Export Management December 14, 2006. Export versus Import Why would countries have problems with more imports than exports? How are these two affected.

Export ManagementExport ManagementDecember 14, 2006December 14, 2006

Export versus ImportExport versus Import

Why would countries have problems with Why would countries have problems with more imports than exports?more imports than exports?

How are these two affected by political How are these two affected by political actions?actions?

What does Fair Trade have to do with all What does Fair Trade have to do with all of this?of this?

The export processThe export process

Information search

Canvassing

Negotiation

Transport / Carriage

Payment

Common export techniquesCommon export techniques

Canvassing:Canvassing: choice of actions, insurance… choice of actions, insurance…

Negotiation:Negotiation: objectives, phases… objectives, phases…

Transport:Transport: export documents, incoterms… export documents, incoterms…

Payment:Payment: bank documents, documentary bank documents, documentary credit…credit…

CanvassingCanvassing

What is it?What is it?Search for potential partners (intermediaries) Search for potential partners (intermediaries)

and/or potential clientsand/or potential clientsClosely related to the choice of entry modeClosely related to the choice of entry mode

Objectives:Objectives:Qualitative: choice of partner, relationship, Qualitative: choice of partner, relationship,

coherency…coherency…Quantitative: numbers, sales potential, Quantitative: numbers, sales potential,

profitability, margins…profitability, margins…

Identifying potential partners and clientsIdentifying potential partners and clientsEvents organized by UE, France, and Events organized by UE, France, and

other countries to help exportersother countries to help exporters

Use embassy commercial services Use embassy commercial services (Missions économiques)(Missions économiques)

Buy list from private providers (Kompass, Buy list from private providers (Kompass, Europages…)Europages…)

Choice of actionsChoice of actions

Search for partners in Search for partners in FranceFrance

Search for potential Search for potential partners/clients partners/clients

abroadabroad

Actions in FranceActions in France -Direct marketing in Direct marketing in France (mail, phone, e-France (mail, phone, e-mail…)mail…)-Participate in trade Participate in trade fairs and other events fairs and other events in Francein France

-Direct marketing aimed Direct marketing aimed at foreign at foreign partners/clientspartners/clients-Contact with foreign Contact with foreign delegationsdelegations-Invite future partners to Invite future partners to FranceFrance

Actions abroadActions abroad -Trade missions in Trade missions in foreign marketforeign market-Participate in trade Participate in trade fairs and other events fairs and other events in foreign marketsin foreign markets

Choice of actionsChoice of actions

MailMail PhonePhone Mission Mission FranceFrance

InvitationInvitation Mission Mission abroadabroad

Trade Trade fair in fair in

FranceFrance

Trade Trade fair fair

abroadabroad

Low HighCOSTS

EFFECTIVENESSLow High

So, in other words if possibly the So, in other words if possibly the outcomes maybe negative rather than outcomes maybe negative rather than positive you are gambling on losing positive you are gambling on losing everything without insurance…everything without insurance…

Think about it personally – why should we Think about it personally – why should we carry insurance on items?carry insurance on items?

Costs are high and effectiveness low – we may want to carry insurance

Canvassing insuranceCanvassing insurance Most governments offer some type of Most governments offer some type of

canvassing insurance to their exporterscanvassing insurance to their exporters

Coface – insures financial costs and risks Coface – insures financial costs and risks related to the search of foreign partners/clientsrelated to the search of foreign partners/clients

For firms with sales < 150 million €For firms with sales < 150 million €

Concerns all costs: market research, product Concerns all costs: market research, product adaptation, participation in trade events, adaptation, participation in trade events, advertising, HR costs…advertising, HR costs…

Other financing/insurance optionsOther financing/insurance options

BanksBanks

Other types of Other types of regional/national/international regional/national/international companiescompanies

After canvassing comes…After canvassing comes…

NegotiationNegotiation

International negotiationInternational negotiation

What is negotiated or negotiation? What is negotiated or negotiation?

