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CHAPTER XXVI EXPORT ENTRY STRATEGIES & EXPORT INTERMEDIARIES

CHAPTER XXVI EXPORT ENTRY STRATEGIES & EXPORT INTERMEDIARIES. Export Entry Strategies Indirect Exporting Direct Exporting Direct Foreign Investment Export Intermediaries Buying agents Export Management Companies Export Trading Companies. Export Entry Strategies.

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CHAPTER XXVI EXPORT ENTRY STRATEGIES & EXPORT INTERMEDIARIES

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  1. CHAPTER XXVI EXPORT ENTRY STRATEGIES & EXPORT INTERMEDIARIES • Export Entry Strategies • Indirect Exporting • Direct Exporting • Direct Foreign Investment • Export Intermediaries • Buying agents • Export Management Companies • Export Trading Companies Copyright(c) 2012 Dr. Chase C. Rhee

  2. Export Entry Strategies • How to enter foreign markets? • Indirect Exporting • Direct Exporting • Foreign Direct Investment Copyright(c) 2012 Dr. Chase C. Rhee

  3. Indirect Exporting • Lets another company handle exports as an intermediary • Immediate access to foreign markets • Minimizes cash outlays and risks of exporting • Minimizes staff efforts • May lose control over foreign sales Copyright(c) 2012 Dr. Chase C. Rhee

  4. Direct Exporting • Takes charge of all exporting activities • Requires more time, personnel, and corporate resources • Maintains more control over overseas distribution • Gets higher profit & closer ties with foreign buyers a. Manufacturer's Agents • Take no title to the goods • Carry catalogs and samples • Usually paid commission on sales Copyright(c) 2012 Dr. Chase C. Rhee

  5. Direct Exporting b. Distributors • Merchants who buy the goods from U.S. exporters and resell them in a foreign market at a profit • Carry inventory of products & spare parts & Provide after-sale service • Advertising and promotion activities with allowance from the exporter • Extend credits to local buyers Copyright(c) 2012 Dr. Chase C. Rhee

  6. Direct Exporting • Exporting to foreign retailers • Foreign department or chain stores • Traveling salesmen • Catalogs, brochures or samples d.Exporting to end-users • Foreign governments • Institutions: Hospitals, Schools • Foreign manufacturers who use U.S. products as components Copyright(c) 2012 Dr. Chase C. Rhee

  7. Foreign Direct Investment • Foreign branch, sales office, distribution hub, assembly operation or manufacturing facility in the foreign country • Requires extensive personnel and financial commitment • Exposed to political and economical risks • A long wait for a return of investment • Direct control over manufacturing and distribution Copyright(c) 2012 Dr. Chase C. Rhee

  8. Export Intermediaries • Buying Agents • Finders of U.S. products for foreign buyers: Foreign government’s buying mission, Chain stores, Dept stores. • Register products with them Copyright(c) 2012 Dr. Chase C. Rhee

  9. Export Intermediaries • Export Management Companies (EMCs) • An EMC acts as the export department of one or several manufacturers of noncompetitive products: Supply-driven • Provides domestic manufacturers with immediate access to foreign markets • Does not take title to the goods • Compensation: • Sales commission • Salary • Basic salary plus commission • Small firms: 60% 6 or fewer employees • When exports reach 15 to 20% of manufacturer's total sales or export sales grow over $1 million, manufacturers tend to have their own export department for direct export. Copyright(c) 2012 Dr. Chase C. Rhee

  10. Export Intermediaries • Export Trading Companies (ETCs) • An ETC provides the same export facilitation services as an EMC • Focus is on procurement of products for foreign buyers. No loyalty to manufacturers: Demand-driven • Conducts business in its own own name • Takes title to the goods and pays the manufacturers directly Copyright(c) 2012 Dr. Chase C. Rhee

  11. Export Trading Company Act of 1982 of the U.S. • To promote and encourage the formation of ETC's • To utilize economies of scale and diversification of risks in penetrating foreign markets • Provides exemption from U.S. antitrust law for joint export activities: • Export Trade Certificate of Review from USDC with concurrence of USDJ • Available at Office of Export Trading Companies Affairs (OETCA, www.ita.doc.gov/oetca) Copyright(c) 2012 Dr. Chase C. Rhee

  12. Export Trading Company Act of 1982 of the U.S. • Permits bank's participation: Bank Trading Companies • Permits cooperatives to form ETC Cooperatives: Agricultural industry like Sunkist • ETCA has not been successful in establishing U.S. Trading Companies similar to Foreign Trading Companies such as • Japanese trading companies (Sogo-shosha) • Korean trading companies (Jonghap Sangsa) Copyright(c) 2012 Dr. Chase C. Rhee

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