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Lake Atitln - Guatemala
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Approximately US$ 355,691 million in trade between U.S. andCentral & South America in 2012
U.S. Trade with Central & South America has increased19.8% from2008 to 2012
U.S. Exports to Central & South America have increased34.3%from 2008 to 2012
U.S. Exports in 2012 to China = US$ 110,590 million(US$ 536,234 trade total)
The U.S. exported 66.3% more goods to Central & South America(US$ 183,866 million) than to China in 2012
Trade Facts
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Highlights of this Presentation
The Basic Fundamentals of Exporting(anywhere)
Latin American Export Strategic PlanElements
Latin American Strategic Issues
General Export Plan Tips,
Suggestions & Recommendations
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Export
Success
MarketSelection
Partners
MarketingFinance
Logistics
HR
Sales
ProductSelection
Entry Mode
Export PlanComponents
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Assessment & Planning
Self-Assessment
Must-Have Conditions
Nice-to-Have Conditions
Global Strategic Plan
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Self-Assessment
Useful at the beginning planning stages
Helps to set goals and get everyone on the same page
http://export.gov/begin/assessment.asp
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SWOT Analysis
Strengths: Weaknesses:
1. Strong Brand in USA
2. Production Capacity
3. Low Cost Producer
1. English only MarketingMaterials
2. Little International Experience
3. Not ISO 9000 Certified
Opportunities: Threats:
1. Growing Latin AmericanIndustrial Markets
2. Few Foreign Competitors
3. High & Low End Markets
1. Copycats & Pirates2. Increased Latin American
Government Regulations3. Rising Fuel Costs
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Porters 6 Forces Analysis:More robust than SWOT Analysis
Comp.products/Govt/
public
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MUST HAVE Conditions
Upper Management Buy-In,Commitment & RealisticExpectations
Knowledge & Experience producing& selling product or service
Sufficient Corporate Infrastructure
Solid Cash Flow
Production Capacity & Flexibility toproduce international products orprovide the service
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NICE-TO-HAVE Conditions
International Expertise
Foreign Language Ability
Cultural Awareness / Sensitivity
Travel to Foreign Markets
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Strategic Plan Layout
Strategic Plan Elements:
I. Creating a Vision
II. Forming Supporting Initiativesi. Market Selectionii. Market Entryiii. Cultural Intelligence
iv. Export Plan Pillars
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Creating a Vision Statement 1, 5, or 10 years out Where do you want to be? What do you want to happen?
How are going to do it?
Ex: It is January 1st2023 andwe havebecome the go-to, influential market leaderin the Latin American markets we serve byfocusing on giving our customers
consistently outstanding service through ourlocal sales, distribution & after-sales servicelocations. Our sales in Latin America are atleast $50 million and
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What are the Initiatives that Support the Vision?
Which markets am I going to select and why?
What will my entry mode be and who will be my partner?
What other strategic issues will I have to account for whenI am building my:
Sales & Marketing Plan?
Logistics Plan?
Finance, Legal, and HR Plan?
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Market Selection
ReactiveStrategy
Pro-ActiveStrategy
PrimaryResearch
SecondaryResearch
QualitativeResearch
RiskAssessment
FTAs
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Market SelectionPro-ActiveApproach to Foreign Market Selection:Create decision criteria/indicators to assess each markets potential.
