Huang Huiping Economic School.Whut International Business Huang Huiping Economic School.Whut

Chpt 8 Exporting and Countertrade Reading Questions: Why does exporting remain a challenge for many firms? How to improve export performance? Countertrade

1 Why does exporting remain a challenge for many firms? Self-reading P411-419 Read“ The 12 most common mistakes and pitfalls awaiting new exporters”, on p451, Another Perspective, Try to find the solutions to those problems, from your textbook and other sources.

The 12 most common mistakes and Pitfalls Awaiting New Exporters Failure to develop an international marketing plan and obtain export counsel Insufficient commitment by top management Insufficient care in selecting oversea distributors Chasing orders from around the world instead of establishing a basis for profitable operations and orderly growth Neglecting export business when domestic market booms Failure to treat international distributors on a equal basis with domestic counterparts

The 12 most common mistakes and Pitfalls Awaiting New Exporters Assuming that given market technique and products will automatically be successful in all countries; Unwillingness to modify products to meet the regulations or cultural preference of other countries; Failure to print service, sale, warranty messages in locally understood language; Failure to use of an export management company; Failure to consider licensing or joint-venture agreements Failure to provide readily available servicing for the product

1 Why does exporting remain a challenge for many firms? The pitfalls of exporting Simple ignorance of the potential opportunities ; Combination of unfamiliarity and intimidation to foreign market Poor market analysis, poor understanding of competitive conditions in foreign market, failure to the needs of foreign customers, lack an effective distribution program, poorly executed promotion, financial problems Underestimating time and expertise

2 How to improve export performance? (1) Increasing the awareness of exporting opportunities---------Information sources; (2) Utilizing export management companies (3) Adopt proper exporting strategies

(1)Information sources Germany: Trade Associations, Government Agencies, Commercial Banks…... Japan: Japanese Ministry of International Trade and Industry(MITI,通产省） America: U.S. Department of Commerce (International Trade Administration, U.S. And Foreign Commercial Service) Small Business Adminitrative(SBA)

China:

P432 Research Task 1 : 介绍3～5个贸易信息资源给大家，10分钟报告

（2）Utilizing Export Management Companies A good EMCs will help the exporter identify opportunities and avoid common pitfalls However, not all EMCs are equal—some do a better job than others！ Firms that rely on an EMC may not develop their own export capabilities

The Degree of export involvement Direct export Sales representatives Distributors Indirect export - agents - export management companies (EMCs) - export trading companies (ETCs)

Direct export: Direct export: A company sells products directly to buyers in a target market. Sales representatives: only represent its own company’s products. They do not take titles to the merchandise, they are hired by the exporting company. Distributors: who take the ownership of the merchandise when it enters their country.

Indirect export: A company sells products to intermediaries who then resell to buyers in a target market.

Indirect export Agents: Individuals or organizations that represent one or more indirect exports in a target market. EMCs: Company that exports products on behalf of indirect exporters. ( export-related activities: info., promotion , customer’s credit, shipping arrangement, exporting documents etc.) ETCs: Company that provides services to indirect exporters in addition to activities related directly to clients’ exporting activities. (Activities: import & export, countertrade services, expanding distribution channels, providing storage facilities ,financing trading and investment projects, manufacturing products) ex: sogo shosha in Japan; chaebol in Korea

（3）Adopt proper exporting strategies Case Study： Export Strategy at 3M FIDO: focus on one, or a few, markets at first MLSL: enter a foreign market on a fairly small scale in order to reduce the costs of any subsequent failures hire an EMC or export consultant, to help identify opportunities and navigate through the tangled web of paperwork and regulations so often involved in exporting (EMC) hire locals to help establish a presence in the market develop a good relationship with local distributors and customers consider local production

To reduce the risks of exporting, firms should focus on one, or a few, markets at first (FIDO) enter a foreign market on a fairly small scale in order to reduce the costs of any subsequent failures (MLSL) hire an EMC or export consultant, to help identify opportunities and navigate through the tangled web of paperwork and regulations so often involved in exporting (EMC) recognize the time and managerial commitment involved develop a good relationship with local distributors and customers hire locals to help establish a presence in the market be proactive about seeking exporting opportunities consider local production

3 Countertrade Countertrade: The trade of goods and services for other goods and services . The reason of countertrade when conventional means of payment are difficult. Types - Barter,(易货贸易） - Counterpurchase,（补偿购买） - Offset, （冲销） - Switch Trading, （转移贸易） - Buybacks（回购）

1. Barter(易货贸易） is a direct exchange of goods and/or services between two parties without a cash transaction Barter is the most restrictive countertrade arrangement It is used primarily for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy 2. Counterpurchase（补偿购买，互购） is a reciprocal buying agreement. It occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made

3. Offset(冲销） is similar to counterpurchase insofar as one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale The difference is that this party can fulfill the obligation with any firm in the country to which the sale is being made 4. A buyback （回购）occurs when a firm builds a plant in a country—or supplies technology, equipment, training, or other services to the country—and agrees to take a certain percentage of the plant’s output as a partial payment for the contract

5. Switch trading（转移贸易） refers to the use of a specialized third-party trading house in a countertrade arrangement When a firm enters a counterpurchase or offset agreement with a country, it often ends up with what are called counterpurchase credits, which can be used to purchase goods from that country Switch trading occurs when a third-party trading house buys the firm’s counterpurchase credits and sells them to another firm that can better use them

The Pros and Cons of countertrade Finance an export deal; Become a strategic marketing weapon Cons: May involve in unusable or poor-quality goods; Need worldwide network to dispose the goods.

Summary 出口的挑战 提高出口绩效的方法 补偿贸易

Assignments Thinking and Discussion Q 1, 2, closing case Oral presentation: research task 1, 1 group, 10-minute, Nov.14