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 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

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

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? )

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 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

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)

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)

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

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

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

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?

Import Strategies (cont. ) Types of importers include those: • Looking for any product around the world to import and sell • Looking 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

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

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