WEBVTT Kind: captions Language: en 00:00:13.360 --> 00:00:21.120 Hello, good morning to all of you. Welcome back for my module 2. So, and we will, 00:00:21.680 --> 00:00:29.840 today we will discuss various international business entry modes. Okay. So, how you can enter 00:00:29.840 --> 00:00:35.120 in an international market or a foreign market; so, there are various modes of entry. So, each 00:00:35.120 --> 00:00:40.720 one of those modes we will discuss step by step so that you understand each one of them. Then, 00:00:40.720 --> 00:00:49.760 after once I complete that, then we will discuss certain theories, uh and these theories, you need 00:00:49.760 --> 00:00:56.640 to understand because these are very essential before you make a huge investment in a country. 00:00:56.640 --> 00:01:01.920 So, these are basically the theories which help you to take a very, very 00:01:02.480 --> 00:01:10.800 correct decision. Then we will uh; so, today's all sections, all these discussions will be based on 00:01:10.800 --> 00:01:16.240 the various modes of entry as well as couple of theories wa in international uh marketing. 00:01:17.120 --> 00:01:19.680 So, these some theories are in international finance, 00:01:19.680 --> 00:01:25.200 some theories are in international marketing. So, we will all discuss that uh today. So, 00:01:25.200 --> 00:01:32.560 I hope uh uh we can have a great learning session and we will start now with the uh one. 00:01:33.120 --> 00:01:37.840 So, the international business, as I have discussed, it involves carrying 00:01:37.840 --> 00:01:43.360 out the business activities across the national borders of the country. Okay. So, 00:01:45.040 --> 00:01:52.960 so, imagine you are an Indian company and you are now trying to establish an international network 00:01:53.760 --> 00:02:00.960 outside India and say our neighboring countries Bangladesh, Myanmar, Sri Lanka and all these 00:02:00.960 --> 00:02:09.520 countries you want to start your business. So, it is across the border; so, that means 00:02:10.320 --> 00:02:15.280 you should have the knowledge about each of these countries, each of these markets 00:02:15.840 --> 00:02:23.760 and then you have to then decide how I enter in this market with what type of an entity. 00:02:23.760 --> 00:02:29.440 Is it through a distributor or a through a dealer or should I have a licensed agent or should I 00:02:29.440 --> 00:02:36.400 have? So, there are various ways we can decide. So, this is, this here comes in most complexity 00:02:36.400 --> 00:02:44.560 because till now you have done the business within the domestic geography. So, imagine you are having 00:02:44.560 --> 00:02:51.360 a plant or the factory somewhere in Chennai and your customers are somewhere in Jammu Kashmir or 00:02:51.360 --> 00:02:58.320 somewhere in uh what is called your northeastern states or somewhere in uh Gujarat, in Ahmedabad. 00:02:59.200 --> 00:03:04.560 So, the each of these states, the size of the market of each of these states for your product 00:03:04.560 --> 00:03:11.120 are different. Then the logistics, the supply chain, the complete channel distribution, 00:03:11.120 --> 00:03:16.560 everything will be different because the way you market or way you distribute a markets 00:03:17.440 --> 00:03:22.480 in Gujarat or the size of the market in Gujarat may not be identical the size of 00:03:22.480 --> 00:03:28.640 the market what is in northeastern, various northeastern states or maybe in Maharashtra 00:03:28.640 --> 00:03:34.080 or Delhi or Chennai. So, there are enough complexities are there in domestic business. 00:03:34.080 --> 00:03:39.120 So, then you have to decide about how you, what is the size of each of the state 00:03:39.840 --> 00:03:46.640 of your (cust) target customer and then currently who are the competitors in that market and then 00:03:46.640 --> 00:03:53.120 whether you will put your own sales force in that large, in the states where the potential is very 00:03:53.120 --> 00:03:58.640 high. Will you put your own sales force there or will you put a dealer there? Or the market, 00:03:58.640 --> 00:04:03.760 the competition is fierce, they have a directly sales people there, so, should you follow 00:04:03.760 --> 00:04:10.160 the same structure or not? So, these are all dimensions in your inter uh domestic business. 00:04:10.720 --> 00:04:14.880 Now, imagine you are, you know you are a citizen of this country, 00:04:15.520 --> 00:04:20.160 you know about the various cultures various, you have the data available 00:04:20.160 --> 00:04:24.720 about the competition, size of the market and all those information is available. 00:04:25.440 --> 00:04:32.080 It is also available; it is also easy for you to send the goods from Chennai to Gujarat or may be 00:04:32.080 --> 00:04:39.600 to Mizoram or Meghalaya through, by truck or by train or by air you can send it; and there are 00:04:39.600 --> 00:04:47.760 no customs border there and there is no one; you just uh send the goods and then the ca, through 00:04:47.760 --> 00:04:52.560 the transport and the, your customer or your distributor will receive the goods. 00:04:52.560 --> 00:04:54.880 So, there is no complexities there in that. 00:04:55.520 --> 00:05:02.400 Now imagine you are now going to a market Bangladesh. So, the moment you enter Bangladesh, 00:05:02.400 --> 00:05:06.400 the product enters to your (Bangla), you enter Bangladesh, you have to have an idea 00:05:06.400 --> 00:05:11.680 about how big is the size of the market of your product. Okay. So, same Chennai factory will 00:05:11.680 --> 00:05:17.520 be now selling in Bangladesh and how big is the size of the market? Who are the players at this 00:05:17.520 --> 00:05:23.680 point or who are the competitors? What is their market share? And then, what are your products? 00:05:23.680 --> 00:05:28.560 How that product will be beneficial for the consumers or the customers in that market? 00:05:28.560 --> 00:05:32.160 And what are your points in your brand, whether the your 00:05:32.160 --> 00:05:38.480 points of parity or points of disparity or points of difference there? All those things 00:05:38.480 --> 00:05:43.600 will be now very, very important. Then it comes, we will discuss the all all 00:05:43.600 --> 00:05:48.320 the marketing uh functions what we; we will discuss in one of the class; we will discuss 00:05:48.320 --> 00:05:54.400 these marketing functions. So, we will go and in the Bangladesh market, what we have to do? 00:05:54.400 --> 00:06:00.560 We have to also find it out what is the distribution network; that is, 00:06:00.560 --> 00:06:07.280 channels of distribution. Should we put, should we put a distributor there or should we put a 00:06:07.280 --> 00:06:12.320 direct sales people there or should we have a licensed agent there? All those things are very, 00:06:12.320 --> 00:06:18.240 very critical and it becomes very complex also. Now, imagine at the same time, the same factory 00:06:18.240 --> 00:06:22.800 from Chennai, you will be supplying to Bangladesh. You will be now going to (sing) uh what is called 00:06:22.800 --> 00:06:28.640 Sri Lanka and also maybe Thailand and maybe Myanmar and all these countries you will go. 00:06:28.640 --> 00:06:33.840 So, the complexities will be much more. So, I have explained you the complexities from 00:06:33.840 --> 00:06:40.240 moving from Chennai within the country to Gujarat and Jammu Kashmir or Punjab or to 00:06:40.240 --> 00:06:44.960 northeastern states. Now, the complexities will be much more because the, you are going 00:06:44.960 --> 00:06:50.000 to a new geography and which is a different country, different culture, different 00:06:50.000 --> 00:06:57.760 the, and the entire marketing, uh all the 4 piece of the marketing has to be reevaluated 00:06:57.760 --> 00:07:03.360 at that marketplace. And at the same time, you are going to 4 different markets or 5 different 00:07:03.360 --> 00:07:08.560 markets or maybe 10 different markets or 20 different markets; it is all very, very complex. 