Tag: NEP 2020 Notes

Import and export of goods into and outside a country should undergo a customs clearance process. The importer and exporter of the goods should submit valid documents to clear this process. In this article, we look at some of the major steps and processes in clearing customs in India.

Calling of Vessels

Once the vessels carrying the goods reaches the country, the person who carried the vessels should make sure that the calling of vessels is done at the customs port. For instance, if goods are imported via aircraft, the pilot is responsible for call of the vessels at the customs airport. There is no requirement for the importer to get involved in this process and will be done by the airline or shipping line.

Filing Import General Manifest (IGM)

The person-in-charge of the vehicle should file an Import General Manifest electronically before the goods arrive. This file would include the details of all the goods imported by the vessel.

Post Verification Operations

On review of the Import General Manifest and post verification of documents, the customs authorities will grant entry inwards to the vessel, assign an IGM number to the manifest and permit the master of the vessel to land and unload the cargo.

Custody of Custodian

On arrival of the vessel, the goods would remain in the custody of the Custodian until it clears the customs process. A custodian may be a person approved by Principal Commissioner or Commissioner of Customs for this purpose. Imported goods can be unloaded subject to the following conditions:

• A note to unload the goods should be mentioned on the manifest report.
• Could be unloaded only at the approved places in the customs port.
• Under the supervision of the approved authorities.
• Should be unloaded only during working hours.

Filing Bill of Entry

The importer of the goods should file a bill of entry (customs copy) electronically for the clearance of the goods, before or on arrival of the goods. In the bill of entry, the duty and taxes to be paid is assessed by the importer himself and this is called self- assessment. The importer will self-assess the duty after considering the applicable rate of exchange and the rate of import duty. On approval of the Bill of Entry, the importer has to pay the GST and duty which will be entered in the Indian Customs Electronic Date Interchange System (ICEDIS). Once it is entered in ICEDIS, a bill of entry number will be generated.

The importer should then submit the bill of entry (customs copy), the duty-paid challan and other supporting documents to the port authorities for making an order permitting clearance. After making an order permitting clearance, the port officer would generate duplicate bill of entry (importer’s copy)  and triplicate bill of entry (exchange control copy). Both the copies will be handed over to the authorized person later.

Delivery of Goods

On showing the customs clearances to the port authorities, the importer can take the delivery of his goods. In case of cargo deposited in a warehouse, the importer would another bill of entry called the ex-bond bill of entry to clear the whole or part of the warehoused cargo.

There are a few exemptions from Customs duty, and they are as follows.

• The Central Government can grant exemptions by issuing a notification. Capital goods and spares can be imported under “project imports” at concessional/ Nil rate of customs duty.
• Section 25 of the Customs Act authorises the Central Government to issue notification granting exemption from customs duty partially or wholly on any goods.
• The exemptions may be in respect of primary duty or auxiliary duty.
• General or specific exemptions may be granted. While general exemptions are in respect to the user of goods, specific exemptions are in respect of various products.
• The exemptions are also granted subject to fulfilment of certain conditions.

Types of Exemptions

The following are the types of exemptions from Customs Duty.

• By notification
• By particular order on the Adhoc basis
• General exemptions
• Exemptions to Oil and Natural Gas Corporations Limited (ONGC)/ Oil India Limited (OIL)
• Other exemptions

“Customs Duty Drawbacks”

“Drawbacks” about any goods manufactured in India and exported has either of the following meanings.

• Rebate of duty chargeable.
• Rebate of duty of excise.
• A drawback is equal to the Customs duty paid on imported inputs and the Excise duty paid on indigenous inputs.

Value of the Customs Act

Customs Duty is an amount that is payable as a percentage of ‘value’ often called as ‘Assessable Value’ or Customs Value. Sections 14(1) provide the following criteria for deciding ‘value’ for Customs Duty.

