Part Five Global Strategy, Structure, and Implementation

1. Part FiveGlobal Strategy, Structure, and Implementation Chapter Thirteen Export And ImportStrategies

2. Chapter Objectives • To introduce the ideas of export and import • To identify the elements of export and exporting strategies • To compare direct and indirect selling of exporting • To identify the elements of import and importing strategies • To discuss the types and roles of third-party intermediaries in exporting • To discuss the role of countertrade in international business

3. Exports & Imports • Exporting refers to the sale of goods or services produced by a company based in one country to customers that reside in a different country • Importing is the purchase of goods or services by a company based in one country from sellers that reside in another

4. Advantages of Exporting • Lower investment way to enter foreign markets • Lower risk way to enter foreign markets • Expands sales • Achieves scale economies • Diversifies sales

5. Characteristics of Exporters • The probability of a company’s becoming an exporter increases with company size, but the extent of exporting does not directly correlate with size • Companies export to increase sales revenues, use excess capacity, and diversify markets

6. Pitfalls of Exporting • Companies new to exporting (and also some experienced exporters) often make many mistakes • One way to avoid mistakes is to develop a comprehensive export strategy that includes an analysis of the company’s resources as well as its export potential • Companies can also improve the odds of export success by working with an experienced export intermediary

7. Designing an Export Strategy • As a company establishes its export business plan, it must: • assess export potential • obtain expert counseling • select a country or countries where it will focus its exports • formulate its strategy • determine how to get its goods to market

8. Types of importers • Those looking for any product around the world to import and sell. • Those looking for foreign sourcing to get their products at the cheapest price. • Those using foreign sourcing as part of their global supply chain.

9. Types of imports • Industrial and consumer goods to independent individuals and companies. • Intermediate goods and services that are part of the firm’s global supply chain.

10. Strategic Advantages of Imports • Specialization of Labor • Global Rivalry • Local Unavailability • Diversification of Operating Risks

11. Customs Agencies • Customs agencies assess and collect duties, as well as ensure that import regulations are adhered to • A custom broker helps by valuing products to qualify for: • more favorable duty treatment • qualifying products for duty refunds through drawback provisions • deferring duties by using bonded warehouses and foreign trade zones • limiting liability by properly marking an import’s country of origin

12. Principal types of exporting • Direct: goods and services are sold to an independent party outside of the exporter’s home country. • Indirect exports: goods and services are sold to an intermediary in the domestic market, which then sells the goods in the export market.

13. Indirect Selling • Exporters may deal directly with: • agents or distributors in a foreign country • indirectly through third-party intermediaries, such as export management companies • other types of trading companies

14. Direct Selling • Through distributors who usually deal with retailers instead of end users • To retailers and end users • Internet marketing is a new form of direct exporting that is allowing many small- and medium-sized companies to access export markets as never before

15. Export Documentation • Key export documents are: • pro forma invoice • commercial invoice • bill of lading • consular invoice • certificate of origin • shipper’s export declaration • export packing list

16. Export Assistance • Trading companies can perform many of the functions for which manufacturers lack the expertise • Exporters can use the services of other specialists, such as freight forwarders, to facilitate exporting • These specialists can help an exporter with the complex documentation that accompanies exports • Government agencies in some countries, such as the Ex-Im Bank in the United States, provide assistance in: • terms of direct loans to importers • bank guarantees to fund an exporter’s working capital needs • insurance against commercial and political risk

17. Countertrade • Countertrade is when goods and services are traded for each other. It is used when a firm exports to a country whose currency creates barriers to efficient trade • Common types are: barter, buyback, offset, switch trading, and counter purchase