Preengagement Companies selling goods and services solely in the domestic market Those companies considering but not currently exporting Phase 1 Initial Exporting Companies that do sporadic, marginal exporting Companies that see lots of potential in export markets Companies unable to cope with exporting demands Phase 2 Advanced Companies become regular exporters Companies gain extensive overseas experience Companies may use other strategies for entering markets Phase 3 Phases of Export Development Export and import Strategies

Export Entry Mode A firm’s products are manufactured in the domestic market or a third country, and then transferred either directly or indirectly to the host market. Indirect export Direct export Cooperative export

Indirect Export Mode Using independent organizations located in the producer’s country. The sale is like a domestic sale.

Indirect Export Mode (cont’) Export buying agent (export commission house) -- A representative of foreign buyers who resides in the exporter’s home country. Broker -- What is the characteristic of a broker? Export management company/export house Trading company Piggyback

Direct Export Modes Sells directly to an importer or buyer located in a foreign market area, including export through foreign-based agents and distributors (independent intermediaries). Distributors Agents

Cooperative Export M odes/Export Marketing Groups Small companies ally to export through a common foreign-based agent. The cooperation among the manufacturers can be tight or loose.

Shipping Arrangements in Trade 1. EXW (ex-works) 2. FAS (Free Alongside Ship) 3. FOB (Free on Board Vessel) 4. C&F (Cost and Freight) 5. CIF (Cost, Insurance, Freight) 6. Ex dock 7. DDP (Delivered Duty Paid)

Point of Delivery and Where Risk Shifts From Seller to Buyer Ex: Green Bean US$5,000/ton FOB New Orleans EXWFASFOBC&FCIFEx dock DDP Supplier’s factory/warehouse Export dock Port of shipment (on board vessel) Import dock Buyer’s warehouse (destination) Main transit risk on

Payment Conditions 1. Consignment 2. Open Account 3. Document against Acceptance (D/A) 4. Document against Payment (D/P) 5. Letter of Credit 6. Cash in advance

Foreign Freight Forwarders Freight forwarder—an import or export specialist dealing in the movement of goods from producer to consumer Intermodal transportation—movement of goods across different modes from origin to destination

Importing—bringing of goods and services into a country Results in the importers paying money to the exporter in the foreign country Two basic types of imports Why companies import? Import Strategies

Types of importers include those: Importing requires expertise in dealing with institutions and documentation Import broker—intermediary who helps an importer clear customs Import Strategies (cont.)

Role of Customs Agencies Customs—a country’s import and export procedures and restrictions Broker or import consultants—help importer minimize import duties by:

Role of Customs Agencies (cont.) Documentation—importers must submit to customs documents that determine whether the shipment is released and what duties are assessed Third-Party Intermediaries Companies that facilitate the trade of goods but that are not related to either the exporter or importer