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Exporting and domestic selling are alike in many ways. Its marketing 101, except that your customers are outside, not within your country. Lets start with the similarities. Whether you're doing business in or outside your country:

• You have a product or service to sell, either your own or a client's if you're an intermediary.
• Your customers vary in their racial, religious, ethnic, cultural and linguistic orientations.
• Your marketing territory includes areas with differing seasons and physical environments.
• You do market research to pinpoint, size-up, and assess your customer base.
• You develop a market plan to plot your distribution, pricing and promotion strategy.
• You market and promote through flyers, mail, phone, press releases, the ad media, trade shows, etc.
• You set up sales and distribution networks to cultivate and service customers.
• You respond to inquiries and issue price quotes on request.
• You invoice purchasers and get paid.

Here are the main dissimilarities between domestic sales and exporting:

• Exports are more often channeled through intermediaries in each country, not directly to end-users: In most countries, imports are routinely handled by local agents on commission, or by importer-distributors who buy for their own account and resell to end users. These intermediaries know the market and have contacts with the end-users. They are assets for you, not extra layers. They develop and send you sales orders, arrange for payment in dollars, prepare all required import documents, and clear the delivered goods through customs. Many are equipped to stock, install and service the goods. The end-users know and prefer to deal with these local agents and distributors, rather than buy direct from you or other foreign suppliers. As the exporter, therefore, your best bet is to find a good agent (s) or distributor (s) to represent you abroad. To help you find qualified overseas agents and distributors, contact Machintel Industrial Corporation or state export office in your area.
  
  
• Exporters are paid in home currency converted from foreign currencies: The importer pays your purchase price in his local currency, converted to your currency at the prevailing exchange rate. To protect against exchange rate fluctuations, you should quote your selling price in your currency. That way, you get the amount you quoted in your currency, whether or not the importer has to put up more or less in equivalent local currency by the time payment is due.
  
  
• Export sales use different payment methods: Payment is normally on the basis of irrevocable letter of credit opened before shipment. Once a solid business relationship has developed this can be changed to payment on collection basis. Authorized dealers have been permitted to make advance remittance towards the import of capital goods. However, a guarantee from an international bank of repute situated outside India needs to be obtained by the banker if the remittance amount exceeds US$15,000.
  
  

An "ideal" exporter has four basic attributes-a committed management, a competitive product, adequate resources, and sound marketing methodology. Where do you stack up against this ideal?

• Management Commitment: A motivated management is the primary key to export success-Where there's a will, there's a way." If the will exists, ways can be found to make a product more salable; overcome or adjust to tight budgets; or try a better way to market a product. But that won't happen with a reluctant or indifferent management. Exporting takes time and perseverance to pay off. To be more than an occasional or incidental exporter, management must be willing to commit and see it through. Have you or your management reached this point? Do you see exporting contributing to sound, specific company goals? Do you want foreign sales to be a more significant facet of your business? Would you be willing to wait the 2-4 times longer it may take to develop new export business, compared with domestic selling? If you're not sure, you might try low-risk, "go-slow" approaches to test the waters and build more confidence in your export potential.



• Product Competitiveness: Products won't sell anywhere if they can't compete. To compete, your product must match or exceed the appeal of others-in meeting needs, in quality, price, etc. Are you exporting competitive? You may well be without realizing it. For example, if your product has sold reasonably well in the U.S., chances are it will also sell abroad. Why? Because, to do well here, the world's largest market, you've already proven you can compete, not only against other American products, but imported products as well. This is essentially the same competition you'll meet when you export. The overseas playing field will be different, and you may need to adapt your product and pricing somewhat to compete in specific markets. You might have to absorb added marketing and shipping costs to remain price competitive. You may have to offer credit and wait longer for payment to match competitors. You may need to alter your product to comply with local standards and tastes. Are you prepared to do what it takes to compete? If you can't or won't, you'll not prosper abroad unless you're the only game in town.



• Export Resources: If you're just starting, you'll need experienced staff, premises and equipment, as with any start-up business. That could be as little as yourself, a home-based office, and a computer, phone and fax. If you're already established, you'll need to research and develop potential markets abroad. As export orders come in, you'll need enough products on hand to fill them, or the ability to produce or acquire more product as needed. If your customers want delayed payment terms, you'll have to pay for financing. You can minimize these costs and still export, but you can't eliminate them entirely.



• Marketing Methodology: How you enter and develop a foreign market is important, and the best way may not be how you've done it here. Marketing and distribution practices vary by country, often dictated by law, custom or necessity. Some countries may require or prefer certain marketing or distribution methods, such as direct sales or use of local agents; others may control or prohibit them. Some may have excellent mass media and high receptivity to advertising, trade shows, mail order, etc. Others may shun these approaches, or not have the modern communications to support them. Are you prepared to adapt your marketing methodology where necessary? If not, you'll need to limit yourself to U.S.-like markets, such as Canada.