• Price at which such or like goods are ordinarily sold or offered for sale.
• Price for the delivery at the time and place for importation or exportation.
• Price should be in the course of International Trade.
• Seller and buyer have absolutely no interest in the business of each other, or one of them has no interest in the other.
• Price should be sole considerations for sale or offer for sale.
• The rate of exchange as appropriate on the date of presentation of Bill of Entry as fixed by CBE&C (Board) by Notification should be considered. This criterion is entirely appropriate for valuing export goods. However, in the case of import goods valuation is required to be done according to valuation rules as stated in Chapter 6 Para 5 of the CBE & C’s Customs Manual, 2001.

“Coastal goods” means goods, other than imported goods, transported in a vessel from one port in India to another [Section 2(7)];

“Dutiable goods” means any goods which are chargeable to duty and on which duty has not been paid [Section 2(14)];

“entry” in relation to goods means an entry made in a bill of entry, shipping bill or bill of export and includes the entry made under the regulations made under section 84; [Section 2(16)];

“Export”, with its grammatical variations and cognate expressions, means taking out of India to a place outside India [Section 2(18)];

“Export goods” means any goods which are to be taken out of India to a place outside India [Section 2(19)];

“Foreign-going vessel or aircraft” means any vessel or aircraft for the time being engaged in the carriage of goods or passengers between any port or airport in India and any port or airport outside India, whether touching any intermediate port or airport in India or not, and includes –

(i) Any naval vessel of a foreign Government taking part in any naval exercises;

(ii) Any vessel engaged in fishing or any other operations outside the territorial waters of India;

(iii) Any vessel or aircraft proceeding to a place outside India for any purpose whatsoever [Section 2(21)];

“Goods” includes:

(a) Vessels, aircrafts and vehicles;

(b) Stores;

(c) Baggage;

(d) Currency and negotiable instruments; and

(e) Any other kind of movable property [Section 2(22)].

“Prohibited goods” means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with [Section 2(33)];

“Stores” means goods for use in a vessel or aircraft and includes fuel and spare parts and other articles of equipment, whether or not for immediate fitting; [Section 2(38)];

Levy and Collection of Customs duty

There are four stages in any tax structure, viz., levy, assessment, collection and postponement. The basis of levy of tax is specified in Section 12, charging section of the Customs Act. It identifies the person or properties in respect of which tax or duty is to be levied or charged. Under assessment, the liability for payment of duty is quantified and the last stage is the collection of duty which is may be postponed for administrative convenience.

As per Section 12, customs duty is imposed on goods imported into or exported out of India as per the rates specified under the Customs Tariff Act, 1975 or any other law. On analysis of Section 12, we derive the following points:

(i) Customs duty is imposed on goods when such goods are imported into or exported out of India;

(ii) The levy is subject to other provisions of this Act or any other law;

(iii) The rates of Basic Custom Duty are as specified under the Tariff Act, 1975 or any other law;

(iv) Even goods belonging to Government are subject to levy, though they may be exempted by notification(s) under Section 25.

Custom Tariff Act, 1975 has two schedules. Schedule I prescribes tariff rates for imported goods, known as Import Tariff‖ and Schedule II contains tariff for export goods known as Export Tariff.

Sample size Variables Based on Target Population

Before you can calculate a sample size, you need to determine a few things about the target population and the sample you need:

Population Size: How many total people fit your demographic? For instance, if you want to know about mothers living in the US, your population size would be the total number of mothers living in the US. Not all populations’ sizes need to be this large. Even if your population size is small, just know who fits into your demographics. Don’t worry if you are unsure about this exact number. It is common for the population to be unknown or approximated between two educated guesses.

Margin of Error (Confidence Interval): No sample will be perfect, so you must decide how much error to allow. The confidence interval determines how much higher or lower than the population mean you are willing to let your sample mean fall. If you’ve ever seen a political poll on the news, you’ve seen a confidence interval. For example, it will look something like this: “68% of voters said yes to Proposition Z, with a margin of error of +/- 5%.”

Confidence Level: How confident do you want to be that the actual mean falls within your confidence interval? The most common confidence intervals are 90% confident, 95% confident, and 99% confident.

Standard of Deviation: How much variance do you expect in your responses? Since we haven’t actually administered our survey yet, the safe decision is to use .5; This is the most forgiving number and ensures that your sample will be large enough.

