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International Business

International Business. Chapter Thirteen Export and Import. Strategy of the Multinationals. Price. Competitive Advantage. Quality. Export Strategy of the Firm. Firms export in order to…. increase revenues achieve economies of scale alleviate excess capacity

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International Business

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  1. International Business Chapter Thirteen Export and Import

  2. Strategy of the Multinationals Price Competitive Advantage Quality

  3. Export Strategy of the Firm • Firms export in order to…. • increase revenues • achieve economies of scale • alleviate excess capacity • minimize risk and diversify markets • John Dunning’s OLI framework on production, trade and investment: • Ownership advantages • Location advantages • Internalization advantages • Components of Export Business Plan (see Table 13.5)

  4. Export Intermediaries Export can be conducted directly, indirectly or through third party intermediaries. Export management company (EMC):a firm that either acts as a manufacturer’s agent or buys merchandise from manufacturers for international distribution. Export trading company (ETC): a large, independent broker whose primary purpose is to match suppliers to foreign customers for a fee. Foreign freight forwarder: an international trade specialist who assists in the delivery of goods from producer to customer

  5. Import Strategy of the Firm • Why import? Basic imports include: • industrial and consumer goods and services • intermediate goods and services • Strategic advantages of imports • Specialization of labor • Global rivalry • Local unavailability • Diversification of operation risks • Gain knowledge from abroad

  6. Export Import Process Ships Exporter Importer Bill of lading Receives payment Payment Opens Letter of Credit Informs Reimbursement Importer’s Bank Exporter’s Bank Informs

  7. Types of Export Documents Key export documents include: • Pro Forma Invoice: outlines the terms of sale, price, and delivery details • Commercial Invoice: all particulars regarding export-import, legal document • Shipper’s Export Declaration: used to monitor exports and compile trade statistics • Bill of Lading: a detailed receipt from the carrier transporting the cargo • Consular Invoice: required to monitor imports • Certificate of Origin: determines the tariff • Export Packing List: lists the cargo details

  8. Countertrade • Countertrade: is good when a firm/government lacks sufficient funds or convertible currency to pay for imports • Two basic types of countertrade transactions include: • barter [based on clearing arrangements used to avoid money-based exchange] • buybacks, offsets, and counterpurchase [all of which are used to impose reciprocal commitments] • Countertrade can be inefficient or inflexible

  9. Chapter 13: Discussion Questions • Explain why firms export or import. What do they gain from export-import? • Discuss the functions of Export Intermediaries. • Describe the export-import process and explain the role of various types of export documents involved in the process. • What is countertrade? Why firms or governments engage in countertrade?

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