00:07:10.160 --> 00:07:16.080 So, so international business, these activities carried out in the global and transaction 00:07:16.080 --> 00:07:22.000 level, (tran) transnational level. Marketing mix, as I have said, and the strategy are designed 00:07:22.000 --> 00:07:27.440 according to the international targeting audience. So, I will have a different marketing mix; 00:07:27.440 --> 00:07:33.120 that means, the product, price, promotion and distribution, these all 4 piece mix. I will have 00:07:33.120 --> 00:07:37.920 different for Bangladesh, I may have different for Sri Lanka. I may decide that in Bangladesh 00:07:37.920 --> 00:07:44.240 I will have my direct sales uh team there to sell there, because size of the market is big. 00:07:44.240 --> 00:07:48.480 Maybe Sri Lanka market is small, I might decide to put 1 distributor there. 00:07:49.280 --> 00:07:54.800 And the market maybe in Thailand or maybe in Malaysia, size of the market is very big, 00:07:54.800 --> 00:08:00.640 I might put my own plant, my subsidiary there in that market. So, it all depends and it all depends 00:08:00.640 --> 00:08:05.680 on the target audience, size of the market and the decision of the company what type of entry 00:08:05.680 --> 00:08:12.240 strategy we should do in that market. And business can be defined, carried out in different modes; 00:08:12.240 --> 00:08:18.080 we will discuss that in the next slide.So, why we do the international business? 00:08:18.080 --> 00:08:23.760 Why? Why? What for we are doing the international business? We are, we we are a la; suppose we are 00:08:23.760 --> 00:08:29.600 a large domestic company and we are very happy and we have a large domestic market share, so, 00:08:29.600 --> 00:08:34.240 why we want to go in the international market? So, the international, the reason; there are 00:08:34.240 --> 00:08:40.240 several reasons can be; one can be the the the entrepreneur or the owners, they might think to 00:08:40.240 --> 00:08:46.480 make the brand global; that is one of the reason. They might have an large production capacity at 00:08:46.480 --> 00:08:51.440 the plant, they may be using 70 percent or 60 percent of the production capacity, there is some 00:08:52.000 --> 00:08:56.320 available production capacity there; so, they can use that production capacity to 00:08:56.320 --> 00:09:00.800 build some more (pla) equipments so that they can sell in the international market. 00:09:01.920 --> 00:09:08.320 They they, there is also another dimension there. That is the, some of the foreign markets, 00:09:08.320 --> 00:09:14.080 as I explained in my previous class, the GDP and; I have explained the GDP and 00:09:14.080 --> 00:09:19.520 then also I have explained the foreign exchange reserves, balance of payment, 00:09:19.520 --> 00:09:25.200 balance of trade; and you find the GDP of a certain country; few countries are very, very, 00:09:25.840 --> 00:09:32.240 growth rate is very high and you want to invest in that. Then the third reason comes when the 00:09:32.240 --> 00:09:36.000 domestic market, there are several constraints in the domestic market, because, you know, 00:09:36.000 --> 00:09:42.160 the market has become now, too many competitors at the marketplace and huge price competition. 00:09:42.160 --> 00:09:48.720 And then, the, to increase 1 percent for, typically for FMCG goods, which is fast moving 00:09:48.720 --> 00:09:53.920 consumer goods, maybe increase of 1 percent or 2 percent market share will be a tough task. 00:09:55.440 --> 00:10:02.400 So, I have very limited growth can be one of the reason that the, my domestic market is not 00:10:02.400 --> 00:10:06.880 really growing or domestic market is going through some economic recession or some, 00:10:06.880 --> 00:10:11.920 the some competitor has come up with a product and I I cannot compete with 00:10:11.920 --> 00:10:16.160 the (com) market leader. So, there are several factors can be there. 00:10:16.160 --> 00:10:22.880 So, to, in order to reduce the risk, then the company decides that instead of depending on 00:10:22.880 --> 00:10:28.320 a single market, let us go and spread and go to the international market. 