Question

Write short Answers of the following.

What are the advantages and disadvantages of direct and indirect exports?

Answer 1

When goods of the domestic country are sold to a foreign country, with no intermediary in between, it is referred to as direct export. However, sometimes the goods are first sold domestically, who then sells the goods to foreign country. This kind of export, in which the manufacturer is not in direct contact with the seller, is known as indirect export.

Advantages of direct export:
i. Exporter has control over prices and on terms of credit.
ii. The exporter can build and develop goodwill by enhancing customer satisfaction.

Disadvantages of direct exports:
i. Importers have greater bargaining power, as they have direct contact with the exporter; so, the exporter may receive lower prices for the goods exported.
ii. As prices are low, it may mean low profits for the seller.

Advantages of indirect exports:
i. The manufacturer need not bother about export procedures and can concentrate on production only.
ii. The producer is at low risk, as he gives the order to export to another merchant.

Disadvantages of indirect exports:
i. Since the producer does not directly contact the end–users, he is not aware about changes in their preferences.
ii. The producer’s identity is hidden; so, he does not receive any goodwill that could be earned by a direct exporter.