India’s import and export system is governed by the Foreign Trade (Development & Regulation) Act of 1992 and India’s Export Import (EXIM) Policy.

Import and export of all goods are free, except for the items regulated by the EXIM policy or any other law currently in force. Registration with regional licensing authority is a prerequisite for the import and export of goods. The customs will not allow for clearance of goods unless the importer has obtained an Import Export Code (IEC) from the regional authority.

Chapter 6 Registration of Exporters

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Once all the research and analysis is done its time to get registered with the various government authorities.

Registration with Reserve Bank of India (RBI)

Prior to 1997, it was necessary for every first time exporter to obtain IEC number from Reserve Bank of India (RBI) before engaging in any kind of export operations. But now this job is being done by DGFT.

Registration with Director General of Foreign Trade (DGFT)
For every first time exporter, it is necessary to get registered with the DGFT (Director General of Foreign Trade), Ministry of Commerce, Government of India.

DGFT provide exporter a unique IEC Number. IEC Number is a ten digits code required for the purpose of export as well as import. No exporter is allowed to export his good abroad without IEC number.

However, if the goods are exported to Nepal, or to Myanmar through Indo-Myanmar boarder or to China through Gunji, Namgaya, Shipkila or Nathula ports then it is not necessary to obtain IEC number provided the CIF value of a single consignment does not exceed Indian amount of Rs. 25, 000 /-.

Application for IEC number can be submitted to the nearest regional authority of DGFT.
Application form which is known as “Aayaat Niryaat Form – ANF2A” can also be submitted online at the DGFT web-site: http://dgft.gov.in.

While submitting an application form for IEC number, an applicant is required to submit his PAN account number. Only one IEC is issued against a single PAN number. Apart from PAN number, an applicant is also required to submit his Current Bank Account number and Bankers Certificate.

A amount of Rs 1000/- is required to submit with the application fee. This amount can be submitted in the form of a Demand Draft or payment through EFT (Electronic Fund Transfer by Nominated Bank by DGFT.

Registration with Export Promotion Council

Registered under the Indian Company Act, Export Promotion Councils or EPC is a non-profit organisation for the promotion of various goods exported from India in international market. EPC works in close association with the Ministry of Commerce and Industry, Government of India and act as a platform for interaction between the exporting community and the government.

So, it becomes important for an exporter to obtain a registration cum membership certificate (RCMC) from the EPC. An application for registration should be accompanied by a self certified copy of the IEC number. Membership fee should be paid in the form of cheque or draft after ascertaining the amount from the concerned EPC.

The RCMC certificate is valid from 1st April of the licensing year in which it was issued and shall be valid for five years ending 31st March of the licensing year, unless otherwise specified.

Registration with Commodity Boards

Commodity Board is registered agency designated by the Ministry of Commerce, Government of India for purposes of export-promotion and has offices in India and abroad. At present, there are five statutory Commodity Boards under the Department of Commerce. These Boards are responsible for production, development and export of tea, coffee, rubber, spices and tobacco.

Registration with Income Tax Authorities
Goods exported out of the country are eligible for exemption from both Value Added Tax and Central Sales Tax. So, to get the benefit of tax exemption it is important for an exporter to get registered with the Tax Authorities.

 

Chapter 5 SWOT Analysis

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Introduction

SWOT analysis is a useful method of summaries all the information generated during the export planning. SWOT stands for strengths, weakness, opportunities and threats, which helps to isolate the strong and week areas within an export strategy. SWOT also indicates the future opportunities or threats that may exist in the chosen markets and is instrumental in strategy formulation and selection.

To apply your own SWOT analysis, start by creating a heading for each category – ‘Strengths’, ‘Weaknesses’, ‘Opportunities’, and ‘Threats’. Under each of these, write a list of five relevant aspects of your business and external market environment. Strengths and weaknesses apply to internal aspects of your business; opportunities and threats relate to external research.

