Disadvantages of Direct Exporting


Disadvantages of Direct Exporting

The following are the disadvantages of direct exporting:

(a) High Degree of Risks: Direct exporters are prone to more risks as they shoulder the twin responsibility of manufacturing as well as marketing. They are also subject to the risks of domestic as well as overseas markets.

(b) Higher Investment: As in case of direct exports, an exporter shoulders numerous responsibilities of production, distribution and marketing, the capital requirement is higher.

(c) Lack of Specialisation: Since a direct exporter looks after numerous activities of production, distribution, marketing, he cannot do justice to any one of them, creating chaotic situation in the organisation.

(d) Requires a Vast Knowledge: A direct exporter requires a vast knowledge not only in production and marketing fields but also about social, cultural, economic and political situations prevailing in the foreign countries.

(e) Not Suitable for Small Manufacturers: - Small firms, especially SS1s and cottage industries, may find it difficult to export directly due to inadequate infrastructure and knowledge about the foreign markets.

(f) Diseconomies of Distribution: Direct exporters may not be able to enjoy economies of large scale distribution. Indirect exporters may combine several shipments together and can avail of economies of large scale distribution.


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