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GUIDELINES
TO NIGERIA’S EXPORTS
This
is a document carefully created by the MAN Export
Promotion Group from a selection of export guidelines
and other export related references and contributions
from bankers and agencies in order to assist the
exporter from Nigeria in his export businesses.
The
document is a reference book for the small and
medium scale business exporter and the first time
exporter. The guidelines will be updated regularly.
It
is divided in the following parts in such a way
that it will make reading quick and easy.
PART
I - Developing Export Strategy
PART
II - Getting Started
PART
III - Export Finance
PART
IV – Understanding
the Different Transport Insurance Policies
PART
V -
Understanding
Terms and Conditions of International Transport
PART
VI – Documentation
PART
VII-
Mastering
packaging of your products
PART
VIII- Understanding the Principles of Standardisation
PART
IX-Proper
Practice for Preparing an Exhibition
PART
I - Developing Export Strategy
This
section details issues involved in entering the
foreign market, finding and developing trade leads,
exporting directly and indirectly, pursuing international
bid opportunities, managing and motivating distributors,
promoting your product and traveling overseas.
Once
a detailed market analysis has been completed,
your company should develop a method of market
entry. Each of the general categories listed below
come with their own unique trade-offs between
financial risks, product control and organisational
goals.
The
indirect methods of market entry usually require
less marketing investment, but you could lose
substantial control over the marketing process.
Direct exporting may necessitate larger capital
investment in marketing, but your degree of control
over export strategies is greater. Corporate presence
is an option for companies with successful test
marketing.
Direct
Exporting
You
can sell directly to customers in foreign markets
by establishing an export department within your
organisation. Selling through your company's sales
department creates an opportunity to establish
a closer relationship with the overseas market
and buyer. In addition to selling directly to
the market you wish to penetrate, you may also
choose to use an export manager to handle other
parts of the world. In fact, in some countries,
you cannot sell directly to the end-user, you
must use a local agent or representative.
Other
direct exporting options include using a variety
of export intermediaries, as shown below.
Manufacturer's
Representative or Sales Agents
Generally,
a representative or agent refers to a person who
is responsible for closing the sale and taking
orders on a commission basis. They do not take
financial responsibility or collect payment for
the goods sold, and they assume no risk or responsibility
for the product. Remember that the primary interest
of all salespeople is to make the sale, it is
your responsibility to check credit and arrange
payment terms. A representative will want a contract
from you for:
1.
Guaranteeing Territory
2.
Exclusivity
3.
Method of Compensation
4.
Term of Service
5.
Representation of the Product Line for
a Definite Period of Time
In
most instances, the representative will be servicing
both local and import accounts, as well as selling
complimentary lines that do not compete. The representative
utilizes the product literature and samples that
you supply.
There
is some controversy over the term agent. Depending
on the country, the term carries a rather broad
interpretation of legal responsibilities involving
the agent's independent activity to contract on
your behalf without your instruction.
Avoid using the term agent. Any contract should clearly indicate
legal authority of the representative to obligate
the firm.
Foreign
Distributor/Importer
The
foreign distributor purchases the product and
is always responsible for payment of the export
item. They assume financial risk and generally
provide support and service for the product. Distributors
often buy to fill their own inventories and typically
carry a range of non-competitive, but complementary
products. Beware, some distributors have been
known to take on products they purposely don't
sell to check competition.
The
distributor should maintain adequate facilities
and staff for day to day servicing. Investigate
this option if your product requires maintenance
or spare parts. Payment terms and length of contract
time are usually initiated with a short trial
period. Territory exclusivity is normally required
by the distributor.
Overseas
Retailers
Selling
directly to a foreign retailer relies mainly on
traveling sales representatives. Another distribution
alternative uses overseas buying offices of domestic
retailers. These buyers can also be a practical
source of foreign distribution for Nigerian manufacturers.
Print based selling techniques that use catalogues,
product literature, and brochures can also reach
the marketing base of foreign retailers and they
reduce the cost of traveling.