Calculating Sample Size

Okay, now that we have these values defined, we can calculate our needed sample size. This can be done using an online sample size calculator or with paper and pencil.

Your confidence level corresponds to a Z-score. This is a constant value needed for this equation. Here are the z-scores for the most common confidence levels:

90% – Z Score = 1.645

95% – Z Score = 1.96

99% – Z Score = 2.576

If you choose a different confidence level, use this Z-score table* to find your score.

Next, plug in your Z-score, Standard of Deviation, and confidence interval into the sample size calculator or into this equation:**

Necessary Sample Size = (Z-score)2 * StdDev*(1-StdDev) / (margin of error)2

Here is an example of how the math works assuming you chose a 95% confidence level, .5 standard deviation, and a margin of error (confidence interval) of +/- 5%.

((1.96)2 x .5(.5)) / (.05)2

(3.8416 x .25) / .0025

.9604 / .0025

384.16

385 respondents are needed

The potential for international marketing is enormous for Indian firms. The fast expansion of the international business, as indicated by the current statistics available from appropriate sources is an indication of this. The scope of international business for developing countries is amply demonstrated by the rapid strides made by several developing countries like South Korea, Taiwan, Hong Kong, Singapore and Peoples Republic of China. Indias performance, in comparison with these countries has been very poor. Developing countries like South Korea with very good economic performance has such well known multinationals like Hyundai, Daewoo, Samsung, LG, which are making inroads into India whereas India with its massive size and diverse resource base and which has a longer history of industrialization can hardly boast anything of that sort.

The rapid strides made by several other developing countries in the international market, and trends of the growing economic power of the developing countries described earlier are indication of the enormous global business opportunities which Indian firms could exploit.

A look at some of the successful Indian example, covering products ranging from bullock cart technology to high-tech would indicate the strategies Indian firms may employ to seize the various opportunities.

Product modification to suit the requirements of the foreign markets will enable international marketing of many products by Indian firms. Examples include TI cycles. Hero cycles, TTK pressure cookers etc.

Another international marketing opportunity which a number of Indian firms may avail of is the one provided by the vocation of certain industries / segments of the market in the developed countries by the large players as they become unattractive for them. For example, several dominant firms have vacated the ply tire segment in the developed markets as this segment has shrunk due to the popularity of radial tires. Similarly developed country firms have given up several chemical products due to various reasons.

Indian firms with products of acceptable quality may explore the foreign markets. The Pricol, supplier of dashboard instruments to Maruti, thus entered the US market in a small way and today it is an international player. The Sundaram Fastners, which was adjudged as one of the 20 best Asian companies, is a highly reputed global supplier of automobile parts like radiator caps to dominant players like General Motors. There is enormous opportunity to take advantage of the growing global sourcing. The growing foreign investment in India and development of quality consciousness in Indian firms will encourage the growth of an ancillary sector of quality products and thus enlarge the Indian base for global sourcing.

Firms which are suppliers to foreign firms or whose products are sold under foreign brand names may explore the possibility of selling their own products under their own brand names.

There are a number of products in which the developing countries have advantage like textiles, leather, gems, and jewellery, seafood etc. Although these are among Indians important export items, the nation has not been very successful, when compared with several other developing countries, in exploiting these opportunities.

Many products, which become off patent, provide international marketing opportunities for firms of developing countries like India because of the low cost advantage. A number of them pose technical challenges. The Technocrat Industries, an Indian firm set up in 1972 by two fresh graduates from IIT, succeeded in mastering the technology of drum closures, precision products used to seal drums in which oil and chemicals are stored, competed with the MNC in the Indian market and entered foreign markets . Several Indian pharmaceutical firms are globalizing using generics and bulk drugs as their mainstay.

India is an important exporter of many products like spices and seafood. They are, however, mostly commodity exports. A lot of potential exists for developing their value added exports. There is also considerable scope for quality improvement, product development and value addition in respect of several other categories like leather, textiles, etc.

There can be a temptation to go too broad

Linked to this, sometimes when companies set out on international marketing research projects, they make the mistake of going too broad and trying to understand a region as a whole. Another error we see is firms commissioning research to target one market and then using this as a jumping off point into others with “similar” attributes. This inevitably leads in costly mistakes as brands map their assumptions about one market onto another.

