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CHAPTER 15 Exporting, Importing, and Countertrade.

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Presentation on theme: "CHAPTER 15 Exporting, Importing, and Countertrade."— Presentation transcript:

1 CHAPTER 15 Exporting, Importing, and Countertrade

2 McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Learning Objectives Simple strategic steps for successful exporting What is meant by counter trade? Why do firms enter counter trade agreements?

3 Exporting To ship to another country for sale or exchange McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

4 McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Promise and Pitfalls of Exporting Ignorance and Intimidation Poor market analysis Poor understanding of competitive conditions Failure to customize product offering Poor distribution program Poorly executed promotional campaign Problems securing financing

5 McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Improving Export Performance Information from government sources Export Management Companies Utilizing export strategies

6 McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Government Support for Exports

7 McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved US Export Support

8 McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Utilizing Export Management Companies EMCs: Export specialists who act as the export management department or international department for client firms. Two types of assignment: Start operations for a firm with understanding the firm will take over after they are well established. Start-up services with continuing responsibility for selling the firms products internationally.

9 Exporting Strategy It helps to hire an EMC or, at least, someone with experience. Focus on one or a few markets. Enter markets on a fairly small scale until you ‘learn the ropes’. Add new lines after initial success. Need to recognize the time and managerial commitment. Build strong and lasting relationships. Hire locals to help firm establish itself. Keep the option of local production in mind McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

10 Countertrade Trade carried out wholly or partially in goods rather than money McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

11 Countertrade as a Share of World Trade Value % McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

12 Countertrade Practice Figure 15-5 Percent of companies engaged in each countertrade practice McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

13 Countertrade Typically, 5 kinds of countertrade Barter Counterpurchase Offset Switch trading Compensation or Buyback McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

14 Definitions Barter: direct exchange of goods and/or services without a cash transaction. Counterpurchase: reciprocal buying agreement. Offset: like counterpurchase, but can buy goods from any firm in country. Switch trading: uses third-party trading house. Buybacks: foreign plant takes products as contract payment McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

15 Pros and Cons of Countertrade Gives firms a way to finance an export deal when other means are unavailable. Foreign governments may require it. Helps countries that don’t have sufficient foreign currency reserves. However: May involve defective goods. Must invest in in-house trading department - expensive and time consuming. Most attractive to large, diverse multinational enterprises McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.


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