INTRODUCING IMPORT/EXPORT

INTRODUCING

IMPORT/EXPORTCHAPTER 1

9/11/2012 Ph.D Ho Nhut Quang 1

Learning expectations

Defining and classifying Export and

Import

Recognizing the differences between

international business and domestic

business

Identifying internal and external

factors that may affect import/export.


Defining and classifying Export and

Import

Exports: goods and services flowing out of a country

Exporting: the sale and delivery of goods and services by a firm based in one country to customers residing in a different country◦ results in receipts from the customers◦ affords less control over the marketing function

Imports: goods and services flowing into a country

Importing: the purchase of goods and services by a firm based in one country from sellers that reside in a different country◦ results in payments to the sellers◦ affords less control over the production function


Import-Export Management

Import- Export Management: all activities of a company which aim at: ◦ Strategic planning

◦ Organizing, Implementing

◦ Supervising and Controlling

of all import/export activities from the beginning until the end of a business operation cycle.

A business operation cycle ranges from searching and contract negotiation to the end of the contract implementation.


Strategic Advantages of Exports

Increase revenues and profitability Achieve economies of scale in

production and research Alleviate excess capacity in domestic

operations Minimize risk (as compared to

licensing and foreign direct investment)

Diversify markets


Strategic Advantages of Imports

Decrease costs and increase competitiveness and profitability

Secure essential inputs and products Secure higher quality products,

supplies, materials, and/or components

Minimize risk and investment Diversify suppliers


Major forms of Export

Direct exports: goods and services sold directly to an independent party (foreign customer) outside of the exporter’s home country

Indirect exports: goods and services sold to or via an intermediary in the domestic market, who in turn sells them to a foreign customer

Third-party intermediaries: independent, i.e., unrelated, firms that facilitate international trade transactions by assisting both importers and exporters


Indirect selling/exporting: selling products to or through an independent (third-party) intermediary

• Export intermediaries may perform any or all of the following functions:◦ stimulate sales, obtain orders, and conduct market

research◦ perform credit investigations and payment-collection

activities◦ handle foreign traffic arrangements and shipping

details ◦ provide support for a client’s sales, distribution, and

promotion staff

Export intermediaries may be Export Management Companies (EMC) and Piggyback Exporting


Indirect Exporting: Export

Management Companies (EMC)Export management company (EMC): a

firm that either acts as a manufacturer’s representative or buys merchandise from manufacturers for inter-national distribution

EMCs generally operate on a contractual basis, provide exclusive representation in a well-defined foreign territory, and act as the export arm of a manufacturer.

EMCs normally take title to the goods and assume all risks associated with doing business in other countries.


Indirect Exporting: Piggyback

Exporting Piggyback exporting: a foreign

distribution operation where products are sold along with those of another manufacturer.

Used by companies that have related or complementary but non-competitive products.

EX: piggyback exporting of hair-brushes manufacturer and a shampoo company.


Advantages of piggyback

exporting Offer more complete line of products

with little or no additional investment.

Increase revenue and profits


Direct Exporting

Direct selling: exporting through sales agents to distributors, foreign retailers, or final end users

Direct selling:◦ gives exporters greater control over the

marketing function

◦ offers exporters the potential to earn higher profits

a sales agent: a company representative, who usually operates on a commission basis within an exclusive territory

a distributor: a merchant who purchases goods from a manufacturer and stocks, services, and resells them to retailers at a profit


Environmental Forces that effect

the success of import/export Forces that importers/ exporters can

control

Forces that importers/ exporters can

not control.


Forces that importers/ exporters

can control

Availability of capital

Finances

Raw materials

Personnel

Production and Marketing capabilities

Technology



can not control. Economic and socioeconomic conditions

of the home and host countries◦ Foreign exchange rates, inflation, interest

rates, GDP per capita, unemployment, budget deficits, etc.

Physical conditions◦ Geographical location, natural resources,

market size, climate, trading relationship

Political and legal conditions◦ Stability of the government and their attitudes

toward free trade, friendly (hostile) political atmosphere.



can not control. Regulations and legal systems

◦ Common laws, Civil laws, custom regulations

Cultural conditions◦ Aesthetics: sense of beauty and good taste; color,

messages, etc

◦ Attitudes and beliefs: attitude toward time

◦ Religion: Christianity, Buddhism, Islam, Protestantism.

◦ Material culture: technological degree, using of advertising, finance, management.

◦ Language: low context or high context, verbal and non-verbal communications .

Financial conditions: ◦ Fluctuation of foreign exchange currency and risks

◦ Spot rate and forward rate;


INTRODUCING IMPORT/EXPORT

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