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20 Cards in this Set

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  • Back
What ar potential challenges to exporting?
 Management focus – hard on middle mgmt if not prepared
 Develop new promotional material – translation costs, translator
 Subordinate short-term profits to long-term gains – enough money from domestic sales
 Incur added administrative costs
 Allocate personnel for travel
 Wait long for payments
 Modify your product or packaging
 Finding good distributors for the product overseas – and good relationships
 Apply for additional financing
 Obtain special export licenses
Why do companies import?
 Sell more product
 Make more profits
 Test market
 Protect domestic market – by providing products they want
 Guarantee supply of materials
 Acquire technology
 Diversify to reduce vulnerability
 Management ego for expansion
What are the risks to an importer?
 Risks In Transit – undamaged goods
 Currency Risk – exchange rate fluctuations
 Interest Rate Risk – interest rate fluctuations
 Documentary Risk – subject to delays at customs
What are letters of credit?
 Letters of Credit are guarantees of payment to help you make purchases or transact business with companies with whom you have limited trading experience or credit history
 3rd party in-between that ensures both operating parties receive their payments and goods, usually banks
What are the various forms of letters of credits?
 Standby Letter of Credit (aka non-performing letters of credit)
 Documentary Revocable/Irrevocable (unconfirmed/confirmed) LCs
 Special Letters of Credit
o Back-to-Back LC
o Deferred Payment (Usance) LC
o Red Clause LC
o Revolving LC
o Transferable LC
What are some common problems with letters of Credit?
Common Problems with Letters of Credit
 Shipment schedule cannot be met (weather extremes, mechanical/IT breakdown, border crossing delay)
 Stipulations concerning freight costs are unacceptable
 Price becomes too low due to exchange rate fluctuations
 Quantity of product ordered is not expected amount
 Description of product ordered is insufficient or too detailed (effects customs classification)
 Stipulated documents are difficult or impossible to obtain (permits and permissions)
What are some sources of export financing?
1. PEMD - Program for Export Market Development
2. NEBS - New Exporters to Border States
3. AECB - Association for the Export of Canadian Books
4. EDC - Export Development Canada
5. CCC - Canadian Commercial Corporation
6. BDC - Business Development Canada
What is PEMD?
Program for Export Market Development – aim to increase export sales of Cdn goods and services by sharing the costs of activities that companies normally could or would not undertake alone, thereby reducing risks
What is NEBS?
New Exporters to Border States – targets Cdn companies not yet exporting to US, provides practical export information and first-hand exposure to US markets
What is AECB?
- Association for the Export of Canadian Books – help develop and sustain Cdn publishers’ export sales
What is EDC?
Export Development Canada – federal export insurance agency provides market reports and advises exporters on how to minimize risk in int’l business transactions; insures you against losses due to 3 types of political risk:
o Transfer and inconvertibility of funds (inability to repatriate 4X)
o Expropriation
o Political violence
What is CCC?
Canadian Commercial Corporation - export sales agency that helps Cdn exporters win sales, on improved terms, in government and private-sector markets around the world
What is BDC?
Business Development Bank of Canada – working capital for exporters, helps SME finance export activities with criteria and exceptions
What is Keiretsu?
-driving force behind japan's industrial success. (eg. mitsubishi)

-This economic corporate culture and cooperation, that fits the Japanese culture, lowers transactions, and in collaborative research efforts, expedite development of new technologies

- Financial and non-financial benefits accrue – reduced risk through mutual support, control of stock voting power, cooperation in marketing and product development, guaranteed markets and sources of supply, ties with a trading company that supplies needed raw material imports and handles export trade, and a bank to supply financial resources

-International keiretsu-style practices have received positive evaluation, particularly in auto parts industry
What is Sogo Shosha?
 General trading companies dealing with a wide range of products and materials (eg. Mitsubishi Corp)
 Arose due to desire to develop foreign trade that was independent of foreign control
 Functions include: obtaining modern equipment, new technology and raw materials; financing purchases; and arranging for the shipment and exporting of final products
What is Countertrade?
 Exchanging goods or services that are paid for, in whole or part, with other goods or services
 Transactions which have a basic characteristic a linkage between exports and imports of goods and services in addition to financial settlements
Why should a company engage in countertrade?
 World debt crisis made ordinary trade financing very risky
 Many countries cannot obtain trade credit or financial assistance to pay for desired imports
 Countries are increasingly returning to the notion of bilateralism as way to reduce trade imbalances
 Countertrade viewed as mechanism to gain entry into new markets
 Providing countertrade services helps sellers differentiate its products from those of competitors

Also, from creative countertrade book:

 Expand or maintain foreign markets
 Increase sales
 Sidestep liquidity problems
 Repatriate blocked funds
 Clean up bad debt situations
 Build customer relationships
 Keep from losing markets to competitors
 Gain foreign contracts for future sales
 Find lower-cost purchasing sources
What are the reasons that the london countertrade roundtable lists for engaging in countertrade?
 Money – some people cannot pay in currency they want
 Political environment – to protect or stimulate local jobs and industries
 Political environment – rules and regulations to protect host country; reflection of political and economic policies which seek to plan and balance overseas trade
 To gain competitive advantage over competing suppliers
Name four countertrade strategies.
 Defensive – sell products at rock-bottom prices and promise to help country with export development
 Passive – participate at minimal level, because they have product leverage
 Reactive – reacting to cooperate with buyer country, use as competitive tool
 Proactive – do so aggressively as marketing tool
What are the six (6) main times of countertrade?
 Offset – promote import substitution and minimize balance of payments deficit for military purchases
o Direct offset – supplier agrees to incorporate materials, components or sub-assemblies which are obtained from importing country
o Indirect offset – purchaser requires suppliers to enter into long term industrial cooperation and investment
 Counterpurchase – foreign supplier undertakes to purchase goods and services from the purchasing country as a condition of securing the order
 Tolling – supplier provides raw material and hires capacity of the factory to turn it into finished goods
 Barter – goods exchanged for goods
 Buyback – suppliers of capital plant or equipment agree to be paid by the future output of the investment
 Switch Trading – goods paid for by uncleared credit surpluses