Exporting has benefits for the nation as well as the firms that export. The nation benefits when increased exports create jobs, spur economic growth, bring in more tax revenues, and improve the balance of payments. For firms, the number one benefit is more money. Whatever your business, you're mostly in it to make money. Exporting helps you do that by increasing your sales income, diversifying your markets, reducing your vulnerability to lags in domestic demand, extending product life cycles, using idle capacity, and reducing unit costs through economies of scale. Exports also help sharpen competitiveness, broaden contacts, and enhance understanding of global markets and cultures. Besides, exporting can be fun if you like to travel abroad and meet new people.

• Exports increase sales income: Selling more is the surest way to make more money, and exporting greatly increases your sales potential. If you're just selling domestically, you're basically competing for a larger slice of the Indian pie. With exporting, you expand the pie-the entire world is your market. Over 95% of the world's population and two-thirds of its purchasing power lie outside India. Many Indian firms have done just that. They started locally, expanded regionally, and then went nationally, increasing sales at each stage. But then they stopped, as if the vastly larger world market didn't exist. Why stop at the Indian border? There's no sales barrier that automatically begins where India ends, unless it's self imposed.



• Exports diversify market risk; offset lags in domestic demand: The world market is not only larger, but offers new sales options when business in India slows down. Exports can help offset sales lags during recessions and seasonal changes. When the Indian economy stagnates, other countries may be booming. As their production and consumption increase, their import demand also rises, including for Indian products. Similarly, when it's summer or winter in India, it's just the reverse in other parts of the world. These countries are in the market for the seasonal products you just stopped selling. So, in down cycles in India, why accumulate inventory, use less capacity, or lay off people while you're waiting for recovery? Explore export opportunities in growth economies. When your Indian season ends, why dump or mothball your goods until next year? Look for export sales in countries with complementary seasons.



• Exports extend product life cycles: As technology advances and tastes change, many products become obsolete or lose their appeal in Indian market. That doesn't mean they have no value elsewhere. In fact, products that run their course here may be just the ticket in other markets. Over half the world's economies are less developed. They may not need or can't afford your latest model. Last year's or even older may suit well enough-even used products if they're serviceable. Why scrap the old when the new comes out? Pursue exports in markets that still value your castoffs.



• Exports use idle capacity; reduce unit costs: Increased exports put idle production capacity to work and can often be achieved with the same equipment, staff and capital investment. With increased export production and sales, you can achieve economies of scale and spread your costs over a larger volume of revenue. You reduce your average unit costs and increase your overall profitability and competitiveness.

Costs of exporting can be kept low, but can't be avoided altogether. If you're starting from scratch, as with any business, you'll face the usual start-up costs for an office, furniture and equipment, supplies, etc. As a beginning exporter, you'll have some up-front research costs to identify your best markets. To enter and develop these markets, you'll incur costs to gain exposure, set up sales and distribution networks, and attract customers. As your exports increase, you might translate your sales literature, take overseas business trips, do more media advertising, and participate in trade shows abroad. In some countries, you may have to redesign or modify your product to meet local requirements or customer preferences.

Generally, the more you spend to prepare, promote and adapt for export, the greater your return. But don't be deterred if your funds are limited. You can start even on a tight budget. You can also borrow at reasonable rates to help with higher export start-up and operating expenses. Sources include home-equity loans, loans from family and Export Working Capital Loans.

• Self-Inflicted Risks: If you're a start-up intermediary, you're often in over your head if you try to find immediate "matches" for trade leads you've uncovered. Don't assume that any Indian supplier would welcome a sales opportunity, or would want you to represent them just because you found the lead. Remember, most of the manufacturers you contact don't and won't export. Even if they might, they'll want more details about the lead, the buyer, the market and you. You'll need to convince them the lead is viable, the market warrants their attention, you are conversant in their product and industry, and you're equipped to handle their export business. That takes knowledge of the market and experience in export mechanics and procedures. If you're not there yet, you'll either face lots of rejections or make mistakes that could harm you as well as your clients.



• Financial Risks: Your main concern is non-payment after you've shipped the goods, either because the importer can't or won't pay. You can largely avoid default by selling on a Letter of Credit (L/C) basis. Irrevocable, confirmed L/Cs virtually assure payment, because the buyer must deposit the money in advance at his bank, and an Indian bank then takes on the obligation to pay you. However, many foreign buyers want delayed payments -- say by sight draft within 30-120 days after the goods arrive. These are customary terms when you know and trust the buyer. You might also extend credit if your competitors are offering these terms. That increases your risk, particularly if, by payment time, the buyer's local purchase costs have increased due to depreciation against the rupee. You can protect yourself with Eximbank export credit insurance.
  
  If buyers won't pay, it's for two possible reasons-either you haven't complied with the terms of sale in their view, or they're dishonest. It's your responsibility to comply with the terms of sale. These are usually spelled out in the L/C and the shipping documents. With reasonable precautions, you can ferret out dishonest buyers. Banks and credit-reporting firms can do background checks on overseas firms. Some institutions provide detailed financial and commercial information on the companies you specify, including an opinion on whether the firm would be a "suitable" partner for Indian firms.



