AMIT CHOUDHARY 10302 CIE2
AMIT CHOUDHARY 10302 CIE2
DIVISION -MARKETING
CIE-2
1 Define Import and export. explain the key difference between Direct and
Indirect Exporting.
Give an example of each. Why is understanding these methods crucial for a
business
venturing into international trade?
Ans1). Import: Importing refers to the process of purchasing goods or services
from another
country and bringing them into one's own country. This can be done by
individuals,
businesses, or governments.
• Export: Exporting is the opposite of importing. It involves selling goods or
services produced
in one's own country to buyers in another country.
Direct vs. Indirect Exporting
The key difference between direct and indirect exporting lies in how a
company reaches its
international customers:
• Direct Exporting: In direct exporting, a company directly handles all aspects
of the export
process. This includes:
o Identifying and contacting potential foreign buyers
o Negotiating contracts
o Arranging shipping and logistics
o Handling customs and documentation
o Managing marketing and sales in the foreign market
Example: A clothing manufacturer in India sets up its own sales office in the
United Arab Emirates to
directly market and sell its products to retailers in the UAE.
• Indirect Exporting: With indirect exporting, a company relies on
intermediaries to handle
the export process on its behalf. These intermediaries can include:
o Export trading companies
o Export management companies
o Agents or distributors
o Domestic buyers who then export the goods
resources but offers greater control and potential profits. Indirect exporting is
less resource-
intensive and less risky, making it suitable for smaller businesses or those new
to exporting.
4. What are spot rates and forward rates in foreign exchange explain how a
company can use a
forward contract to manage its foreign exchange risk than exporting goods.
Illustrate your
answer with a simple numerical example.
Ans. Understanding Spot and Forward Rates:
• Spot Rate: The current exchange rate for immediate currency transactions.
• Forward Rate: A predetermined exchange rate for a future transaction,
agreed upon
today.
How Forward Contracts Help Exporters?
• A forward contract allows businesses to lock in an exchange rate, protecting
them
from currency fluctuations.
• Example:
• An Indian electronics exporter secures a deal to sell products worth $20,000
to a US
company.
• Current Spot Rate: ₹82 per USD → Expected payment: ₹16,40,000.
• If the exchange rate fluctuates to ₹85 per USD, the exporter would gain ₹3
per
dollar.
• However, if it drops to ₹80 per USD, they would lose ₹2 per dollar.
• To eliminate this uncertainty, the exporter signs a forward contract at ₹82
per USD,
ensuring a fixed revenue of ₹16,40,000.
5. Briefly describe the roles and responsibilities of the following in the import-
export process
• Customs house agents
• Marine insurance provider
• Export Promotion Council
• A bank involved in an LC transaction.
Ans.
1. Customs House Agents (CHAs):
Handle customs clearance procedures, including documentation and duty
payments.
Ensure compliance with international trade regulations.
Example: A CHA helps an Indian pharmaceutical company complete import
paperwork for
raw materials sourced from Germany.