International Development

Developpement International

Agenda

1. Export Readiness (Motivations, Export Diagnosis)

2. Export Potential (Market Research, Country selection, Study of Demand)

3. Developing Export strategies (Competition, Business Models, Brand and Communication)

4. Export Planning and Documentation

5. Export/ Import Risks (Types of Risks, Managing Risks)

6. Obtaining Finances/ Resources for Exports (Export Receivables, Payment Methods)

7. Developing Export as a Conclusion

Export Readiness

Ready to export?

What does the company want to gain from exporting? Is exporting consistent with the other goals? What demands will exporting place on company's key

resources, management and personnel, production capacity, and finance and how will these demands be met?

Are the expected benefits worth the costs, or would company resources be better used for developing domestic business?

Motivations to go abroad?

Proactive motivations represents stimuli for firm-initiated strategic change.

Reactive motivations describe stimuli that result in a firm's response and adaptation to changes imposed by outside environment.

So firms with proactive motivations go international because they want to, with reactive motivations, because they have to.

Motivations to go abroad

Proactive Profit advantage Unique products Technological advantage Exclusive information Tax benefit Economies of scale

Motivations to go abroad

Reactive Competitive pressures Overproduction Declining domestic sales Excess capacity Saturated domestic markets Proximity to customers

Priorities to contact

C.R.C.I REGIONALES (Chambres Régionales de Commerce et d'Industrie)

La C.O.F.A.C.E. (Compagne Française d'Assurance du Commerce Extérieur)

La D.R.C.E. (Délégation Régionale au Commerce extérieur)

Les Douanes

Others:

Le Medef International

Les Chambres de commerce a l'etranger

Partenariat France

Export diagnosis

Management objectives

How committed is top management. Management's expectations for the export effort? When operations come self-sustaining?

Experience

With what countries has business already been conducted? What product lines are used more often? Trend of sales up or down? Domestic and foreign competitors? Lessons to learn from past?

Export Diagnosis

Management and personnel

The role of management is crucial! Staff's international experience, language capacities?

How much time senior management time has allocated? Organizational structure? Who will follow through when planning is done?

Production capacity

How is present capacity being used? Does exporting hurt domestic sales? What would be required to design and package product for export? What is the status of the products? What does it mean to human resources?

Export diagnosis

Commercialization

How to organize internal and external communication? How organize adaptation?

Company's notability? Situation of the brand?

What products should the firm offer abroad?

What foreign needs does the product satisfy?

Do new products have a concept?

Product's life cycle (courbe de vie)

Juridic assessments, cultural differences: Should the firm modify the products? Should it develop a new product for the foreign market?

What specific features, such as design, color, size, packaging, brand and warranty should the product have?

Export diagnosis

Commercialization

How to organize sales? Are sales people motivated? What are the targets in every

country? How does the cultural differences effect to sales? Language barriers? Knowledge of English ?

Export diagnosis

Financial capacity Is the company rentable, what is it's

solvency? What amount of capital can be committed to export production and marketing? What level of export department operating costs can be supported? What are the initial expenses of export efforts to be allocated? By what date must an export effort pay for it self?

Export diagnosis

How to organize logistic? The structure? How to transport? Resourses

to transport? Does it respect the delays of delivery? Process of taxes?

When a company is searching for the specific market obligations, they compare their

advantages to their resources, in the case of logistic, materials, finance, a human resources

etc. So it is important to compare its actual performance to its potential performance.

Export diagnosis

Export diagnosis and GAP analysis

GAP analysis a tool that helps a company to compare its actual performance with its potential performance.

It involves analyzing current market offerings to assess the extent to which they meet customer demand.

The goal of GAP analysis is to identify the gap between the optimized allocation and integration of the resources and current level of allocation. This helps provide the company with insight into areas which could be improved.

It provides a foundation for measuring investment of time, money and human resources required to achieve a particular outcome. It has also been used as a means for classification of how well a product meets a targeted need or requirements.