• Business Risks: Don't take a deal "too good to be true." It can happen here, there and everywhere. Take elementary precautions to check out potential business partners. Beware of outright scams. These promise rich rewards for up-front advances, such as guaranteed access to lucrative government procurements. Nigeria, in particular, is notorious for such scams backed with impressive documentation and testimonials.
  
  Greasy palms are a potential problem. In many countries, petty and not-so-petty graft are common. The line between what's customary and tolerable, and what's excessive or illegal is not always clear. If you're in doubt, seek advice from a lawyer or country specialist. Be wary of firms out to copy or "pirate" your technology once they get a "sample" or the first shipment. Take special care appointing overseas agents and distributors. They may already represent your competitors; they may be so overloaded they can't do your products justice; or they may not have the qualifications or capabilities they claimed, such as the ability to stock, install and service your goods. In some countries, once you sign an agent/distributor agreement, it's almost impossible to terminate.



• Legal Risks: Every country has its own business laws and regulations, and you're presumed to know them. Many are similar to Indian laws or follow international standards, and pose no particular problem. Some vary widely by country, affecting import procedures, agent/distributor agreements; treatment of intellectual property; rights to own businesses or land; tax liability; currency trading; health and technical standards; and what you can eat, drink or wear. Failure to comply could trigger fines or worse. Take the time to do market research, and seek legal advice as needed.



• Political Risks: Political upheavals occur less frequently now than before, but could still erupt. Dramatic changes could result, including major economic shake-ups, nationalization, expropriations, loss of personal rights, and physical dangers. These could prompt foreign reactions in the form of economic sanctions, boycotts and embargoes. You have no control over events. If you're caught in the middle, recourse is limited and slow, so be alert to what's happening in the world. More common are the shifts to the economic right or left that often come with periodic elections. These can be "good" for Indian exporters, not necessarily bad. For example, the shift toward privatization and freer trade in Latin America, Eastern Europe and the former Soviet Union offer major new opportunities for Indian exporters.
  
  The Reserve Bank of India may open representative or liaison offices in India with approval. These offices cannot accept this type of office can generate orders or sign contracts and no profits. Branch office activities in India may result in legal liability being imposed directly on foreign home offices for business activities in India. Franchising arrangements in India are very rare.
  

Sections 182 to 238 of the India Contract Act govern agent-principal relations. The types of commercial agents recognized under Indian law are brokers, auctioneers, del credere agents, and insurance agents.

Premature revocation or termination of an agreement by the principal without just cause requires that compensation be paid to the agent. Agent-principal relations may be terminated prematurely if the agent is guilty of misconduct in the discharge of duties. Depending on the agent-principal contract, the agreement may be terminated upon: expiration of the contract term; death or incapacity of the agent; death or incapacity of the principal; completion of the business; impossibility of execution by reason of law or destruction of the subject matter.

Companies choosing an agent for the Indian market should make sure that the agent have an office, or is located in Delhi. This will increase the chance that they receive up-to-date notice of policy changes and government procurement notices. The agent should be the main distributor since Indian law does not permit foreign companies to have marketing subsidiaries in India. The exclusive agency agreement is the most common type of agreement in India.

India's import licensing policy was designed to conserve foreign exchange and promote import substitution, but has been relaxed for the current five-year period. Under a new Import-Export Policy announced April 1, 1992, and effective for five years, most goods have become freely importable, no longer requiring import licenses. A sharply curtailed negative list remains in effect which: bans three items outright; bans all consumer items and computers valued at less the Rs 150,000 (US$ 5,000); restricts 68 items and reserves eight products for import by public sector trading companies. The revised policy has also abolished requirements that all goods be imported by the end-user, allowing imports for stock and sale by distributors and wholesalers.

Indian import controls still apply to some industrial items and most consumer goods. As a result, companies interested in the Indian market should become familiar with the licenses or other controls necessary for the import of their particular products.

Import duties are applied to almost all goods entering India. The tariff system is based on the Harmonized System (HS) with most tariffs being charged on an ad valorem basis. Tariffs are in the 40 to 60 percent range for basic raw materials, 60 to 100 percent for semi-processed goods, and 100 percent and above on finished and consumer goods. Luxury items can be taxed at rates up to 110 percent. Companies should check import duties for their particular product because rates are product specific.

All imports now fall into one of the following four categories:

(i) freely importable items - Items in this category do not require import licenses and may be freely imported by any individual or entity.

(ii) Licensed imports - Certain items can be imported only with licenses and only by the actual users. The current "negative list" indicates all items, which require licenses and what conditions are applicable to import that item.

(iii) Canalized items - Items under this category can be imported only by specified public-sector agencies.

(iv) Prohibited items - Items that are completely banned from importation.

Import approval is based on compliance with procedures whereby specific items may be imported by certain types of importers under certain types of licenses.

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