global marketing management, 5e chapter 16copyright (c) 2009 john wiley & sons, inc. 1 chapter...

Global Marketing Management, 5e

Chapter 16Copyright (c) 2009 John Wiley & Sons, Inc.

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Chapter 16

Export and Import Management

Chapter Overview

1. Organizing for Exports2. Indirect Exporting3. Direct Exporting4. Mechanics of Exporting5. Role of the Government in Promoting Exports6. Managing Imports—the Other Side of the

Coin7. Mechanics of Importing8. Gray Markets


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Introduction

Exporting is the most popular way for many companies to become international.

Exporting is usually the first mode of foreign entry

used by companies. Selling to foreign markets involves numerous

high risks, arising from a lack of knowledge about and unfamiliarity with foreign environments, which can be heterogeneous, sophisticated, and turbulent.

Furthermore, conducting market research across national boundaries is more difficult, complex, and subjective than its domestic counterpart.


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Introduction

With every export transaction there is an import transaction.

Aside from differences between the procedure and rationale for exports and imports, both are largely the same the world over

For successful development of export activities, systematic collection of information is critical.


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1. Organizing for Exports

Research for Exports:First use available secondary data to research potential markets. The identification of an appropriate overseas

market involves the following criteria:1. Socioeconomic characteristics2. Political and legal characteristics3. Consumer variables (lifestyle, preferences, culture, taste, purchase behavior)4. Financial conditions


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1. Organizing for Exports

It is also noted that export research for markets such as China and the Commonwealth of Independent States must still be done largely in the field, because very little prior data exist, and even when available, they are often not reliable.

Export Market Segments Homogeneous market segments and clusters Geographical and psychographic segments Issues of standardization vs. adaptation


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2. Indirect Exporting

Indirect exporting involves the use of independent middlemen to market the firm’s products overseas.

Combination Export Manager (CEM) Export Merchants Export Broker Export Commission House Trading Companies (sogoshosha) (See Exhibit 16-1.) Piggyback Exporting


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Exhibit 16-1: Major Types of Trading Companies and Their Countries of Origin


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3. Direct Exporting

Direct exporting occurs when a manufacturer or exporter sells directly to an importer or buyer located in a foreign market (Exhibit 16-2).

Export Department Export Sales Subsidiary Foreign Sales Branch


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Exhibit 16-2: Comparison of Direct and Indirect Exporting


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4. Mechanics of Exporting

The Automated Export System (AES) on the Internet In the U.S., the AES which was launched in

October 1999, enables exporters to file export information at no cost over the Internet. AES is a nationwide system operational at all ports.

Legality of Exports- can be proactively dealt with Export license (general or validated license)


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Exhibit 16-3: U.S. Government Departments and Agencies with Export Control Responsibilities


Export Transactions The terms of sale Monitoring the transportation and delivery

of the goods to the assigned party Shipping and obtaining the bill of lading

Bill of lading A straight bill of ladingA shipper’s order bill of lading

Commercial invoice Freight forwarders


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Terms of Shipment and Sale INCOTERMS 2000 (International

Commercial Terms) Terms of Shipment (Exhibit 16-4):

Ex-Works (EXW) at the point of originFree Alongside Ship (FAS)Free on Board (FOB)Cost and Freight (CFR)Carriage Paid To (CPT)Cost, Insurance and Freight (CIF)


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Exhibit 16-4: Terms of Shipment


Payment Terms (Exhibit 16-5) Advanced Payment Confirmed irrevocable letter of credit Unconfirmed irrevocable letter of credit Documents Against Payment (D/P) Documents Against Acceptance (D/A) Open account Consignment

Currency Hedging Done through a banker or the firm’s treasury

to counter foreign risk in the export transaction.


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Exhibit 16-5: Terms of Payment in an Export Transaction

5. Role of the Government in Promoting Exports Export promotion activities generally

comprise:1. Export service programs2. Market development programs

Export Enhancement Act of 1992 Some governments encourage inward FDI as a

way to increase their exports (e.g., Argentina) Export - Import Bank (Ex-Im Bank) Tariff Concessions

Foreign Trade Zone


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5. Role of the Government in Promoting Exports American Export Trading Company

The Export Trading Company Act of 1982 Export Regulations

The Trade Act of 1974 The Foreign Corrupt Practices Act (FCPA) of 1977 COCOM (Coordinating Committee for Multilateral

Exports) U.S. Antitrust Laws Tariffs and local laws of foreign governments

which may include: tariffs, local laws relating to product standards and classification, and taxes.


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6. Managing Imports – the Other Side of the Coin For organizations in the United States,

importing is considerably easier than for most firms in the rest of the world.

About 60 percent of the world’s trade is still denominated in U.S. dollars.

Most of the time, a U.S. importer does not have to bother with hedging foreign exchange transactions or with trying to accumulate foreign currency to pay for imports.


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Exhibit 16-6: Model of Importer Buyer Behavior

6. Managing Imports – the Other Side of the Coin

Model of Importer Buyer Behavior Stage 1. Need recognition and

problem formulation (triggered by competition and

unavailability)Stage 2. Search (guided by country

characteristics, vendor characteristics, and information sources)

Stage 3. Choice (vendors evaluation and selection)


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7. Mechanics of Importing

Steps in Importing Finding a bank that either has a branch in the

exporter’s country or has a correspondent bank Establishing a letter of credit with the bank Deciding on the mode of transfer of goods from

exporter to importer Checking compliance with national laws of the

importing country Making allowances for foreign exchange

fluctuations Fixing liability of payment of import

transactions and warehousingChapter 16Copyright (c) 2009 John Wiley & Sons, Inc.

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Import Documents and Delivery Entry documents filed by the consignee:

The bill of lading Customs form 7533 Customs form 3461 Packing list Commercial invoice Also accompanied by evidence that a bond is

posted with customs to cover any potential duties, penalties, and taxes

For Special Permit for Immediate Delivery, use Customs form 3461 for fast release after arrival.


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Import Duties in the United States Ad valorem duty Specific duty Compound duty Antidumping import duty Countervailing duty Duty drawback:

Direct identification drawbackSubstitution drawbackAll countries have procedures allowing for the

temporary of goods across their borders.


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8. Gray Markets

Gray market channel refers to the legal export/import transaction involving genuine products into a country by intermediaries other than the authorized distributors.

From the importer side, it is also known as parallel imports.

Three conditions are necessary for gray markets to develop:

1. Products must be available in other markets.2. Trade barriers must be low enough for parallel importers.


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8. Gray Markets

3. Price differentials among various markets must be great enough to provide the basic motivation for gray marketers. Such price differences arise for various reasons:

Currency fluctuations Differences in market demand Legal differences Opportunistic behavior Segmentation strategy The WWW’s information transparency


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8. Gray Markets

How to Combat Gray Market Activity (See Exhibit 16-7.) Reactive Strategies

Strategic ConfrontationParticipationPrice cuttingSupply interferencePromotion of gray market product

limitationsCollaborationAcquisitions


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8. Gray Markets

Proactive StrategiesProduct/service differentiation and

availabilityStrategic pricingDealer developmentMarketing information systemsLong-term image reinforcementEstablishing legal precedenceLobbying


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Exhibit 16-7: How to Combat Gray Market Activity


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Exhibit 16-7: How to Combat Gray Market Activity, cont’d