes in a host country's government policies, regulations, or political stability. Understanding and managing political risk is crucial for exporters engaged in international trade. 

• Expropriation: Expropriation occurs when a foreign government seizes the assets or investments of foreign companies, including those of exporters. This can happen for various reasons, such as nationalization, confiscation, or forced takeover, often with or without compensation to the affected entities.

• Changes in Government: Political risk can stem from changes in government leadership, elections, or political instability in the host country. New governments may introduce policies that affect trade, foreign investments, or market access, potentially harming exporters.

• Sanctions and Embargoes: Political risk can arise from international sanctions or embargoes imposed by the exporter's home country or international organizations against the host country. These restrictions can limit trade and financial transactions. 

• Civil Unrest and Political Violence: Political instability, protests, civil unrest, and political violence in the host country can disrupt business operations, supply chains, and the safety of personnel. 

• Bribery and Corruption: In some countries, corrupt practices and demands for bribes may be prevalent. Exporters may face political risk if they choose not to engage in corrupt practices, as this could lead to unfavorable treatment by local authorities. 

• Trade Barriers: Governments can impose trade barriers such as tariffs, quotas, import restrictions, and non-tariff barriers (e.g., technical regulations, product standards) that hinder or disrupt exports. These measures may be introduced as protectionist policies, political responses, or in response to international conflicts. 

Transportation Risk

Transportation risk in export business refers to the potential challenges and uncertainties associated with the movement of goods from the exporter's location to the destination in a foreign market. This risk can impact the timely delivery of products, their condition upon arrival, and the overall cost of transportation. Some of the forms of transportation risks are:

• Delays in Transit: Delays can occur at various stages of the transportation process, such as loading, unloading, customs clearance, and during transit. These delays can be caused by factors such as congestion at ports, transportation strikes, adverse weather conditions, or infrastructure issues. Delays can lead to missed delivery deadlines and financial losses.

• Damage or Loss of Goods: The physical condition of goods during transportation is a significant concern. Exported products may be exposed to rough handling, theft, accidents, or damage due to environmental factors like temperature fluctuations or moisture. Inadequate packaging or improper handling can contribute to the risk of goods being damaged or lost.

• Container and Equipment Shortages: Transportation risk can arise from shortages of shipping containers or specialized equipment required for certain types of goods. These shortages can lead to delays in booking cargo space and increased transportation costs.

• Port Congestion: Congestion at ports and terminals can disrupt the flow of goods. Exporters may face delays in cargo loading and unloading, vessel berthing, and customs inspections due to overcrowded ports.

Legal Risk

Legal risk in export business refers to the potential challenges, liabilities, and uncertainties related to compliance with international trade laws, regulations, contracts, and legal requirements when conducting cross-border transactions. Exporters must navigate a complex web of legal issues to ensure their operations are in accordance with the laws of both their home country and the destination market.

• Contractual Risks: Exporters often enter into contracts with foreign buyers. Legal risks can arise from misunderstandings, disputes, or breaches of contract. Contracts should be drafted carefully to clearly define terms, responsibilities, and dispute resolution mechanisms.

• Intellectual Property (IP) Protection: Exporters must protect their intellectual property rights (e.g., trademarks, patents, copyrights) in foreign markets. Violations of IP rights, such as trademark infringement, can result in legal actions and reputational damage.

Exchange Rate Risk

Exchange rate risk in export business, also known as currency risk or foreign exchange risk, refers to the potential financial losses or uncertainties that exporters face due to fluctuations in exchange rates between their home currency and the foreign currency used for international trade transactions. This risk can impact the profitability and competitiveness of export operations. 

Natural Calamities Risk

Natural calamities risk in business, often referred to as natural disaster risk, refers to the potential adverse impacts that natural disasters, such as earthquakes, hurricanes, floods, wildfires, tornadoes, tsunamis, and droughts, can have on a company's operations, assets, and overall business continuity. These events are often unpredictable and can lead to significant financial losses, disruptions, and even the closure of businesses. 

• Recession in Global Markets - During recession, consumer spending falls. Therefore imports decrease. Interest rates are cut. Therefore, exchange rate depreciates making exports cheaper and imports more expensive. This reduction in the exchange rate improves the current account deficit of a nation, if seen wisely. Great Depression from 2007 to 2009 affected financial institutions and automobile industry in the US, which in turn affected Indian trade and finances. COVID-19 Crisis has affected Indian exporters in carrying out trade at full capacity. Massive amount of SMEs and Labour Intensive Based Industries have been affected due to the lockdown. This is due to closure of international markets in order to contain the deadly virus. 

