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This article is written by Aakriti Bansal pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.

Introduction 

With the growth of the Internet and the emergence of globalization, many sectors and firms have now started to grow their businesses on a larger share and global scale. Whenever a business or a firm starts to grow and expand, many entrepreneurs start thinking to become more competitive in the world market.

They think of two different ways of competing in the world market which is either by import or export of goods and services. So what are basically imports and exports?

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Imports may be defined as any good or service which is brought from one country and then brought to another country.  While on the other hand, exports may be described as those goods and services which are being produced in our own home country and then sold outside in the world market. So, exporting your own product in the world market can be a very difficult job while it may give you some fruitful results. 

This article will focus on certain pointers that one needs to keep in mind while they start their own export business.

Importance of exporting and importing

Once different firms enter the global market, their businesses start functioning globally and internationally, so they have to consider many additional factors that can have a major impact on their growth and success. Export and import of different goods and services is not only the major factor that may lead to a large and successful business; it is a major factor that also helps national and international economies to flourish, grow and expand.

There is development in the economies once the countries start to export different goods and services they have in abundance and they import few goods and services they have in shortage. When we export some goods and import a few goods it also helps the consumers globally not only does it benefit the businesses. 

Consumers can take advantage of certain products that are not manufactured locally, but they are available in the market due to globalization and the consumers can buy them online from a business abroad. 

Besides, all of these individual businesses and entrepreneurs that make their own goods and services have a fair chance of making profits internationally, especially when after the Covid-19 pandemic most of the consumers are relying on online business and e-commerce for buying products.

Benefits of exporting

There are various reasons for exporting your own product in the global market. Here are the two key advantages of exporting products to other countries:

Increase in the sales potential

While the import of goods can help businesses in reduction of costs and labour, on the other hand, export of goods and services can increase sales and directly increase the sales potential. Businesses that focus on exporting goods and services expand their vision and markets regionally, internationally or globally. Instead of earning money by selling their goods in the local market, these firms focus on establishing new ways to present their work in the world market. 

Export of products is definitely beneficial for medium and large firms – the ones that have already expanded within the local market. 

Once they have explored the markets in their own country, the export of products globally can be a big opportunity for these businesses to increase their sales potential Additionally, exporting can be one way of scanning opportunities for overseas franchising or even production.

Increase in the profits

Export of goods can majorly contribute to increasing in one’s profits. The reason is due to the foreign orders because they are generally larger and bigger as compared to those placed by the local vendors. In the local markets, customers buy only a few products, businesses abroad generally order a container of products that is much larger and in turn leads to an increase in profits. Moreover, if your product is very different, unique or innovative in the global market, your profits can increase fourfold and rapidly in no time.

How to start your export business and legal compliances

India’s Foreign Trade, that is exports and imports, are regulated according to the  Foreign Trade Policy as stated by the Central government of India in the exercise of the powers given by section 5 of the foreign trade (Development and Regulation) Act 1992. Currently, the Foreign Trade Policy of 2015-20 is being effective from 1st April 2015.  As per the policy, export is described as an act of taking out of your own country, any goods or services by land, sea or air and with proper movement of money. Export in itself is a very wide term and a lot of preparations is done by an exporter before he plans to start his own export business.

 To start an export business, the following steps are required to be followed:

Establishing an Organization

To start an export business, first, a sole Proprietary concern/ Partnership Firm/Company needs to be set up according to the procedure with an attractive name and logo.

Opening a Bank Account

A current account with a bank authorized to deal in Foreign Exchange should be opened.

Obtaining Permanent Account Number (PAN)

It is important for every exporter and importer to obtain a PAN from the Income Tax Department.

Obtaining Importer-Exporter Code (IEC) Number

As per the Foreign Trade Policy, it is mandatory for any firm to obtain IEC for export/import from India. An application for IEC is to be filed online at www.dgft.gov.in as per ANF 2A, online payment of application fee of Rs. 500/-through net Banking or credit/debit card is made along with the required documents as stated in the application form.

