Exporting is a way to
- increase market size and profits
- lower trade barriers under the WTO and regional economic agreements, such as the EU and NAFTA make it easier
larger firms
- often proactively seek new export opportunities
- you actively seek it
smaller to medium firms
- export reactively
- if opportunity comes your way you react
exporting firms need to
- identify market opportunities
- deal with foreign-exchange risk
- navigate import and export financing… transportation
- understand the challenges of doing business in a foreign market… tariffs, etc
Distributors…
- absorb some risks and must identify opportunities
examples:
Entertainment industry…
- action films popular in asia, middle east
- europe prefers sex to shootouts
- italians recoil from science fiction
- russia loved minions
steps firm can do to improve their export performance
(write digram in notes)
improving export performance
- market analytics and info… opportunities, competition, culture, customer understanding
- direct assistance from countries and/or use an export management company
- germany and japan developed extensive institutional structures for promoting exports
common pitfalls to exporting
- poor market analysis
- poor understanding of competitive conditions
- lack of local customization
- poor distribution program
- poorly executed promotion
- problems securing financing
- underestimation of expertise required, amount of paperwork and business formalities
Export management companies (EMC)
- service provider
- act as an export marketing department or international department for client firms
EMC assignments
1.) EMC begins export operations and then the firm takes over
2.) EMC will have continuing responsibilities for selling the firms products
for the US GDP:
- exporting is a huge component of our countries income
- as a result, US gov does a lot of work to help support exporting for domestic companies
the US department of commerce
- the most comprehensive source of export info for US firms
- organizes various trade events to help firms make foreign contacts and explore export opportunities
the international trade admin and the US and the foreign commercial service:
- provides “best prospects” lists for firms
- the small business administration provides the availability of mentors
- local and state govs
strategies for reducing the risks of exporting
- hire an EMC or export consultant to identify opportunities and handle paperwork and regulations
- start small: focus on one or a few markets at first
- enter a foreign market on a small scale in order to reduce the costs of any subsequent failures - count the costs: make a commitment- recognize the time and managerial commitment involved
- utilize local resources: hire locals to help establish a presence in the market
- consider local production
identify the basic steps involved with export financing key terms associated with exporting
bank acts as a middle man/facilitator to the whole exchange (millions of dollars worth of products)
by using a bank you as a company builds trust
(write steps in notes)
letter of credit (L/C)
the bank will pay a specific sum to exporter of money on presentation of documents
draft (bill of exchange)
an order written by an exporter instructing an importer to pay a specified amount of money at a specified time
draft (bill of exchange)- two ways payed
- slight draft: is payable on presentation to the drawee
- time draft: a promise to pay by the accepting party at some future time (most common)
bill of lading
- issued to the exporter by the common carrier transporting the merchandise
1.) it is a receipt: merchandise described on document has been received by carrier
2.) it is a contract: carrier is obligated to provide transportation service in return for a certain charge
3.) it is a document of title- can be used to obtain payment or a written promise before the merchandise is released to the importer
countertrade
- an alternative means of structuring an international sale when means of payment are difficult, costly or non existent
- countertrade is a kind of barter agreement: trade goods and services for other goods and services
barter
direct exchange of goods
advantages of countertrade
- a way to finance an export deal when other means are not available
- potential edge over firms unwilling to do countertrade
- countertrade agreements may be required by the gov of the country
disadvantages of countertrade
- may involve the exchange of unusable or poor-quality goods that are unprofitable
- firm must establish an in-house trading department to handle countertrade deals
- countertrade is most attractive at large, diverse, multi-national enterprises who can use their worldwide network
sample question
True/False: smaller to medium sized firms are often times reactive towards exporting; waiting until their domestic markets are saturated
ANSWER: true
