Export and Import Strategies Phases of Export Development
Export and Import Strategies Phases of Export Development Preengagement Phase 1 Companies selling goods and services solely in the domestic market Those companies considering but not currently exporting Initial Exporting Phase 2
Companies that do sporadic, marginal exporting Companies that see lots of potential in export markets Companies unable to cope with exporting demands Advanced Phase 3 Companies become regular exporters Companies gain extensive overseas experience Companies may use other strategies for entering markets Export Entry Mode
A firms 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 Indirect Export Mode Using independent organizations located in the producers country. The sale is like a domestic sale. Least cost and risk
Potential problem with this mode? Indirect Export Mode (cont) Export buying agent (export commission house) Broker Export management company/export house Trading company Piggyback Direct Export Modes 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 companys 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 Choice of an Intermediary Asking potential customers to suggest a suitable agent. Obtaining recommendations from institutions such as trade associations, chambers of commerce and government trade departments. Using commercial agencies. Poaching a competitors agent. Advertising in suitable trade papers. Contracts with Intermediaries
Cooperative Export Modes/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.
Freight Forwarder Freight forwarderan import or export specialist dealing in the movement of goods from producer to consumer Intermodal transportationmovement of goods across different modes from origin to destination Increasing reliance on airfreight Documentation Export license
Pro forma invoice Commercial invoice Bill of lading Certificate of origin Shippers export declaration Export packing list Export Financing Method of paymentflow of money across borders requires the use of special documents Draft (bill of exchange)the drawer directs
the drawee to make a payment documentary drafts sight drafts time drafts Method of Payment (cont.) Letter of credit formssight versus time Revocable Irrevocable confirmed letter of credit open account
usually for members of the same corporation Export Financing (cont.) Insurance Countertrade Bartergoods are exchanged for goods of equal value without any flow of cash Offset tradeexporter sells products for cash and then helps to promote exports from the importing country in order to help it earn foreign exchange
Import Strategies Importingbringing 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 firms global supply chain Why companies import?
Import Strategies (cont.) Types of importers include those: Importing requires expertise in dealing with institutions and documentation Import broker Role of Customs Agencies Customsa countrys import and export procedures and restrictions Customs agenciesassess and collect duties
and ensure import regulations are adhered to Broker or import consultantshelp 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 imports country of origin
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