00:10:30.080 --> 00:10:37.200 There is another huge impetus there for earning the foreign exchange, because if you know, if you 00:10:37.200 --> 00:10:42.640 are earning the foreign exchange for the country, there is a huge uh gain for the country, because 00:10:42.640 --> 00:10:48.720 country's foreign exchange reserve increases and also you get several incentives from government 00:10:48.720 --> 00:10:54.880 for earning the foreign exchange by by the way of exports or by the way of exports you earn that. 00:10:56.160 --> 00:11:04.480 And then you can get some tax benefits from there. So, these are all the reasons why we go from a 00:11:04.480 --> 00:11:13.040 domestic market to international market. Clear? Okay.So, then there are various modes of entry to 00:11:13.040 --> 00:11:21.200 the international market. So, first take it as a list and I have used this from the International 00:11:21.200 --> 00:11:27.920 Finance Management, the book I have referred there, and there are various sources of going to 00:11:27.920 --> 00:11:35.680 international market. The first one is exporting, the first one. I will explain each one of that. 00:11:36.480 --> 00:11:43.440 Then number 2 is licensing agreement; number 3 is the franchisee; then joint venture; 00:11:43.440 --> 00:11:48.480 then setting up a new foreign subsidiary; acquisition of an existing operation. So, 00:11:48.480 --> 00:11:52.080 each one of this I will discuss step by step with you. Okay.So, 00:11:56.720 --> 00:12:02.960 what is exporting? So, here, the domestic company, here the domestic company 00:12:04.480 --> 00:12:11.840 decides that I have some excess plant capacity, I have the same product which I am producing in 00:12:11.840 --> 00:12:15.600 India or in my domestic country; whatever maybe the country; I am producing. 00:12:15.600 --> 00:12:22.160 This product might have a, is having a good market in the neighbouring country or some X country, 00:12:22.160 --> 00:12:30.880 there is a good uh market there. Now, it is first I decide that let me test, let me check 00:12:30.880 --> 00:12:36.880 whether this product can be sold in a market uh, either neighbouring market or by market 00:12:36.880 --> 00:12:40.720 may be in the middle east market, whether these Indian products can be sold or not. 00:12:41.520 --> 00:12:48.880 So, I will then, what I will do as an domestic company, I will consider, I will discuss, I will 00:12:48.880 --> 00:12:56.080 find it out a distributor in that country and I will have some arrangement with the distributor, 00:12:56.080 --> 00:13:01.680 some legal agreement with the distributor and then distributor, I will fix a distributor. 00:13:01.680 --> 00:13:07.840 Say I am going to a market in Bangladesh. So, I decide that the products what we manufacture 00:13:07.840 --> 00:13:13.920 in India, I will be marketing these products in Bangladesh. So, I have surveyed the market, 00:13:13.920 --> 00:13:19.280 I have, I came to know the size of the market is this, I have done some sort of a test marketing, 00:13:19.280 --> 00:13:24.880 I have done some some amount of market research to find out maybe some secondary research, maybe in 00:13:24.880 --> 00:13:31.040 some, in for large product, some civil products we can do some primary research also to find out what 00:13:31.040 --> 00:13:36.880 is the size of the market, what is the customer expectation and what is the, who is the dealer, 00:13:36.880 --> 00:13:42.720 what is their share and then all those details we collect typically for the Bangladesh market. 00:13:43.920 --> 00:13:51.440 Now, we then wanted to test. So, easiest one is to export first. So, there is not much of cost there. 00:13:51.440 --> 00:13:57.040 Why? Because you have to find out a distributor there who is already having a legal establishment 00:13:57.040 --> 00:14:03.520 in Bangladesh. So, he has a legal license to do the business in Bangladesh. Then you 00:14:03.520 --> 00:14:08.000 you would start talking, you identify the distributors. You may have 3, 4 or 00:14:08.000 --> 00:14:12.720 5 distributors. You you go, you some of your executive visits Bangladesh 00:14:12.720 --> 00:14:19.360 and meets with couple of distributors, discuss with them and then shortlist them based on their 00:14:19.360 --> 00:14:23.280 past performance, financials and all those you shortlist. 