Advantages and Disadvantages to Direct Exporting

Developing a Foreign Market Entry Strategy

Direct exporting means you export directly to a customer interested in buying your product. You are responsible for handling the market research, foreign distribution, logistics of shipment and for collecting payment.

The advantages of this method are:

  • Your potential profits are greater because you are eliminating intermediaries.
  • You have a greater degree of control over all aspects of the transaction.
  • You know who your customers are.
  • Your customers know who you are. They feel more secure in doing business directly with you.
  • Your business trips are much more efficient and effective because you can meet directly with the customer responsible for selling your product.
  • You know whom to contact if something isn't working.
  • Your customers provide faster and more direct feedback on your product and its performance in the marketplace.
  • You get slightly better protection for your trademarks, patents and copyrights.
  • You present yourself as fully committed and engaged in the export process.
  • You develop a better understanding of the marketplace.
  • As your business develops in the foreign market, you have greater flexibility to improve or redirect your marketing efforts.

The disadvantages:

  • It takes more time, energy and money than you may be able to afford.
  • It requires more "people power" to cultivate a customer base.
  • Servicing the business will demand more responsibility from every level of your organization.
  • You are held accountable for whatever happens. There is no buffer zone.
  • You may not be able to respond to customer communications as quickly as a local agent can.
  • You have to handle all the logistics of the transaction.
  • If you have a technological product, you must be prepared to respond to technical questions, and to provide on-site start-up training and ongoing support services.

Direct exporting can reveal itself in various organizational forms, depending on the size of an enterprise and the number of years that a firm has been engaged in exporting.  For example, here are ways in which direct expansion activities can occur:

  1. Hire an export sales manager.  In its simplest form, a company will have an export sales manager with some administrative help and support.  The export sales manager leads and directs all export sales activities.
  2. Establish a separate export department.  An export sales department is largely self-contained and typically operates independently of domestic operations.
  3. Setup an export sales subsidiary.  Some businesses prefer to setup an export sales subsidiary instead of an export department in order to keep export activities separate from the rest of the firm.
  4. Form a foreign sales branch (FSB).  Instead of a foreign sales subsidiary, a firm can also form a FSB.  A FSB is not a separate legal entity.  A FSB handles sales, distribution and promotional efforts throughout a specific overseas geographic area and sells to a firm's target customer -- agents, wholesalers and distributors, for example.  

    Should you decide to export direct, make sure you have a company-wide commitment, which includes your Import/Export Dream Team to ensure the initiative is fully supported.

    Photo credit: Laurel Delaney, Narita Airport, Tokyo, Japan

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