Government targets $340 billion exports this year

Source: The Economic Times, Nov 26, 2014

NEW DELHI: Government has fixed an export target of $340 billion for the current fiscal, Commerce and Industry Minister Nirmala Sitharaman said today.

Exports had registered a growth of 4.7 per cent at $314.4 billion in the previous fiscal.

Japan and the US contributed 1.84 per cent and 13.75 per cent respectively to total exports during April-September period of the current year, Sitharaman said in a written reply to the Rajya Sabha.
Growth rate of exports entered the negative zone after a gap of six months, declining 5.04 per cent in October due to a dip in shipments from engineering, pharma and gems and jewellery.

In a separate reply, she said that the long-term vision of the government is to increase India’s exports of merchandise and services from present level of $464.1 billion to about $900 billion by 2018-19 (CAGR of about 14 per cent) and take India’s share of global exports to above 3 per cent. “An aggressive product promotion strategy for high value items that have a strong manufacturing base is the main focus of the overall growth strategy.

“The core of the market strategy is to retain presence and market share in traditional markets, move up the value chain in providing export products in the developed countries’ markets; and open up new vistas, both in terms of markets and new products in these new markets,” she added. The focus sectors have been identified as pharmaceuticals, electronics, automobiles, leather, gems and jewellery and textile sectors to boost shipments.

“Focus of the strategy is to penetrate into the markets in Asia (including ASEAN), Africa and Latin America to strengthen our presence in newly opened up markets. At the same time our aim would be to deepen engagement in the older markets,’ she added. Top ten destinations of Indian exports during the first half of the fiscal are: USA, UAE, Saudi Arabia, Hong Kong, China, Singapore, UK, Brazil, Germany and the Netherlands.

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Government working towards reducing transaction cost for exports

NEW DELHI: India is working to significantly reduce cost of transaction and quicken the process for exports based on a raft of recommendations made by a high-level committee, as the government seeks to make doing business easier and give a thrust to foreign trade.

A taskforce headed by former Director General of Foreign Trade Anup Pujari has listed out 10 broad issues hurting exporters and requiring urgent attention.

These include rationalisation of bank charge, self-certification of documents and a reduction in physical checks.

The committee has suggested a framework to build an efficient trade facilitation mechanism in India. The average cost of exports from India is $1,170 per transaction, nearly double that of Sri Lanka, the UAE and China, as per the World Bank’s Doing Business report, in which India is ranked 134 out of 189 countries.

“The good news is that most of the issues can be addressed though procedural and electronic data interchange (EDI) level,” the committee said the report.  Some of its recommendations are likely to figure in the foreign trade policy for 2014-19, expected to be announced mid-October.
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How to boost exports without increasing costs?

Now more than ever, we must sell our products or services in new markets. The consumption in our countries has gone down and the need to diversify risk pushes us to find other growing markets.

However, this task generates various problems to companies: CapturFiles

First of all, we have to decide between a large number of potential countries we can export to: BRICs, Latin America, Europe, USA, Africa… Which one/s to choose?

Target selection becomes crucial due to our limited resources. We don’t have the capacity to reach all of them, not even a lot of them, at the same time.

Another difficulty lies in that, more often than not, we lack knowledge of those markets: their language, market features, business culture, laws and regulations, etc.

The usual approach taken to solve that handicap is to attempt covering as many markets as we can with the available internal resources. So we plan:

• Travelling to new markets as frequently as possible.

• Attending trade missions, trade fairs, etc. where we can contact a high number of potential customers.

• Selecting distributors, agents and/or importers who can do business development for us.

Occasionally, this strategy works and provides reasonably good results. Unfortunately, due to current global competition, its efficiency is decreasing because of the following reasons:

Due to lack of time not enough follow up is done to contacts made in those business trips.

Lack of local presence in foreign markets, which clients find increasingly valuable.

Distributors/agents chosen don’t do enough promotion/ business development of our product/service.