00:14:24.400 --> 00:14:31.120 These distributors are a legal entity in that market; so, what they will do? You will sell the 00:14:31.120 --> 00:14:38.160 product and in foreign exchange, say in u, in this case, in US dollar you will send to Bangladesh 00:14:38.160 --> 00:14:44.160 distributor. So, you will, the Bangladesh, you will first give a quotation or to the Bangladesh 00:14:44.160 --> 00:14:50.400 distributor that my product X, quantity this, unit price is this, will cost this much, 00:14:50.400 --> 00:14:58.160 I can give you a cost. So, this one is, they will, then distributor will look into that and then 00:14:58.160 --> 00:15:02.880 distributor might negotiate with you the pricing and then credit terms and all those; we will teach 00:15:02.880 --> 00:15:06.480 you in the various, how are the various payment mechanisms and all those, we will 00:15:06.480 --> 00:15:11.840 teach you in the later course of this uh ba International Marketing later say lectures. 00:15:13.200 --> 00:15:16.880 So, I will, what we will do, we will appoint the distributor, we will have a 00:15:16.880 --> 00:15:22.400 legal agreement with the distributor. And then, this this agreement needs the legal 00:15:22.400 --> 00:15:27.920 people to weight the agreement and ensure that it follows the uh law of the country 00:15:28.560 --> 00:15:32.560 of Bangladesh, it follows the law of the country where the agreement is made and 00:15:32.560 --> 00:15:37.880 also an international agreement; you have to, this agreement has to be uh 00:15:39.040 --> 00:15:45.360 done and the both the parties has to sign legally with all the exit clause. 00:15:45.360 --> 00:15:50.960 That is, if distributor decides that I will not sell this product after 6 months, after 1 year, 00:15:50.960 --> 00:15:56.800 so, there should be an exit clause in that and all those. Okay. I will take certain business problems 00:15:56.800 --> 00:16:04.080 with you in the later course of lectures, where a company wants to remove the distributor and come 00:16:04.080 --> 00:16:08.640 directly to the market, then what are the various options. We will go into detailed discussion in 00:16:08.640 --> 00:16:15.440 that uh business uh problems. So, the, here, to make the things very simple, we have identified a 00:16:15.440 --> 00:16:21.680 distributor in Bangladesh and we have, and we have given the product to them, a quotation to them. 00:16:21.680 --> 00:16:28.560 They bought one, the demo product from us; we have given a demo product at discounted price. 00:16:28.560 --> 00:16:34.560 And the distributor is now having their own sales force and they are importing in dollars 00:16:35.280 --> 00:16:40.880 and they are paying the customs duty to Bangladesh government and clearing the consignment and taking 00:16:40.880 --> 00:16:46.800 the consignment from seaport or airport to their office or to their warehouse and from 00:16:46.800 --> 00:16:50.640 there their sales people are selling. So, you do not have anything in that country, 00:16:50.640 --> 00:16:56.960 you do not have any any network there except the distributor who says that you are the, 00:16:56.960 --> 00:17:03.840 they are the exclusive distributor of company ABC India Private Limited. Okay. 00:17:05.520 --> 00:17:08.800 You can appoint 1 distributor, you can appoint 4 distributors, you can appoint 5 distributors, 00:17:08.800 --> 00:17:12.800 you can have 1 national distributor and then you can have regional distributors. So, 00:17:12.800 --> 00:17:17.440 depending on the size of the country, depending on the business, all those things you can do that. 00:17:17.440 --> 00:17:22.720 So, what happens here? You invoice, you manufacture the goods at your Chennai factory 00:17:23.280 --> 00:17:29.120 and then you invoice the goods; now it is an invoice. Invoice means you are changing the 00:17:29.120 --> 00:17:35.440 title of the goods of the, title of the ownership from your company ABC India Private Limited to 00:17:35.440 --> 00:17:41.360 the company Bangladesh, say XYZ Bangladesh uh company distributor you are sending. 