Importing, Exporting, and Sourcing Chapter 8 презентация

Learning Objectives Compare and contrast export selling and export marketing. Identify the stages a company goes through, and the problems it encounters, as it gains experience as an exporter. Describe the various national policies that pertain to imports and exports. Explain the structure of the Harmonized Tariff System. Describe the various organizations that participate in the export process. Identify home-country export organization considerations. Identify market-country export organization considerations. Discuss the various payment methods that are typically used in trade financing. Identify the factors that global marketers consider when making sourcing decisions.

Export Selling vs. Export Marketing Export selling involves selling the same product, at the same price, with the same promotional tools in a different place Export marketing tailors the marketing mix to international customers

Requirements for Export Marketing An understanding of the target market environment The use of market research and identification of market potential Decisions concerning product design, pricing, distribution and channels, advertising, and communications

Organizational Export Activities The firm is unwilling to export; it will not even fill an unsolicited export order. The firm fills unsolicited export orders but does not pursue unsolicited orders. Such a firm is an export seller. The firm explores the feasibility of exporting (this stage may bypass Stage 2). The firm exports to one or more markets on a trial basis.

Organizational Export Activities (Cont.) The firm is an experienced exporter to one or more markets. The firm pursues country- or region-focused marketing based on certain criteria The firm evaluates global market potential for the “best” target markets.

Potential Export Problems

Top 10 Clothing Exporters 2011 ($ billions)

National Policies Governing Exports and Imports Most nations encourage exports and restrict imports In 2014, the total was $2.8 trillion European Union trade, domestic and foreign, is $3 trillion +

Government Programs that Support Exports Governments concerned about trade deficits or economic development should educate firms about possible gains from exporting Done at the national, regional & local levels After WWII, Japan’s trade ministry developed export strategies The China triangle (People’s Republic, Taiwan, & Hong Kong), & the four tigers--Singapore, South Korea, Taiwan, & Hong Kong) learned from Japan and built strong export-based economies

Government Programs that Support Exports Tax incentives Subsidies Governmental assistance Free trade zones

Governmental Actions to Discourage Imports and Block Market Access Tariffs: 3 Rs—rules, rate schedules, & regulations Import controls Nontariff barriers (hidden) Quotas Discriminatory procurement policies Restrictive customs procedures Arbitrary monetary policies Restrictive administrative & technical regulations

Examples of Trade Barriers

Harmonized Tariff System Developed by the World Customs Organization Effective January 1989 Adopted by most trading nations Importers & Exporters have to determine the classification number for any product moved across borders Import & export numbers are the same on Schedule B Meant to simplify tariff procedures but problems still arise

Tariff Systems Single-column tariff Simplest type of tariff Schedule of duties in which rate applies to imports from all countries on the same basis Two-column tariff General duties plus special duties apply Normal Trade Relations (NTR) means that countries in the WTO apply the Column 1 rates most favorable or lowest rates to all nations (with exceptions). Column 2 rates are for non-WTO countries

Sample Rates of Duty for U.S. Imports

Preferential Tariff Reduced tariff rate applied to imports from certain countries GATT prohibits the use, with three exceptions: Historical preference arrangements already existed Preference is part of formal economic integration treaty Industrial countries are permitted to grant preferential market access to LDCs

Customs Duties Ad valorem duty Expressed as percentage of value of goods Specific duty Expressed as specific amount of currency per unit of weight, volume, length, or other unit of measurement Compound or mixed duties Apply

Other Duties and Import Charges Anti-dumping Duties Dumping is the sale of merchandise in export markets at unfair prices Special import charges equal to the dumping margin Countervailing Duties offset subsidies of the exporting country Variable Import Levies apply to agriculture Temporary Surcharges protect local industries and are used to adjust balance of payment deficits

Key Export Participants Foreign purchasing agents Export brokers Export merchants Export management companies

Organizing for Exporting in the Manufacturer’s Country Exports can be handled As a part-time activity performed by domestic employees Through an export partner Through an export department Through an export department within an international division For multi-divisional companies; each possibility exists for each division

Organizing for Exporting in the Market Country Direct market representation Advantages: control and communications Representation by independent intermediaries Advantages: best for situations with small sales volume

Trade Financing and Methods of Payment Documentary credits (letter of credit) Documentary collections (bill of exchange) Cash in advance Sales on open account Sales on consignment basis

Documentary Credit-Letter of Credit

Documentary Credit (Con’t)

Methods of Payment Documentary Collections (Sight or Time Drafts) use a bill of exchange(draft) which is a negotiable instrument that easily transfers from one party to another A Bill of Exchange is a written order from one party (the drawer)directs one party (the drawee) to pay a third party (the payee) Different from a L/C in that the bank has no risk The exporter-seller bears all the risk Fees are lower than L/C so used in low value transactions

Methods of Payment Cash in Advance

Customs Trade Partnership Against Terrorism The U.S. Customs and Border Patrol inspects cargo C-TPAT aims to have businesses certify their security and that of their partners They get inspection priority

Duty Drawback Refunds of duties paid on imports that are processed or incorporated into other goods AND re-exported Reduce the price of imported production inputs Used in the U.S. to encourage exports After NAFTA, U.S. reduced drawbacks on exports to Canada and Mexico China had to reduce drawbacks in order to join the WTO

Sourcing

Factors that Affect Sourcing Management vision Factor costs and conditions Customer needs Logistics Country infrastructure Political risk Exchange rate, availability, and convertibility of local money

Other Export/Import Issues

Other Export/Import Issues Customer Needs Needs can trump low cost; Dell moved call centers back to U.S. when customers complained about problems with Indian tech support Logistics Improved transportation systems & intermodal services cut time & lower costs Country Infrastructure Power, transportation, roads, communications, service & component suppliers, a labor pool, civil order, effective government

Other Export/Import Issues Political Factors Political risk is higher in less developed countries in Africa, South America or Asia than in the Triad Protectionism at the state and federal level Senate passed an amendment that would prohibit certain agencies from hiring companies that used offshore call centers Foreign Exchange Rates Companies try to use global sourcing to limit risk of volatile exchange rates or price levels of commodities

Looking Ahead to Chapter 9 Global Market-Entry Strategies: Licensing, Investment, and Strategic Alliances