Chapter 8 Exporting, Importing,

and Sourcing

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IntroductionThis chapter looks at

Export selling and export marketingOrganizational export activitiesNational policies on imports and exportsTariff systemsKey export participants

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Export selling involves selling the same product, at the same price, with the same promotional tools, in a different placeExport marketing tailors the marketing mix to international customers

Export Selling versus Export Marketing

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Requirements for Export Marketing

An understanding of the target market environmentThe use of market research and identification of market potentialDecisions concerning product design, pricing, distribution and channels, advertising, and communications

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Organizational Export Activities

The firm is unwilling to export; it will not even fill an unsolicited export order.The firm fills unsolicited export orders but does not pursue unsolicited orders. Such a firm is an export seller.The firm explores the feasibility of exporting (this stage may bypass Stage 2).The firm exports to one or more markets on a trial basis.

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Organizational Export Activities

The firm is an experienced exporter to one or more markets.After this success, the firm pursues country- or region-focused marketing based on certain criteria. The firm evaluates global market potential before screening for the “best” target markets to include in its marketing strategy and plan.

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Potential Export Problems

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National Policies Governing Exports and Imports

Most nations encourage exports and restrict imports.Goods and services imported into the United States almost doubled in seven years.In 2005, the total was $1.9 trillion.

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Share of U.S. Apparel Market by

Exporting Country, 20041. China 13.1

2. Mexico 10.2

3. Honduras 6.0

4. Bangladesh 4.5

5. El Salvador 4.5

6. Hong Kong 4.1

7. Dominican Rep. 3.9

8. Vietnam 3.7

9. Indonesia 3.4

10. Korea 3.2

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Government Programs that Support Exports

Tax incentivesSubsidiesGovernmental assistanceFree trade zones

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Governmental Actions to Discourage Imports and Block Market Access

TariffsImport controlsNontariff barriers

QuotasDiscriminatory procurement policiesRestrictive customs proceduresArbitrary monetary policiesRestrictive regulations

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Tariff Systems

Single-column tariff Simplest type of tariffSchedule of duties in which rate applies to imports from all countries on the same basis

Two-column tariffGeneral duties plus special duties apply

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Tariff Systems

Sample Rates of Duty for U.S. Imports

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Preferential Tariff

Reduced tariff rate applied to imports from certain countriesGATT prohibits the use, with three exceptions

Historical preference arrangements already existedPreference is part of formal economic integration treatyIndustrial countries are permitted to grant preferential market access to LDCs

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Customs Duties

Ad valorem dutyExpressed as percentage of value of goods

Specific dutyExpressed as specific amount of currency per unit of weight, volume, length, or other units of measurement

Compound or mixed dutiesApply both ad valorem and specific on the same items

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Other Duties and Import Charges

Anti-dumping dutiesDumping is the sale of merchandise in export markets at unfair pricesSpecial import charges equal to the dumping margin

Countervailing dutiesVariable import leviesTemporary surcharges

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Key Export Participants

Foreign purchasing agentsExport brokersExport merchants Export management companies

Export distributorExport commission representativeCooperative exporterFreight forwardersManufacturer’s export representatives

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Organizing for Exporting in the Manufacturer’s Country

Exports can be handled As a part-time activity performed by domestic employeesThrough an export partner Through an export departmentThrough an export department within an international divisionFor multi-divisional companies, each possibility exists for each division

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Organizing for Exporting in the Market Country

Direct market representationAdvantages—control and communications

Representation by independent intermediaries

Advantages—best for situations with small sales volume

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Export Financing and Methods of Payment

Documentary credits (letter of credit)Documentary collections (bill of exchange)Cash in advanceSales on open accountSales on consignment basis

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Flow Chart of Documentary Credit

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Flow Chart cont.

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Customs Trade Partnership Against Terrorism (C-TPAT)

The U.S. Customs and Border Patrol inspects cargoC-TPAT aims to have businesses certify their security and that of their partnersThey get inspection priority

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SourcingMust emphasize benefits of sourcing from country other than home countryMust assess vision and values of company leadershipAdvantage can be gained by

Concentrating some of the marketing activities in a single locationLeveraging company’s know-howTapping opportunities for product development and R&D

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Factors that Affect Sourcing

Management visionFactor costs and conditionsCustomer needsLogisticsCountry infrastructurePolitical riskExchange rate, availability, and convertibility of local money

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Looking Ahead to Chapter 9

Global market entry strategies: licensing, investment, and strategic alliances