The distinction between direct exporting and indirect exporting is on the basis of how the exporter carries out the transaction flow between himself and the foreign importer or buyer. In indirect exports, the manufacturer utilize the services of various types of independent marketing middlemen. In other words, when a manufacturer exports indirectly, he transfers the responsibility for the selling job to some other organization. On the other hand, in direct export, the responsibility for performing international selling activities rests on the producers. These activates are carried out by organizations that are administratively a part of the manufacturer’s company organizations.

The indirect method is more popular with firms, which are just beginning their exporting activities, and with those whose export business is not considerable. Indirect exporting has the following advantages:

i.    Standing in the market: A new exporter’s name will be an unknown element and therefore, even though the price and quality of the produce may match those of the new companies, the new entrant will be at a disadvantageous position. In such a situation it would be easier to gain credibility in the market if a known distributor can be persuaded to handle the product, because the standing of the distributor will help in assuring the customers about the quality of the new merchandise.

ii.    Economies of Scale: Customers of certain range of products genially purchase a set of complementary products rather than one. A distributor handling complete line can therefore effectively economize on selling costs. A manufacture-exporter, selling directly may not enjoy this economic advantage, unless it is very large company manufacturing a complete line of complementary products.

iii.    The firm does not have to build up an overseas marking venture.

iv.    The channel is simple and inexpensive.

v.    The risk involved is less.

vi.    Little or no investment required to enter the international market place.

vii.    The manufacturer incurs no start-up costs for the channel and is relived of the responsibilities for physically moving the goods overseas.

viii.    The intermediary very likely represents several clients who can help share distribution cost, the costs for moving the goods are further reduced.

ix.    No company personnel are required to do the overseas business.

x.    The middleman may have an established network of sales offices and international marketing & distribution knowledge.

This method is, therefore, advantageous for firms with small means and for those whose limited export business does to justify large investments in developing their own international marketing infrastructure.

The main limitations of the indirect method of exporting are:

i.    The manufacturer gives up control over the marketing of its products to another firm. This situation may adversely affect the product’s success in the future.

ii.    If the chosen intermediary is not aggressive, the manufacturer may become venerable, especially in the case where competitors are careful about their distribution practices.

iii.    The indirect channels may not necessarily be permanent. Being in the business of handling products for profits, the intermediary can easily discontinue handling a manufacturer’s product if there is no profit or if a competitive product offers a better profit potential.

iv.    If the product has a long purchase cycle and requires a large amount of market development and education, then the export middlemen may not devote the necessary effort to penetrate into a new market.

For more help in Indirect Exporting click the button below to submit your homework assignment