Export Guide Essay

12243 Words May 22nd, 2013 49 Pages
7.1 When exporting indirectly, is it better to use a merchant or an agent in the export marketing channel? Explain.
When exporting indirectly, whether it is better to use a merchant or an agent when exporting depends on the objectives and needs of the exporter. A merchant takes title to the goods and assumes most of the risk. In return for this, the merchant consumes a greater share of the return, receiving a greater share of the producer’s profit margin. This can be justified for a producer who has little foreign market and export knowledge or is very risk adverse. An agent does not take title to the goods and so most of the risk remains with the producer. Agents act by bringing buyers and sellers together without assuming the
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The separate export department is larger and more self-contained and self-sufficient. It may be structured on a basis of function, geographic region, product, customer, or some combination of these. It is formed as export activities increase and helps resolve problems inherent in the builtin department. An export sales subsidiary is created in an attempt to completely divorce export sales activities from domestic operations. It allows for unified control of export activities, control and accountability for costs and profits, placing of orders with the most suitable plant, easy access to sources of finance for export activities due to separate financial position, handling a more complete line of products due to its ability to carry those from outside sources, and exploitation of some tax advantages. The largest concern it can create, aside from its cost, is in the question of setting a transfer price.
7.8 ‘The decision facing the export marketer concerning establishing a foreign-based sales subsidiary is a difficult and complex one to make.’ Discuss.
A foreign sales subsidiary is a separate entity

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