• Protectionist Measures - Imposing heavy duties on imports to protect domestic industries is kind of Protectionist Measure. Such steps are taken by the Govt of a nation to protect its economy from international technology makers, patent creators, sci-fi knowledge so as to gain more control during a crisis like situation. USA, Europe, Canada, Latin America has exercised this to protect domestic jobs, national security, infant industries, health, safety and environmental standards and unfair competition. Post Great Depression 2009, USA announced the biggest bailout package “Buy American Clause” where firms getting financial assistance from the Government would buy American and not import. This affected Indian exporters, thereby collapsing Indian trade and Balance of Payment.

At present amidst the COVID Crisis, Indian Hon'ble Prime Minister remarkably announced “Aatmanirbhar Bharat” with an aim to go local and support Indian firms and industries. It aimed to create a sense of selfless belongingness towards raising demand for Indian products, thereby sidelining imported goods.  

•  Reduction in Export Incentives - Over a period of time, there has been a slight reduction in export incentives by the Indian Government like reduction in DBK rates, withdrawal of tax holidays which demotivates potential exporters. The increased paper, admin and clerical work also tends to stress out medium and small scale exporters. Link to check: All Industry Duty Drawback Rates Schedule (Revised) applicable w.e.f. 4th February 2020: CBIC Notification No. 7/2020 dated 28th January 2020 

• Competition from China - China is a massive producer and a lot of goods enter Indian market with the “Made in China” logo. Besides, a lot of goods are dumped in global markets at considerably low prices which is a blow to the Indian manufacturers and exporters. Analysis of export price indices shows that Indian exporters face competitive pressures from countries with lower production costs, i.e. China, Taiwan and Vietnam which adds pressure to the Indian exporters to maintain competitive pricing while ensuring quality standards.  

• Problem of Product Standards - An obligation to comply with foreign country requirements depending on quality, safety, sentiments, etc. which has to be adhered if you want to sell in that particular country. Standards ensure that products are qualitative, safe, environment friendly, etc. 

For eg. European Union nations require CE mark on electronic items to enter their market. 

Halal Certification is necessary to get trade permission in 117 countries. 

Food Safety and Standards Authority of India (FSSAI) regulates the import of food articles into India. 

International Standard Organization (ISO), a harmonized system accepted globally. 

China Compulsory Certification (CCC) is required for trading 19 categories of 130 products including electric fuses to auto parts. Required even for domestic trade. 

What's in India? 

According to the Bureau of Indian Standards (BIS) annual report for 2015-2016, there were 18,781 standards in effect as of March 2016. Of these, 5,119 Indian Standards have been harmonized with international standards. The BIS has signed 21 Memorandums of Understanding (MoU) pertaining to the standardization and conformity assessment with their national counterparts in other countries as well as with the International Organization for Standardization (ISO). The BIS has also signed two Mutual Recognition Arrangements (MRA) with Pakistan and Sri Lanka.

• Problem of Anti-dumping Duties - Duty imposed on inward goods priced below the fair market value of similar goods in the domestic market is called Anti-Dumping Duty. It's intention is to protect local organizations from getting hit by the cheap exports made by the certain nations.

Eg. USA imposed 62.5% ATD on Flat Panel Display (FPD) Screens being imported from Japan in 1991. 

USA imposed 500% ATD on selected steel imports from China to protect their domestic steel industry in 2015.

India has imposed ATD ranging from USD 13.07 per ton to USD 173.1 per ton on certain steel products imported from China, Vietnam and Korea in 2020.

Israel imposed ATD on imports of low voltage copper cables from Turkey ranging from 9 to 14% in 2019.  

• Marine Attacks - Marine attacks claim to be another threat to potential exporters globally. The Geneva Convention defines piracy as “an illegal act of violence, detention or depreciation through the use of a ship”. Piracy takes place in strategic areas. Attacks by pirates in the Somalia region of the Aden Gulf and Socotra Passage for ransom has always been on high focus. This also escalates insurance and security cost. Similarly, attacks on the Gulf of Guinea on crude tankers by mafias for robbing crude or even destroying vessels. Such attacks have been reducing over a period of time from 445 in 2010 to 162 in 2019. As per reports, Malacca Strait (Sumatra), South China Sea, Gulf of Aden (Yemen - Somalia), Gulf of Guinea (Nigeria - Benin) are most affected sea routes.

• Cases:

1. As per UN Reports (2005), MV Feisty Gas, A Hong Kong based liquefied petroleum gas tanker was seized by Somali pirates and was released after payment of USD 315000 to a pirate representative in Mombasa, Kenya.

2. Indian Vessel MV Safina al Birsarat, in 2016 was hijacked in the Somalian region but turned out to be a failed attempt by the pirates. The US Navy Vessel came for rescue and the pirates surrendered. Reports say they were imprisoned for 7 years. 

• Negative Attitude of Overseas Buyer (Acceptability Issues) - Indian Human Resources are highly valued but not all the products exported. Going global requires following international norms and quality standards along with serving domestic needs. Innovation, R&D, Strategic Partnership, Discipline, Think Global - Act Local concept, etc. should be followed by marketers and manufacturers so that hey can face off the unfavorable attitude of overseas buyers. 

