The following article will guide you about how to make an offer for your willingness to supply required material/service to the inquirer.
Introduction to Offer:
This activity follows at the receiver’s end (exporter/supplier) when the inquiry has been received. The response to an inquiry is an offer provided the exporter requires no clarifications. An offer is the indication and your willingness to supply required material/service to the inquirer.
What you mention in the offer is your categorical acceptance to honour the commitment if called upon by the importer to do so. If you have made firm commitment than it is up to the importer to consider or not. If you have made no commitments, but made a general offer, than the importer may come back to you for firm commitment.
It all depends what was inquired at the first place and what was offered subsequently by you.
Essential Parts of an Offer:
The offer sheet contains four essential parts of information;
Part 1: The Identity:
The identity of the sender (exporter):
(i) Name of the organization,
(ii) Name of the sender and his/her designation.
(iii) Physical mailing address,
(iv) Electronic mailing addresses like telephone, fax, web site, e-mail.
The identity of the receiver (importer):
(i) Name of the organization
(ii) Name of the person, designation, department who sent the inquiry.
(iii) Physical mailing address.
(iv) Electronic mailing addresses like telephone, fax, web address, and e-mail.
For an offer to reach the desired destination, it must contain correct details of the above four levels. If the offer is sent only by the company name than there are chances that it may not reach the right person who sent the inquiry or if it reaches the right person it may not reach with in the stipulated time specified in the inquiry.
There are cases when the importer mentions in the inquiry sheet that offers must be delivered at the reception or dropped in the “OFFER BOX” kept at specified place (generally near the reception of the office of the importer.), in which case even the offers which are sent by mail or courier are deposited in this box.
As is said in the-case of communication, offers sent are not offers received rather you have to make sure the offer is sent in time and in the right manner and to the right place & person in the concerned department of the importer.
Therefore when you send the offer make sure to counter check whether the right person has received it or not, if not, than trace the movement and make sure it reaches the right destination, better re-send another copy as re-confirmation using more secure means of delivery.
Part 2: Product/Service Offered:
This part will contain information like;
a. Item,
b. Specification,
c. End usage (if mentioned in the inquiry),
d. Price,
e. Total value,
f. Quantity,
g. Delivery,
h. Packing,
i. Shipping term of delivery,
j. Validity, and
k. Special terms & conditions.
Part 3: Identification Mark of the Offer:
This is an essential reference point of the offer sheet. The reference number is unique for the offer and has a date as well. This reference number is used for all future communications between the importer and the exporter.
It is different from the contract number. The contract number is assigned once the offer has been accepted and contract has been drawn which contains reference to both the inquiry and the offer besides other standard terms and conditions for the supply.
Part 4: Time Factor:
The time factors indicate the urgency of the requirements for the offer submission. In the case of direct business the importer may ask the exporter over phone the price and other essential terms and may request the exporter to fax or e-mail the detailed offer followed by mail copy.
If the requirements are not urgent the importer might give sufficient time to the exporter to make an offer and mail it. It is the duty of the exporter to follow the instructions.
However if he (the exporter) feels the time given is not sufficient to make an offer than he must get prior acceptance of the importer for additional time otherwise late offer might be rejected or by that time the importer might have concluded the business.
The Commitments of the Exporter:
The moment you make an offer you stand committed to:
a. Price,
b. Production of the required goods,
c. In required quantity,
d. In required specification,
e. To deliver in required packing,
f. To make goods available to be carried by a carrier up to the importer’s destination,
g. To stand by the quality and replacement/compensation if faults found by the importer,
h. To provide warranty and guarantee to the ultimate consumers whom the importer will sell your products (consumer goods),
i. To protect the importer from any patent or copy right infringements,
j. To receive payment from the importer, and
k. To pay taxes/duties as applicable in your country.
The Important Factors:
As an exporter/ supplier you might be getting a number of inquiries but it is not necessary that you respond to each of them.
Whether to take up an inquiry or not depends on following factors:
(i) Anticipated governmental clearance for exports.
