1. International Business Management (MS34B)
Export Marketing and Finance Strategy
Facilitator: Densil A. Williams
MS34B, UWI Mona, Department of Management Studies

2. MS34B, UWI Mona, Department of Management Studies
Contents
Models of Export Market Development
- Stage Model
- Born Globals
Export Marketing Challenges
Response to Challenges
Export Financing
Risk analysis in export financing
- Options for reducing risks
Export Finance Challenges
Concluding Remarks
MS34B, UWI Mona, Department of Management Studies

3. Models of Export Market Development
Stage Model
Stage 1 – Importer Pull (exporter responsible for only cost and partially responsible for design)
Stage 2 – Basic Production (also responsible for local promotion)
Stage 3 – Advanced Production (also responsible for foreign promotion to importer)
MS34B, UWI Mona, Department of Management Studies

4. Models of Export Market Development
Stage 4 – Channel Push (also responsible for distribution to wholesaler)
Stage 5 – Consumer Pull (fully internalised all marketing functions, except partial responsibility for price to consumer).
Operational risk decreases from Stage 1 to 5 because of increased internalisation of marketing, but financial risk increases proportionately.
MS34B, UWI Mona, Department of Management Studies

5. Models of Export Market Development
Born Globals
With the improvements in information and communication technologies, firms now enter export markets in more unorthodox ways i.e. less incremental than before.
Firms start out as exporters even before they build domestic operations (international new ventures or born globals)
Some characteristics of these firms are: cadre of managers with wide range of international experience, technologically intensive, generally service oriented etc.
t Studies

6. Export Marketing Challenges for Developing Country Firms
Supply - improvement in design, packaging, utilitarian and aesthetic functions of products.
Demand – market intelligence, distribution channels, overcome protectionism.
Transportation and logistics - including government bureaucracy, customs, infrastructure.
MS34B, UWI Mona, Department of Management Studies

7. Response to Marketing Challenges
Lobby host government for assistance.
Attend trade shows or export fairs (Remember Blooming Things?!!!!!).
Gain technical assistance from foreign firms or individuals.
MS34B, UWI Mona, Department of Management Studies

8. MS34B, UWI Mona, Department of Management Studies
Export Finance
The long lead times between the shipping of an order and the receipt of payment for the order can impose capital constraints on exporters.
Export financing is therefore critical in order to deal with working capital management
Financing generally used for retooling and export marketing activities.
MS34B, UWI Mona, Department of Management Studies

9. Usage of Funds from Export Financing
Funding for Retooling/Capital Expenditure
Funding for Marketing Expenditure
Working Capital Financial Management
Management of credit risk.
Management of elongated payment cycles.
Management of exchange risk.
MS34B, UWI Mona, Department of Management Studies

10. Sources of Funding for the Exporter
Equity - tap into local or even international stock markets, personal savings or family wealth etc.
Debt - commercial banks, development financing institutions etc.
Grants - government financing programme, multilateral financing programmes etc.
MS34B, UWI Mona, Department of Management Studies

11. Risk Analysis in Export Financing
The methods used to gain financing for trade activities can be categorised based on the extent to which the exporter bears the risk.
The exporter can either bear all the risk or relieve himself of all risk- extreme cases.
In the more likely cases, the exporter can share risk with the government, banks or insurance institutions.
MS34B, UWI Mona, Department of Management Studies

12. MS34B, UWI Mona, Department of Management Studies
Risk Analysis in Export Financing - Options for Reducing Financing Risk
Exporter bears Risk
Consignment transactions
Sales on open account
Sales on Sight/Time draft
Secured Bank Overdraft
Exporter Transfers
Forfaiting
Factoring
Discounting of Time Drafts
Private Insurance
Exporters Shares Risk
Government Insurance Facilities
Third Party takes Risk
Confirming House operating through letter of credit transactions
MS34B, UWI Mona, Department of Management Studies

13. Options for Reducing Financing Risk
Forfaiting
Buyer pays exporter with promissory note which has been guaranteed by a bank in the importer’s home country.
The exporter sells the guaranteed promissory note to a forfaiter for a discount.
The discount reflects the credit ratings of the buyer, the credit rating of the guaranteeing bank, and the time value of money between the time the note is purchased and when it becomes due for payment.
MS34B, UWI Mona, Department of Management Studies

14. MS34B, UWI Mona, Department of Management Studies
Risk analysis in Export Financing - Options for Reducing Financing Risk
Letters of credit
Bank, in buyer’s home country confirms, by letter, that it will accept liability for payments on orders placed by buyer with the exporter.
Confirmed LC: Bank in exporter’s home country guarantees to pay export order on proof of exporter’s compliance with terms of LC.
MS34B, UWI Mona, Department of Management Studies

15. MS34B, UWI Mona, Department of Management Studies
Risk analysis in Export Financing - Options for Reducing Financing Risk
Letters of credit
Revocable LC: Importer can cancel LC up until shipment of goods.
Negotiable LC: Exporter can present LC to any bank for payment.
Revolving LC: Can be used to pay for multiple shipments.
MS34B, UWI Mona, Department of Management Studies

16. Examples of Export Documents-Letter of Credit
MS34B, UWI Mona, Department of Management Studies

17. Examples of Export Documents-Letter of Creidt
MS34B, UWI Mona, Department of Management Studies

18. Examples of Export Documents- Bill of Lading
MS34B, UWI Mona, Department of Management Studies

19. MS34B, UWI Mona, Department of Management Studies
Concluding Remarks
Export marketing requires significant financial resources because of the cost involved in doing market research and gathering intelligence on overseas markets.
The delay in the lead time between shipment and payment can result in serious cash flow problems for exporters. As a result, they have to find ways to finance their export trade.
This financing is generally used for retooling and marketing which are critical for building a competitive export business.
MS34B, UWI Mona, Department of Management Studies