Registration cum membership certificate (RCMC)

For availing the right to import or export of any good or product exporters is required to obtain RCMC granted by the concerned Export Promotion Councils/ FIEO/Commodity Boards/ Authorities.

Selection of Product

All goods and services are freely exportable except a few items that appear in the prohibited/ restricted list. Make sure that your product doesn’t fall in the prohibited category.

Pointers to keep in consideration when exporting your own product

1. Setting clear goals

The first step to keep in mind is to decide what you want to achieve with your exporting business and some facts about how you will be able to do so. Details might include:

  • business goals for your expansion,
  • your set level of sales,
  • the specific kind of product or service you want to export,
  • the target market and
  • a timeline for achieving these goals and other available resources in the market.

2. Research your market

The second most important thing to do is the first round of research on the targeted market. Information to collect from the market includes:

  • the size of the market,
  • the consumer tastes and preferences,
  • needs and perceptions of products like your own product in the domestic and international market,
  • your unique value proposition in the market regulatory,
  • certification,
  • trade and other barriers and
  • adequate potential support from Canadian and foreign governments for your exports. 

This information will give you a nice sense of whether the market you targeted is suitable or not for your business. “One of your purposes is to figure out why the consumers or the buyers should buy your product or service, in comparison to someone local or a competing exporter.

“Businesses often underestimate the amount of competition in the new markets. If you don’t see how you will be different, it’s better not to go to the targeted market.”

3. Choose your mode of entry

Third, you need to choose how you will enter the international market. You may need to rethink how you will get your products and services to the market. Do you sell directly to the end-user, or do you work with intermediaries such as wholesalers or distributors? 

If you sell directly to a target clientele, do you require the help of an in-country sales agent to “open the doors” for your product and facilitate sales?

You can consider choosing from a variety or combination of a number of options. This can take various forms, such as franchising, licensing, a joint venture, co-production and cross-manufacturing.

– Opening a physical presence.

This can be done by buying or renting an office or to hire a local representative.

– Selling through an online marketplace

You can offer direct sales through your e-commerce website. Selling indirectly could use methods like selling indirectly to a target market through another company that exports your products or uses them as components.

4. Price your product

Fourthly, once you now know what product you want to work with and you have identified your target market. Next in line is to figure out, how much to charge for your product. Typically, the business models which are based on an imports/exports business include two basic understandings: the volume of units sold, and the commission which is being made on that volume. 

Be sure to price your product such that your markup on the product (what ends up being your commission) does not exceed what a customer is willing to pay. But you do not want to make it too low such that you are not even going to make a profit on your sales.

5. Consider financing and insurance needs

In order to determine the amount and the type of financing that is required to support your exporting business, it is very important to calculate how your initial investment in production, shipping, hiring and other costs will affect working capital, keeping in mind that the foreign buyers may require longer payment terms. 

You need to see your banker about any financing needs that are required to cover shortfalls. It’s better to arrange for credit or loan ahead of time than to take the risk of a cash crunch when you wait for sales to ramp up in the market. You may also want to consider getting insurance to protect your company from unexpected losses in the future. 

6. The art of the deal

Negotiation is one of the key highlights for being an entrepreneur and being “the boss”.

This is where you can set the terms of your own business and drive a hard bargain. Negotiating is a key part of any business from the trader at your local market stall, to multi-billion pound companies all over the world. At every point of your import and export business, you are going to have to negotiate in the market. 

Once you have marketed your products, you’ll have to negotiate the price, the quantities, the samples and it won’t end there. When you approach buyers, you’ll have to negotiate in terms of the sale, the retail price, the wholesale price, minimum order, delivery time, exclusivity and the list can go on. Contract terms will also need to be negotiated. Before you enter into negotiations, you must develop a negotiating strategy.

Conclusion

While coming up with an idea does not cost anything, executing and materializing is what will create a successful business in the marketplace. It is also mandatory to keep in mind other factors such as taxes that would come at every stage of the business and also you should also consider tying up with some online apps and making your own websites for the products in order to reach a greater market and a large number of buyers. Import and export of goods and services will always be an encouraging and interesting business, and it will always help in opening up new sources for you and for your country. 

Reference 

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