Limited understanding of the target market needs (tastes, specific requirements, distribution channels, etc.)

Inadequate selection of distributors or agents. Mistake that is not usually promptly corrected due to commitments.

• Change of distributors or agents implies starting again from scrap. Their usual limited feedback constrains the chances of learning from the market.

Are you familiar with this scenario? But, how can we avoid these problems?

If we were able to arrange for additional resources we could increase our presence in foreign markets by opening commercial delegations or subsidiaries which could proactively promote our products/services.

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The problem is that this is rarely feasible as it would increase our costs beyond our actual capacity.

But, is this statement really TRUE? We think that not necessarily…

If we analyze the real cost of what we are currently doing:

CapturFiles_2• The time devoted by export/international managers to prepare business agendas and the trips duration.

• Travelling expenses, accommodation, etc.

• Time and costs employed afterwards in managing contacts, replying to enquiries, elaboration and follow up of commercial offers (in response to enquiries whose seriousness and feasibility we ignore), not only by export/sales department but also technical, financial and sometimes even top management .

• Resource overuse (especially from travelers) and loss of focus due to scattering their attention into an excessive amount of opportunities, frequently of poor quality and low success probability.

If we add up all these items we realize that those actions actually involve a high cost with diminishing results.

 

So… what to do?

Without any doubt, the first step consists of going through a strategic reflection process about the company’s goal, requirements and target markets in the medium/long term. The number of markets/countries to cover will depend on the company size, its previous international experience, the type of product/service, available resources, etc.

When planning the tactics to access new markets without high structural cost, we suggest a method available in most markets and that INDOLINK offers to its clients in India. This method facilitates a more proactive and continuous commercial promotion at a low cost. We are talking about outsourcing the service of a part time Country Manager. This person, employed by a trustworthy third party, dedicates a prefixed part of his working day for the export company, like any other member of his sales (or purchase) team.

Which are the advantages of this model?

A. A more proactive effort towards commercial promotion/ business development: Continuous search, contact and follow up of clients/ leads/ distributors/ importers. The Country Manager is a local person, expert in the target market and focused on it, increasing his efficiency.CapturFiles_3

B. Local presence: prospects and clients may call locally. This is an advantage in many countries, especially in India, where the permanent physical presence is viewed favorably by the clients. The Country Manager has company business card, which shows local address and phone number.

C. Higher market understanding: about product characteristics/features, competitors, distribution channels, prices, news on the sector, etc. Regularly, the CM passes on to the company the information that he is gathering; unlike the distributors or agents, who usually resist to share such information.

D. Saving time and money to the overseas team by preparing their business agendas, trade fair visits, logistics organization, etc. Having a salesperson outsourced in the country, he will be the one who takes care of organizing the trip, coordinate visits/meetings, follow up and monitor everything, freeing time to the company.

E. Avoiding red tape and structural costs. As it is an outsourced service, it does not have the disadvantage of fix costs and the bureaucracy derived from more traditional commercial establishments (branch or representation offices, subsidiaries, etc.)

Two basic conditions to ensure that this process will be successful are required:

• The selection of a suitable person for Country Manager

• The CM must be appropriately led. Although this person is legally employed by a third party, in practice, he belongs to the export sales team. Therefore, he will require: a proper initial training, a good joint planning of his tasks and duties and an effective monitoring to get the maximum benefit out of this part time Country Manager.

The CM reports weekly by mail about the activities conducted, important news from the sector and the planning for the following week.

Additionally, at the end of every month, he sends a monthly report describing the activities carried out, with complete information about the contacts made, achievements, difficulties, market information, along with a brief planning of the actions to be conducted in the coming month.

The cost for the company is a small fixed monthly amount that ensures full commitment from the company’s side, plus a variable percentage of sales depending on the product.

To receive more information e-mail us here: indolink@indolinkconsulting.com

or call us: +34 944 449 552 (Spain)    + 91 20 64731585 (India)