Usesecondarydata to narrow the field or create a pool of
possibilities (5 to 10 markets)
Useprimarydata for final selection (1 to 3 markets; create alist ranking all identified markets)
Use qualitativedata as criteria to select or narrow selections
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Market Selection
International commodity coding system that most countries
use to classify their products
6-digit HS Code is known as the international level orsubheading (e.g. 8429.39)
All imported goods are subject to duties based on the HS
code, value listed on commercial invoice & country of originof manufacture (not necessarily the country of export)
Key Factor in Secondary Research: Harmonized System Code
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Market SelectionHarmonized System Code:
You can find your HS Code/Schedule B Number by using:
https://uscensus.prod.3ceonline.com/(search engine)
http://www.census.gov/foreign-trade/schedules/b/(by chapter)
https://uscensus.prod.3ceonline.com/http://www.census.gov/foreign-trade/schedules/b/http://www.census.gov/foreign-trade/schedules/b/http://www.census.gov/foreign-trade/schedules/b/http://www.census.gov/foreign-trade/schedules/b/https://uscensus.prod.3ceonline.com/https://uscensus.prod.3ceonline.com/8/10/2019 Export to Latin America
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Market SelectionGood Secondary Research Data Sites
Subscription Based: Piers Euromonitor GTIS USA Trade Online Datamyne* Kompass*
Free: Export.gov (USDOC) Global Edge (MSU) World Bank Trade Data Comdata (UN) DCEO / OTI (IL)
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Market SelectionPrimary Data Sources: Direct data collection throughinterviews, surveys and direct contact
More expensive, time consuming + personalinvolvement
Tailored to your needs, gives specific answers
Private & Government offers this service
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Market SelectionQualitative Research: research dealing with phenomena thatare difficult or impossible to quantify mathematically, such asbeliefs, meanings, attributes, and symbols
Generally used for exploratory purposes; a small number ofrespondents; not generalizable to the whole population;statistical significance & confidence not calculated
Examples include focus groups, in-depth interviews,personality tests
Can be time consuming, expensive & requires personalinvolvement
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Market SelectionGlobal Assessment Suitability Indicators:
Demographic population, literacy, education, per capita,language, Human Development Index (HDI)
Macroeconomic GDP, growth, inflation, economic activityindex, industrial activity index
Government taxes, tariffs, political stability, corruption index,ease of doing business index, non-tariff barriers, intellectual
property rights, Free Trade Agreements (FTA)
Environmental infrastructure, climate, geography
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Market SelectionRisk Assessment Factors:
Politicalexpropriation, terrorism,instability, bureaucracy, corruption,
relationship with US Government, trade &non-trade barriers
Economiccurrency exchange,recession, inflation, financial, taxes
Legal intellectual property protection,contract law, employment laws
Cultural nationalism, religion,packaging, language, context
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Description Detail Imported Product(US$)
Brazilian-madeProduct (US$)
Cost (FOB) Milking Machine(8434.10.00)
50,000.00 50,000.00
International Ocean Freight Estimated Cost 2,000.00 0.00
International Insurance 0.3% of FOB & Freight 156.00 0.00
CIF Value (basis for calculation oftaxes)
Cost + Insurance +Freight
52,156.00 50,000.00
Import Duty (ID) Federal Tax 14% on CIF 7,301.84 0.00
IPI Federal TaxIndustrialized Products (0- 5%)
0% on CIF+ID 0.00 0.00
PIS Federal Tax
Program for the Social Integration
1.65% on CIF+ID+IPI 1,185.59 1,108.65
COFINS Federal TaxSocial Security
7.6% on CIF+ID+IPI+PIS 5,460.92 5,106.50
ICMS State Tax (Sao Paulo)Circulation of Goods & Services
18% onCIF+ID+IPI+PIS+COFINS
14,510.71 12,339.91
Total Value after Taxes 80,615.07 68,555.05
Cost Differential +15%
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Market SelectionForeign Corruption Index:http://cpi.transparency.org/cpi2011/results/
Rank Country Score
1 New Zealand 9.5
2 Denmark 9.4
2 Finland 9.4
4 Sweden 9.3
5 Singapore 9.2
6 Norway 9.0
7 Netherlands 8.9
8 Australia 8.8
8 Switzerland 8.8
10 Canada 8.7
24 USA 7.1
Top Latin American countries:
Rank Country Score
22 Chile 7.2
25 Uruguay 7.0
73 Brazil 3.8
80Colombia, El Salvador,
Peru 3.4
86 Panama 3.3
100 Argentina, Mexico 3.0
118 Bolivia 2.8
120 Ecuador, Guatemala 2.7
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Market SelectionEase of doing business index:http://www.doingbusiness.org/rankings
Economy Overall WorldRank
Singapore 1
Hong Kong (SAR) 2
New Zealand 3
USA 4
Denmark 5
Norway 6
UK 7
S. Korea 8
Iceland 9
Ireland 10
Canada 13
Germany 19
Japan 20
Latin AmericanEconomy
Overall WorldRank
Chile 39
Peru 41
Colombia 42
Mexico 53
Panama 61
Uruguay 90
Belize 93
Guatemala 97
El Salvador 112
Argentina 113
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Market SelectionFree Trade Agreements (FTA)
USA has 14 FTAs, 6 of which involve 11 LATAM countries:
NAFTA (Mexico) CAFTA (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica
& Dominican Republic) Peru Colombia
Panama Chile
Free Trade Agreement of Americas (FTAA) Proposed - ???
