Part Five Global Strategy, Structure, and Implementation Chapter 9 Export And Import Strategies Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 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 in exporting To discuss the role of countertrade in international business Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Exports & Imports Exporting refers to the sale of goods or services produced by a company based in one country to customers that reside in a different country Importing is the purchase of goods or services by a company based in one country from sellers that reside in another Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Advantages of Exporting Lower investment way to enter foreign markets Lower risk way to enter foreign markets Expands sales Achieves scale economies Diversifies sales Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Characteristics of Exporters The probability of a company’s becoming an exporter increases with company size, but the extent of exporting does not directly correlate with size Companies export to increase sales revenues, use excess capacity, and diversify markets Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Pitfalls of Exporting Companies new to exporting (and also some experienced exporters) often make many mistakes One way to avoid mistakes is to develop a comprehensive export strategy that includes an analysis of the company’s resources as well as its export potential Companies can also improve the odds of export success by working with an experienced export intermediary Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Designing an Export Strategy As a company establishes its export business plan, it must: assess export potential obtain expert counseling select a country or countries where it will focus its exports formulate its strategy determine how to get its goods to market Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Types of importers Those looking for any product around the world to import and sell. Those looking for foreign sourcing to get their products at the cheapest price. Those using foreign sourcing as part of their global supply chain. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Types of imports Industrial and consumer goods to independent individuals and companies. Intermediate goods and services that are part of the firm’s global supply chain. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Strategic Advantages of Imports Specialization of Labor Global Rivalry Local Unavailability Diversification of Operating Risks Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Customs Agencies Customs agencies assess and collect duties, as well as ensure that import regulations are adhered to A custom broker helps 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 limiting liability by properly marking an import’s country of origin Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Principal types of exporting Direct: goods and services are sold to an independent party outside of the exporter’s home country. Indirect exports: goods and services are sold to an intermediary in the domestic market, which then sells the goods in the export market. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Indirect Selling Exporters may deal directly with: agents or distributors in a foreign country indirectly through third-party intermediaries, such as export management companies other types of trading companies Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Direct Selling Through distributors who usually deal with retailers instead of end users To retailers and end users Internet marketing is a new form of direct exporting that is allowing many small- and medium-sized companies to access export markets as never before Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Export Documentation Key export documents are: pro forma invoice commercial invoice bill of lading consular invoice certificate of origin shipper’s export declaration export packing list Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Export Assistance Trading companies can perform many of the functions for which manufacturers lack the expertise Exporters can use the services of other specialists, such as freight forwarders, to facilitate exporting These specialists can help an exporter with the complex documentation that accompanies exports Government agencies in some countries, such as the Ex-Im Bank in the United States, provide assistance in: terms of direct loans to importers bank guarantees to fund an exporter’s working capital needs insurance against commercial and political risk Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Countertrade Countertrade is when goods and services are traded for each other. It is used when a firm exports to a country whose currency creates barriers to efficient trade Common types are: barter, buyback, offset, switch trading, and counter purchase Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall