1. International Business Environments & Operations
Daniels ● Radebaugh ● Sullivan
International Business Environments and Operations 15e by Daniels, Radebaugh, and Sullivan
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Chapter 14
Export and Import
Chapter 14: Export and Import
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Learning Objectives
Understand the role of export/import in the strategy of the multinationals
Learn about export/import process and the documentation involved
Explain the idea of exporting/importing and evaluate their relative benefits/drawbacks
Describe the intermediaries in export/import-resources and assistance for international traders
Identify and discuss the platforms that support expanding international trade
The Learning Objectives for this chapter are
To explain the idea of exporting and profile its elements
To explain the idea of importing and profile its elements
To describe the problems and pitfalls that challenge international traders
To describe the resources and assistance that helps international traders
To discuss the idea of an export plan
To discuss the practice of countertrade
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4. Competitive Advantage and the Strategy of the Multinationals
Price
Competitive Advantage
Quality

5. Export Strategy of the Firm-1
Exporting and importing are the most common modes of international business; and, one of the fastest growing activities in the world
Why Export….
Profitability-increase revenues
Productivity-achieve economies of scale, alleviate excess capacity
Diversification-minimize risk and diversify markets

6. Export Strategy of the Firm-2
Firms’ “entry strategy/mode” is influenced by
Ownership advantages
the firm’s core competencies
Location advantages
the combination of sales opportunity and investment risk that creates favorable locations in foreign markets
Internalization advantages
reflect companies’ response to market imperfections that often create uncertainties
Ownership, location, and internalization advantages all influence the choice of entry mode. For example, companies that have few ownership advantages are less likely to engage in exporting. Location advantages can attract companies to favorable business environments. Internalization advantages can encourage companies to export rather than engage in licensing.
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7. Exporters: Initiation and Development
Two approaches
Incremental internationalization
exporting is a learning process
Born global
instant internationalization
global focus
Some firms approach exporting in a deliberate sequential way targeting markets that are similar and closer first before moving on to more dissimilar and geographically distant markets. So, a U.S. company might target Canada first, followed by Mexico before moving on to Europe and Asia.
In contrast, some companies engage in exports right from the start. These companies assume the domestic market is just one of many opportunities in the global market. The born global approach has been facilitated by advances in technology and lower barriers to trade.
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8. Exporters: Initiation and Development
Top Trade Partners of the United States: Exports and Imports
This Table shows the top ten trade partners of the United States. Notice that it illustrates the interaction of the two perspectives on the export process. In the future, this interaction is likely to accelerate thanks to the opportunities that ecommerce provides and the easy access to information on dissimilar markets provided by the Internet.
Keep in mind that serendipity can also explain a company’s export activity. responding to unsolicited orders can be the start of successful export activity.
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9. Approaches to Exporting
Export approaches include
Direct exporting
involves independent representatives, distributors, or retailers outside of the exporter’s home country
Indirect exporting
products are sold to an intermediary in the domestic market, which then exports them
Passively filling orders from domestic buyers who then export the product
Selling to domestic buyers who represent foreign end users or customers
In theory, exporting involves making a product, packing it, and then shipping it. In reality though, it’s a bit more involved. Some companies are direct exporters. They sell their product to independent intermediaries in foreign countries who then sell it to the end consumer.
Companies that sell their product to independent intermediaries in the home country are indirect exporters. The intermediary resells the product to foreign agents who then sell it to the end consumer.
Some companies simply passively fill orders from domestic buyers who then export the product, while others sell to domestic buyers who represent foreign end users or customers. In either of these cases, the company may not know that its product has been resold. Some companies use more than one approach depending on their particular ownership, location, and internalization advantages.
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10. Export Import Process Ships Exporter Importer Bill of lading
Receives payment
Informs
Payment
Opens Letter of Credit
Reimbursement
Exporter’s Bank
Importer’s Bank
Informs

11. Types of Exports Documents
Pro Forma Invoice: outlines the terms of sale, price, and delivery details, it is the basis for Commercial Invoice
Shipper’s Export Declaration: used to monitor exports and compile trade statistics
Bill of Lading: a detailed receipt from the carrier transporting the cargo
Consular Invoice: required to monitor imports
Certificate of Origin: determines the tariff
Export Packing List: lists the cargo details
Commercial Invoice: details of sale according to Pro Forma Invoice, it is legal document

12. Types of Exports Documents

13. Import Strategy of the Firm
Why import? Strategic advantages of import….
Specialization of labor
Global rivalry
Local unavailability
Diversification of operation risks

14. Issues in Exporting/Importing
Financial risks
Customer management
Lack of international business experience
Marketing challenges
Top management commitment
Government regulation
Trade documentation
Regular and occasional exporters face a host of problems and pitfalls that make international trade challenging. Some of the more common ones involve financial risks, especially a shortage of working capital to finance an export strategy. In fact, financial constraints are one of the biggest challenges for SMEs.
In addition, exporters are hampered by their lack of international expertise, marketing barriers, and the challenges of meeting customer expectations in foreign markets. These demands can put significant pressure on managers.
Finally, trade regulations and documentation requirements also make exporting a complex process.
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15. Support, Resources and Assistance
Companies can get support, resources and assistance from
Government agencies
The U.S. Department of Commerce International Trade Administration
The Small Business Administration
Exporters can get a lot of assistance from both public agencies and private intermediaries to facilitate the export process. The U.S. Department of Commerce’s International Trade Administration offers assistance in more than 100 cities in the United States and also in 75 foreign countries. In addition, it offers online assistance.
The Small Business Administration is another source of information for importers and exporters.
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16. Support, Resources and Assistance
Trade Assistance by Type and Source
This Table shows information and assistance available to exporters from a variety of sources.
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17. Export/Import Intermediaries
Export intermediaries: third party firms that market products and services abroad on behalf of manufacturers, farm groups, and distributors
Export management company (EMC)
Export trade companies (ETC)
Customs agents: enforce the rules of trade for a particular country
Customs brokers: help importers navigate the regulations imposed by customs agencies
Freight forwarders: the largest export/import intermediary in terms of value and weight of products shipped internationally
Export intermediaries work on behalf of exporters to manage the intricacies of international trade. Firms using export intermediaries must balance their cost along with the implied loss of control against the cost and challenges of managing the process in-house.
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An Export Plan
An Export Plan
This Table shows a sample export plan.
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Countertrade
Countertrade
different arrangements that parties use to trade products via transactions that use limited or no currency or credit
Examples of countertrade transactions….
barter [based on clearing arrangements used to avoid money-based exchange]
buybacks, offsets, and counter purchase [all of which are used to impose reciprocal commitments]
Costs and Benefits of Countertrade
Costs: inefficient, risky, cumbersome
Benefits: build mutually beneficial relationships
In situations where the home country currency is inconvertible or a lack of cash prevents a traditional transaction firms may turn to countertrade. According to the WTO, countertrade accounts for about 5 percent of world trade.
Countertrade can be inefficient way to do business. It can also be risky especially if the products received are difficult to resell or are of poor quality. However, because it can allow for mutually beneficial relationships, it’s still used today.
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20. Types of Countertrade Common Types of Countertrade
This Table shows the common types of countertrade.
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21. Chapter 14: Discussion Questions
Explain why firms export or import. What are their competitive advantages for export or import?
Describe the export-import process and explain the role of various “export documentation” involved in the process.
Who are the export/import intermediaries? Explain their role and functions in the export-import process.
What are the common issues in exporting/importing? Explain.
What is countertrade? What are the different types of countertrade? Why firms or governments engage in countertrade? Explain.

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