(ii) Quantity required.
(iii) Quality required.
(iv) Expected end usage (for industrial products).
(v) Delivery required.
(vi) Payment options.
(vii) Sup-pliability at your end.
(viii) Past performance of the importer with you.
Evaluate your position against above pointers and if the answer is affirmative than take up the inquiry otherwise politely refuse it with a promise to make the offer next time. In the case of “Direct” inquiries, it is not considered good in international business that the exporter if not in a position to offer just scraps the inquiry without sending any response to the importer.
If you do so than chances are that the next time the importer is in the market he/she might not send you the inquiry and thus lessening your chances for getting the future business. However this situation may not arise if the inquiry has come via e-mail or through un-solicited importer.
Making the Hard Decision to Quote or not to Quote:
Many organizations have exclusive export department, which caters to the export market. They are given preferential treatment over the domestic market demands. Also there are organizations, which do not have exclusive export department, but the domestic department caters to the export inquiries together with the domestic ones.
This differentiation between the export market and the domestic market has been in existence for a long time. The basic difference is primarily the quality of the two products. The products meant for exports are given extra make up and accessories as required in the specific overseas markets.
Whereas in the case of the domestic markets the products are of the generic level, any addition on them differentiates them into different categories like deluxe or super deluxe brands.
Take the case of the Maruti Suzuki. They are exporting cars to a number of overseas markets but what they export is not marketed domestically. Even take the case of the Matiz car of Daewoo, the export model is different from the one they market in India. The major difference is in the accessories.
With the advent of the globalization of the markets this phenomenon of differentiation is fading away giving rise to more robust quality conscious manufacturers who produce for the world quality. They can afford not to have exclusive export department and similar products serve all markets.
They might have domestic marketing dept. and international marketing departments but both of them tap products from the same production line. However some differentiation might occur for adapting the products for a specific market of groups of customers.
Generally if your quality level is same for the domestic and export markets than most of the problems caused due to quality, are diminished since the production line concentrates on one quality level and not two for same product/brand/model.
When you receive an export inquiry the first thing to consider is whether you can afford to make an offer, is there enough production capacity available to meet the export demand and still continue to meet the domestic demand or the demand from your existing customers which may include not only the domestic buyers but also the overseas importers as well.
Many organizations falter at this point, without any reference to the quantity availability they make an offer. Sooner they realize their folly and the contract which was supposed to give them additional markets just adds additional troubles especially on the delivery side.
Further it must be noted that every offer that you make does not gets converted into order. This situation is so glaring when business is decided on tender basis. Against one tender there might be as many as 30 to 40 bids out of which only one or two will be converted into orders. For the rest of the bidders it is learning experience for getting ready for the next time.
Same situation exists when project business is done like power plant or fertilizer plant. Making a bid for such a large project involves not only expenditure but also consumes time. Again only one bidder gets the order and the rest are scrapped. But this situation does not deter the suppliers from making further bids. The bidders generally back out if persistent efforts do not bring them the positive results.
Therefore while considering an export inquiry you have to ask many questions to yourself. The questions may range from your internal position to external factors. The internal position would include factors like corporate policy decision for export marketing, production capacity constraints, financial position, and technological limitations.
The external factors would include the pricing and profitability, competition, volume of business, legal aspects of business in destination market, and distribution logistics. These factors need not be considered on case to case basis. They involve long term planning and short term decisions.
The long-term decisions would include the corporate policy and short term would include the product and the market. Sometimes pricing decisions are also referred back to the top level management for specific decisions like “whether to sacrifice profitability for getting foot hold in specific market” or “outsourcing to cut costs for remaining and retaining competitiveness”.
As the export manager you would be confronted with such teasing situations and it is up to you to come out of them to show results.
Without going into the intricacies of export marketing let us consider the case at the grass root level when you are confronted with an export inquiry and have to take a decision whether to bid or not to bid. In the following lines a basic decision making structure is given based on which a budding export manager can build up his fortress suiting his and his organizations’ requirements and guidelines.