00:17:42.000 --> 00:17:46.160 So, you are giving it to your freight forwarder. We will teach you all this 00:17:46.160 --> 00:17:52.000 in detail uh in the in the next lectures. So, what are the various modes of transportation 00:17:52.000 --> 00:17:56.000 and all those things? What are the international terminologies? All those things we will teach you; 00:17:56.000 --> 00:18:00.160 but time being, just you understand that we hand it over to a freight forwarder 00:18:00.160 --> 00:18:03.200 who carries these goods from Chennai, from your warehouse 00:18:03.840 --> 00:18:12.080 to the airport in Kolkata and from Kolkata airport it goes by air to Dhaka in Bangladesh. 00:18:12.080 --> 00:18:18.960 And then and then Bangladesh, you send the entire invoice to the, through bank or there 00:18:18.960 --> 00:18:25.760 may be various mechanisms; we will discuss. Right now, let us not concentrate on the modes or the, 00:18:25.760 --> 00:18:30.640 how we collect, the payment mechanism or the transportation and all those things; 00:18:30.640 --> 00:18:36.320 right now make it very simple to understand what exactly is the situation there in, how we export. 00:18:36.320 --> 00:18:39.440 So, then we send these goods to Bangladesh. 00:18:40.640 --> 00:18:48.000 The Bangladesh, the distributor then receives the goods from there and then he pays the customs duty 00:18:48.000 --> 00:18:54.800 as per the customs duty uh structure, duty structure in Bangladesh, clears the consignment 00:18:54.800 --> 00:19:02.080 and then takes it in his inventory and then he again sells it to his Bangladesh customer. 00:19:02.080 --> 00:19:08.240 So, he again invoices; so, he becomes the legal owner of your product. Okay. So, that means you 00:19:08.240 --> 00:19:15.520 have transferred your title from ABC India limited to the Bangladesh company XYZ Bangladesh. You have 00:19:15.520 --> 00:19:20.800 transferred the title of the goods and the goods he has received in good condition and he has now, 00:19:20.800 --> 00:19:26.320 in his inventory, he is the owner of the goods. Now he is selling the goods in Bangladesh. You 00:19:26.320 --> 00:19:30.480 have no responsibility; they will sell the goods and they will earn profit by selling 00:19:30.480 --> 00:19:37.360 that. In this process, you have earned foreign exchange; they have made you payment in dollars. 00:19:37.360 --> 00:19:43.840 So, that is typically, the foreign exchange has come to your India and your company has earned 00:19:43.840 --> 00:19:49.440 the, got the payment in US dollar. So, this is known as a direct exporting. Clear? So, this 00:19:49.440 --> 00:19:56.400 is known as a direct exporting. Then comes what is indirect exporting. So, indirect exporting is that 00:19:56.960 --> 00:20:02.320 you are same cha; I am just giving example; in this case, you are the same company in India, 00:20:02.320 --> 00:20:06.480 ABC India Private Limited in Chennai; you have a manufacturing there. 00:20:07.760 --> 00:20:11.520 You have not gone and searched the distributor. 00:20:12.080 --> 00:20:17.440 In this, in in in this indirect export, you have not, you have no idea who are the distributors, 00:20:17.440 --> 00:20:21.600 you have not done any search cost for the distributors or anything there. 00:20:21.600 --> 00:20:24.960 So, you have gone there and you have wanted to 00:20:24.960 --> 00:20:29.680 uh, you have not been to the Bangladesh but you; maybe you had been to Bangladesh but you 00:20:30.400 --> 00:20:35.280 you could not find it out a good distributor or you do not have the resources to do that. 00:20:35.280 --> 00:20:42.880 So, what you do in this case? You approach some export house. So, there are several export houses. 