Your final analysis should help you develop short and long term business goals and action plans, and help guide your market selection process.

Environmental factors internal to the company can be classified as strengths or weaknesses, and those external to the company can be classified as opportunities or threats.

Strengths

Business strengths are its resources and capabilities that can be used as a basis for developing a competitive-advantage. Examples of such strengths include:

  • Patents
  • Strong brand names.
  • Good reputation among customers.
  • Cost advantages from proprietary know-how.
  • Exclusive access to high grade natural resources.
  • Favorable access to distribution networks.

Weaknesses

The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:

  • Lack of patent protection.
  • A weak brand name.
  • Poor reputation among customers.
  • High cost structure.
  • Lack of access to the best natural resources.
  • Lack of access to key distribution channels.

Opportunities

The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:

  • An unfulfilled customer need.
  • Arrival of new technologies.
  • Loosening of regulations.
  • Removal of international trade barriers.

 Threats

Changes in the external environmental also may present threats to the firm. Some examples of such threats include:

  • Shifts in consumer tastes away from the firm’s products
  • Emergence of substitute products.
  • New regulations.
  • Increased trade barriers

Successful SWOT Analysis
Simple rules for successful SWOT analysis:

  • Be realistic about the strengths and weaknesses of the organization.
  • Analysis should distinguish between where the organization is today, and where it could be in the future.
  • Be specific.
  • Always analyse in relation to your competition i.e. better than or worse than your competition.
  • Keep your SWOT short and simple.

A SWOT analysis can be very subjective, and is an excellent tool for indicating the negative factors first in order to turn them into positive factors.

 

Chapter 4 Market Selection

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Introduction

After evaluation of company’s key capabilities, strengths and weaknesses, the next step is to start evaluating opportunities in promising export markets. It involves the screening of large lists of countries in order to arrive at a short list of four to five. The shorting method should be done on the basis of various political, economic and cultural factors that will potentially affect export operations in chosen market.

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.

Foreign Market Research

Understanding a market’s key characteristics requires gathering a broad range of primary and secondary research, much of which you can source without cost from the internet.

Primary research, such as population figures, product compliance standards, statistics and other facts can be obtained without any cost from international organizations like United Nations (UN) and World Trade Organizations (WTO). Analysis of export statistics over a period of several years helps an individual to determine whether the market for a particular product is growing or shrinking.

Secondary research, such as periodicals, studies, market reports and surveys, can be found through government websites, international organisations, and commercial market intelligence firms.

Foreign Market Selection Process

Step 1: Gather Information on a Broad Range of Markets

Market selection process requires a broad range of informations depending upon the products or services to be exported, which includes:

  • The demand for product/service.
  • The size of the potential audience.
  • Whether the target audience can affords product.
  • What the regulatory issues are that impact on exports of product.
  • Ease of access to this market – proximity/freight.
  • Are there appropriate distribution channels for product/service.
  • The environment for doing business – language, culture, politics etc.
  • Is it financially viable to export to selected market.

You can gather much of the first step information yourself from a variety of sources at little or no cost. Sources of information include:

  • Talking to colleagues and other exporters.
  • Trade and Enterprise – web site, publications, call centre.
  • The library.
  • The Internet.

Step 2: Research a Selection of Markets In-Depth

From the results of the first stage, narrow your selection down to three to five markets and undertake some in-depth research relating specifically to your product. While doing so, some of the questions that may arise at this stage are:

