IAF 605 - International Business Management Week 10 Export and Import Strategies
Jan 21, 2015
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