Are you ready to export to India...

An Expert's View about Banking and Finance in India

Last updated: 9 Dec 2010

Selling your products or services internationally is the key to your business growth. To assess whether you are ready for exporting, first ask yourself the following three questions:

  1. Do you currently have a successful product or service in the domestic market?
  2. Is your product or service reasonably attractive for the foreign markets? (To answer this, you may consider unique features of the product, not too easy to copy, attractive for foreign customers & their ability to pay for it, export and import regulations, etc.)
  3. Are you ready to commit dedicated resources (financial, manufacturing capacity, staff, time...) to support marketing abroad?

If the answer to each of these questions is an unqualified yes, you are way ahead of the game. There is of course a lot more to know and do before you are really ready to jump in the International arena, but all of it is rather straightforward and an extensive Eco system exists to support you to do it successfully. Here are some of the important items you need to do:

1. Market Research

This is the most important first step. You can do it yourself or hire a consultant to do all or part of the research. The objective is to choose an initial target market in a well-defined geographic territory and a local sales channel appropriate for your product. With the help of your local partner and potential customers, you will need to understand the selected market's requirements for price, style, packaging, labeling, etc. for your product taking into account export/import regulations and cultural preferences.

A lot can be gleaned from the trade magazines and the research reports available on the Internet. It is priceless, however to attend a trade show that attracts foreign customers and distributors. You can exhibit at the show, take a speaking role in a business forum, and hold meetings with the perspective buyers and distributors. It is also a good place to gauge customer interest, their ability to pay, getting feed back in modifying your product, checking what your competition is offering, what channels they are using etc.

2. Sales Channel management

If you intend to use a distributor for selling your product, you first have to select a distributor and create a legally binding agreement with the distributor.

Prior to committing anything in writing, conduct a thorough due diligence on potential distributors such as, checking on their track record, verifying their commitment to your product, etc.

Keep the agreement concise, cover all aspects of business operations, responsibilities and money flow in advance. For instance, does it cover who is responsible for and will pay for local product registrations?

You need to pay special attention to training, promotional material, customer support, performance tracking, delivery schedules, quality inspections, frequency and means of communications, etc.

Make sure both sides have a skin in the game, gain more or less equally from the terms and conditions because either both succeed or neither does.

Get the distributor up and running. Make sure to frequently visit the market, distributors, and prospects.

3. Shipping your product overseas

You can do it yourself but it will not be easy. A thorough knowledge of export paper requirements for your product is a must. Alternately you can use an international freight forwarder or an integrator for this purpose.

A friendly and experienced freight forwarder can be a very valuable partner that can take care of numerous export issues, reduce your shipping costs and free you to attend to what you know best: producing and marketing your product.

If you have simple and infrequent shipments with no personalized service required, an integrator such as UPS may be a good choice.

4. Develop working knowledge of export payment mechanisms

Your choices include cash, letter of credit, open account etc.

Cash payments can be in the form of wire transfer, check or credit card, wire transfer is the safest option. You need to be aware of the issues with checks and credit cards (processing fee, delay in collection, fraud etc.)

A letter of credit is issued by a bank on behalf of the buyer in favor of the seller. In effect, the bank promises to make the payment to the buyer upon presentation of the documents listed in the letter of credit. There are further nuances to various forms of letter of credit that affect terms and timing of the payment.

Open account i.e. waiting for the payment after goods are shipped and received by the buyer is the most risky of the methods and should be avoided or used only in a known and proven relationship.

5. Learn how to arrange for export financing

The availability of working capital for an export transaction is important for worry free operations. You may make use of the credit of the foreign buyer for this purpose (through a transferable letter of credit, for instance).

If you need working capital for exporting, you may use the US SBA's Guaranteed Export Working Capital Loan Program. US-based exporters can benefit from the programs by obtaining a working capital guarantee from Ex-Im Bank.

6. Know who can help you

Your local, regional, national, or international chambers of commerce are a good source of information and support.

Export.gov set up by the US Commercial Service has detailed research reports specific to many industry sectors in numerous countries written by experts in International trade. You can also sign up and make use of extensive services offered by the US commercial service.

Export consulting companies can be very helpful in getting you up and running in no time.

Have fun doing this and your business will go from surviving to thriving in no time.

More is available at www.entryindia.com


Useful links:

  • Entry India : The intent of this site is to provide timely and reliable information, and practical support to SMEs and entrepreneurs so they can succeed in their business initiatives in India. For example, 'News you can use' offers news items that can directly affect your business in India, 'Events' lists selected business conferences & expos where you can meet potential partners and experts, ' Money Transfer ' displays US$-Indian Rupee exchange rate in real time and the best way to send or receive money from India.
Posted: 07 December 2010, last updated 9 December 2010

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