  • What similar products are in the marketplace (including products that may not be similar but are used to achieve the same goal, e.g. the product in our sample matrix at the end of this document is a hair removal cream. As well as undertaking competitor research on other hair removal creams, we would also need to consider other products that are used for hair removal, i.e. razors, electrolysis, wax).
  • What is your point of difference? What makes your product unique? What are the key selling points for your product?
  • How do people obtain/use these products?
  • Who provides them?
  • Are they imported? If so from which countries?
  • Is there a local manufacturer or provider?
  • Who would your major competitors be? What are the key brands or trade names?
  • What is the market’s structure and shape?
  • What is the market’s size?
  • Are there any niche markets, and if so how big are they?
  • Who are the major importers/ stockists / distributors / agencies or suppliers?
  • What are the other ways to obtain sales/representation?
  • What are the prices or fees in different parts of the market?
  • What are the mark-ups at different distribution levels?
  • What are the import regulations, duties or taxes, including compliance and professional registrations if these apply?
  • How will you promote your product or service if there is a lot of competition?
  • Are there any significant trade fairs, professional gathers or other events where you can promote your product or service?
  • Packaging – do you need to change metric measures to imperial, do you need to list ingredients?
  • Will you need to translate promotional material and packaging?
  • Is your branding – colours, imagery etc., culturally acceptable?

Foreign Market Selection Entry

Having completed the market selection process and chosen your target market, the next step is to plan your entry strategy.
There are a number of options for entering your chosen market. Most exporters initially choose to work through agents or distributors. In the longer term, however, you may consider other options, such as taking more direct control of your market, more direct selling or promotion, or seeking alliances or agreements.

 

Chapter 3 Identifying Products For Export

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Introduction

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.

Key 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.

 

Chapter 2 Basic Planning For Export

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Introduction

Before starting an export, an individual should evaluate his company’s “export readiness”. Further planning for export should be done only, if the company’s assets are good enough for export.

There are several methods to evaluate the export potential of a company. The most common method is to examine the success of a product in domestic market. It is believed that if the products has survived in the domestic market, there is a good chance that it will also be successful in international market, at least those where similar needs and conditions exist.

 One should also evaluate the unique features of a product. If those features are hard to duplicate abroad, then it is likely that you will be successful overseas. A unique product may have little competition and demand for it might be quite high.

 Once a businessman decides to sell his products, the next step is to developing a proper export plan. While planning an export strategy, it is always better to develop a simple, practical and flexible export plan for profitable and sustainable export business. As the planners learn more about exporting and your company’s competitive position, the export plan will become more detailed and complete.

 Objective:

The main objective of a typical export plan is to:

  • Identifies what you want to achieve from exporting.
  • Lists what activities you need to undertake to achieve those objectives.
  • Includes mechanisms for reviewing and measuring progress.
  • Helps you remain focused on your goals.

 For a proper export planning following questions need to answered:

    1. Which products are selected for export development?
    2. What modifications, if any, must be made to adapt them for overseas markets?
    3. Which countries are targeted for sales development?
    4. In each country, what is the basic customer profile?
    5. What marketing and distribution channels should be used to reach customers?
    6. What special challenges pertain to each market (competition, cultural differences, import controls, etc.), and what strategy will be used to address them?
    7. How will the product’s export sale price be determined?
    8. What specific operational steps must be taken and when?
    9. What will be the time frame for implementing each element of the plan?
    10. What personnel and company resources will be dedicated to exporting?
    11. What will be the cost in time and money for each element?
    12. How will results be evaluated and used to modify the plan?

From the start, the plan should be viewed and written as a management tool, not as a static document. Objectives in the plan should be compared with actual results to measure the success of different strategies. The company should not hesitate to modify the plan and make it more specific as new information and experience are gained.

Some “Do’s and Don’ts of Export Planning

DO ensure your key staff members are ‘signed on’ to the Plan.
DO seek good advice – and test your Export Plan with advisers.
DON’T create a bulky document that remains static.
DO review the Export Plan regularly with your staff and advisers.
DO assign responsibility to staff for individual tasks.
DON’T use unrealistic timelines. Review them regularly – they often slip.
DO create scenarios for changed circumstances – look at the “what ifs” for changes in the market environment from minor to major shifts in settings. e.g. changes of government, new import taxes.
DO develop an integrated timeline that draws together the activities that make up the Export Plan.
DO make sure that you have the human and financial resources necessary to execute the Export Plan. Ensure existing customers are not neglected.