Importing refers to the purchase of foreign products for use or sale in the home market. Importing involves searching foreign markets for acceptable products and sources of supply, providing for transfer of the product to the home market, arranging financing, negotiating the import documentation and customers procedure, and developing plans for use or for resale of the item of service. Thus, successful importing depends on more than good buying; it requires planning for acceptance of the product and delivery of the promised benefits. The importing firm has the responsibility to determine whether the foreign product or service will meet the needs to the home market.
Essentially the import process comprise the following five stages:
- Determining market demand and purchases motivation.
- Locating and negotiating with sources of supply.
- Securing physical distribution.
- Preparing documentation and customs processing to facilitate movement among countries and organizations.
- Development a plan for resale or use.
1. Determining Market Demand and Purchase Motivation.
Importers can have a distinct advantage over foreigners in the home market, because often they know or can more easily learn the requirements and nuances of the market. They are closer to the market, may live there, and may be native to the market. They are familiar with information sources and institutions. This knowledge can, however, be a disadvantage when familiarity leads to carelessness and individuals assume a level of knowledge that does not really exist. Enthusiastic exclamations of family and friends over souvenirs from abroad are no substitute for careful market analysis. Studies and market analysis are needed also by the local importer to achieve realistic estimates of market potential and as a basis for development of the promotional plan.
Raw material and component parts are imported for use by home country manufactures in fabricating their own final products. The potential for such material and parts is determined by the expected sales of the manufactures who use them. A careful analysis of trade reports and business conditions will aid importers in determining the market potential for both final products and components. Manufactures may not only buy crude materials from abroad but may operate mines and processing plants abroad from which they import to meet their requirements.
Affluence and the lifestyles of the population affect the level and types of manufactured products imported by merchants for resale. Some equipment and supplies are imported to facilitate and make more efficient our manufacturing, commercial, educational, and governmental processes.
2. Locating and Negotiating with Sources of Supply
Importers must develop dependable supply sources in order to assure customers and themselves of their ability to deliver promised goods at the negotiated time and place and in the correct quantity and quality. Various types of sourcing strategies are available ranging form a constant scouring of the foreign market by the importer, resident buyer, or middlemen to the ownership and control of supplying firms. The choice among the various options is dependent on supply market characteristics, the product involved, and the importer’s ability to finance and manage the operation.
The importer and the importer’s customers are interested in supply sources that are capable for producing the quantities and the quality levels needed as well as having financial stability and dependability. Where possible, sources should be operating in an environment that is conducive to satisfactory future performance if the relationship is expected to continue.
Product quality is partly a technical matter of specifications or conformance to samples or description. It also has another dimension. Foreign products may be perceived differently than local ones. Some foreign products from some countries may be seen as being of higher quality than local products (e,g., cars) while other foreign products may find it difficult to overcome an image of poor quality. The quality perception can change over time, but importers should, at least, be aware of the potential differences perceived by their customers.
3. Physical Distribution
The logistics of supply, including delivery dates, transportation modes, inventory policy, and claims servicing, may be the responsibility of either the buyer or seller or both- and may be subject to negotiation. These considerations affect the ability of the ability of the importer to deliver goods to customers or the assemble line on time and they affect the final cost. Risk management policies will very with the negotiated results.
Documentation is important in international trade. The distances between trading partners and the sovereign rights of nations require more elaborate systems than those in domestic trade. Each business person desires to protect a personal interest and each nation wishes to be certain its laws are upheld, it revenues protected, and its sovereignty maintained. The individual importer has little choice but to conform- at least in the short-run. Failure to carry out documentation procedures can be costly and result in nondelivery. Exporters who require irrevocable confirmed letters of credit will not ship merchandise on revocable unconfirmed letters. Customs procedures are especially relevant.
5. Developing a Plan for Resale or Reuse
Importers need to have a plan for resale or use of the goods they buy Otherwise, they may find themselves stuck with a product that doesn’t appeal to the local people or does not necessarily fit the production and use systems of a specific business or institution. It is advantageous, then, for the importer to have plan for convincing others of the merits of a product or service. The distribution channels, promotional activities, pricing, and financing should be organized for orderly and effective marketing because selling in the home market may be even more competitive and difficult than in foreign markets. There is no reason to expect that the majority of foreign products will sell themselves any more than it would be true for domestic goods. Competitive products and sources make a marketing plan necessary for successful selling if resale if resale is contemplated.
Credit: International Business-MGU