The basic points, which affect the decision, are:
1. (a) Does the product required conforms to our regular products.
(b) Current product has to be modified (physical dimensions).
(c) New product has to be engineered (physical dimensions and quality).
2. What is the quantity required?
3. What is the quality required?
(a) Is our present quality level sufficient?
(b) Do we have to improve quality level?
(i) What are the cost implications of the new quality levels?
(ii) Can we absorb additional costs?
(iii) If we absorb additional costs what advantages can we expect from the customer and/or from the market?
(iv) Does it affect our existing markets/customers?
(v) What is the competition existing and anticipated once we enter the new market?
(vi) How will the competition react to our changes in the existing markets and in the new market?
4. When is the delivery required?
(a) Can we meet the delivery requirements? If no, then,
(b) Can we create new production line?
(i) Will the new production line sustain it commercially, if no then
(ii) Can we work on additional shift? If no, then
(iii) Can we procure/produce from other divisions or out source, if yes, then
(iv) What advantages can we expect from this deal?
4. What is their packing requirement?
(i) Can we offer it, if not
(ii) Can we suggest alternative packing?
(iii) What is the cost implication for the new packing method/material?
(iv) Can we ship in bulk and let importer repack at their end (consumer goods)
5. What is the level of competition?
6. What price is expected against i-a, b, and c.
7. Are we already exporting to the market in question?
(a) If yes, then is the inquiry from our regular customer or
(b) From a new customer?
(c) What is the credit worthiness of the customer?
8. If it is a new market then do we really want to enter it?
(a) If yes, then do we have the infrastructure required to handle the new market?
9. What is the market potential and future growth expected? 10. The decision making process at the importer’s side
(i) The organization’s chart
(ii) Who makes the decisions?
(iii) What is their current supply source?
(iv) How they import?
(v) How much they importer last year?
(vi) How much they will import this year?
(vii) What is their future planning?
(viii) What is the location of their plant or point of consumption (industrial goods)?
(ix) What is their distribution network (consumer goods)?
(x) Do they sell under their brand?
(xi) What sort of business links they have with other suppliers of compatible products and not so-compatible products.
While considering above points for making decision it might be possible that information on some points is not readily available, in that case make your decision on the available information but before entering into the negotiation stage for contract formation make sure you have maximum information.
If situation filters down to contract stage better wait till you have all the required inputs on the importer and the market. The wording “wait till” is not a limitless time factor it is very short from couple of hours to days.
Making an Offer:
An offer is the exporter’s response to the importer’s inquiry. It must reflect what was inquired and on what conditions you can offer. The importer might be sitting hundreds of kilometers away from you. All he has about and from you is your offer sheet.
So make sure it conveys you intentions to do business. Your offer must not become the cause of numerous clarifications but be the source of numerous information’s that the importer wanted or intended to have from you.
Your offer must reflect and convey what you are offering and is free from any assumptions and assertions. The selection of the words be such that they convey one and only one meaning and that meaning should be what you thought and wrote in the first place and is what the importer will understand and interpret when he reads it at his place.
The structure or the body of the offer is decided and is dependent on the inquiry on which it is going to be based. So the first and most important thing to do is to read and fully understand what is inquired. If you have any doubts get clarifications, in writing, from the importer.
If you get those clarifications over phone write back to the importer what you hate understood and if possible counter check with him again. This may lake time and efforts but it is worth doing if you want to avoid complications later on. because once you release your offer than it is beyond your control.
Your offer comprises of two parts. One containing the information mentioned in the inquiry sheet and the second part contains your price and associated terms and conditions on which you can supply the material.
Items to be picked up from the inquiry: Products, specifications (quality),, Application (for industrial products), packing, quantity, and delivery terms.
Items to be included by the exporter from his side: Price, delivery time, quantity offerable (if different from the inquiry and has direct bearing on the price), payment, Inspection, validity, and applicable laws (Optional).
It is normal practice for the importer to ask for specific validity of the offer to the exporter so that he (importer) has time to evaluate the offer and revert back to the exporter for comments/confirmation. As for the exporter is concerned, he has to keep provision in his manufacturing programme to accommodate the quantity in case the importer places the order.