Gap analysis

To identify a gap in the market, the technique of gap analysis can be used.

Planning gap Usage gap Product gap Competitive gap

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Planning gap

An examination of what profits are forecasted for the organization as a whole compared with where the organization “want's those profits to be represents what called “planning gap”

This shows what is needed of new activities in general and of new products in particular.

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Product gap

Could also be described as the segment or positioning gap, represents that part of the market from which the individual organization is excluded because of product or service characteristics.

Because the market has been segmented and the organization does not have offerings in some segments.

Competitive offerings are better

Competitive gap

The competition gap represents the effects of factors such as price and promotion, both the absolute level and the effectiveness of its message. → marketing

Demand Side and Supply Side Gaps

Demand side gaps involve a market situation where consumers are not satisfied buying what is available – usually because the offering is too expensive.

The gap may exit in the sense that existing firms are not offering what consumers may ideally want, there is a limit to what buyers would be willing to pay for. (cleaning service).

Supply side gaps involve firms that provide services that are needed, but ones that can be met elsewhere at lower prices.

When a business finds that the services that has traditionally offered to customers in the past are now too expensive to justify the value for the product. (travel agencies)

Closing gaps

Firms may be able to close, or reduce, their gaps by reconsidering their offerings.

A gasoline station that offers an average level of service at price higher than those of self-service stations might either target the low cost segment, lowering prices and cutting costs, or targeting a premium market service and “beefing up” service.

Closing gaps

In the situation, when the gap is not big it is possible to fill close or reduce it by,

Training

Hiring people

To realize investments ( purchasing materials, stock supplementary)

In the situation, when it is impossible to fill the gap, company has to

Abandon to search

To choice another distributional model (direct >< indirect)

Export Potential

Export potential

Approach to market research How to select a country? A study of demand (quantitative, qualitative

supply, evaluation of rentability)

Market researches

Purpose to identify marketing opportunities and constrains abroad, as well as to identify prospective buyers and customers.

Encompasses all methods that a company can use to determine which markets have the best potentials.

Market researches

Two ways of doing market research:

Primary data resources

Collects data directly from the foreign marketplace through interviews, surveys.

Has advantage of being tailored to the company's needs and provides answers to specific questions, but it is expensive and takes time.

Secondary market research

Collects data from various sources (trade statistics for a country or the products)

Less expensive and an easy step to take

Approach to Market Research

Screen potential markets

Obtain export statistics that indicate export to various countries.

Identify five to ten large and fast-growing markets for the firms' product.

Identify some smaller but fast-emerging markets that may provide ground-floor opportunities.

Consult business associates and priorities for further evaluate targeted markets.

Approach to Market Research

Assess targeted markets

Examine trends for company products as well as related products that could influence demand. Calculate overall consumption of the product and the amount accounted for by imports.

Ascertain the sources of competition, including the extent of domestic industry production and the major foreign countries the is competing against in each targeted market by using competitive assessments.

Analyze factors affecting marketing and use of the product in each market, such as end-users sectors, channels of distribution, cultural idiosyncrasies and business practices.

Identify any foreign barriers (tariff or nontariff) for the product being imported.

How to select the country?

Choice the market which are best to adapt concerning to export diagnosis and market researches.

It is usually best to focus on selling to similar markets.

Many new exporters choose to start by exporting to markets that are relatively easy to deal with (EU) or have some previous links.

To build a matrix where market accessibility (physical, cultural, political economic criterion), potential market (demand, competition, country openness, image) and the risks are evaluated.

Study of Demand

Quantitative When gathering information from the markets it is important to check its

relevant and trustworthy.

Launching a product it is important to collect the local information in which to evaluate the the country's average consumption.

Global market survey: A x B x C

A = Target audience (population ciblée)

B = Average purchase (le panier moyenne)

C = Purchase frequency

Study of Demand

Qualitative Who, what, when, where, how and why? Buying habits, image of the brands Deeper understanding → consumer insight

Study of Supply Competitor analysis: SWOT, positioning,

indirect competition, potential competition

How to analyze rentability?