Product
sales are usually limited to consumer goods, which
can be sold at a lower price, reflecting the absence
of a representative's commission. It is recommended
that you sell to the retailer at a price flexible
enough to allow you to pay a representative in
the future. In general, stores are more willing
to select the service of a representative who
places the order for them, and services their
account with follow-up channels of communication.
Indirect
Exporting
While
direct exporting may be a profitable method of
foreign market entry for some businesses, sale
by the exporter through an intermediary may be
a better alternative to the complex tasks and
risk involved in direct exporting.
Domestic
Intermediary
Export
Management Company
An
Export Management Company (EMC), functions as
an "off-site" export sales department,
representing your product along with various non-competitive
manufacturers. The EMC searches for business for
your company and usually provides the following
services:
·
Performs
market research and develops a marketing strategy
·
Locates
new and utilizes existing foreign distributors
or sales representatives to put your product into
the foreign market
·
Functions
as an overseas distribution channel or wholesaler
·
May
take title to the goods and operates on a commission
basis
.
Export
Trading Company
Export
Trading Companies (ETC) are very similar to Export
Management Companies. The ETC is more likely to
take title to the product and pay you directly,
but like an EMC, they can also act as an export
department. Usually, there is less responsibility
on the part of the ETC towards the supplier and
they tend to be demand driven and transaction
oriented.
Currently,
the Nigerian Export Promotion Council (NEPC) is
proposing to set up similar Export Houses in strategic
African countries, to benefit Nigerian Export
companies.
Nigerian
exporters are strongly advised to be careful in
doing businesses with Export Trading Houses. Verifying
the experience of such houses is important especially
as there are no experienced licensed Export Houses
the way it applies in other countries.
Before
deciding to use an EMC or ETC, consider these
pros and cons.
Advantages
and Disadvantages of Using EMCs/ETCs
There
are advantages and disadvantages to using an EMC
or ETC.
Advantages
of Using an EMC/ETC
·
Faster
entry into the overseas market in terms of first
recorded sales.
·
Better
focus on exporting, because most firms give priority
to their domestic problems.
·
Lower
out-of-pocket expenses.
·
An
opportunity to study the methods and potential
of exporting.
·
Expertise
in dealing with the special details involved in
exporting, as well as its strategies.
Potential
Disadvantages of Using an EMC/ETC
·
Loss
of control of the export strategies and quality
control of after-sales service.
·
Competition
from the EMCs/ETCs other products.
·
Reluctance
on the part of some foreign buyers to deal with
a third party intermediary.
·
Some
added costs, and higher selling prices because
of gross profit margin requirements of the EMC/ETC,
unless the economies of scale can be used to off-set
this factor.
·
The
possibility of the EMC/ETC neglecting the client's
product in favor of other products that might
be more profitable and easier to sell.
Export
Merchants
These
re-marketers purchase and then re-package products
(usually under their own label) to establish exclusive
markets and customers. The main disadvantage of
using export merchants is that your company could
lose control over product pricing and marketing
in overseas markets. Care should be taken to track
the territories the re-marketer's products are
reaching to avoid interference with current export
activities.
Corporate
Presence
Entering
the foreign market by establishing an overseas
presence requires careful planning and legal guidance..
Alternative
Distribution Approaches
Joint
Venture
Joint
ventures bring together a foreign company and
a Nigerian company with similar goals to establish
a market entry and a distribution network. Each
partner brings specialised skills that make significant
contributions to manufacturing and distribution
capabilities.
Unique
features of joint ventures include:
·
Joint
ventures can be equity or non-equity partnerships.
·
In
some countries, a joint venture is the only way
a Nigerian company can set up operations.
·
Host
country laws often require a citizen from that
country to have a percentage of ownership.
·
Both
partners make substantial investments into the
venture.
Unlike
licensing, joint ventures require a direct investment
for management, technology transfer, training,
and foreign relations. However, in a joint venture
agreement, your company is in a position to expand
resources, export experience and market knowledge
while spreading the risk and laying a distribution
framework. There are also several forms of tax
advantages or waivers offered by foreign countries
for joint ventures.
Finding
Trade Leads
After
deciding to pursue export methods for your product,
you need to develop leads to opportunities with
end users, distributors, and potential joint venture
partners and representatives. If the buyer or
end user is readily identified, this is simple.
