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28 Cards in this Set
- Front
- Back
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_____ is a way to increase market size and profits?
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Exporting
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Exporting is increasing thanks to ...
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lower trade barriers under the WTO and regional economic agreements such as the EU and NAFTA
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Large firms often ______ seek new export opportunities, but many smaller firms export _______.
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proactively
reactively -often intimidated by the complexities of exporting |
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Exporting firms need to
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identify market opportunities
deal with foreign exchange risk navigate import and export financing understand the challenges of doing business in a foreign market |
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What Are The Pitfalls Of Exporting?
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poor market analysis
poor understanding of competitive conditions a lack of customization for local markets a poor distribution program poorly executed promotional campaigns problems securing financing a general underestimation of the differences and expertise required for foreign market penetration an underestimation of the amount of paperwork and formalities involved |
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How Can Firms Improve Export Performance?
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Many firms are unaware of export opportunities available
Firms need to collect information Firms can get direct assistance from some countries and/or use an export management companies |
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Where Can U.S. Firms Get Export Information?
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The U.S. Department of Commerce - the most comprehensive source of export information for U.S. firms
The International Trade Administration and the United States and Foreign Commercial Service Agency - “best prospects” lists for firms The Department of Commerce - organizes various trade events to help firms make foreign contacts and explore export opportunities The Small Business Administration Local and state governments |
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What Are Export Management Companies?
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Export management companies (EMCs) are export specialists that act as the export marketing department or international department for client firms
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EMCs normally accept two types of assignments
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1-They start export operations with the understanding that the firm will take over after they are established
2-They start services with the understanding that the EMC will have continuing responsibility for selling the firm’s products |
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How Can Firms Reduce The Risks Of Exporting?
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hire an EMC or export consultant to identify opportunities and navigate paperwork and regulations
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 recognize the time and managerial commitment involved develop a good relationship with local distributors and customers hire locals to help establish a presence in the market be proactive consider local production |
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How Can Firms Overcome The Lack Of Trust in Export Financing?
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Because trade implies parties from different countries exchanging goods and payment the issue of trust is important
Exporters prefer to receive payment prior to shipping goods, but importers prefer to receive goods prior to making payments To get around this difference of preference, many international transactions are facilitated by a third party - normally a reputable bank By including the third party, an element of trust is added to the relationship |
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What Is A Letter Of Credit?
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A letter of credit is issued by a bank at the request of an importer and states the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents
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What Is the main advantage of A Letter Of Credit?
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main advantage is that both parties are likely to trust a reputable bank even if they do not trust each other
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What Is A Draft?
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A draft (also called a bill of exchange) is an order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time
-the instrument normally used in international commerce for payment |
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What Is A sight Draft?
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A sight draft is payable on presentation to the drawee while a time draft allows for a delay in payment - normally 30, 60, 90, or 120 days
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What Is A Bill Of Lading?
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The bill of lading is issued to the exporter by the common carrier transporting the merchandise
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A bill of lading serves 3 purposes
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It is a receipt - merchandise described on document has been received by carrier
It is a contract - carrier is obligated to provide transportation service in return for a certain charge It is a document of title - can be used to obtain payment or a written promise before the merchandise is released to the importer |
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Where Can U.S. Firms Get Export Assistance?
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1-Financing aid is available from the Export-Import Bank (Eximbank) - an independent agency of the U.S. government
2-Export credit insurance is available from the Foreign Credit Insurance Association (FICA) - provides coverage against commercial risks and political risks |
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What Is Countertrade?
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Countertrade refers to a range of barter-like agreements that facilitate the trade of goods and services for other goods and services when they cannot be traded for money
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What Are The 5 Forms Of Countertrade?
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Barter
Counterpurchase Offset buyback Switch trading |
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Barter
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a direct exchange of goods and/or services between two parties without a cash transaction
-the most restrictive countertrade arrangement -used primarily for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy |
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Counterpurchase
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a reciprocal buying agreement
-occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made |
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Offset
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similar to counterpurchase insofar as one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale
-difference is that this party can fulfill the obligation with any firm in the country to which the sale is being made |
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Buyback
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A buyback occurs when a firm builds a plant in a country—or supplies technology, equipment, training, or other services to the country—and agrees to take a certain percentage of the plant’s output as a partial payment for the contract
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Switch trading
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the use of a specialized third-party trading house in a countertrade arrangement
-when a firm enters a counterpurchase or offset agreement with a country, it often ends up with counterpurchase credits which can be used to purchase goods from that country -switch trading occurs when a third-party trading house buys the firm’s counterpurchase credits and sells them to another firm that can better use them |
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What Are The Pros Of Countertrade?
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it gives a firm a way to finance an export deal when other means are not available
it give a firm acompetitve edge over a firm that is unwilling to enter a countertrade agreement |
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What Are The Cons Of Countertrade?
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it may involve the exchange of unusable or poor-quality goods that the firm cannot dispose of profitably
it requires the firm to establish an in-house trading department to handle countertrade deals |
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Countertrade is most attractive to...
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large, diverse multinational enterprises that can use their worldwide network of contacts to dispose of goods acquired in countertrade deals
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