How To Begin Export
The first step for new entrant is to identify the product or products which he intends to export. Before considering the product, one might begin by considering why to get involved with exports, at all. One may have the following objects for starting the exports.
You may decide that profitability can increase by starting the exports. Exports can certainly raise the tax- free income and can provide best means of increasing the output also.
Domestic Market Saturated/Not Available
You may resort to exports because of this reason that your local market is saturated or local market is totally finished because of the newer and better alternate products. Exports can provide the best outlet for your products.
Better Utilization of Existing Resource
You may be under-using your resources and feel that export can provide the best means of increasing the use of your existing resources in terms of money, production , marketing and personnel capacities.
Spreading the Risk
You may feel that your domestic market’s ups and downs should be evened out if you were less dependent on it, and that your export markets would not be subject to such uneven trading condition.
Livelihood as Employee
The exports may provide you livelihood as employee in some export trade house or some other business house exporting goods abroad. Working in exports department can really provide you job satisfaction. But do not forget that this is a valuable opportunity for you to learn everything about exports for tomorrow you may establish your own export business.
For achieving these objectives you will have, first of all, to prepare a strategy.
Strategy for Exports
Do not do anything unless you know the export markets well and can be sure that you can get a good share of some of them, that is to say, you must have potential demand markets overseas. You must initially recognise that there is a need for your product in other parts of the world. You strategy will then determine how you satisfy those needs by exporting. You must accordingly work out a manufacturing and selling strategy for your company. You can have the following four basic options:
Manufacturing but not Exporting
You may elect to remain a manufacturer of products suitable for export, but not actually exporting them yourself, leaning this work to be handled by experts in export marketing. You may continue to manufacture the goods which you are already manufacturing but now your buyers will be exporters in your own country.
Manufacturing and Selling from Indian Base
You may decide to manufacture all your products in your own country and sell them in overseas demand markets by supplying from your domestic base. For example, you may make hand tools covering a range of thirty items. You may make them in the domestic factory and export them to as many demand markets overseas as you can find.
Selling From Overseas Base
You may opt for manufacturing your goods in India but selling those through your own offices abroad. Such facility is being allowed to 100% export oriented units to ensure additional marketing effort. The interested units can apply to RBI on Form OBR for seeking approval.
Advisory Services to Exporters
You may prefer to sell the know-how or the skills you possess rather than the actual results of those skills.
You can guide exporters in successfully effecting the export sales. There are lot many manufacturers who are not aware of the formalities involved in exporting; you can guide them and help them in documentation and other fields.
You can procure different goods from different parts of the country and export them under your trade name.
It is easier for overseas buyer to get different goods from the same seller It also helps the exporter in changing the pattern of the goods to be exported depending upon the demand of the goods abroad. For carrying out this activity there is need of actually manufacturing the goods. It also provides the exporter with a type of insurance against sudden fall in the demand of a product abroad and against the consequences of such causalities which may take place any time in the export trade.
You can also undertake service exports such as software exports, computer consultancy services, management consultancy services abroad in connection with various utility managements. The New Exim Policy (1990-93) has for the first time given recognition to the important role played by service exports towards export earnings for the country. The services mentioned above have been recognized for benefits under this New Policy. Such service exports will be entitled for a replenishment licence at the rate of 10% of the Net Foreign Exchange earned. Further, such exports will also be considered, up to the full extent, for the benefit of Export House/Trading House/Star Trading House status.
An other vital part of the exports strategy is marketing of your product. You need to prepare a detailed marketing plan for launching your product. The marketing plan should cover the following aspects.
You must identify the product you want to sell. It is possible that the product you are already manufacturing may need certain modifications before it is fit for being launched in the overseas market. You must have the proper evaluation of the marketability of your product and the way it can be presented.
It must have some comparative advantage over its competitors. For example, if you offer garments, they must meet the fashion needs of the demand market which is fast changing.
You must also be able to produce the goods within the order/LC validity date. You need to chalk out a strategy for completing your production cycle on time. You should also be able to catch the requirement of the buyer and undertake modifications accordingly in the manufacturing pattern. The quality of the product should also be scrupulously kept.
Your Sales Promotion
No marketing plan can be complete without your considering the methods of your exports promotion. You may have to pay visits abroad. You may consider to participate in the trade and fashion shows. Sometimes the advertisement in the foreign magazine may also be required. You will have to plan these sales promotion programmes beforehand.
YOU can fix the price of your product only after providing for all the fixed variable and overhead costs. So an essential feature of an export marketing plan is the price and terms to be charged, together with the method you will use to quote to the customer.
However, these price quotations are also to be in tune with the base prices of some goods fixed by the Government.
Your Market in Hand
in order to arrive at a precise estimation of the sales you aim to achieve, you will need to examine your demand markets. Your whole marketing plan will depend on your orders in hand. But you must have a marketing plan for each demand market, otherwise your export trade with it will suffer from lack of direction and you will not be able to exploit its possibilities to the full.
Nor will you know what returns to expect, or even be able to say whether the operation was financially successful or not.
After you have chalked out your export strategy and marketing plan the first thing you are required to do under the Exchange Control Regulations is to obtain the exporter’s code number from Reserve Bank of India.
Exporter’s Code Number
Every person, firm or company engaged in export business in India should obtain a Code number from the Reserve Bank of India. Code number need not be obtained for export of services. In other words, firms and companies who undertake construction contracts outside India and or offer consultancy services to parties outside India are not required to obtain code number from Reserve Bank of India. It is obligatory under the Foreign Exchange Regulation Act, 1973 to obtain a code number. Following procedure should be followed while applying for allotment of code number.
1) Application in duplicate. in the prescribed form called CNX should be made to the Exchange Control Department of the Reserve Bank within whose jurisdiction the Head Principal Office of the exporter is situated. The application should be routed through the bankers of the applicant in the interest of speedy disposal. Authorised dealers have been advised to forward the application without any delay together with their confidential reports on means and standing of the applicants indicating, inter alia, date of establishment of the concern, firm, company, names, addresses of the proprietor’s, partners, directors, nature of business and period for which they have been bankers of the applicant.
2) Applications should be made only by the Head Principal Office of the firm company.
3) Advice regarding the allotment of Permanent Account Number (PAN) by the Income Tax Department should be enclosed with the application for perusal and return by the Reserve Bank.
4) If PAN is not allotted, an undertaking to furnish PAN as soon as it is allotted by the Income Tax Department should be furnished by the applicant.
5) Photocopy of RBI’s permission under section 29/ 30 of FERA 1973 if the non-resident interest in company/Firm exceeds 40%.
If the application is in order, code number will be allotted by the Reserve Bank. The code number is permanent and there is no need to review or revalidate it. The number should be cited invariably on export forms used for declaration of exports. Customs authorities’ will not entertain any export form which does not bear the exporters code number allotted by the Reserve Bank of India. The code number allotted to the applicant by the Reserve Bank of India is advised to them on the copy of form CNX submitted by the applicant.