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Copyright © 2015 Pearson Education, Inc. 14-1
International Business
Environments & Operations
15e
Daniels ● Radebaugh ● Sullivan
Copyright © 2015 Pearson Education, Inc. 14-3
Learning Objectives
Understand the role of export/import in the strategy of the multinationals
Learn about export/import process and the documentation involved
Explain the idea of exporting/importing and evaluate their relative benefits/drawbacks
Describe the intermediaries in export/import-resources and assistance for international traders
Identify and discuss the platforms that support expanding international trade
Competitive Advantage and the Strategy of the Multinationals
Price
Quality
Competitive Advantage
Export Strategy
Investment /
Collaborative strategy
Manufacturing / Supply
chain strategy
Marketing Finance
Accounting Human Resource
R&D
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Export Strategy of the Firm-1
Exporting and importing are the most common modes of international business; and, one of the fastest growing activities in the world
Why Export…. Profitability-increase revenues Productivity-achieve economies of scale,
alleviate excess capacity Diversification-minimize risk and diversify
markets
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Export Strategy of the Firm-2
Firms’ “entry strategy/mode” is influenced byOwnership advantages
the firm’s core competenciesLocation 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
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Exporters: Initiation and Development
Two approaches Incremental internationalization
exporting is a learning process Born global
instant internationalization global focus
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Exporters: Initiation and Development
Top Trade Partners of the United States: Exports and Imports
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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
Export Import Process
Informs
Exporter
Exporter’s Bank
Importer
Importer’s Bank
Receives payment
Ships
Bill of lading
Informs
Reimbursement
Payment
Opens Letter of Credit
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Types of Exports Documents
Pro Forma Invoice: outlines the terms of sale, price, and delivery details, it is the basis for Commercial Invoice
Shipper’s Export Declaration: used to monitor exports and compile trade statistics
Bill of Lading: a detailed receipt from the carrier transporting the cargo
Consular Invoice: required to monitor imports Certificate of Origin: determines the tariff Export Packing List: lists the cargo details Commercial Invoice: details of sale according
to Pro Forma Invoice, it is legal document
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Import Strategy of the Firm
Why import? Strategic advantages of import…. Specialization of labor Global rivalry Local unavailability Diversification of operation risks
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Issues in Exporting/Importing
Financial risks Customer management Lack of international business experience Marketing challenges Top management commitment Government regulation Trade documentation
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Support, Resources and Assistance
Companies can get support, resources and assistance from Government agencies The U.S. Department of Commerce
International Trade Administration The Small Business Administration
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Support, Resources and Assistance
Trade Assistance by Type and Source
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Export/Import Intermediaries
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)
Customs agents: enforce the rules of trade for a particular country
Customs brokers: help importers navigate the regulations imposed by customs agencies
Freight forwarders: the largest export/import intermediary in terms of value and weight of products shipped internationally
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Countertrade Countertrade
different arrangements that parties use to trade products via transactions that use limited or no currency or credit
Examples of countertrade transactions…. barter [based on clearing arrangements used to
avoid money-based exchange] buybacks, offsets, and counter purchase [all of which
are used to impose reciprocal commitments] Costs and Benefits of Countertrade
Costs: inefficient, risky, cumbersome Benefits: build mutually beneficial relationships
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Chapter 14: Discussion Questions1. Explain why firms export or import. What are their
competitive advantages for export or import? 2. Describe the export-import process and explain the role
of various “export documentation” involved in the process.
3. Who are the export/import intermediaries? Explain their role and functions in the export-import process.
4. What are the common issues in exporting/importing? Explain.
5. What is countertrade? What are the different types of countertrade? Why firms or governments engage in countertrade? Explain.
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