Since importer and exporter are located in different countries so there has to be difference in the applicable commercial laws. It is advisable for the exporter to mention at the offer stage as to what laws would govern the expected contract.
Most of the problems in international trade are related to the delivery, payment, and quality. These three points will be discussed in details in item 2 (contract formation) later in this section.
About delivery please understand at this stage that you have to mention in your offer that delivery terms (what was mentioned in the inquiry and what you are offering) would be as per the INCOTERMS 2000.
About quality there are international standards like JIS (Japan), BS (British), DIN (German), IS (Indian), ASTM (American). These are universally accepted and understood. Each of these standards has equivalent/compatibility with other standards.
If the importer has inquired for material (industrial) as per say the Japanese standards but you cannot produce under those standards than you must mention in your offer that the offered material is as per equivalent IS (Indian) standards and possibly enclose the relevant text as is applicable from the Indian standard.
If the importer is not comfortable with the Indian standards and he liked your offer than he might come back to you asking to consider equivalent BS or DIN standards. Most of the Indian standards are based on British standards so it might not be difficult for you to accept alternative compatible standard.
However in such cases it is advisable to include the material specification (chemical and physical properties like elongation, strength, and elasticity) and testing methods. In the case of consumer and consumer durable goods the most important factor is the Warranty and Guarantee.
Another point, which has direct linkage to quality, is the inspection. Though there are various pre-shipment inspection norms enforced by law still it leaves room for improvement so that the quality asked be the quality supplied.
Example 1 (General Inquiries):
1. Inquiry:
“Please let us know your current prices for the Oral B tooth brushes for the Indian market”
Offer:
“Regarding Oral B tooth brush we are offering US $ 75 per box (144 pieces) CIF Mumbai. Please revert your detailed inquiry for firm offer. Rgds. Stewart/export dept 2”
2. Inquiry:
“We are planning to enter the market for the bulk imports of Oral B tooth brushes, please revert supply position with your manufacturers for shipments in the latter half of the year.”
Response:
“Please specify the market. If you are considering Indian market than our manufacturer can supply up to 4 FCL during second half of this year, but orders for which must be place on them by end this month. Kindly revert your detailed requirements for our firm offer. Rgds Stewart/export dept 2”.
3. Inquiry:
“Regarding leather belts for men and women, we have entered into bulk supply contract with the largest retailer in the Japanese market. Please revert your supply position for 4 FCL so that we can release firm inquiry”
Response:
“Regarding leather belts, we can supply the required quantity, please release firm inquiry. Rgds: Shekher/International Marketing Div.”
4. Inquiry:
“We are going to participate in the 210 MW power plant under WB finance. For this project we need 30,000 tons of steel wire rods per JIS 1008. Please revert your budgetary offer on CIF Chennai basis in US $ for shipments in second half 2001. Payments will be as per WB conditions.”
Offer:
“Please refer your inquiry no. SSB/8 for 30,000 Tons steel wire rods per JIS 1008. We can offer this material as per your specifications, sizes, and delivery at US $ 235 for sizes up to 8mm, and US $ 345 for sizes over 8 mm on CIF Chennai India under WB payment. This offer is subject to our final confirmation. Rgds. Lee/steel-div/International sales”.
6. Inquiry:
“We are planning to bid for the 20,000 tons Basmati rice to Dubai in bulk. Please revert bulk freight rates Mumbai to Abu Dhabi, all risk cover insurance Indore to Unloading port, and the loading and unloading charges. All rates to be in US $.”
Offer:
“Thanks for your inquiry. We offer regular service for Mumbai-Dubai sector. We can also offer you very competitive charter rates for carrying 20,000 tons Basmati rice in bulk.