00:20:42.880 --> 00:20:50.720 Their job is to to get the orders internationally and supply it from the local market. 00:20:50.720 --> 00:20:56.800 So, you approach one of the export houses and this export houses participate in various international 00:20:56.800 --> 00:21:04.080 tenders. And then, you get one of these order from this export house and you sell to a export 00:21:04.080 --> 00:21:11.280 house. So, export house, you will sell your goods in the export house in India in Indian rupees. 00:21:11.280 --> 00:21:18.880 Okay. So, your goods, you, the export house in India will place an order on you in Indian rupees 00:21:18.880 --> 00:21:24.320 for the goods as per your quotation and then you supply the goods to the export house. 00:21:24.960 --> 00:21:31.520 Then export house will finally sell the goods say in Bangladesh or in middle east, somewhere 00:21:31.520 --> 00:21:39.360 to their, in to to their customer directly. So, export house will invoice your goods to the 00:21:39.360 --> 00:21:44.480 foreign customer who is located in middle east or maybe in Bangladesh or maybe in any foreign 00:21:44.480 --> 00:21:52.320 country. In this case, you are not in contact with your end customer at the, end customer 00:21:52.960 --> 00:21:57.360 where in the, say in middle east or in Bangladesh. The export house is in contact; 00:21:57.360 --> 00:22:01.440 but the product; say this is the product what you have manufactured 00:22:01.440 --> 00:22:07.760 is now moving across the geographic, Indian geographical boundary and going to international 00:22:07.760 --> 00:22:14.000 market, say in middle east or Bangladesh, but this is done by in the export house. 00:22:14.000 --> 00:22:19.760 You have not done anything, you have only sold to the export house. So, the export house will 00:22:19.760 --> 00:22:25.120 make the payment to you in Indian rupees and you will deliver the goods to the export house, 00:22:25.120 --> 00:22:32.640 but your good has moved the Indian, out the Indian geography, moved out of Indian geography and gone 00:22:32.640 --> 00:22:39.280 to middle east or Bangladesh or any country. So, the goods has moved to the foreign market, 00:22:39.280 --> 00:22:44.080 but foreign exchange has not come to you, foreign exchange has come to the export house. 00:22:44.080 --> 00:22:49.280 So, you understand the difference, indirect export. In indirect export, goods or the 00:22:49.280 --> 00:22:58.560 services has moved outside the country but the payment mechanism, the foreign exchange or the 00:22:58.560 --> 00:23:04.880 invoicing has been done by a different company, the export house who has done the invoicing. This 00:23:04.880 --> 00:23:10.240 is known typically as indirect export. That means, your good has moved to the foreign country but the 00:23:10.240 --> 00:23:14.960 payment has, the foreign exchange has not come to you, foreign exchange has come to an export house. 00:23:14.960 --> 00:23:21.120 So, in this case, you have changed your title of goods from your company's name to the export house 00:23:21.760 --> 00:23:27.280 and then export house then change the ownership or the title of the goods from their name to 00:23:27.280 --> 00:23:31.600 the foreign company's name. So, and the transaction, the financial transaction, 00:23:31.600 --> 00:23:36.000 the foreign exchange transaction is between the foreign country and the export house, 00:23:36.000 --> 00:23:40.240 not with you, but your good has moved the geographical out boundary 00:23:40.240 --> 00:23:44.880 and gone there to the international market. Clear? So, this is known as indirect export. 00:23:46.240 --> 00:23:51.360 Okay. So, direct exporting which I have explained to you, the exporters deal directly with the 00:23:51.360 --> 00:23:56.240 foreign customers. As I have told, the ABC India Limited will directly deal with the 00:23:56.240 --> 00:24:01.840 foreign customers. They can build the connection with the customers, we can, the distributors, 00:24:01.840 --> 00:24:07.120 we can do. However, direct export may be costly for exporter because documentation 00:24:07.120 --> 00:24:12.720 and international involvement, because there are serious document, there are several documentation 00:24:12.720 --> 00:24:16.880 required for sending the goods and also the international involvement. 