1. Modes of International Business Exporting/Importing
MMIT
Modes of International Business
Exporting/Importing

2. International vs. Domestic OPPORTUNITIES
Seek opportunities for growth through market diversification
Gain new ideas about products, services, and business methods
Better serve key customers that have relocated abroad
Be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products

3. International vs. Domestic OPPORTUNITIES
Gain access to lower-cost or better-value factors of production
Develop economies of scale in sourcing, production, marketing, and R&D
Confront international competitors more effectively or thwart the growth of competition in the home market
Fundamental changes in the business landscape

4. FDI Based Explanations: Dunning’s Eclectic Paradigm
Three conditions determine whether or not a company will internalize via FDI:
Ownership-specific advantages – knowledge, skills, capabilities, relationships, or physical assets that form the basis for the firm’s competitive advantage
Location-specific advantages – advantages associated with the country in which the MNE is invested, including natural resources, skilled or low cost labor, and inexpensive capital
Internalization advantages – control derived from internalizing foreign-based manufacturing, distribution, or other value chain activities

5. Factors Relevant to Choice of Foreign Market Entry Strategy
The goals and objectives of the firm, such as desired profitability, market share, or competitive positioning;
The particular financial, organizational, and technological resources and capabilities available to the firm;
Unique conditions in the target country, such as legal, cultural, and economic circumstances, as well as distribution and transportation systems;
Risks inherent in each proposed foreign venture in relation to the firm’s goals and objectives in pursuing internationalization;
The nature and extent of competition from existing rivals, and from firms that may enter the market later;
The characteristics of the product or service to be offered to customers in the market.

6. Participants in International Business
The focal firm – initiator of IB transaction, including MNEs and SMEs
Distribution channel intermediary – specialist firm providing logistics and marketing services in the international supply chain
Facilitator – a firm providing special expertise in legal advice, banking, customs clearance, market research, and similar areas

7. Types of Focal Firms Multi-National Enterprise Joint-Venture SME
Born Global Firm
NGOs

9. Foreign Market Entry Strategies of Focal Firms
Cross-border business transactions can be grouped into three categories:
Trade: buying and selling of products
Contractual exchange of services or intangibles: buying and selling of services
Equity ownership in foreign operations: establishing foreign presence through direct investment

10. MODES of International Business Activities
Exporting (importing)
Global sourcing (out-s, in-s, offshore)
Contract manufacturing
Licensing and Franchising (mgmt. contract)
Foreign Direct Investment (FDI)
Strategic Alliances (Joint Venture)
Portfolio Investment

12. Exporting Advantages Disadvantages Relatively low financial exposure
Permit gradual market entry
Acquire knowledge about local market
Avoid restrictions on foreign investment
Disadvantages
Vulnerability to tariffs and NTBs
Logistical complexities
Potential conflicts with distributors

14. Export Documentation quotation or pro forma invoice
commercial invoice is the actual demand for payment issued by the exporter. It includes a description of the goods, the exporter’s address, delivery address, and payment terms.
A packing list, indicates the exact contents of the shipment.
The bill of lading is the basic contract between exporter and shipper.
The shipper's export declaration ("ex-dec”) lists the contact information of the exporter and the buyer (or importer), as well as a full description, declared value, and destination of the products being shipped.
The certificate of origin indicates the country where the product originates.
insurance certificate

15. Incoterms

16. Who pays for what?
Load to truck
Export- duty payment
Transport to exporter's port
Unload from truck at the origin's port
Landing charges at origin's port, Loading
Transport to import's port
Landing charges at importer's port, Unloading
Unload onto trucks from the importers' port
Transport to destination
Insurance
Entry -Customs clearance
Entry -Taxation
EXW No
Main Carriage NOT Paid By Seller (Free… Carrier/Alongside Ship/On Board)
FCA
Yes
FAS*
FOB*
Main Carriage Paid By Seller (Cost and Freight … and Insurance… / Carriage Paid to … and Insurance… )
CFR*
CIF*
CPT
CIP
Arrival (Delivery Duty….. Unpaid/Paid)
DEQ*
DDU
DDP
* for ship only (+ named Port), others for all carriers (+ named Place)

17. Methods of Payment -- Export
Cash in Advance
Letter of Credit
Draft
Open Account

18. Global Sourcing
Importing
Outsourcing
Contract Manufacturing

19. Contract Manufacturing
Hiring firm approaches Contract Manufacturer with Design or Formula
Type of outsourcing
Bidding Process
$ 233 billion business
Wistron, HTC

20. Countertrade Payments are made in kind rather than cash.
The focal firm is engaged simultaneously in exporting and importing.
Also known as “two-way” or “reciprocal” trade
Used when conventional means of payment are difficult, costly, or nonexistent.
Hard currency unavailable
Developing country doesn’t have expertise to sell in foreign markets

22. Examples of Countertrade Transactions
Caterpillar received caskets from Columbian customers and wine from Algerian customers in return for selling them earthmoving equipment.
Goodyear traded tires for minerals, textiles, and agricultural products.
Coca-Cola sourced tomato paste from Turkey, oranges from Egypt, and beer from Poland in order to contribute to national exports in the countries it conducts business,.
Control Data Corporation accepted Christmas cards from the Russians in a countertrade deal.
Pepsi-Cola acquired the rights to distribute Hungarian motion pictures in the West in a countertrade transaction.

23. Types of Countertrade
Barter refers to the direct exchange of goods without any money. Or a mixture of goods and cash is a compensation deal.
Back-to-back transaction, offset agreements, or counterpurchase involves two distinct contracts, contingent on each other.
Buy-back agreement, the seller agrees to supply technology or equipment to construct a facility and receives payment in the form of goods produced by the facility.