To avoid this, be clear on the emphasis of your research. Where are you looking to focus? Why? Looking too broadly across a region of different markets, or exploring how an entire product range might perform, can cloud the picture.

International markets are incredibly diverse

Some business fails to appreciate the diversity within a region or indeed a country. Only by rooting out the nuances of different geographical areas, cultures and consumers, can you get an accurate picture of what people value and whether your products and services might succeed.

Customer Understanding

In particular trying to understand the customer or the consumers in an international market. Often, we have to conduct international marketing research. That does come with some specific challenges or hurdles that we have to overcome.

Language Issues

One language issue is translating our materials. Whether it’s a survey or interview questions or even an advertisement, translating those things into the native language in another country can prove really challenging. Often, things just don’t translate literally. So, we have to translate and then back translate to make sure that the meaning doesn’t change. That can be really critical to getting our message across.

Cultural Issues

Another issue that we have to consider are just broad cultural issues. People from certain cultures are going to be much more willing to engage in discussions with us about our product or our brand or other marketing issues than certain people from other cultures. That is, some cultures are reluctant to answer fully or tell you what you want to hear.

Finding the right research partner

The next big question is whether you have the research capabilities to conduct meaningful projects internationally. Most brands and their research partners can run domestic research projects with ease. But if you’re in the UK, say, even going as far afield as France or Germany requires different sensibilities and capabilities. The more international you get, the harder you need to look for that kind of experience and expertise.

Technical Issues

We don’t have the same levels of technology everywhere in the world. While that level of technology is probably rising almost everywhere, we’re not all starting from the same place.

So, if we plan to use any real level of technology in conducting our marketing research, we’d better make sure that that level of technology is supported in the market that we’re going into.

Ensuring that the project is realistic from the outset

This is where all the other challenges in international marketing research come together: which markets, what purpose, the capabilities available, and the effectiveness of the output all within a budget that makes sense. There are always going to be limits to what’s practical and the last thing any client needs is to be spending large sums testing international markets to no effect.

Bringing together local and global expertise

This is one of the biggest challenges in international marketing research and there has to be a collaborative effort and a shared understanding of the mission, the methodology and the insights to overcome this. A research team at HQ might work with a local marketing team to understand how to position a product for success in an emerging market. But if the teams are siloed and don’t have a consistent understanding of the brief, their approach to researching the market and their findings might not actually help deliver on the challenge at hand.

Faced by research:

Problems with secondary data:

Secondary data are not available in adequate volume. Further, the secondary data collected are unreliable. They suffer from lack of comparability of data.

Multiplicity of markets:

Problems of numerous markets are always experienced in overseas market research. Research project covers a number of foreign markets. This ultimately augments the costs and problems involved in overseas market research.

Problems of communication:

Different countries have different languages. They create problems of translation and communication. Consumer market research is met with more communication problems than industrial market research, because of the fact that industrial market research focuses on technical factors alone. But consumer market research takes care of every pertinent detail related to market conditions.

Problems in collecting primary data:

Buyer behavior of customers varies from country to country. As people behave differently, collecting primary data from them is comparatively difficult.

Pricing and costing are two different things and an exporter should not confuse between the two. Price is what an exporter offer to a customer on particular products while cost is what an exporter pay for manufacturing the same product.

Export pricing is the most important factor in for promoting export and facing international trade competition. It is important for the exporter to keep the prices down keeping in mind all export benefits and expenses. However, there is no fixed formula for successful export pricing and is differ from exporter to exporter depending upon whether the exporter is a merchant exporter or a manufacturer exporter or exporting through a canalising agency.

Export Pricing can be determined by the following factors:

• Prompt deliveries and continuity in supply.
• After-sales service in products like machine tools, consumer durables.
• Product differentiation and brand image.
• Frequency of purchase.
• Range of products offered.
• Specialty value goods and gift items.
• Credit offered.
• Preference or prejudice for products originating from a particular source.
• Aggressive marketing and sales promotion.
• Presumed relationship between quality and price.
• Prompt acceptance and settlement of claims.
• Unique value goods and gift items.