1) Structural costs How many persons are required in the countries?

Annual cost when the salesmen travel different countries or if they operate in foreign countries?

Location. To own or to rent? A warehouse for merchandise, materials and end products?

Other costs/ communication, training, traveling, hosting...

How to analyze rentability?

Varying margin Direct costs VAT tax (Taux de TVA) Tariffs Distributors margin Final psychological prize Exchange rate

Developing Export Strategies

Competition strategies

How to position the brand/ products against the competitors and indirect competitors?

Competition ability >< competition advantage? A market leader or a market challenger?

Strategies by Porter

Cost leadership

Company tries to compete with low costs (mass products) Differentiation

Aspiration to differ from its competitors by differentiating its product from the mass products or by acting in a unique way → value → higher prize

Focus

To focus to a certain product or a market territory. It can be also a combination of strategies, for example a combination

of differentiation strategy and a focus strategy.

Pricing Strategies

Competitor oriented pricing Cost-orientated pricing Demand (Market) oriented pricing

Competitor oriented pricing

Commodity -based pricing Competition-based pricing Follow-the-leader pricing

Cost-orientated pricing

Cost-plus pricing Early cash recovery Satisfactory rate of return on investment

Demand (Market) oriented pricing

Market penetration Market skimming What the market will bear Differential pricing

Business Model Strategies

Business Models

The most common methods of exporting are indirect selling and direct selling. In direct selling, an export intermediary such as Export Management Company (EMC) or an Export

Trading Company (ETC) assumes responsibility for finding overseas buyers, shipping products

and getting paid. In direct selling company deals directly with a foreign buyer.

Direct or Indirect?

The paramount consideration in determining weather to market indirectly or directly is the level of resources a company is willing to devote its international marketing effort. Other factors are:

The size of the company

The nature of the products

Previous export experience and expertise

Business conditions in the selected overseas markets

Approaches to exporting

Export indirectly through intermediaries.

A company engages the services of an intermediary firm capable to finding foreign markets.

EMC, ETC etc can give the exporter well-established expertise and trade contacts. Yet the exporter can still retain considerable control and to realize some other benefits, such as learning more about foreign competitors and markets.

The principal advantage is that it provides a way to penetrate foreign markets without the complexities and risks of direct exporting.

Approaches to exporting

Exporting directly.

It it most ambitious and difficult, because the exporter handles everything by it self and it need lots of resources. But it may the best way to achieve maximum profits in a long term.

The advantages include more control over the export process, potentially higher profits and a closer relationship to the overseas buyer and marketplace. BUT the company needs to demote more time, personnel and corporate resources than indirect exporting.

Indirect exporting

Export Management Companies acts as the export department for one or several producers of goods or services. It transact business in the names of producers it represents or in its own name for commission, salary or retainer plus commission. They usually specialize either by product or by foreign market, or sometimes both. They know their product and markets → easy way to access to foreign market but company may lose the control.

Export Trading Companies can either act as the export department or take title to product and export for its own account.

Export Agents, Merchants or Remarketers purchase products directly from the manufacturer, packing and marketing the products according to their own specifications. They can sell these products overseas through their contacts in their own names and assume all the risks for accounts.

Piggyback Marketing is an arrangement in which one manufacturer or service firm distributes a s second firm's product or service. The common situation is when a company has a contract with an overseas buyer to provide a wide range of products or services.

Direct exporting

Internal organizing. A company generally treats its export sales no differently than its domestic sales, using existing personnel and organizing structures. A company may separate the management of exports from its domestic sales. → export department. Good marketing skills can help the firm operate in an unfamiliar market. The success depends less on the unique attributes than on its marketing methods.

Sales representative uses the company's product literature and samples to present the product to potential buyers. A representative usually handles many complementary lines that do not conflict. The representatives usually works on a comission basis, assumes no risk or responsibility and is under contract for a definite period of time.

Agents means representatives who normally have authority, perhaps even a power of attorney to make commitments on behalf of the firm they represents.

