IAF605 week 10 chapter 13 export and import strategies

IAF 605 - International Business Management

Week 10

Export and Import Strategies

Reminder

Agenda

Review Chapter 12

Chapter 13 – Export and Import Strategies

Review

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

To discuss the role of countertrade

Exports & Imports

Exporting - sale of goods or services produced by a company based in one country to customers that reside in a different country.

Importing - purchase of goods or services by a company based in one country from sellers that reside in another.

what do we want to gain from exporting?

consistent with our other goals?

will it place demands on our key resources?

how will we meet these demands?

leverage our core competency?

fit with our current value chain

configuration?

coordination systems support the needs posed

by exporting?

cost/benefit?develop new

domestic business instead?

To export or not export – that is the question!

Source: thehamletweblog.blogspot.com

Strategic Advantages of Exporting

Lower investment way to enter foreign markets

Lower risk way to enter foreign markets but lower return on sales

E x p a n d s sales

Achieves economie$ of scale

Profit Potential

Size doesn’t matter

export intensity of a firm is related to and often determined by firm-specific feature that are independent of its size

Image source: http://i.dailymail.co.uk/

Export Development – 2 views

incremental internationalization

born-global

Incremental Internationalization - 3 Phases of Export Development

Pitfalls of Exporting

adjusting financial management

customer demand for greater range of services; competition = less negotiating power

technology = instant communication…no time to deal with issues

see p484-485 for 12 additional stumbling blocks

Designing an Export Strategy to Avoid Making Mistakes

assess export potential

obtain expert counseling (banks, lawyers, EDC, agents..)

select a market or markets where you will focus your exports

formulate and implement your strategy (see Table 13.2 – page 488)

Figure 13.3 The International Transaction Chain (page 485)

Types of Importers

Those looking for any product around the world to import and sell.

Those looking for foreign sourcing to get highest quality products at the cheapest price.

Those using foreign sourcing as part of their global supply chain.

Why Import? Strategic Advantages of Imports

Specialization of Labor

Global Rivalry

Local Unavailability

Diversification of Operating Risks

Import Brokers and Customs Agencies

import brokers help 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

• providing document and paper-flow management

• limiting liability by properly marking an import’s country of origin

customs brokers help by

• providing procedural assistance

• efficiency improvement via technologies and systems

Import Documentation

documents to determine if

customs will release the shipment

documents for duty and statistical

purposes

usually include an entry manifest,

commercial invoice and a packing list

Principal types of exporting: direct and indirect

goods and services are sold to an independent party outside of the exporter’s home country.

Indirect Selling

Exporters may deal directly with:

agents or distributors in a foreign country

indirectly through third-party intermediaries,

such as EMC’s or ETC’s

other types of trading companies

Direct Selling

Through distributors who usually deal

with retailers instead of end users

To foreign retailers and end users

Internet marketing -allowing many small-

and medium-sized companies to access

export markets as never before

Export Documentation

pro forma invoice

shipper’s export

declaration

bill of lading

consular invoice

certificate of origin

commercial invoice

export packing list

Pro Forma Invoice

Purpose

• used to declare value for customs

• commitment from the seller to provide specified goods to the buyer at specific prices

Critical information

• selling terms, price and delivery

Purpose

• Generate payment for goods

• Provide valuation for customs (duties)

• Ensure compliance

Critical information

• description of goods/markings

• quantity and value

• selling & delivery terms, instructions

• seller and buyer information

Commercial Invoice

Purpose

• Contract between shipper and carrier

• document of title

Critical information

• complete description of goods

• quantity

• delivery instructions

• names/addresses of all 3 parties

Source: carbonless.net

Bill of Lading

Purpose

• Satisfy customs requirements in certain countries…especially Canada

Critical information

• Information contained in commercial invoice, country of origin

Source: http://www.cbsa-asfc.gc.ca

Consular/Customs Invoice

Purpose

• verify source of goods for correct duty rate

Critical information:

• notarization by local Chamber of Commerce or other external source

Certificate of Origin

Purpose

• Statistical analysis of trade and export control

Critical information:

• product description including HS code

• quantity

• value FOB point of exit

• origin of goods including PROVINCE if origin is Canada

Note: Canada and U.S. share import information with each other.

When needed

• Shipments over $2000 anywhere EXCEPT U.S.

• controlled /regulated /prohibited goods

Export Declaration

Source: http://www.cbsa-asfc.gc.ca

Export Packing List

Regulatory Assistance

national/provincial/local trade offices

freight forwarders

international banks

trade consultants

Countertrade - when goods and services are traded for each other.

used when a firm exports to a country whose currency creates barriers to efficient trade or country does not have enough cash or credit

common types are:

barter (avoid money-based exchange)

buyback, offset, and counter purchase (reciprocal commitments)

inefficient but provides flexibility

Pepsi – Stolichnaya Vodka countertrade

Image sources: http://www.drugrehab.ca/; http://www.normansliquors.com

MONEY

Homework

review Chapter 13

do quiz (Blackboard)

read Chapter 14 – Direct Investment and Collaborative Strategies

CASE: be prepared to discussGetting Airline Alliances off the Ground