Export Costing

Export Costing is basically Cost Accountant’s job. It consists of fixed cost and variable cost comprising various elements. It is advisable to prepare an export costing sheet for every export product.

As regards quoting the prices to the overseas buyer, the same are quoted in the following internationally accepted terms which are commonly known as Incoterm.

The following players are part of distribution channels:

A producer: Can be any company working with a primary product, such as agricultural products, to a manufacturer making products from (primary) materials, for instance a garment manufacturer using organic cotton, yarn, buttons and other accessories.

A specialised exporter: May export the goods, if the producer does not do it by his/herself. The exporter takes care of logistical arrangements and ships the products to his/her counterpart in the target market, the importer.

The importer: Receives and puts the products on the target market.

Agents or Distributors: Can help put the product on the target market, if not done without intermediators. In fact, the importer may also be a retailer, in which case the importer is the final step before the end consumer. More commonly, however, the importer/distributor transfers the product to a retailer, for instance in the case of final products where no further processing is needed.

The Retailer: Sells products to end consumers.

Wholesalers: May be an extra stop between retailer and importer, as wholesalers supply several businesses.

The processing industry: Is a player if the product is used in its production, such as ingredients used in bakery products (chocolate in energy bars for instance), bulk foodstuff repacked in consumer packaging (seeds and nuts for example) or fabrics used for textile products made in the target market.

Packaging:

Language

A package does promotion functions too. The literature printed on the package material must be in local language. Then only a majority of the users can understand the product information the package label bears. Thus, language is one of the important considerations to be borne in mind while designing export packaging.

Buyer’s specifications

Sometimes, buyers specify their requirements with regard to packaging. They may like to purchase the product in a specific form which may be convenient to them. When the package is in the form of a tube rather than a jar, it would be easy for the buyers to handle the package of the product till it is used up.

Regulations in the foreign countries

Packaging is subject to government regulations in foreign countries. Packaging standards are specified for certain commodities. If packaging does not comply with foreign regulations, it may attract punitive action.

Length of the distribution channel

Channel distribution is the pathway of reaching goods to the ultimate consumers. A lengthy distribution channel involves too many middlemen taking a longer time between production and final consumption. Then the package must endure the rigors of travel and handling in the long distribution channel. Stronger packaging is preferred in such cases.

Depending upon the time factor involved in the distribution channel, packaging must be designed. A package should be capable of withstanding the stresses of handling in transport and storage.

Disposability of packages

Generally, consumers in developed countries prefer disposable containers. If the package is disposable immediately after use, then due care must be given to the package material. The package material should not cause environmental hazards. It would be better if the material could be recycled.

Environmental factors

Environmental factors like weather and climatic conditions greatly influence the package design. A tropical country requires different packaging than for a country with cold climate.

Size of package

The size of the package is one of the important considerations in designing packages. It depends upon the buying characteristics of consumers. If buyers purchase regularly at short intervals, then the size of the package can be small. On the other hand, buyers with freezers at home may prefer big packages.

Identification and selection of markets is the first stage in international marketing. Before making an entry in the international market, a firm has to identify those markets in which it can sell its products easily. To take this decision, firm has to analyse the potentials of various foreign markets and their respective marketing environments. Some markets may not be potentially good, and the firm’s objectives and resources may not allow it to operate in some other markets.

Therefore, a proper analysis is necessary for selecting the proper and appropriate foreign market. One market differs from another but still in one respect or the other, they can be grouped in different segments. It is important for the firm entering the world market to segment them in such a way that it is able to effectively meet their requirements. No matter how much attempt is made, the firm will not succeed unless it is marketing right product in the right market.

It costs lot of time and money to find out a suitable foreign market for a product. No firm has unlimited resources. Proper selection of markets would avoid waste of time and effort. One product may be more acceptable in some countries than in others. It would, therefore, be better to concentrate on a few markets than in more markets.