Regarding your requirements for ocean freight and insurance, we are pleased to quote our most competitive rates as follows;
1. For bulk cargo Mumbai to Dubai US $ 28/Ton. (Inclusive of loading and unloading charges.)
2. Comprehensive insurance cover through international insurance company at US $ 950
Above rates are applicable for the 20,000 Tons of rice lot as one cargo. Please let us know when the cargo will be ready.—Rgds Chug/Concord Delhi”.
7. Inquiry:
“We are planning to set up 50,000 TPY Cold Rolling Mill at Hyderabad India for automotive application. Please revert if you can offer latest CR technology. We may also consider importing the main plant based on your technology and recommendation besides technical assistance for 5 years in running and maintenance of the project.”
Response:
“Thanks for your inquiry and noted your requirements. We can offer you the CR technology together with the required plant. From our past experience we feel it would be better for you to source technology and equipment from one source if you require the overall performance guarantee (which you must), in that case we can also consider to offer you technical assistance for 5 years for training, running, and maintenance, of the project. In addition we shall also offer you newer technologies as and when we develop in our R&D. Please consider above proposal and revert your interest. Our techno-commercial team would call on you to discuss further in this matter on receipt your confirmation.— Rgds Y. Sato/Dir. Tech sales Div.”
Example 2 (Specific Inquiries):
1. Inquiry:
“Please quote on CIF Mumbai India in US $ for 12 Container load of mineral water in bulk pack and in pet bottles for shipment third quarter 2000. Payment by L/C. Keep your offer valid for 72 hours from 25th Apr 2000. There will be no negotiation/communication on price hence see to it that your price is rock bottom.”
Offer:
“Quoting firm valid 28th Apr 2000 Ohio USA 12 FCL on CIF Mumbai for shipment Oct 2000 against L/C at sight full amount together with order, packing standard stuffing for sea voyage,
(a) Bulk pack of 500 L @ US $ 3125/20ft container
(b) Half liter pet bottle @ US $ 3650/20ft container
Looking forward to your order.
Lee Schmitt/Pres.”
3. Inquiry:
“Please quote on CIF Mumbai India in US $ for 12 Container load of mineral water in bulk pack and in pet bottles for shipment third quarter 2000. Payment in equivalent Japanese Yens through sight L/C. Any adverse exchange rate fluctuation from contract date to shipment date shall be to your account. Keep your offer valid for 72 hours from 25th Apr 2000.”
Offer:
“Quoting firm valid 28th Apr 2000 Ohio USA 12 FCL on CIF Mumbai for shipment Oct 2000 against L/C at sight full amount together with order, packing standard stuffing for sea voyage. The currency of payment in Japanese Yens is acceptable, the Bank of America exchange rate on the date of shipment shall be used for currency conversion as firm and final.
(c) Bulk pack of 500 L @ US $ 3325/20ft container
(d) Half liter pet bottle @ US $ 3850/20ft container
Looking forward to your order.
Lee Schmitt/Pres.”
4. Inquiry:
Please quote on CIF Mumbai India in US $ for 12 Container load of mineral water as per your quality Q1, in bulk pack and in pet bottles for shipment third quarter 2000. Payment by L/C. Keep your offer valid for 72 hours from 25th Apr 2000.
Offer:
“Quoting firm valid 28th Apr 2000 Ohio USA Mineral water quality Q1, 12 FCL on CIF Mumbai for shipment Oct 2000 against L/C at sight full amount together with order, packing standard stuffing for sea voyage,
(e) Bulk pack of 500 L @ US $ 3525/20ft container
(f) Half liter pet bottle US $ 3405/20ft container
Kindly note this quality is in short supply, we will reserve 12 FCL for you till 28th Apr there after shall allocate to other customers.
Looking forward to your order.
A. Schmitt, Dir.”
5. Inquiry:
“Please revert your interests to market our GANGES BRAND mineral water. The technical details, production facilities, and market share data is enclosed. We shall be shipping in bulk containers and bottling will be done at your end by a plant supplied by us. The product will be marketed under our brand. We will control the retail pricing. You shall be paid 5% of the net sales amount through your retail outlets. Upon receipt your interest our representative will visit you for further discussions. We must have your response by fax in next 30 days.”
