1. Phases of Export Development
Export and import Strategies
Phases of Export Development
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

2. 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

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

4. 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
-- Specialist companies set up to act as the ‘export department’ for a range of companies.
Trading company
-- Mostly in Africa and the Far East. Providing a range of services such as shipping, warehousing, finance, technology transfer, insurance and consulting.
Piggyback
-- The ‘rider’ company use the ‘carrier’ company’s established export facilities (e.g., sales subsidiaries) and foreign distribution to export to focal countries. (Pros and cons?)

5. Direct Export Modes Distributors
Sells directly to an importer or buyer located in a foreign market area, including export through foreign-based agents and distributors (independent intermediaries).
Distributors
-- the exclusive representatives of the company and are generally the sole importers of the company’s product in their markets.
-- often take care of the after-sale service
-- paid according to the difference b/t the buying and selling prices
Agents
-- could be exclusive, semi-exclusive, and non-exclusive in representing export companies
-- works on behalf of exporter but do not buy products.
-- paid by commission Ex: Eli Lilly

6. Cooperative Export M odes/Export Marketing Groups
Small companies ally to export through a common foreign-based agent.
E.g., Companies A, B, C
A-Living room furniture
B-Dinning room furniture
C-Bedroom furniture
The cooperation among the manufacturers can be tight or loose.
-- tight: Create a new export association, acting as the exporting arm of all the member companies
-- loose: sell their own brands through the same agent.
(Photocopy the figure 8.1 on p. 218, Hollensen book)

7. 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)

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

9. 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

12. Foreign Freight Forwarders
Freight forwarder—an import or export specialist dealing in the movement of goods from producer to consumer
Largest intermediary in terms of value and weight of products managed
Services more limited than those of EMC
Obtains best routing and means of transportation
Moves products to air or ocean terminal
Secures space on planes or ships and necessary storage prior to shipment
Does not take title to goods or act as sales representative
Charges based on the shipment value
Intermodal transportation—movement of goods across different modes from origin to destination
Increasing reliance on airfreight
more frequent and lighter-weight shipments

13. Import Strategies
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
Industrial and consumer goods and services provided to customers unrelated to exporter
Intermediate goods and services provided to customers that are part of the firm’s global supply chain
Why companies import?

14. Import Strategies (cont.)
Types of importers include those:
Looking for any product around the world to import and sell
Looking for foreign sourcing to get their products at the cheapest price
Using foreign sourcing as part of their global supply chain
Importing requires expertise in dealing with institutions and documentation
Import broker—intermediary who helps an importer clear customs

15. Role of Customs Agencies
Customs—a country’s import and export procedures and restrictions
Customs agencies—assess and collect duties and ensure import regulations are adhered to
deal with smuggling
assign a tentative value and tariff classification to the merchandise
determine if import restrictions apply
Broker or import consultants—help importer minimize import duties by:
Valuing products to qualify to receive more favorable duty treatment
Qualifying for duty refunds through drawback provisions
Deferring duties by using bonded warehouses and foreign trade zones
Marking import’s country of origin

16. Role of Customs Agencies (cont.)
Documentation—importers must submit to customs documents that determine whether the shipment is released and what duties are assessed
Must file documents to take title of shipment
taking title—receive products without purchasing them
Third-Party Intermediaries
Companies that facilitate the trade of goods but that are not related to either the exporter or importer
Stimulate sales, obtain orders, and do market research
Investigate credit and collect payments
Handle foreign traffic and shipping
Support company’s sales, distribution, and advertising staffs
Some act as agents on behalf of the exporter, and some take title to goods and sell them abroad