What is known as contracting with intermediaries in the foreign market to perform export functions?

The concept being described is known as indirect exporting, which involves working with intermediaries in foreign markets to handle various export functions. When a company chooses indirect exporting, it utilizes agents, distributors, or other intermediaries who have established connections and expertise in the target market. This approach can mitigate the risks and complexities associated with foreign market entry, as the intermediaries are typically familiar with local regulations, customer preferences, and market dynamics.

Direct exporting, on the other hand, requires the company to handle the export process itself, which can involve more significant investment and risk, since the company is directly engaged in sales in the foreign country. A company-owned foreign subsidiary refers to a scenario where a company sets up its wholly-owned branch or operation in another country, which is a more committed and resource-intensive strategy compared to using intermediaries.

Using intermediaries through indirect exporting can offer numerous advantages, such as reduced financial risks, lower entry costs, and increased flexibility when entering new markets. Companies often prefer this route, especially when they are just beginning to venture into international trade.