Export Management December 14 2006 Export versus Import

Export Management December 14, 2006

Export versus Import Why would countries have problems with more imports than exports? l How are these two affected by political actions? l What does Fair Trade have to do with all of this?

The export process Information search Canvassing Negotiation Transport / Carriage Payment

Common export techniques l Canvassing: choice of actions, insurance… l Negotiation: objectives, phases… l Transport: export documents, incoterms… l Payment: bank documents, documentary credit…

Canvassing l What is it? l Search for potential partners (intermediaries) and/or potential clients l Closely related to the choice of entry mode l Objectives: l Qualitative: choice of partner, relationship, coherency… l Quantitative: numbers, sales potential, profitability, margins…

Identifying potential partners and clients l Events organized by UE, France, and other countries to help exporters l Use embassy commercial services (Missions économiques) l Buy list from private providers (Kompass, Europages…)

Choice of actions Search for partners in France Actions abroad -Direct marketing in France (mail, phone, email…) -Participate in trade fairs and other events in France Search for potential partners/clients abroad -Direct marketing aimed at foreign partners/clients -Contact with foreign delegations -Invite future partners to France -Trade missions in foreign market -Participate in trade fairs and other events in foreign markets

Choice of actions COSTS Low Mail Low High Phone Mission France Invitation Mission abroad EFFECTIVENESS Trade fair in France Trade fair abroad High

Costs are high and effectiveness low – we may want to carry insurance So, in other words if possibly the outcomes maybe negative rather than positive you are gambling on losing everything without insurance… l Think about it personally – why should we carry insurance on items? l

Canvassing insurance l Most governments offer some type of canvassing insurance to their exporters l Coface – insures financial costs and risks related to the search of foreign partners/clients l For firms with sales < 150 million € l Concerns all costs: market research, product adaptation, participation in trade events, advertising, HR costs…

Other financing/insurance options l Banks l Other types of regional/national/international companies

After canvassing comes… l Negotiation

International negotiation l What is negotiated or negotiation? l In international business, partners have a different perception of negotiation, a different way of thinking and acting l Cultural dimension: openness and understanding of other cultures, effective communication in spite of differences…

How to persuade someone… In negotiation isn’t there persuasion? l How to you get someone to think like you? l How do you get them to instantly like you? l Aren’t these the million dollar questions? l Let’s see what Dr. Lierberman would say on the subject? (Not Dr. Phil) l

Negotiation phases l Pre-negotiation: determine who, what, when, where… date and agenda l Introduction: first impressions and positions l Observation: collect information on partner and objectives l Adjustment/Concession: heart of negotiation, negotiation strategies, consensus in compliance with initial goals l Conclusion: formalize and finalize agreement

Styles of negotiation France -Debate, conflict -Protocol, etiquette -Affectivity, emotions -Important hierarchy -Philosophical reasoning -Lively conversation -High involvement -Precision expected -Centralized decisions -Expect to wait USA Japan -Problem-solving, business is business -Horizontal relations -Informal, direct, verbal -Logical process -Check-list -Short term orientation -Competitive -Limited flexibility -Written agreement -Importance of group, team -Vertical relations -Rituals (cards, gifts…) -Importance of nonverbal -Time-consuming -Long term orientation -Buyer dominates -Manipulation of information -Search for consensus

Incoterms l Incoterms = international commercial terms (1936, 2000) l ICC: “international rules that are accepted by governments, legal authorities and practitioners worldwide for the interpretation of the most commonly used terms in international trade”, “they are at the heart of world trade”. l Rights and obligations of the parties to the contract of sale with respect to the delivery of goods sold l Reduce or remove uncertainties arising from differing interpretations of terms in different countries l Delivery, transfer of risks, division of costs…

Incoterms l Three letter abbreviation, followed by a destination (named place). Ex: EXW Angers l 13 Incoterms divided into 4 categories l E: the seller only makes the goods available to the buyer at the seller’s own premises. l F: the seller is called upon to deliver the goods to a carrier appointed by the buyer l C: the seller has to contract for carriage, but without assuming the risk of loss or damage to the goods or additional costs due to events occurring after shipment or dispatch l D: the seller has to bear all costs and risks needed to bring the goods to the place of destination

Important documents l Bill of lading (B/L): proof of carriage and title of goods (evidence of title to the goods for collection by the purchaser) l l l Airway bill (AWB): proof of board and carriage l l Issued after mate’s receipt Straight consignee or to order (negotiable instrument) Reserves: clean/dirty Fiata B/L when issued by transit agent Joint/groupage: collective AWB Exclusive: house AWB Signature and flight number Carriage documents (CMR, trucking B/L, railroad B/L): proof of carriage l l Proof of instructions to carrier Signature, require at each border

International payments l International bank transfer: from one account to another l l Check l l l Swift (Society for Worldwide Interbank Financial Telecommunication) Ipi transfer (International payment instruction) Credit card Company check Bank check Letter of credit: documentary credit is very popular in international trade

Documentary credit l l Documentary credit: a bank’s written agreement for payment to an exporter against presentation of export documents (B/L, AWB, Rail B/L, Truck B/L…) Nature of the credit: l Revocable/irrevocable Revocable by issuing bank (provides least security to seller) l Irrevocable cannot be altered without the beneficiary’s consent (provides more security) l l Confirmed/unconfirmed l A second bank adds its endorsement to the credit, indicating that it too will make payment against the specified documents (gives beneficiary additional assurance that payment will be made)

Steps of the confirmed documentary credit 1. Buyer and seller enter into the underlying contract 2. Buyer applies for a letter of credit from issuing bank (buyer may pay for letter now or later, depending on credit standing) 3. Issuing bank instructs confirming bank to pay seller on the letter of credit on seller’s presentation of required documents to confirming bank 4. Confirming bank pays seller and sends documents to issuing bank 5. Issuing bank presents documents to buyer 6. Buyer presents documents to shipper in exchange for goods

International product policy l Existence of global product? International standard? l Three common strategies l l Straight extension Product invention Product adaptation Technical adaptation l Commercial adaptation l

Factors influencing standardization/adaptation Factors affecting standardization Reduced costs Better use of know-how Global image Coherent marketing strategy Better coordination and control “Shrinking” of world market Factors affecting adaptation Cultural differences Govt. and regulatory restrictions Differences in infrastructure Local competition “True” to marketing concept “Think global, act local”, global / local paradox

Elements of a product Installation Tangible product Packaging Delivery and credit Brand name Augmented product Core product Features Core benefit or service Quality Aftersale service Styling Warranty Adapt or standardize?