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FTA Tool - Check out tariff rates & schedules byaccessing FTA tool:
http://export.gov/fta/ftatarifftool/TariffSearch.aspx
Need HS Code (4 to 10 digits)
Select FTA partner
Pending FTA partners included
Market Selection
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Market SelectionMarket research conclusionsTop markets share certain traits, some are:
Domestic sales & dist. methods similar
Solid comparative advantage for productwith good sales potential
Stable political & economic systems
Low tariffs, restrictions and regulations
Relative ease of currency conversion &favorable exchange rates
Realistic transportation costs as a
percentage of the cost of goods sold
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Entry ModesChoosing your entry method should bebased on the following factors:
How much feedback you want?
How much control you want?
How much access to overseasresources you want?
How much infrastructure/resourcesyou currently have?
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Entry ModesTypes of Entry Modes:
Indirect
Direct with no investment
Direct with investment Turnkey projects Wholly owned subsidiaries
Joint Venture Strategic alliance
Licensing Franchising
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Entry ModesWhat is the best mode for you?
Consider your current
infrastructure & plan
Start smart & build up expertise
Choose mode on a region byregion basis
Work toward direct foreigninvestment mode
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Entry Modes
Risk & Reward
Control&
Commitment
Indirect
Licensing
JV
Direct+invest
Direct export
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Mode Conditions Favoring thisMode
Advantages Disadvantages
Exporting(no investment)
Limited sales potential intarget country; little product
adaptation required
Distribution channels close toproduction
High target countryproduction costs
Liberal import policies
High political risk
Minimizes risk &investment
Speed of entry
Maximizes scale; uses
existing facilities
Trade barriers & tariffsadd to costs
Transport costs
Limits access to local
information
Company viewed as anoutsider
Licensing
Import & investment barriers
Legal protection possible intarget environment
Low sales potential in targetcountry
Large cultural difference
Licensee lacks ability to
become a competitor
Minimizes risk &investment
Speed of entry
Able to circumvent tradebarriers
High ROI
Lack of control over useof assets
Licensee may becomecompetitor
Knowledge theft , leaks,spillovers
Licensee period islimited
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Mode Conditions Favoring thisMode
Advantages Disadvantages
Joint Ventures
Import barriers
Large cultural differences
Assets cannot be fairly priced
High sales potential
Some political risk
Gov. restrictions on foreignownership
Local company can provideskills, resources, distribution
network, brand name, etc.
Overcomes ownershiprestrictions & cultural
differences
Combines resources of 2companies
Potential for learning
Viewed as insider
Less investment required
Difficult to manage
Dilution of control
Greater risk than exporting& licensing
Knowledge theft, leaks &spillovers
Partner may become acompetitor
DirectInvestment
Import barriers
Small cultural differences
Assets cannot be fairly priced
High sales potential
Low political risk
Greater knowledge of localmarket
Can better apply specializedskills
Minimizes knowledgespillover
Can be viewed as an insider
Higher risk than othermodes
Requires more resources &commitment
May be difficult to managethe local resources
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Entry Modes
Indirect
Direct
EMCs, Export Agents,
ETCs, PiggybackMarketing, ConfirmingHouses
MODE PARTNER
Commission & Direct SalesReps, Distributors (regional,
master, retail)& End Users
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STRATEGIC ISSUES: LEGAL
Common Law vs. Civil Law: Latin America has a Civil Law legal system In Common Law, prior decisions are binding, while in a Civil Law
system they are merelypermissive
Economic Nationalism (discrimination against foreign businessinterests)
Choice of Law Clauses in export contracts (party autonomy) Most L.A. countries historically have not recognized party autonomy More L.A. countries beginning to recognize the principle of party
autonomy
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STRATEGIC ISSUES: LEGAL
Uniform Commercial Code (UCC) vs. Contracts for the IntlSales of Goods (CISG): UCC is good but some L.A. countries are uncomfortable with some of
the common law requirements (e.g. consideration)
Many UCC and CISG provisions are similar If both countries accept CISG, then automatically in force Be careful that offer acceptance mirrors the terms of offer If you can choose which law to use, go with UCC most familiar &
most judges in state courts & foreign countries unfamiliar with CISG
Analyze local rules on Agent and Distributor Relationships(i.e. title of ownership, commission fees, termination, exclusivity, etc.)
