1. Export and Import Strategies
Chapter 13
Export and Import Strategies
Chapter 14: Export and Import

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Learning Objectives
Explain the idea of exporting and profile its elements
Explain the idea of importing and profile its elements
Evaluate the relative benefits and drawbacks of the export and import of e-waste
Describe the problems and pitfalls that challenge international traders
The Learning Objectives for this chapter are
To explain the idea of exporting and profile its elements
To explain the idea of importing and profile its elements
To describe the problems and pitfalls that challenge international traders
To describe the resources and assistance that helps international traders
To discuss the idea of an export plan
To discuss the practice of countertrade
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Learning Objectives
Define the idea of an export plan
Discuss the practice of countertrade
Describe the resources and assistance for international traders
Identify and discuss the platforms that support expanding international trade
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Introduction
Exporting and importing are the most common modes of international business
Exporting and importing are one of the fastest growing activities in the world
Exporting and importing, the most common forms of international business, have seen substantial growth in recent years thanks in part to globalization, an increase in free trade agreements, and institutional development. Companies like exporting and importing because they allow them to capitalize on international opportunities without substantial risk, and with only a low commitment of resources.
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World Trade
The graph shows the pattern of growth of world trade from 1960 to 2010
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Exporting
Exporting
the sale of goods or services produced by a company based in one country to customers that reside in a different country
Exporting involves sending products to other countries.
Occasional exporters fill unsolicited orders, but don’t pursue additional opportunities.
Regular exporters are experienced in exporting and aggressively pursue new opportunities.
Non-exporters have no experience and do not have any intention of engaging in exporting.
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7. Exporters: Initiation and Development
Two approaches
Incremental internationalization
exporting is a learning process
Born global
instant internationalization
global focus
Some firms approach exporting in a deliberate sequential way targeting markets that are similar and closer first before moving on to more dissimilar and geographically distant markets. So, a U.S. company might target Canada first, followed by Mexico before moving on to Europe and Asia.
In contrast, some companies engage in exports right from the start. These companies assume the domestic market is just one of many opportunities in the global market. The born global approach has been facilitated by advances in technology and lower barriers to trade.
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8. Approaches to Exporting
Export approaches include
Direct exporting
involves independent representatives, distributors, or retailers outside of the exporter’s home country
Indirect exporting
products are sold to an intermediary in the domestic market, which then exports them
Passively filling orders from domestic buyers who then export the product
Selling to domestic buyers who represent foreign end users or customers
In theory, exporting involves making a product, packing it, and then shipping it. In reality though, it’s a bit more involved. Some companies are direct exporters. They sell their product to independent intermediaries in foreign countries who then sell it to the end consumer.
Companies that sell their product to independent intermediaries in the home country are indirect exporters. The intermediary resells the product to foreign agents who then sell it to the end consumer.
Some companies simply passively fill orders from domestic buyers who then export the product, while others sell to domestic buyers who represent foreign end users or customers. In either of these cases, the company may not know that its product has been resold. Some companies use more than one approach depending on their particular ownership, location, and internalization advantages.
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Importing
Importing
the purchase of a good or service by a buyer in one country from a seller in another
Types of importers
Input optimizers: uses foreign sourcing to optimize their supply chain
Opportunistic: exploiting market gaps
Arbitrageurs: looking for price and quality differences between markets
Importing involves the purchase of a good or service by a buyer in one country from a seller in another. Note that it’s possible to import services in addition to products. A service import is any transaction that does not result in ownership or is rendered by nonresidents to residents.
There are three general types of importers. Input optimizers search around the world for optimal inputs which are then used to produce the firm’s products.
Opportunistic importers exploit gaps in the market by importing products that are available from foreign suppliers.
Arbitrageurs capitalize on price and quality differences between markets.
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Why Import?
Reasons to import
Specialization of labor
Global rivalry
Local unavailability
Diversification
Companies can take advantage of the higher quality at lower prices that labor specialization provides. Apple pays workers in China just over a dollar an hour to produce its iPad2 for example.
Similarly, global rivalry has forced companies to use foreign suppliers to keep the costs of inputs low and quality levels high.
Sometimes because of the unavailability of products locally, companies have no choice but to import.
Finally, like exporters, companies import as part of a diversification strategy.
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11. Importing and Exporting: Problems and Pitfalls
Financial risks
Customer management
Lack of international business experience
Marketing challenges
Government regulation
Trade documentation
Regular and occasional exporters face a host of problems and pitfalls that make international trade challenging. Some of the more common ones involve financial risks, especially a shortage of working capital to finance an export strategy. In fact, financial constraints are one of the biggest challenges for SMEs.
In addition, exporters are hampered by their lack of international expertise, marketing barriers, and the challenges of meeting customer expectations in foreign markets. These demands can put significant pressure on managers.
Finally, trade regulations and documentation requirements also make exporting a complex process.
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12. Importing and Exporting: Problems and Pitfalls
Types of Export Documents
This Table shows some of the different types of documentation used in international trade.
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13. Importing and Exporting: Resources and Assistance
Freight forwarders
the largest export/import intermediary in terms of value and weight of products shipped internationally
Typically facilitates intermodal transportations.
Shipping costs determined by basic supply and demand for container space, ports being used and the direction of the travel
Charges the exporter a percentage of the shipment value plus a minimum charge along with some brokerage fee.
Freight forwarders specialize in moving goods from the seller to the buyer. These fee based intermediaries can be especially helpful when the cost or timing of freight can make or break a deal.
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14. Importing and Exporting: Resources and Assistance
Third party logistics (3PLs)
move cargo and provide a range of logistics options
work in partnership with manufacturers, shippers, and retailers
Third party logistics providers are a growing force in international trade.
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Countertrade
Countertrade
different arrangements that parties use to trade products via transactions that use limited or no currency or credit
Costs
inefficient
flexibility
Benefits
build mutually beneficial relationships
In situations where the home country currency is inconvertible or a lack of cash prevents a traditional transaction firms may turn to countertrade. According to the WTO, countertrade accounts for about 5 percent of world trade.
Countertrade can be inefficient way to do business. It can also be risky especially if the products received are difficult to resell or are of poor quality. However, because it can allow for mutually beneficial relationships, it’s still used today.
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16. Countertrade Common Types of Countertrade
This Table shows the common types of countertrade.
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