Key Factors in Product Selection

• If possible, avoid products which are monopoly of one or few suppliers. If you are the manufacturer make sure sufficient capacity is available in-house or you have the wherewithal to outsource it at short notice. Timely supply is a key success factor in export business.
• The product should be manufactured or sourced with consistent standard quality, comparable to your competitors. ISO or equivalent certification helps in selling the product in the international market.
• The price of the exported product should not fluctuate very often threatening profitability to the export business.
• Carefully study the various government incentive schemes and tax exemption like duty drawback and DEPB.
• Import regulation in overseas markets, especially tariff and non-tariff barriers. Though a major non-tariff barrier (textile quota) has been abolished – there are still other tariff and non-tariff barriers. If your product attracts higher duty in target country – demand obviously falls.
• Strictly check the government policies related to the export of a particular product. Though there are very few restrictions in export it is better to check regulatory status of your selected product.
• Registration/Special provision for your products in importing country. This is especially applicable for processed food and beverages, drugs and chemicals.
• Seasonal vagaries of selected products as some products sell in summer, while others in winter. Festive season is also important factor, for example certain products are more sellable only during Christmas.
• Keep in mind special packaging and labelling requirements of perishable products like processed food and dairy products.
• Special measures are required for transportation of certain products, which may be bulky or fragile or hazardous or perishable.

Pricing can be the most challenging due to different market forces and pricing structures around the world.

The pricing is based on estimation, evaluation, size and standard. The price in the market is the exchange value of goods and services expressed in terms of currency. Accordingly, pricing simply means determining the price for a good or service. It is an activity that needs to be repeated and is a continuous process. This continuity is due to environmental changes and the lack of stability in market conditions, which justifies the need to repeat this process.

Although price competition is one of the major issues that companies face it in international markets, but many companies cannot solve this problem efficiently. Price is one of the most important and effective factors that helps companies to attract customers and keep up their loyalty and satisfaction because the quality of the goods and services from different companies is booming, and the competition among different companies are intensifying.

Pricing on global markets is more difficult than pricing in domestic markets. In the domestic market, the manager knows the effects of the cultural and economic environment on pricing policies. But in the international markets, due to the lack of familiarity with foreign markets and the variety of those markets, it is not easy to decide on pricing policy.

In international markets there are fierce problems in pricing: the difference in customer response to pricing strategies by commodity in different markets, the limits imposed by governments on the level of profits and prices, the competition that determines price changes in the market, and the existence of different rules. But despite these problems, a company that wants to compete effectively and reach its goals in terms of sales and profits should consider pricing, local conditions and coordination with other elements of marketing mix. In international pricing, in addition to factors affecting domestic pricing, other factors should be considered, such as exchange rate fluctuations, currency with which prices are announced, government control over tariffs, and a group of economic and cultural factors that are found in different markets and differ with each other.

Pricing Considerations 

• What type of market positioning (i.e., customer perception) does your company want to convey from its pricing structure?
• Does the export price reflect your product’s quality?
• Is the price competitive?
• What type of discount (e.g., trade, cash, quantity) and allowances (e.g., advertising, trade-offs) should your company offer its foreign customers?
• Should prices differ by market segment?
• What should your company do about product-line pricing?
• What pricing options are available if your company’s costs increase or decrease?
• Is the demand in the foreign market elastic or inelastic?
• Is the foreign government going to view your prices as reasonable or exploitative?
• Do the foreign country’s antidumping laws pose a problem?

7 C’s of International Pricing Strategy

Pricing strategy brand depends on three primary factors: your cost to offer the product to consumers, competitors’ products and pricing, and the perceived value that consumers place on your brand and product vis-a-vis the cost. These three factors can be referred to as the 3 C’s of Pricing Strategy and are relevant both domestically and internationally.:

Competitors: Comprehensive and up-to-date analysis of your competitors’ in the international marketplace competing products, brand, and prices as well as where your brand is positioned relative to those competitors.

Costs: Comprehensive understanding of all costs related to offering the product, including development, creative, production, distribution, storage, advertising, manpower, and so on. International transportation and related costs like freight, insurance & handling lead to increase in costs. And then there is TAX.  There could be custom duty and turnover tax like the local GST or VAT which could result in an escalating price.

