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1 CHAPTER XXVI EXPORT ENTRY STRATEGIES & EXPORT INTERMEDIARIES Export Entry Strategies Indirect Exporting Direct Exporting Direct Foreign Investment Export Intermediaries Buying agents Export Management Companies Export Trading Companies
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2 Export Entry Strategies How to enter foreign markets? Indirect Exporting Direct Exporting Foreign Direct Investment
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3 Indirect Exporting Lets another company handle exports as an intermediary Immediate access to foreign markets Minimizes cash outlays and risks of exporting Minimizes staff efforts May lose control over foreign sales
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4 Direct Exporting Takes charge of all exporting activities Requires more time, personnel, and corporate resources Maintains more control over overseas distribution Gets higher profit & closer ties with foreign buyers a. Manufacturer's Agents Take no title to the goods Carry catalogs and samples Usually paid commission on sales
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5 Direct Exporting Direct Exporting b.Distributors Merchants who buy the goods from U.S. exporters and resell them in a foreign market at a profit Carry inventory of products & spare parts & Provide after-sale service Advertising and promotion activities with allowance from the exporter Extend credits to local buyers
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6 Direct Exporting c.Exporting to foreign retailers Foreign department or chain stores Traveling salesmen Catalogs, brochures or samples d. Exporting to end-users Foreign governments Institutions: Hospitals, Schools Foreign manufacturers who use U.S. products as components
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7 Foreign Direct Investment (FDI) Foreign branch, sales office, distribution hub, assembly operation or manufacturing facility in the foreign country Requires extensive personnel and financial commitment Exposed to political and economical risks A long wait for a return of investment Direct control over manufacturing and distribution
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8 Export Intermediaries Buying Agents Finders of U.S. products for foreign buyers: Foreign government’s buying mission, Chain stores, Dept stores. Register products with them
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9 Export Intermediaries Export Management Companies (EMCs) Act as the export department of one or several manufacturers of noncompetitive products: Supply-driven Provide domestic manufacturers with immediate access to foreign markets Do not take title to the goods Compensation: Sales commission Salary Basic salary plus commission Small firms: 60% 6 or fewer employees When exports reach 15 to 20% of manufacturer's total sales or export sales grow over $1 million, manufacturers tend to have their own export department for direct export.
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10 Export Intermediaries Export Trading Companies (ETCs) Provide the same export facilitation services as an EMC Focus on procurement of products for foreign buyers. No loyalty to manufacturers: Demand- driven Conduct business in their own name Take title to the goods and pay the manufacturers directly
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11 Export Trading Company Act of 1982 of the U.S. To promote and encourage the formation of ETC's To utilize economies of scale and diversification of risks in penetrating foreign markets Provides exemption from U.S. antitrust law for joint export activities: Export Trade Certificate of Review from USDC with concurrence of USDJ Available at Office of Export Trading Companies Affairs (OETCA)OETCA
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12 Export Trading Company Act of 1982 of the U.S. Permits bank's participation: Bank Trading Companies Permits cooperatives to form ETC Cooperatives: Agricultural industry like Sunkist ETCA has not been successful in establishing U.S. Trading Companies similar to Foreign Trading Companies such as Japanese trading companies (Sogo-shosha) Korean trading companies (Jonghap Sangsa)
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