International Business Environments & Operations

Name: International Business Environments & Operations
Uploaded: 2017-10-15T16:51:20+00:00
Duration: PTM22S52
Channel: Giles Noel Allison
Description: International Business Environments & Operations

International Business Environments & Operations
Daniels ● Radebaugh ● Sullivan International Business Environments and Operations 15e by Daniels, Radebaugh, and Sullivan Copyright © 2015 Pearson Education, Inc.

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 Copyright © 2015 Pearson Education, Inc.

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 Copyright © 2015 Pearson Education, Inc.

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. Copyright © 2015 Pearson Education, Inc.

Introduction Environmental Factors Influencing Export and Import Operations This Figure shows the environmental factors that influence exporting and importing opportunities. Notice that exporting and importing are just one way to take advantage of opportunities in foreign markets. Copyright © 2015 Pearson Education, Inc.

Exporting Learning Objective: Explain the idea of exporting and profile its elements Learning Objective : To introduce the idea of exporting and profile its elements. Copyright © 2015 Pearson Education, Inc.

Exporting Exporting the sale of goods or services produced by a company based in one country to customers that reside in a different country Types of exporters Non-exporter Occasional exporter Regular exporter 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. Copyright © 2015 Pearson Education, Inc.

Exporting Entry mode is influenced by Ownership advantages the firm’s core competencies Location advantages the combination of sales opportunity and investment risk that creates favorable locations in foreign markets Internalization advantages reflect companies’ response to market imperfections that often create uncertainties Ownership, location, and internalization advantages all influence the choice of entry mode. For example, companies that have few ownership advantages are less likely to engage in exporting. Location advantages can attract companies to favorable business environments. Internalization advantages can encourage companies to export rather than engage in licensing. Copyright © 2015 Pearson Education, Inc.

Characteristics of Exporters
Size Large Small and medium-sized enterprises (SMEs) Management commitment Efficiency Cost structure What companies are most likely to export? Well, large companies account for most export activity. In the United States for example, the 500 biggest companies are responsible for 60 percent of total export value. However, even small and medium-sized companies called SMEs are active exporters. Two-thirds of exporters worldwide have fewer than 20 employees. Perhaps more important though, are other factors including production efficiency, firm competence, and a firm’s commitment to growth via exports. Copyright © 2015 Pearson Education, Inc.

Why Export? Reasons to export include Profits Productivity Diversification Why export? Three dimensions drive the decision to export. First, firms export to increase profits by tapping new markets or selling products at premium prices. Second, exporting is also a way to boost productivity in a firm by increasing scale effects and improving knowledge flows. Finally, firms export in order to diversify their activities and lower their risk. Copyright © 2015 Pearson Education, Inc.

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. Copyright © 2015 Pearson Education, Inc.

Exporters: Initiation and Development
Top Trade Partners of the United States: Exports and Imports This Table shows the top ten trade partners of the United States. Notice that it illustrates the interaction of the two perspectives on the export process. In the future, this interaction is likely to accelerate thanks to the opportunities that ecommerce provides and the easy access to information on dissimilar markets provided by the Internet. Keep in mind that serendipity can also explain a company’s export activity. responding to unsolicited orders can be the start of successful export activity. Copyright © 2015 Pearson Education, Inc.

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. Copyright © 2015 Pearson Education, Inc.

Importing Learning Objective: Explain the idea of importing and profile its elements Learning Objective : To introduce the idea of importing and profile its elements. Copyright © 2015 Pearson Education, Inc.

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 Opportunistic Arbitrageurs 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. Copyright © 2015 Pearson Education, Inc.

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. Copyright © 2015 Pearson Education, Inc.

Importing and Exporting: Problems and Pitfalls
Learning Objective: Describe the problems and pitfalls that challenge international traders Learning Objective : To identify the problems and pitfalls that challenge international traders. Copyright © 2015 Pearson Education, Inc.

Financial risks Customer management Lack of international business experience Marketing challenges Top management commitment 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. Copyright © 2015 Pearson Education, Inc.

Importing and Exporting: Resources and Assistance
Learning Objective: Describe the resources and assistance for international traders Learning Objective : To identify the resources and assistance that helps international traders. Copyright © 2015 Pearson Education, Inc.

Companies can get resources and assistance from Government agencies The U.S. Department of Commerce International Trade Administration The Small Business Administration Exporters can get a lot of assistance from both public agencies and private intermediaries to facilitate the export process. The U.S. Department of Commerce’s International Trade Administration offers assistance in more than 100 cities in the United States and also in 75 foreign countries. In addition, it offers online assistance. The Small Business Administration is another source of information for importers and exporters. Copyright © 2015 Pearson Education, Inc.

Export intermediaries third party firms that market products and services abroad on behalf of manufacturers, farm groups, and distributors Export management company (EMC) Export trade companies (ETC) Export intermediaries work on behalf of exporters to manage the intricacies of international trade. Firms using export intermediaries must balance their cost along with the implied loss of control against the cost and challenges of managing the process in-house. Copyright © 2015 Pearson Education, Inc.

Customs agents enforce the rules of trade for a particular country Customs brokers help importers navigate the regulations imposed by customs agencies Customs agents enforce the rules of trade for a particular country while customs brokers help importers value their product, qualify for duty refunds, defer duties, and limit liability. Copyright © 2015 Pearson Education, Inc.

Freight forwarders the largest export/import intermediary in terms of value and weight of products shipped internationally 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. Copyright © 2015 Pearson Education, Inc.

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. Copyright © 2015 Pearson Education, Inc.

Reconciling Opportunity and Challenge: An Export Plan
Learning Objective: Define the idea of an export plan Learning Objective : To discuss the idea of an export plan. Copyright © 2015 Pearson Education, Inc.

Countertrade Countertrade different arrangements that parties use to trade products via transactions that use limited or no currency or credit Costs inefficient risky cumbersome 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. Copyright © 2015 Pearson Education, Inc.

Technology and International Trade
Advances in technology are leveling the playing field for SMEs Online platform Software platform Logistics platform New technologies are helping to level the playing field for international trade. SMEs are likely to benefit the most from these advances. Copyright © 2015 Pearson Education, Inc.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2015 Pearson Education, Inc.

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