However, sometimes it is necessary to identify
leads for the required buyers, distributors, representatives,
or joint ventures. These are often available from
a variety of government, public and private databases,
programmes, and electronic resources. MANEG’s
Directories shopping provide ample opportunities
for finding trade leads.
Private
agencies and sources include chambers of commerce,
business associations, trade shows, and traditional
media sources. Electronic sources, including the
Internet, represent the newest, fastest growing,
and potentially most promising mechanism.
Private
Agencies & Sources
Existing
business relationships and associations provide
another avenue to making export connections and
obtaining leads. These include:
·
Banks
and other Financial Institutions: Most larger
banks and financial institutions are now multi-national,
have correspondent relationships with overseas
counterparts, or maintain a department to handle
foreign financial transactions. These can frequently
provide leads and introductions to overseas markets.
·
Business
Colleagues: Business colleagues with existing
relationships and firsthand experience may give
personal recommendation or introductions to prospective
representatives, buyers, or distributors.
·
Trade
and Industry Associations: Trade and industry
associations are an excellent opportunity to share
information and contacts with those having similar
interests and contacts.
·
Trade
Shows and Missions: Trade shows and missions are
one of the best ways to not only share information
with other exporters, but provide the opportunity
for direct contact with interested buyers, representatives,
and distributors.
·
Export
Seminars: Seminars oriented towards exporting
offer yet another opportunity to meet like-minded
and experienced producers as well as developing
additional expertise.
·
Chambers
of Commerce: Chambers of Commerce are normally
involved in trade shows and missions. They maintain
a database of contacts for those expressing interest
in Nigeria’s exports. Frequently, Chambers of
Commerce maintain "sister" relationships
with overseas chambers in selected markets.
·
Miscellaneous
Contacts: Many times contacts can be made through
unexpected sources such as freight carriers, shipping
agents, airlines, commodities brokers, port authorities,
and others can be a valuable source of information,
contacts, and leads.
Electronic
Information & Media Sources
Traditionally,
printed publications such as brochures and catalogs
served to promote exports. However, the development
of CD-ROMs, the Internet, and the availability
of search and matching programs on the Internet
are resulting in an explosive increase in the
use of electronic media. Read the following topics
for more information.
Print
Publications and Bulletins
·
Brochures
and Catalogues: Brochures and catalogues exhibiting
your company and/or products not only provide
information but can also promote through a variety
of other sources such as trade shows, catalog
shows, and direct mail or contact with buyers,
distributor, or representatives.
·
Telephone
Books: Telephone books can often be obtained through
an embassy or banking contact if a specific target
market has been selected.
·
Foreign
Trade Association Newsletters: The correspondence
available from overseas can also provide leads
regarding perceived needs and requirements in
those markets.
Electronic
Media
Electronic
formats have the potential to accommodate all
and replace many of the existing ways to locate
leads. Electronic access to all previously listed
government and private services, events, publications,
and foreign associations is available.
Finding
An Overseas Representative
Once
you've determined that you want to export directly,
instead of indirectly, you must decide if you
want to sell through an agent or a distributor
(also called dealers, wholesalers, and sometimes
even retailers). There is a substantial difference
between the two categories both legally and functionally.
It is often difficult and expensive to unwind
from established relationships, therefore it is
important to carefully determine the correct connection
for your exporting efforts. Once this is made,
you need to locate, select, screen, and reach
an operating agreement with your contact. Follow
the links for more information.
·
Decide
if you need an agent or distributor.
·
Compile
a list of possible representatives for each market.
·
Contact
potential representatives describing your intentions.
·
Evaluate
each potential representative's reputation, capabilities,
and financial status.
·
Draft
and execute agreement.
A
thorough analysis of your needs and requirements,
as well as a comprehensive search, evaluation,
and selection are critical to the success of your
marketing effort. Remember, the time spent here
is time well spent and the completeness of your
search will reflect in the performance of your
export programme.
Agent
or Distributor?
The
decision whether to use a distributor or an agent
is a substantial one and vital to the nature of
your overseas efforts. The success or failure
of your export effort will depend upon this decision.