Direct exporting

The foreign Distributor is a merchant who purchases goods from a exporter and resells it for a profit. The distributor generally provides support and service for the product, thus relieving the exporter of these responsibilities. It typically handles a range of non-conflicting but complementary products. End users normally by from retailers, not from distributors.

A company may also sell directly to foreign retailers. This method relies mainly on traveling sales representatives who directly contact foreign retailers, although the result might also be achieved by mailing catalogs, brochures etc. → reduce costs.

Direct sales to end users. E-commerce.

Negotiating an agreement with a foreign representatives

The agreement may contain provisions that the foreign representative

Not have business dealings with competitive firms (anti-trust laws)

Not reveal an confidential information

Not enter into agreements binding to the company

Refer all inquiries received from outside the designed sales territory to the firm fro action.

Legal questions to consider:

How far in advance must the representative be notified of the supplier's intention to terminate the agreement? What is a cause of terminating a representative? Which county' s laws govern a contract dispute? What compensation is due to representative on dismissal? What does he or she give up if dismissed (patents, trademarks...)

Technology licensing and joint ventures

Two alternative ways to obtain foreign trade: technology licensing and joint ventures

Technology licensing is a contractual arrangement in which the licensor's partners, trademarks, copywrights, trade secrets or other intellectual property may be sold or made available to a licensee for compensation that is negotiated in advance between the parties. → quicker market entry than joint ventures.

Franchising is also an important form of technology licensing used by many service industries. In franchising, the franchisor (licensor) permits the franchisee (licensee) to employ its trademark or service mark in a contractually specified manner for marketing of goods. The franchisor usually support the franchisee's business by providing advertising, accounting training etc.

Technology licensing and joint ventures

Joint ventures

The company choses to begin a business relationship with a firm in the host country. Often in East Europe, Chine.

The local partner will likely bring to the joint venture its knowledge of the customs and tastes of the people, an established distribution network and valuable business and political contacts.

Possible disadvantages: the loss of effective managerial control. Complex legal issues.

Brand and communication strategies

Branding

Brands are more than names and logos

• Brands offer assurances to consumers of product quality and value.

• They connect emotionally with consumers and inspire feelings about values and experiences.

• A brand is “a visible part” of the company's strategy.

Brand strategies: single brand → multi brand

Building an Export Brand

When entering a new market, it is important to check that the brands, logos and trademarks are unique and are not already being used by a local business, within the similar categories of product.

The products mus reflect the quality and value of the brand.

It is crucial to develope a close dialogue with buyers that will lead to brand loyalty.

Standardization versus Adaptation?

In case of standardization the communication is identical everywhere.

Better marketing performance, lower marketing coasts.

The disadvantage can be that the it doesn't respect the local context or cultural differences.

Standardization versus Adaptation?

When the communication is adapted the communication is modified and localized to different markets.

It respects the culture It is more expensive and it may be a threat to

brand image.

Standardization versus Adaptation?

Factors encouraging standardization

Economies in product R & D

Economies of scale in production

Economies in marketing

Control of marketing programs

“Shrinking” of the world marketplace

Factors encouraging adaptation

Differing use conditions

Government and regulatory influences

Differing buyers behavior patterns

Local initiative and motivation implementing

Adherence to the marketing concept

Standardization versus Adaptation?

The international marketer must first decide what modifications in the mix policy is needed. 3 alternative approaching:

1. Make no special provisions for the international marketplace, but, rather, identify potential target market and then choose products that can easily be marketed with little or no modifications.

2. Adapt to local conditions in each and every target market (multidomestic- approach).

3. Incorporate differences into a regional or global strategy that will allow for local differences in competition (global approach).

Ideally...

...the international marketers should think globally and act locally, focusing on neither extreme; full

standardization or full localization. Global thinking requires flexibility in exploiting good

ideas and products on worldwide basis.

Global Approach

It differs from multidomestic approach in three basic ways:

The global approach looks similarities among markets. The multidomestic approach ignores similarities.

