Trading and export are to use the intermediaries to
export to China indirectly or directly. There are mainly four type of
intermediaries: agents, distributors, wholesalers and retailers.
Agents do not have the property rights. They are only entrusted to do whatever
they need to do and agents can come in the form of exclusive agent and
non-exclusive agent. A distributor buys goods on its own account and resells
them to customers. The distributor takes on the financial risk of not being
able to sell the product. Wholesaler refers to those bought large volume of
stocks and then sells it in amount to various people. Retailers are those
who purchase products from wholesalers or manufacturers and re-sell them to
Through indirect export, companies can sell its products to the intermediaries in
China and these middlemen can help to bring the product into the market.
There are many channels in China market entry for indirect exportation such as Chinese
importers, international trading company, and foreign companies situated in
china that import the products back to their China market.
The advantages that a
foreign manufacturer chooses to export its goods
indirectly include the following:
* The time taken in China market
entry will be short and it is flexible.
* By selling to an export
merchant, the manufacturers can receive payment for their goods much sooner,
they will not be exposed to risk of foreign exchange and the various credit
* The manufacturer does not need
to set up its own export department hire an export manager, or support its
own commissioned sales agent in China.
* The manufacturer can benefit
from the export know-how and personal contacts with the export merchant or
* The export merchant or agent,
handling several different products or product lines, can achieve various
scale of economies - for example, in the use of sales representatives,
paperwork, shipment and communications.
* The manufacturer can find out
whether its products will sell abroad without having to take great effort,
risk, or financial investment.
* The manufacturers do not have
to worry about all the problems involved in exporting. They merely follow
the instructions given to them by the export merchant or agent with regard
to packing, labeling, and transportation, etc.
However, as indirect export does
not need to deal directly with China market, there are some disadvantages of
selling through an export intermediary:
* The manufacturer has no direct contact with the foreign agents or
distributors, and final users of his products, it is difficult for them to
gain much experience in China market entry.
* The manufacturer may find it difficult to get an export trading house
to take on its products for the foreign market. As these firms may not
prefer to take on products that may require a great deal of promotion.
* The manufacturer may lose control over the way its products are priced,
advertised, and sold.
* The manufacturer will receive a smaller profit margin.
This method in China market entry is like a double edged sword whereby it is
the easiest and also the weakest. Its
method is more suitable for small and medium sized companies, large companies may use this method
as one of channels in their integrated channels for the market with high
risk and less growth potential.
manufacturer wants to export his goods himself, there are various ways for
direct export. Basically, direct exporting has three channels: its own
company employees traveling or stationed in China, Chinese import agents and
Chinese distributors. Once this network is established, their products can
be directly sold to the end-users.
The advantages that a local manufacturer may choose to export its goods
directly as means in China market entry include the following:
* The manufacturer can be rid of the intermediaries and control the market
* Feedback of their products can also reach them sooner and thereby, and be
able to come up with a more practical and feasible marketing strategy.
* The manufacturer can enjoy a larger oversea market share and higher profit
* The manufacturer can establish its own channel network. As such, the
international marketing level and experience of the enterprise can also be
Direct export has its limitations as means in China market entry as well. For example, the cost of this method
is higher than that using indirect export. It may also require huge amount
of capitals, employment of large number of talents. Setting up an overseas
network would require lots of efforts.