8 Criteria’s for Selection of Product for Export Import Business From India
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An entrepreneur should select the right product for export because selection of the right export product is crucial for success in export business. The selection can be made on the basis of consideration of various factors. Some of these factors are explained below:
1) Trends in Exports Business:
An entrepreneur who plans to enter into exports business can identify the export products/export product groups with potential in the foreign markets by analyzing the trends in exports – country- wise and commodity-wise – over a period of time. A study of the trends over a period of five years is expected to yield very useful information. The Ministry of Commerce, based on the analysis of the trends in exports had also prepared a matrix of fifteen highest export import buyer countries and export import products.
2) Production Capacity and Product Availability:
The exporter should choose those products for which there is adequate production capacity in the country and the export product can be sourced for the desired quantities. Thus, a steady supply base is essential to ensure that the exporter is able to deliver the export goods to the foreign buyer as per the agreed delivery time schedules.
3) Product Adaptability:
A export product may have huge potential for export in one market; yet the same export import product offered in another market may draw a blank. The reason for this is very simple: the physical conditions, functional requirements, cultural factors, tastes, levels of skill, and levels of technical development may be different and as such would require the changes to be made in the product offered in another market.
The product to be successful in foreign markets must be capable of the suitable changes in its design, colour, size, taste, packaging, etc. This process of change is known as export product adaptation. Thus, export product adaptability is an important consideration in the selection of the product for export.
4) Demand in the Potential Export Markets:
The level of demand for a product in the target export markets is an important factor in the selection of the product for export.
The potential of the product in a market can be assessed by considering the impact of the following dimensions:
i) Demographic and Physical Environment:
The impact of the demographic and physical environment can be analyzed by considering the following factors:
a) Size of the population, its growth and density levels.
b) Distribution of the population by targeted age groups for the product under analysis (e.g., 1-10, 11-20, 21-30 and so on). Is the size of the target population adequate?
c) Distribution of population by urban, sub-urban and rural areas.
d) Climate and weather conditions. How will these changes affect the product or the service offered?
e) Shipping distances from the point of export country port and import country port.
f) Nature of the transport and telecommunications infrastructure.
g) Adequacy of the shipping, packaging, unloading, and other local distribution networks.
ii) Political Environment:
The political environment should be analyzed by considering the following factors:
a) Is the system of government conducive to the conduct of business?
b) What is extent of government involvement in the private business transactions?
c) What is the government’s attitude towards imports goods and import business?
d) Is the political system stable?
e) Does the government seek to dismantle quotas, and other trade barriers?
f) Is the country committed to fostering higher levels of exports and imports?
iii) Economic Environment:
The exporter should analyze the economic environment of the potential market by considering the following factors:
a) Predicted economic growth levels.
b) Gross national product and the balance of payment position of the country.
c) Percentage share of exports and imports in the overall economy.
d) The country’s import to export ratio.
e) Rate of inflation, and foreign currency or the exchange regulations.
f) What is the per capita income of the target export country? Is it increasing?
g) What is the discretionary income spent on the consumer goods?
iv) Social and Cultural Environment:
Socio-cultural environment of a country affects the demand pattern of people in the country. An understanding of the factors influencing this environment helps in assessing the potential of a product and the likely changes that need to be made to make the product compatible with the socio-cultural environment of the country. Some of these factors are as follows:
a) What is the proportion of the literate population?
b) What is the average educational level of the people?
c) What is the percentage of the population identified as middle class?
d) Is the target market similar to the home market in terms of its characteristics?
e) Would the product require any modification or adaptation or translation?
v) Market Access:
An exporter can target a country for exports to the extent of market access available in the foreign market. The following factors define the level of market access for a export product in a country:
a) Legal aspects of distributorship in the foreign market,
b) What are the documentary requirements for export import business, and the technical, or environmental import regulations covering the product?
c) Is the market closed to foreigners, despite the emergence of a free and open market?
d) What intellectual property protection laws would affect the product or the service?
e) If a commercial dispute arises, does the judicial system offer a fair and unbiased review?
f) Are the tax laws fair to foreign investors? What is the rate of tax on repatriated profits?
vi) Product Potential:
The potential of a export product in the foreign market should be assessed from the point of view of acceptance of the product in the foreign market. The following factors should be examined to assess the acceptance level of the export product in the foreign market:
a) Is there an identified need for the export product in the target international market?
b) What is the gap between production and anticipated consumption? To what extent the gap is being filled by the imports? What is the percentage of imports to the total demand of the product?
c) Is the product or the service understood and accepted by the target international market?
d) What is the general level of acceptance of the imported products in the foreign markets?
e) What is the state of competition in the foreign market for the export product? Who are the competing exporters and from which countries?
5) Trade Restrictions:
A country may impose restrictions on the import of products from other countries in the form of licensing or other quantitative restrictions. However, under the Uruguay Round, countries have agreed not to impose quantitative restrictions on imports. There is a commitment by all the WTO member countries to follow open and liberal trade policies.
Yet it has been observed that the countries have started imposing restrictions on imports in the form certain regulations aimed at protecting environment, child law, public health, public safety, and so on. Even the countries are resorting to the use of anti-dumping duties or the countervailing duties or the safeguard duties to protect their domestic industries.
Such regulations or the tariff measures have the effect of restricting imports into their countries. An exporter should find-out whether such restrictions are applicable to the proposed product for export in the target foreign market.
6) Incentives/Facilities Offered for Export:
It is quite possible that the exporting country offers various incentives or facilities to promote the exports. In India, exporters enjoy various facilities in general and for the particular products. These incentives relate to the duty drawback, facility of duty free import of raw materials and other inputs required for the manufacture of the export products, import of capital goods for the promotion of exports at concession rates of import duties. Such incentives/facilities should be taken into account while deciding the product for exports.
7) Shifting Spending Patterns:
Basic determinants of how much a consumer buys of a product are the person’s taste and preference, as well as the price of the product relative to the price of other products. Another major influence is the consumer’s income. If the consumer’s income increases, demand for most goods will rise. However, the demand for goods that people regard as necessities, such as fuel, tobacco, bread, or meat, tends to decline and exporters of such products are not likely to greatly benefit from rising consumer incomes in other countries. The demand for luxuries, such as new cars or expensive food, expands more rapidly. Therefore, exporters should generally put more emphasis on goods that consumers regard as “luxuries”, due to shifting spending patterns in response to rising incomes.
8) Quality and Niche Marketing:
Several studies on export-import trade indicate that firms that have shown a sustained increase in their sales and overall profits have often emphasized quality and concentrated on niches. In this age of diversity, marketers are being awakened to the erosion of the mass market.
Traditional marketing methods are no longer as effective as they used to be and a new emphasis on quality and niche marketing is proving successful. Even after the elimination of textile quotas in 2005, many European textile producers have maintained steady growth in their exports because of their emphasis on high fashion items with special brand identity.
- Company – Firm Incorporation
- Import Export Certificate – IEC Code
- Export Promotion Counciles – RCMC
- Goods & Service Tax Registration – GST
- MSME Registration
- FSSAI – Food Licence Registration
- Halal Certificate
- Kosher Certificate Registration
8 Criteria’s for Selection of Product for Export Import Business From India
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