The global approach actively seeks homogeneity in products; image, marketing, and advertising message. The multidomestic approach. Results in unnecessary differences from market to market.

The global approach asks, “Is this product or process suitable for world consumption?” The multidomestic approach never asks questions.

Globalization

Globalization means the centralization of decision making. Changes in philosophy concerning local autonomy are delicate issues; and the “not invented here” syndrome may became a problem. It can be solved by utilizing various motivational policies:

Encourage local managers to generate ideas.

Ensure that local managers participate in the development of marketing strategies and programs for global brands.

Maintain a product portfolio that includes local as well as regional and global brands.

Allow local managers control over their marketing budgets so they can respond to local consumer needs and counter local competition.

Promotional Policy

The international marketer must choose a proper combination of various promotional tools - advertising, personal selling, sales promotions and publicity to create images among the intended target audience.

The choice will depend on the target audience, company objectives, the product marketed, the resources available and the availability of the tool in a particular market.

Promotional Policy

In advertising the key decision-making areas are

Media strategy Promotional message The organization or the promotional

program

Promotional Policy

Media Strategy is applied to the selection of media vehicles and development of a media schedule. There are limitations because of the regulations vary in different countries.

A media plan includes:

Objectives (commercial and communication)

Budget

Advertising action plan

Time table

Results

Promotional policy

Promotional message Based on the creative strategy

What the consumers are really buying, what are their motivations. They will vary, depending on

The diffusion of the product into the market The criteria on which the consumer vill evaluate the

product The product's positioning

Export Planning and Documentation

Planning and Documentation

A written plan is important because:

It displays strengths and weaknesses rapidly It is not easily forgotten It is easy to communicate to others and less likely to

be misunderstood It allocates responsibilities It is helpful when seeking financial assistance It signals, that the decisions to export has already

been made

Developing an Export Plan

At least 10 questions should be addressed

Which products are selected for export development? What modifications?

Which countries are targeted for sales development?

In each country, what is the basic customer profile? What marketing and distribution channels should be used to reach customers?

What special challenges pertain to each market? (competition, cultural differences... → what strategies,

How will the product's export sale price be determined?

What specific operational steps must be taken and when?

What will be the time frame for implementing each element of the plan?

What personnel and company resources will be dedicated to exporting?

What will be the cost in time and money for each element?

How will results be evaluated and used to modify the plan?

Export and Import Risks

Credit risks

Poor quality risks

Transportations and logistical risks

Country and political risks

Legal risks

Commercial risks

Unforseen risks

Exchange rate risks

Cultural and language risks

Types of risks

Credit risks

It is difficult to verify the creditworthiness and reputation of an importer.

If the creditworthiness of a foreign buyer is unknown, there is the increased risks of non-payment or late payment.

The export should insist for a secure method of payment such as an irrevocable documentary credit.

Poor quality risks

If the goods to be exported are not inspected before they are shipped by an independent third-party, the exporter may find his entire shipment being rejected on arrival at the importer´s premises due to the poor quality of the good.

The exporter should ship one or two samples of the goods to the importer by an international courier company.

Transportation and logistic risks ans Incoterm

With the movement of goods from one continent to another, goods face many hazards: theft, damage and possibility the goods not even arriving at all.

Exporter must understand all aspects of international logistic, in particular the contract of carriage (between shipper and a carrier).

Legal rights

Incoterms

Incoterms are internationally accepted commercial terms. They define the respective roles of the buyer and seller in the agreement of transportation and other responsibilities and clarify when the ownership of the merchandise takes place.These terms are incorporated into export-import sales agreements and contracts worldwide and are a necessary part of foreign trade.

Incoterms are used in union with a sales agreement or other methods of sales transactions and define the responsibilities and obligations of both, the exporter and importer in foreign trade transactions.

The main objectives concerned with the loading, transport, incurance and delivery transactions. Its main function is the distribution of goods and regulation of transport charges.