In international business, partners have a different In international business, partners have a different perception of negotiation, a different way of perception of negotiation, a different way of thinking and actingthinking and acting

Cultural dimension: openness and understanding Cultural dimension: openness and understanding of other cultures, effective communication in spite of other cultures, effective communication in spite of differences…of differences…

How to persuade someone…How to persuade someone…

In negotiation isn’t there persuasion?In negotiation isn’t there persuasion?How to you get someone to think like you?How to you get someone to think like you?How do you get them to instantly like you?How do you get them to instantly like you?Aren’t these the million dollar questions?Aren’t these the million dollar questions?Let’s see what Dr. Lierberman would say Let’s see what Dr. Lierberman would say

on the subject? (Not Dr. Phil)on the subject? (Not Dr. Phil)

Negotiation phasesNegotiation phases

Pre-negotiation:Pre-negotiation: determine who, what, when, where… determine who, what, when, where… date and agendadate and agenda

Introduction:Introduction: first impressions and positions first impressions and positions

Observation:Observation: collect information on partner and collect information on partner and objectivesobjectives

Adjustment/Concession:Adjustment/Concession: heart of negotiation, heart of negotiation, negotiation strategies, consensus in compliance with negotiation strategies, consensus in compliance with initial goalsinitial goals

Conclusion:Conclusion: formalize and finalize agreement formalize and finalize agreement

Styles of negotiationStyles of negotiation

FranceFrance USAUSA JapanJapan

-Debate, conflictDebate, conflict-Protocol, etiquetteProtocol, etiquette-Affectivity, emotionsAffectivity, emotions-Important hierarchyImportant hierarchy-Philosophical Philosophical reasoningreasoning-Lively conversationLively conversation-High involvementHigh involvement-Precision expectedPrecision expected-Centralized decisionsCentralized decisions-Expect to waitExpect to wait

-Problem-solving, -Problem-solving, business is businessbusiness is business

-Horizontal relations-Horizontal relations

-Informal, direct, verbal-Informal, direct, verbal

-Logical process -Logical process

-Check-list-Check-list

-Short term orientation-Short term orientation

-Competitive-Competitive

-Limited flexibility-Limited flexibility

-Written agreement-Written agreement

-Importance of group, -Importance of group, teamteam

-Vertical relations-Vertical relations

-Rituals (cards, gifts…)-Rituals (cards, gifts…)

-Importance of non--Importance of non-verbalverbal

-Time-consuming-Time-consuming

-Long term orientation-Long term orientation

-Buyer dominates-Buyer dominates

-Manipulation of -Manipulation of informationinformation

-Search for consensus-Search for consensus

IncotermsIncoterms Incoterms = international commercial terms (1936, 2000)Incoterms = international commercial terms (1936, 2000)

ICC: “international ICC: “international rulesrules that are accepted by governments, that are accepted by governments, legal authorities and practitioners worldwide for the legal authorities and practitioners worldwide for the interpretationinterpretation of the most commonly used terms in of the most commonly used terms in international trade”, “they are at the heart of world trade”.international trade”, “they are at the heart of world trade”.

Rights and obligationsRights and obligations of the parties to the contract of sale of the parties to the contract of sale with respect to the with respect to the deliverydelivery of goods sold of goods sold

Reduce or remove uncertaintiesReduce or remove uncertainties arising from differing arising from differing interpretations of terms in different countriesinterpretations of terms in different countries

Delivery, transfer of risks, division of costs…Delivery, transfer of risks, division of costs…

IncotermsIncoterms Three letter abbreviation, followed by a destination (named place). Three letter abbreviation, followed by a destination (named place).

Ex: EXW AngersEx: EXW Angers

13 Incoterms divided into 4 categories13 Incoterms divided into 4 categories

E:E: the seller only makes the goods available to the buyer at the seller’s the seller only makes the goods available to the buyer at the seller’s own premises.own premises.

F:F: the seller is called upon to deliver the goods to a carrier appointed the seller is called upon to deliver the goods to a carrier appointed by the buyerby the buyer

C:C: the seller has to contract for carriage, but without assuming the risk the seller has to contract for carriage, but without assuming the risk of loss or damage to the goods or additional costs due to events of loss or damage to the goods or additional costs due to events occurring after shipment or dispatchoccurring after shipment or dispatch

D:D: the seller has to bear all costs and risks needed to bring the goods the seller has to bear all costs and risks needed to bring the goods to the place of destinationto the place of destination

Important documentsImportant documents Bill of lading (B/L):Bill of lading (B/L): proof of carriage and title of proof of carriage and title of

goods (evidence of title to the goods for collection by goods (evidence of title to the goods for collection by the purchaser)the purchaser) Issued after mate’s receiptIssued after mate’s receipt Straight consignee or to order (negotiable instrument)Straight consignee or to order (negotiable instrument) Reserves: clean/dirtyReserves: clean/dirty Fiata B/L when issued by transit agentFiata B/L when issued by transit agent