00:24:16.880 --> 00:24:21.840 You need, there people need to travel to uh for direct export, meet with the distributor, search 00:24:21.840 --> 00:24:26.800 distributor, meet with the customer, understand the requirement; if the product requires service, 00:24:26.800 --> 00:24:32.320 then that service setup should be there, your distributor's uh technical people or the engineers 00:24:32.320 --> 00:24:38.080 has to be trained to provide the service; all those things cost lot of money. So, direct exports 00:24:38.080 --> 00:24:41.520 directly deals with the foreign customers. So, remember it is a directly dealing with a 00:24:41.520 --> 00:24:46.160 foreign customer, where you change the title of your goods from your company's name directly to 00:24:46.160 --> 00:24:51.600 the foreign company's name and earn foreign exchange against the supply of the product. 00:24:52.640 --> 00:24:57.360 Indirect export as I have explained to you, exporting firm do not directly deal with the 00:24:57.360 --> 00:25:01.280 foreign country. So, I am not dealing with the fa, I do not know who is the foreign customer. 00:25:01.280 --> 00:25:05.040 So, intermediaries like the export house are the dealing hands. 00:25:05.040 --> 00:25:12.480 No direct relation between exporter and foreign (con) customer and no direct relation; 00:25:12.480 --> 00:25:17.840 there is no direct relation between exporter and foreign customers. And exporter, I do not know 00:25:17.840 --> 00:25:24.880 who is my customer and exporter is dependent on intermediaries or for market intelligence. 00:25:24.880 --> 00:25:29.520 So, I do not know, I have to depend on the intermediaries like these export houses for 00:25:29.520 --> 00:25:34.800 the market intelligence. What is the size of the market? How much is the demand? And then, 00:25:34.800 --> 00:25:38.960 what is the feedback about the product? I do not have any access to this market. Okay. 00:25:39.920 --> 00:25:45.440 And relations with the (consta) customers in the foreign market. So, I do not have any relation, 00:25:45.440 --> 00:25:51.520 it is totally within the intermediaries or the export house who is in between there. Clear? 00:25:51.520 --> 00:25:55.200 So, these are the very first and very beginner thing 00:25:55.200 --> 00:26:00.080 in this international marketing what is known as export and indirect export. Clear? 00:26:00.800 --> 00:26:07.040 So, next session, we will teach about the various other modes of entry, but you all remember, 00:26:08.320 --> 00:26:14.880 first attempt to go to the international market is through direct export or maybe you can start 00:26:14.880 --> 00:26:20.880 through indirect export initially and then once you have sufficient amount of sales of indirect 00:26:20.880 --> 00:26:26.160 export, you get some knowledge about the market through these customs houses selling the large 00:26:26.160 --> 00:26:32.880 amount of your products in this foreign markets, then you slowly convert this to a direct export 00:26:32.880 --> 00:26:39.040 model, go to that country, visit and then fix up a distributor there or a dealer there and then sell 00:26:39.040 --> 00:26:44.800 it to them or maybe start up your own subsidiary there; all those things we will discuss later. 00:26:44.800 --> 00:26:48.720 So, the first step can be indirect export for some (com) domestic companies. 00:26:49.520 --> 00:26:55.360 Some domestic companies might decide the first step can be a direct one also. Clear? So, it it 00:26:55.360 --> 00:27:00.240 can be a mix of both. In some countries you can start with indirect export, in some countries you 00:27:00.240 --> 00:27:05.520 can start with direct export, depending on your finance, uh depending on your capital available 00:27:05.520 --> 00:27:10.880 with your domestic company. Clear? That is all from my side in this slide. Thank you very much.