13 International Incoterms

EXW (Ex works)

FCA (Freen Carrier)

FAS (Free Alongside ship9

FOB 8Free on board)

CFR (Coast and Freight)

CiF (Incurance and Freigft)

CPT (Carriage Paid to)

CIP (Carriage and Incurance Paid To)

DAF (Deliverde At Frontier

DES (Delivered Ex-Ship

DEQ (Delivered Duty Unpaid)

DDP (Delivered Duty Paid)

Ex Works

The seller makes the goods available at his premises. The buyer is responsible for all charges.

This trade term places the greatest responsibility on the buyer and minimum obligations on the seller. The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included.

EXW means that a seller has the goods ready for collection at his premises (Works, factory, warehouse, plant) on the date agreed upon.

The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination.

International Incoterms

Make trade between different countries easier. Worldwide Deal directly with the questions related to the

delivery of the products from the seller to the buyer.

Political or Country risks

The political stability – aware of policies in foreign governments.

Instability in the target market could lead to losses resulting from war, civil strife and pol. instability.

May be constrains upon foreign currency reserves.

Beside country risks assessments, the exporter should consider overall political and economic stability, the strength of democratic institutions, a well aw economic factors, such as GDP growth, inflation and unemployment.

COFACE refines the countries into different types of risks: very high, high, low etc.

COFACE

Coface is the Compagnie française d'assurance pour le commerce extérieur. The globalisation of the worlds economies has enabled companies to increasingly capitalise on market opportunities. This has logically led to an ever-rising demand for customised tools dedicated to managing client and supplier relations in real time and with total security. Coface whose mission is to facilitate business-to-business trade responds to this call, by proposing a full array of solutions suited to companies of all sizes and nationalities across all sectors of the economy. Its offer is geared to managing, financing and protecting the customer portfolio while enabling companies to outsource all or part of their receivables management, as well as the related risks.

Coface provides:

- guarantees for export credits

-guarantees for exports by French corporations

- some other international support for exporters

Legal risks

International laws and regulations change frequently.

The legal environment is developed from the political environment.

When appointing a middlemen or intermediary, exporters should be aware of many responsibilities that influence the appointment of such intermediaries.

Unforseen risks

A natural disaster or terrorist action could destroy everything.

Commercial risks

Relate to a foreign buyer´s or supplier´s performance under a commercial contract.

Include risks related to payment or performance according to the terms of the commercial contract. Buyer risk includes the risk of devaluation of the importr´s currency, which may results in default on a payment.

Exchange rate risks

Involves Transactional exposure resulting from fluctuations in exchange (FX) rates. Significant currency rate fluctuations can have effects on foreign receivables and can easily affect profit margins.

Involves the fluctuations of the value of the one currency relative to another. When transactions are based in foreign currency, these fluctuations can represent significant risks (or opportunities).

Three main kind of risks

Transaction exposure relates to the effect of FX fluctuations on transactions that have been initiated but not completed. → cash flow

Translation exposure refers to the effects of foreign exchange fluctuations on financial reporting, for taxes and financial statements.

Economic exposure relates to impact of economic conditions on future cash flow.

Culture and Language risks

Misunderstanding in communication. In most instances, taxes, rules and regulations,

accounting methods, currency controls and customs systems all differ of the exporter´s own country.

Managing the risks

Know the risks. Cover the risks: Credit risk cover, Country risk

cover, Transit risk cover. In exchange risks you can´t insure the

exchange risk exposure, but you can minimize the risks throught hedging your risk by using on of four financial instruments forward contracts, future contracts, swaps and options.

Managing Country risks

The options range from deciding not to export to a particular area, to obtaining appropriate insurance and mitigation assistance from company´s export finance service providers.

Managing commercial risks

May lead the firm to a variety of risk management strategies. At the extreme, the firm choise not to pursue business with a particular buyer.

Alternatively, some form of insurance scheme or secured payment option may be required.

Or the firm finds out that the partner is secure.