Cases:

1. Jindal Steel and Power exited from Bolivia from Mining operations after a fight with the Govt. (2007)

2. Arcelor Mittal which employed over 20000 employee in France for running blast furnace announced shutting down of its furnace due to its in-competitiveness created a rage in France. (2012)

3. Haldiram Snacks were banned in USA claiming that they contain pesticides and bacteria, which is permissible in India. (2015)

4. Nestle Maggie was banned and rejected by consumers after confirming higher than permissible levels of lead and mono sodium glutamate in it. (2015)

5. Other Indian brands banned abroad includes Dabur Chyawanprash (Canada), Alto and Tata Nano, Kinder Surprise (USA), Bhakarwadi (un--branded), Desi Ghee (USA)

• Excess Documentation - Usually, an international supply involves a huge number of documentation which holds high significance. Every stage of consignment need to be documented so as to have clear evidence and proof of outwards, dispatch, transit, insurance, finance and taxes. In India, three major documents are required. A survey by the Federation of Indian Export Organizations (FIEO) found that exporters spend an average of 10-15 hours per week on paperwork and compliance-related activities. Administrative burdens increase costs and time to market.

(1) Bill of Lading (2) Commercial Invoice (3) Shipping Bill

• Regulations

Documents - Indian exporters are required to dispatch all export related documents through an authorized dealer. Documents can be sent directly only if RBI approval is obtained and advance payment is received.

Realization - An exporter cannot receive payment directory from the importer through cheque, draft, cash without RBI permit. Payments are routed only through authorized dealers like Financial Institutions or Banks.

Payment Period - Bills are to be realized within 6 months. Certain exporters are allowed to to extend credit beyond 6 months for eg. Units of SEZ, Sale of Capital Goods, etc. 

GR Procedure - GR Form (Guaranteed Remittance) is a mean of exchange control imposed by the RBI which states that export proceeds should be realized within 6 months from the shipment of goods.

SOFTEX - Indian exporters registered under STP, SEZ must file SOFTEX form to value the software exports. 

• Infrastructure - Availability of infrastructure is a big challenge for exporters. Infrastructure includes port size and capacity, port entry, loading, cranes, transportation, roads for connectivity, e-clearance, digital platforms, etc. Indian government has initiated numerous schemes under “Ease of Doing Business” as per Trade Facilitation Agreement of the WTO.  India has 12 major ports and 200 plus minor ports administered by Central and State Government of India. India is expected to have 2500 MMTPA (Million Metric Tonnes Per Annum) of cargo traffic from current 1500. The project is named Unnati focusing on Operational Efficiency Improvement, Capacity Expansion (Rs. 58884 Cr investment for 20 years to add 712 MMTPA). According to the World Bank's Logistics Performance Index (LPI), India's infrastructure ranking was 44 out of 160 countries in 2020, indicating significant room for improvement. Currently, delays at ports and inadequate road / rail networks is contributing to higher logistics costs. The Logistics Cost and Efficiency Survey by the Ministry of Commerce and Industry estimates that logistics costs in India account for about 13-14% of GDP, which is higher than developed countries. This high cost reduces competitiveness in global markets.

• Trade Blocs - Export business can be badly affected due to external trade blocs where the exporter's country is not a member. India is not a member of certain powerful associations such as NAFTA, CEFTA, ASEAN, EU, GCC, OPEC, etc. which can create hurdles for Indian exporters to enter into those markets. The Ministry of Commerce and Industry of India has various Foreign Trade Territorial Divisions to deal with bilateral relations with various such international associations like NAFTA, EU, Africa, ASEAN, WANA (West Asia and North Africa), etc.

• Finance - Reports suggest that access to affordable working capital finance remains a challenge for many Indian exporters, particularly SMEs. This further limits the exporter's ability to fulfill large orders or expand operations. However, the Export-Import Bank of India provides export credit finance, but uptake and availability vary across sectors and regions. This varying credit availability affects exporter's ability to offer competitive credit terms to overseas buyers, inviting contractual loss. 

All this would stand incomplete if you miss learning about Trade Data. As a tip, I am sharing couple of website site links presented by the Government of India and other International Authorities where you can get latest and most authentic data free of cost. Don't forget to check the following:

1. Top commodities exported and imported by India

2. NIRYAT

3. Export Potential Map

4. India's Trade Monitoring Dashboard

Note: When you check into the above links, don't forget:

1. Select the relevant year you want to.

2. Set the HS (Harmonized System) Code at 2 digits.

3. Select value as US$ to understand figures from global perspective. Eg. US $ 123,456,789,876 will be read as 123 Billions, 456 Lakhs, 789 Thousand and 876 Units. All thanks to the commas!