Response:
“Thanks for your offer, we are interested to market your product in Philippines. Your pre-conditions suit the local laws on mineral water bottling and branding. However the trade margin offered by you will not meet our distribution costs, we operate on 15% margin. Also considering your brand that is new for this market we expect you to meet all the promotional expenses. As we are also discussing with French suppliers of mineral water, so would request you to reply by fax within this week. If you accept our proposal please depute negotiation team for detailed discussions and finalization of contract terms.
Rgds. S. Oswald/CEO”
Example 3. Making Detailed Offer:
So far we have seen brief inquiries and offers, let us now consider a detailed response to an inquiry received over phone and at first was responded by e-mail followed up by detailed letter offer.
Inquiry:
“This is Alec from ABC Inc. New Delhi India. Please quote by torn noon valid 3 days for acceptance, 100 tons industrial solvent in 100 kgs drums Mar 2001 shipment 90 days L/C. on CIF Sydeny”
Offer:
BY E-MAIL/TELEX/CABLEGRAM ETC.
“TO MR: ALEC ABC Inc. New Delhi India
FROM: Tom XYZ Inc. Singapore
Ref. No: xyz/aIec/IS/001 dated 21st Apr 2000
Re. Industrial Solvent.
Thanks for your inquiry of 18th Apr 2000. Pleased to quote 100 Tons Industrial Solvent packed in 100 Kgs drums for Mar 2001 shipment at US $ 2500/Ton (Two thousand Five hundred) CIF Mumbai. Payment by L/C in US $ at 90 days sight. Offer valid 1500 Hrs Singapore 28th Apr 2000. Detailed offer follows.
Offer by Letter:
Let us make detailed offer based on above brief offer, which will be sent by mail to the importer. This detailed offer will also be in confirmation to the earlier offer by e-mail.
Xyz Inc.
Singapore
Ref: is/abc/tom/001
Dated 21st April 2000
ABC Inc. New Delhi India
Atten. Mr. Alec MGR IMP.
Sub: Industrial Solvent/export
Dear Mr. Alec,
I confirm having e-mailed you my offer on 21st April 2000 under reference xyz/alec/IS/001 (copy enclosed) against your inquiry over phone on 18th April 2000. The detailed offer follows as per under;
1. Item: Industrial Solvent
2. Specification: As per grade GX-2 (details enclosed)
3. Price: CIF Mumbai US $ 2,500/TON (US dollars two thousand and five hundred per ton)
4. Total Value: US $ 250,000. / (Two hundred fifty thousand)
5. Packing: 100 Kgs steel drums
6. Shipment: Mar 2001 provided L/C received within 30 days from the date of the order confirmation.
7. Payment: By irrevocable confirmed without recourse Letter of Credit in US $ covering full contract amount payable at 90 days sight.
8. Validity: Price and other terms & conditions are valid for your acceptance till 1500-hrs Singapore times on the 28th Apr 2000 and thereafter subject to our confirmation.
9. Other Terms and Conditions:
(i) The laws of Singapore shall govern the contract.
(ii) Mill’s test certificate shall be final.
(iii) In case third party inspection is required the same shall be to your account.
(iv) The site of inspection shall be our premises or loading port. We shall give you 7 days advance notice for the readiness of the cargo for inspection.
(v) If L/C opening is delayed, the shipment period shall be shifted accordingly.
(vi) If L/C opening is delayed by more than 30 days delivery shall be revised or the order shall be treated as cancelled without any implication to the seller. Thanking you and looking forward to your confirmation.
Yours truly
S.D.TOM
MGR IMPORTS
ABC Inc.
Encl: As above.
Once you have made up your offer then you deliver it as required by the importer in his inquiry and follow the same process as was adopted by the importer after he had made his inquiry.
Lastly I may add here that it is not necessary that you only respond to when you receive an inquiry. As a manufacturer or a trader some time you post your offers directly to the parties that you think may require your products and for this purpose you use various marketing tools for sales promotion or you follow appropriate steps of “inquiry” for “offers”.