Managing Exchange risks

Forwared contracts are contracts with commercial banks, in which an exporter agrees to sell a fixed amount of foreign currency at a field price, at a mutually agreed future date. → eliminates the uncertainty associated with FX fluctuation.

Export netting relates to the practice of matching foreign currency inflows with outflows in the same currency, to eliminate the exposure.

Currency options are contracts that confer the right to buy or sell foreign currency at a specified price, with in defined time period.

Obtaining finances/ resources for the payment

Export receivables

To turn export receivables into cash Confirming Factoring Forfaiting

Confirming

A financial service in which an independent company confirms an export order into seller's country and makes payment for goods in the currency of the country.

For the exporter it means that the hole export transaction is coordinated an paid for over time.

Factoring

Involves the discounting of company's foreign account receivable to a specialist factoring house (an organization that specializes in this form of financing).

A factoring house will probably be prepared to offer a company more (80%) for the value on company's accounts receivables than a bank.

A company would transfer the title to company's foreign accounts receivable to the factoring house for cash at a discount on the face value.

The factor assumes these risks upon purchase of the receivable, and reflects these risks by the discount rate to the value of the receivable.

Forfaiting

Form of bill discounting

It enables exporters to convert a credit sale into a cash sale.

It involves selling longer-term accounts receivable from a foreign buyer to specialist agency such as bank that does forfeiting (not all banks do forfaiting).

The forfaiting agency would pay for the value of accounts receivable, less a discount, which represents their fee.

Difference between factoring and forfaiting

While factoring is essentially a loan based on company's account receivables, forfaiting is the outright sale of company's accounts receivables.

Forfaiting is often used in instances when a company will be paid in stages and is is used for financing high-value goods.

Payment methods

The payment method to use may have a significant effect on the financing required and the level of risk to which are exposed. The common payment methods in exporting:

Open account Payment in advance Documentary collections Documentary credits

Open account

It agrees to supply the goods to the importer and, once the company have done so, it then invoice the buyer. Once the buyer receives the invoice he or she effects payment.

The exporter carries all the risk associated with the sale. It may needed to arrange financing itself to pay for the credit period, but banks may be reluctant to finance solely on the strength of the open account as they have no guarantee that the importer will pay. Instead the company may have to offer other forms of guarantee.

Payment in advance

The most preferred form of payment from the exporter's point of view.

The company have no risks and bear none of the financing costs. There is no additional cost beyond the costs involved in any export transaction.

Payment or part payment in advance is typically used for low value sales to individuals or new customers.

For any individual transaction, the most appropriate method will depend on the level of risk involved, how strong is the negotiating position and how the cost of financing compares for the company and the customer.

Documentary collections

Allow to keep control of the goods and to raise additional finance as a result.

An overseas bank will only release the documents necessary for company's customer (importer) to take possession of the goods once they formally accepts the term of a bill of exchange.

A bill of exchange is a written document in which the eporter requires the customer to pay a specified amount.

There is a risk that a company may not receive payment, unless the bill has been guaranteed by the bank

A bill of exchange can specify any credit period that you negotiate with the customer.

Documentary credits

Also known as “letters of payments”

Amongst the safest methods of payments

The customer arranges a letter of credit with its bank (known as the "issuing bank"). In this letter of credit will stand all the instructions that the company must follow and documentary evidence that must supplied to a correspondent bank.

A letter of credit can specify any credit period that the company have negotiated with its customer.

Documentary credits are typically used for exports to customers you have not sold to before and for customers and countries that present particular credit risks.

Developing Export as a Conclusion

Export readiness

Broad missions statement and initial budget

Confirming management's commitment

Undertaking an initial SWOT analysis of the firm

Selecting and researching potential countries

Preparing and implementing the export plan

Obtaining financing for exports

Managing the export risks

Promoting the firm and its products abroad

The selling process – negotiating and quoting exports

Revising export costing and price

Obtaining the export order

Producing the goods

Handling the export logistics

Export documentation

Providing follow-up support

Getting paid

Reviewing and improving the export process