Customers: Customers overseas will have a different perception of the value of the product as compared to domestic markets due to many differential cultural and other factors. It should also be noted that customers today are able to instantly compare their prices with domestic prices on the internet.

Besides the primary factors (3 c’s) that determine international pricing there are a range of secondary factors which are unique to each international market. These make the pricing decision much more complex in international marketing.  When a firm crosses its domestic borders and enters a foreign country it encounters many unique international dimensions. These factors affect the pricing decision and consequently in case of international pricing we have expanded the 3 C’s of pricing to 7 C’s of International Pricing by adding the following additional 4 C’s:

Channels of Distribution: Lengthening channels of distribution means that more people are going to be handling your product including importers and wholesalers which causes not just cost escalation but increases distribution complexities.

Cultural Differences: The international pricing decision requires a comprehensive understanding of the overseas markets culture as well as the wants and needs of its inhabitants, including their perceptions of the value of your brand and products and your competitors’ brands and products.

Currency Rates: The complexities of multiple currencies which are subject to exchange rate fluctuations plus conversion costs.

Control by Government: Governmental and bureaucratic controls and regulations can be onerous and complex, like in China and even some European countries. Some countries have price control over some products like pharmaceuticals, fuel and food.

A key factor in any export business is clear understanding and detail knowledge of products to be exported. The selected product must be in demand in the countries where it is to be exported. Before making any selection, one should also consider the various government policies associated with the export of a particular product.

Whether companies are exporting first time or have been in export trade for a long time – it is better for both the groups to be methodical and systematic in identifying a right product. It’s not sufficient to have all necessary data ‘in your mind’ – but equally important to put everything on paper and in a structured manner. Once this job is done, it becomes easier to find the gaps in the collected information and take necessary corrective actions.

There are products that sell more often than other product in international market. It is not very difficult to find them from various market research tools. However, such products will invariably have more sellers and consequently more competition and fewer margins. On the other hand a niche product may have less competition and higher margin – but there will be far less buyers.

Fact of the matter is all products sell, though in varying degrees and there are positive as well as flip sides in whatever decision you take popular or niche product.

Factors in Product Selection

• The product should be manufactured or sourced with consistent standard quality, comparable to your competitors. ISO or equivalent certification helps in selling the product in the international market.
• If possible, avoid products which are monopoly of one or few suppliers. If you are the manufacturer make sure sufficient capacity is available in-house or you have the wherewithal to outsource it at short notice. Timely supply is a key success factor in export business
• The price of the exported product should not fluctuate very often – threatening profitability to the export business.
• Strictly check the government policies related to the export of a particular product. Though there are very few restrictions in export it is better to check regulatory status of your selected product.
• Carefully study the various government incentive schemes and tax exemption like duty drawback and DEPB.
• Import regulation in overseas markets, specially tariff and non-tariff barriers. Though a major non-tariff barrier (textile quota) has been abolished – there are still other tariff and non-tariff barriers. If your product attracts higher duty in target country demand obviously falls.
• Registration/Special provision for your products in importing country. This is specially applicable for processed food and beverages, drugs and chemicals.
• Seasonal vagaries of selected products as some products sell in summer, while others in winter. Festive season is also important factor, for example certain products are more sellable only during Christmas.
• Keep in mind special packaging and labeling requirements of perishable products like processed food and dairy products.
• Special measures are required for transportation of certain products, which may be bulky or fragile or hazardous or perishable.

Some factors to consider include:

1. Geographical Factors
   • Country, state, region,
   • Time zones,
   • Urban/rural location logistical considerations e.g. freight and distribution channels
2. Economic, Political, and Legal Environmental Factors
   • Regulations including quarantine,
   • Labelling standards,
   • Standards and consumer protection rules,
   • Duties and taxes
3. Demographic Factors
   • Age and gender,
   • Income and family structure,
   • Occupation,
   • Cultural beliefs,
   • Major competitors,
   • Similar products,
   • Key brands.
4. Market Characteristics
   • Market size,
   • Availability of domestic manufacturers,
   • Agents, distributors and suppliers.