Scribd
Upload
1K views

Export Import Strategy

Export and import strategies involve assessing a company's export potential and market selection. Companies can directly export through sales representatives or indirectly through export intermediaries like trading companies. Key financial considerations are pricing, payment methods like letters of credit, financing receivables, and insurance. Countertrade may be used when countries face foreign exchange shortages.

Uploaded by

Amit Jain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
1K views

Export Import Strategy

Export and import strategies involve assessing a company's export potential and market selection. Companies can directly export through sales representatives or indirectly through export intermediaries like trading companies. Key financial considerations are pricing, payment methods like letters of credit, financing receivables, and insurance. Countertrade may be used when countries face foreign exchange shortages.

Uploaded by

Amit Jain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 33

Export and Import Strategies

1
Readings

 Daniels,
Radebaugh, Sallivan, International
Business, Chapter 17

2
Objectives

 Identify the key elements of export and import


strategies
 Compare direct and indirect selling of exports
 Discuss the role of trade intermediaries
 Identify methods of export payments and the
financing of receivables.
 Readings.

3
Introduction

 Characteristics of Exporters
– The probability of a company’s being an exporter
increases with the size of the company
– Export intensity is not positively correlated with
company size
– The largest exporters in the United States also are
among the largest industrial corporations
– Smaller exporters make smaller shipments; larger
exporters make larger shipments

4
Export Shipments of Various Sizes as Percentages of
Total Dollar Value of Exports

5
Why companies export

 Exporting
– Expands sales and profits
– Achieves economies of scale and reduces the unit
costs of production.
– Is less risky than DFI because it does not require
the same degree of capital.
– Allows companies to diversify sales location.

6
Phases of export development

 Ascompanies learn more about the process of


exporting,
– they tend to export to more countries
– they tend to export to more dissimilar countries
which are located further away
– they tend to export a larger percentage of their
sales.

 Thefollowing figure summarizes the various


7 phases of exporting.
Phases of Export Development

8
Export Strategy

– Entry mode depends on ownership advantages of the


company, location advantages of the market, and
internalization advantages of integrating transactions
within the company
– Companies that have lower levels of ownership
advantages either do not enter foreign markets or use
low-risk strategies such as exporting
– Strategic considerations affect the choice of exporting
as an entry mode

9
Designing an Export Strategy

 In
designing an export strategy, a company
must
– Assess export potential
– Get expert counseling
– Select market or markets
– Set goals and get the product to market

10
11
12
The Import Strategy

 Importers need to be concerned with procedural


and strategic issues

 An import broker is an intermediary that helps


an importer clear customs

13
The Import Strategy

 The Role of Customs Agencies


– Customs agencies assess and collect duties and
ensure import regulations are adhered to.
– Drawback provisions allow U.S. exporters to apply
for a refund of 99 percent of the duty paid on
imported components.
 Documentation
– Importers must submit to customs documents that
determine whether the shipment is released and
what duties are assessed.
14
Export Intermediaries

 Companies use external specialists for


exporting before developing internal capabilities

 Companies may market their products either


directly or indirectly through external specialists
or intermediary organizations

15
Export Intermediaries

 Direct Selling
– Direct selling involves sales representatives, agents,
distributors, or retailers
– A sales representative usually operates on a
commission basis
– A distributor is a merchant who purchases the
products from the manufacturer and sells them at a
profit

16
Export Intermediaries

 Indirect Selling
– Commission agents work for the buyer
– Export Management Companies (EMCs) provide
export services for a specific exporter or group of
exporters
– Export Management Companies
 EMCs in the United States are mostly small, entrepreneurial
ventures that tend to specialize by product, function, or
market area

17
Export Trading Companies (ETCs)

 ETCs tend to operate on the basis of demand


rather than supply
 ETCs can be formed by
– Competitors can be exempt from antitrust laws
– State and local governments
– Money-center banks
– Major corporations

18
Foreign Freight Forwarders

A foreign freight forwarder is an export or import


specialist dealing in the movement of goods
from producer to consumer
– The typical freight forwarder is the largest export
intermediary in terms of value and weight handled
 Air and Ocean Freight
– Ocean freight is dominant in terms of total weight of
products traded, but air freight is significant in terms
of value of products shipped

19
Foreign Freight Forwarders

 Documentation: An export license is used to


determine whether products can be shipped to
specific countries
– Key export documents include
 pro forma invoice
 commercial invoice
 bill of lading
 shipper’s export declaration
 and export packing list

20
Export Financing

 Financial issues relating to exporting:

– Product price
– Method of payment
– Financing of receivables
– Insurance

21
Product Price

 Export pricing is influenced by:


– Exchange rates
– Transportation costs
– Duties
– Multiple distribution channels
– Insurance costs
– Banking costs

22
Methods of payment

 Methods of payments are


– Cash in advance
– Letter of credit
– Documentary collection or draft
– Open account
– Countertrade

23
Export Financing

 Financing receivables for US exporters

– Ex-Im Bank provides direct loans to importers or


guarantees to financial institutions

– The Small Business Administration (SBA) guarantees


long-term financing to small exporters

24
Letter-of-Credit Relationships

25
An Irrevocable Export Letter of Credit

26
Export Financing

A letter of credit obligates the buyer’s bank to


pay the exporter
 A revocable letter of credit may be changed by
any of the parties to the agreement
 An irrevocable letter of credit requires all parties
to agree to a change in the documents
 A confirmed irrevocable letter of credit adds an
obligation to pay for the exporter’s bank

27
Countertrade

 Countertrade refers to any one of a number of


different arrangements by which goods and
services are traded for each other
 Countertradeoften takes place because of a foreign-
exchange shortage
 Barter occurs when goods are traded for goods
 In offset trade,
trade the exporter sells goods for cash
but then undertakes to promote exports from the
importing country in order to help it earn foreign
28
exchange
An Offset Transaction

29
Summary

 The likelihood that a company is becoming an


exporter increases with company size, but the
percentage of sales exported is not correlated
with size.
 Companies export to increase sales
revenues, use excess capacity, and diversify
sales.

30
Summary

 As a company establishes its export business


plan, it must assess export potential, do the
appropriate research, and determine how to
get its goods abroad.
 Importers need to be concerned with
procedural and strategic issues.

31
Summary

 Exporters may engage in direct or in indirect


exporting.
 Trading companies and export management
companies can be used to engage in indirect
exporting.
 Freight forwarders specialize in moving goods from
one country to another.

32
Summary

 There are four major financial issues related to


exporting: the price of the product, the method
of payment, financing of receivables, and
insurance.
 Countertrade and offset trade are special
cases of exporting and importing used when
countries face foreign exchange problems.

33

You might also like