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STRATEGIC ISSUES: LEGAL
Organizational structures can differ significantly in scope & detailin Latin American countries (i.e. partnerships, corporations, LLCs)
Intellectual Property Law:
If you want IP protection rights in a country, you must obtain theprotection under that countrys rules no automatic protection
Trademark registration requirements in L.A. can be very differentthan those in U.S.
Get agents or distributors to obtain IP protection for their territory
Arbitration not often used in L.A. because L.A. countriestraditionally have not enforced arbitral awards obtained outside thatcountry. In order for arbitration to be binding, add an arbitration clauseto your export contract.
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STRATEGIC ISSUES: CrossCultural Communication
Distortion or misinterpretation can occurwhen messages are sent from one
cultural perspective to a different one.
This is because the sender is using adifferent set of values, attitudes, beliefs,expectations and preconceptions fromthat of the receiver.
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STRATEGIC ISSUES: CrossCultural Communication
Understand cultural framework
Customer service #1 focus
Be consistent but flexible
Be careful of granting exclusivity
Its all about relationships
Minimize perceived risk
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STRATEGIC ISSUES:Product Selection
Factors to consider:
What are the needs of your LatinAmerican customer (VOC)?
How easily can you modify yourproduct to meet Latin Americanneeds?
How will your packaging, labeling &manuals change?
What about after-market salessupport, returns & warranties?
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Export Plan Tips and AdviceFreight is your #1 variable cost. Getting your product to yourcustomer in good shape, on time and at the lowest cost should be atop priority
Freight Tips:Find a knowledgeable Freight Forwarder/Carrier you can work withAn average shipment is handled between 44 and 91 times duringtransit & falls 2 meters (6.5 ft.) or receives a blow equal to a 2-meterfall at least once during transitSelect packing materials that consider the mode of transport (e.g. air
or ocean freight), type of commodity & weather (e.g. desiccant)Use international handling & instruction symbolsBe shrink-wrapped if feasible
Remember the ISPM 15Regulation (keep bugs out!)http://www.aphis.usda.gov/import_export/plants/plant_exports/wpm/wpm_faqs.shtml
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Export Plan Tips and AdviceCompliance
Most exporters are unsure if they are 100% compliant. Makesure your international sales processes & procedures include:
List of specific export docs needed for each country(tradewizards.com)
Your Export Control Classification Number (ECCN)
Use the Denied Parties List (DPL) on BIS website to check newbuyers
Having a Destination Control Statement (DCS) on key exportdocuments
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Export Plan Tips and Advice
Sales, Marketing & Promotion
Get FREE or low cost secondary research from InternationalTrade Centers, SBDCs, State Agencies (DCEO), FederalGovernment (Dept. of Commerce export.gov) Market Selection Market Entry
Find new overseas reps, distributors & partners via:
Dept. of Commerce Gold Key program ($700 - $1300) Go to trade shows & trade missions (STEP program) Connect with OTI foreign offices
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Export Plan Tips and Advice
Finance
Using Credit Insurance (e.g. EX-IM
Bank) to gain new customers &increase order sizes
Develop an Export List Price in localcurrency to increase revenues 5 to15% via foreign currency exchange
(FX)
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Thanks, Gracias, Obrigado, Merci!