International BusinessStrategy of the MultinationalsExport Strategy of the FirmPhases of Export DevelopmentSteps Involved in Designing Export StrategyExport IntermediariesImport Strategy of the FirmExport Import ProcessExport DocumentationCountertradeChapter 13: Discussion QuestionsInternational Business International Business Chapter ThirteenChapter ThirteenExport and Import Export and Import StrategiesStrategiesStrategy of the MultinationalsStrategy of the MultinationalsPriceQualityCompetitiveAdvantage33Export Strategy of the FirmExport Strategy of the FirmFirms export in order to….Firms export in order to….•increase revenuesincrease revenues•achieve economies of scaleachieve economies of scale•alleviate excess capacityalleviate excess capacity•minimize risk and diversify marketsminimize risk and diversify marketsFirms consider the following factors to Firms consider the following factors to export:export:•Ownership advantages Ownership advantages •Location advantagesLocation advantages•Internalization advantagesInternalization advantages44Phases of Export DevelopmentPhases of Export Development55Steps Involved in Designing Export Steps Involved in Designing Export StrategyStrategyAssess company’s export potentialAssess company’s export potentialObtain export counselingObtain export counselingSelect a market or marketsSelect a market or marketsFormulate and implement an export Formulate and implement an export strategystrategyTable 13.2 Export Business Plan has the details Table 13.2 Export Business Plan has the details66Export IntermediariesExport IntermediariesExport can be conducted directly, indirectly or Export can be conducted directly, indirectly or through third party intermediaries.through third party intermediaries.Export management company (EMC):Export management company (EMC): a firm that a firm that either acts as a manufacturer’s agent or buys either acts as a manufacturer’s agent or buys merchandise from manufacturers for international merchandise from manufacturers for international distribution.distribution.Export trading company (ETC):Export trading company (ETC): a large, independent a large, independent broker whose primary purpose is to match broker whose primary purpose is to match suppliers to foreign customers for a fee.suppliers to foreign customers for a fee.Foreign freight forwarder:Foreign freight forwarder: an international trade an international trade specialist who assists in the delivery of goods specialist who assists in the delivery of goods from producer to customerfrom producer to customer77Import Strategy of the FirmImport Strategy of the FirmWhy import? Basic imports include:Why import? Basic imports include:•industrial and consumer goods and industrial and consumer goods and servicesservices•intermediate goods and servicesintermediate goods and servicesStrategic advantages of importsStrategic advantages of imports•Specialization of laborSpecialization of labor•Global rivalryGlobal rivalry•Local unavailabilityLocal unavailability•Diversification of operation risksDiversification of operation risks•Gain knowledge from abroadGain knowledge from abroadExport Import ProcessExport Import ProcessInformsExporterExporter’s BankImporterImporter’s BankReceives paymentShipsBill of ladingInformsReimbursementPaymentOpens Letter of Credit99Export DocumentationExport DocumentationKey export documents include:Key export documents include:pro forma invoice: pro forma invoice: outlines the terms of outlines the terms of sale, price, and delivery detailssale, price, and delivery detailscommercial invoice: commercial invoice: detailed legal detailed legal document-see example in the textdocument-see example in the textshipper’s export declaration: shipper’s export declaration: used to used to monitor exports and compile trade statisticsmonitor exports and compile trade statisticsbill of lading: bill of lading: a detailed receipt from the a detailed receipt from the carrier transporting the cargocarrier transporting the cargoconsular invoice: consular invoice: required to monitor required to monitor importsimportscertificate of origin: certificate of origin: determines the tarifdetermines the tarifexport packing list:export packing list: lists the cargo details lists the cargo details1010CountertradeCountertradeCountertrade: is good when a Countertrade: is good when a firm/government lacks sufficient funds or firm/government lacks sufficient funds or convertible currency to pay for importsconvertible currency to pay for importsTwo basic types of countertrade Two basic types of countertrade transactions include: transactions include: •barter [based on clearing arrangements barter [based on clearing arrangements used to avoid money-based exchange]used to avoid money-based exchange]•buybacks, ofsets, and counterpurchase buybacks, ofsets, and counterpurchase [all of which are used to impose [all of which are used to impose reciprocal commitments] reciprocal commitments] Countertrade can be inefficient or Countertrade can be inefficient or inflexibleinflexible1111Chapter 13: Discussion QuestionsChapter 13: Discussion Questions1.1.Explain why firms export or import. What Explain why firms export or import. What do they gain from export-import? do they gain from export-import? 2.2.Discuss the functions of Export Discuss the functions of Export Intermediaries. Intermediaries. 3.3.Describe the export-import process and Describe the export-import process and explain the role of various “export explain the role of various “export documentation” involved in the process.documentation” involved in the process.4.4.What is countertrade? Why firms or What is countertrade? Why firms or governments engage in countertrade?governments engage in