Airway bill (AWB):Airway bill (AWB): proof of board and carriage proof of board and carriage Joint/groupage: collective AWBJoint/groupage: collective AWB Exclusive: house AWBExclusive: house AWB Signature and flight numberSignature and flight number

Carriage documentsCarriage documents (CMR, trucking B/L, railroad (CMR, trucking B/L, railroad B/L): proof of carriageB/L): proof of carriage Proof of instructions to carrierProof of instructions to carrier Signature, require at each borderSignature, require at each border

International paymentsInternational payments International bank transfer: from one account to anotherInternational bank transfer: from one account to another

Swift (Society for Worldwide Interbank Financial Swift (Society for Worldwide Interbank Financial Telecommunication)Telecommunication)

Ipi transfer (International payment instruction)Ipi transfer (International payment instruction) Credit cardCredit card

CheckCheck Company checkCompany check Bank checkBank check

Letter of credit: documentary credit is very popular in Letter of credit: documentary credit is very popular in international tradeinternational trade

Documentary creditDocumentary credit Documentary credit: a bank’s written agreement Documentary credit: a bank’s written agreement

for payment to an exporter against presentation of for payment to an exporter against presentation of export documents (B/L, AWB, Rail B/L, Truck export documents (B/L, AWB, Rail B/L, Truck B/L…)B/L…)

Nature of the credit:Nature of the credit: Revocable/irrevocableRevocable/irrevocable

Revocable by issuing bank (provides least security to seller)Revocable by issuing bank (provides least security to seller) Irrevocable cannot be altered without the beneficiary’s consent Irrevocable cannot be altered without the beneficiary’s consent

(provides more security)(provides more security)

Confirmed/unconfirmedConfirmed/unconfirmed A second bank adds its endorsement to the credit, indicating A second bank adds its endorsement to the credit, indicating

that it too will make payment against the specified documents that it too will make payment against the specified documents (gives beneficiary additional assurance that payment will be (gives beneficiary additional assurance that payment will be made)made)

StepsSteps of the confirmed documentary credit of the confirmed documentary credit

1.1. Buyer and seller enter into the underlying contractBuyer and seller enter into the underlying contract

2.2. Buyer applies for a letter of credit from issuing bank (buyer may Buyer applies for a letter of credit from issuing bank (buyer may pay for letter now or later, depending on credit standing)pay for letter now or later, depending on credit standing)

3.3. Issuing bank instructs confirming bank to pay seller on the letter Issuing bank instructs confirming bank to pay seller on the letter of credit on seller’s presentation of required documents to of credit on seller’s presentation of required documents to confirming bankconfirming bank

4.4. Confirming bank pays seller and sends documents to issuing Confirming bank pays seller and sends documents to issuing bankbank

5.5. Issuing bank presents documents to buyerIssuing bank presents documents to buyer

6.6. Buyer presents documents to shipper in exchange for goodsBuyer presents documents to shipper in exchange for goods

International product policyInternational product policy

Existence of global product? Existence of global product? International standard?International standard?

Three common strategiesThree common strategies Straight extensionStraight extension Product inventionProduct invention Product adaptationProduct adaptation

Technical adaptationTechnical adaptation Commercial adaptationCommercial adaptation

Factors influencing Factors influencing standardization/adaptationstandardization/adaptation

Factors affecting Factors affecting standardizationstandardization

Factors affecting Factors affecting adaptationadaptation

Reduced costsReduced costs

Better use of know-howBetter use of know-how

Global imageGlobal image

Coherent marketing strategyCoherent marketing strategy

Better coordination and Better coordination and controlcontrol

““Shrinking” of world marketShrinking” of world market

Cultural differencesCultural differences

Govt. and regulatory Govt. and regulatory restrictionsrestrictions

Differences in infrastructureDifferences in infrastructure

Local competitionLocal competition

““True” to marketing conceptTrue” to marketing concept

“Think global, act local”, global / local paradox

Elements of a productElements of a product

Core benefit

or service

Packaging

Brand name

Quality Styling

Features

Installation

Delivery and credit

After-sale

service

Warranty

Augmented product

Tangible product

Core product

Adapt or standardize?