Consultation with your legal counsel, the practicalities
of your export requirements, and the traditions
of the country you are exporting to will have
substantial bearing on your decision. The time
and effort spent up front in your evaluation and
determination of the correct avenue will greatly
benefit the success of your export programme.
Representation
of any kind in a foreign country is much like
a marriage, it can be easy to get into but often
difficult and expensive to terminate. If you are
not confident in your selection of a representative,
sell directly to retailers or other end users
until the right one is located.
Use
an Agent if:
·
It
is the accepted distribution method in the country
you are exporting to.
·
You
do not need to maintain inventory in the foreign
country. For example, if you manufacture custom
or capital equipment, sell services, or can have
inventory shipped direct for individual orders,
you probably do not need to keep stock and maintain
a distributorship program in the foreign country.
·
You
want to maintain direct control of the sales of
your products overseas. Since agents sell the
product on behalf of the exporter, they must sell
it at the exporter's price, under specified conditions,
and with prescribed representations.
·
You
intend to benefit from corporate identity and
intend to conduct business under your own name.
Use
a Distributor if:
·
It
is the accepted distribution method in the country
to which you are exporting.
·
You
need to maintain inventory on the foreign country
and do not want to maintain your own distribution
network.
Compile
Potential Representative List
Once
you've determined that you will use a representative,
you must locate possible candidates to act on
your behalf. These are available either through
government sponsored or private sector programmes,
databases, business contacts, and a host of other
methods.
.
Contacting
Potential Representatives
Having
obtained a list of contacts of potential representatives,
the next step is to establish contact to determine
those who might be available and have interest
in acting in that capacity. The best method is
the face to face contact which is available during
trade shows, trade missions, and foreign travel.
If this is not practical, communicate through
written correspondence. Contact representatives
through letters, telephone or telefax, or through
the electronic medium.
Initial
communications should convey the following, at
a minimum.
·
Background
information on your firm
·
Information
regarding your product
·
The
type of sales representative you are seeking
·
Available
information regarding your target market and/or
end user
·
Deadline
for securing representation in the local market
Take
care that you don't make an offer or imply a contract,
instead your communication should be a solicitation
for a proposal. Keep track of your communications
and responses. If you do not have a response from
your contact within 30 days of your first efforts,
send a follow up letter. If there is still no
response within another 30 days, consider placing
this contact on your inactive list.
Evaluating
Potential Representatives
As
previously stated, the arrangements you make with
your representative are critical to the success of
your marketing efforts. Too little care in
evaluating and selecting your representative may
be regretted later. You want to know as much as
possible about your contacts to make informed
decisions and assure mutual compatibility. At a
minimum, you should consult the following
information when available:
Background
Information on the Representative
The
more information available to you on a prospective
representative, the better. At a minimum, you
should inquire about the following:
·
Company
letterhead
·
History
and experience, particularly with similar products
or industry
·
Qualifications
of principals and/or officers
·
Adequacy
of personnel, facilities, and resources
·
Availability
of the resources to meet your requirements
·
Current
sales volume and size of inventories
·
Territories
they cover
·
Product
lines they carry (including competing or
complimentary products)
·
Customer
base
·
Current
clients
·
Past
Performance
·
Familiarity
with global business practices
·
Nature
of Sales force
·
Media
resources
Third
Party Evaluations
Often,
evaluations are made by independent companies and
agencies.
Bank
and Trade References
The
relationship a contact has with his bank, as well
as the extent and nature of credit availability,
types of accounts, and history, are often
indicative of the prospect's business practices
and history. Additionally, trade contacts such as
suppliers, shipping agents, customs brokers, etc.
can provide valuable background regarding the
history, strength, integrity, and reliability of
the contact.
Current
Business References
One
of the best ways to explore how you might expect a
relationship to proceed can be indicated by those
your prospective representative has current
business relationships. These can be other
exporters currently utilizing this source,
accountants and legal firms, and industry and
trade associations.
Draft
& Execute Agreements
After
selecting your representative, the next step is to
draft and execute a definitive contract or
agreement which will serve as a basis of
documenting your understandings and
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