Slide 1 Professor W. Tim G. Richardson Export routes.

Professor W. Tim G. Richardson

Export routes

Fore ign Buyer

Fore ign Buyer

Fore ign Brokeror

trading com pany

Fore ign buyer

Fore ign Brokeror

trading com pany

Dom estic agentbroker or

trading house

Fore ign buyer

M ail orderdistributor

Fore ign buyer

O n linesales com panyInternet based

Exporter


Exporting, different options

Advantages and disadvantages of each option

discussed on page 268~269

Fore ign Buyer

Fore ign Buyer

Fore ign Brokeror

trading com pany

Fore ign buyer

Fore ign Brokeror

trading com pany


trading house

Fore ign buyer


Fore ign buyer


Exporter


F ore ign Buyer

F ore ign Buyer

F ore ign Brokeror

trading com pany

F ore ign buyer

F ore ign Brokeror

trading com pany

D om estic agentbroker or

trading house

F ore ign buyer

M a il orderdis tr ibutor

F ore ign buyer

O n l inesa les com panyInte rne t based

E xporte r

Export - Foreign BuyerExport - Foreign Buyer

AdvantagesAdvantages

- costs minimized- costs minimized

- can communicate directly with your customer- can communicate directly with your customer

DisadvantagesDisadvantages

- internal specialists needed- internal specialists needed

- the buyer may not know a lot about the import process- the buyer may not know a lot about the import process

- the exporter takes a big risk- the exporter takes a big risk

page 268~269


Fore ign Buyer

Fore ign Buyer

Fore ign Brokeror

trading com pany

Fore ign buyer

Fore ign Brokeror

trading com pany


trading house

Fore ign buyer


Fore ign buyer


Exporter

Export - Domestic Export Intermediary - Foreign Buyer


-- have specialized expertise so fewer mistakes, can effect costs have specialized expertise so fewer mistakes, can effect costs

- your firm’s internal resources not tied up in exporting- your firm’s internal resources not tied up in exporting- some financial risk transferred to export intermediary- some financial risk transferred to export intermediary


- export intermediary will cost money, sometimes, than adding this job - export intermediary will cost money, sometimes, than adding this job description on to existing staffdescription on to existing staff

you do not deal direct with the customer and may miss receiving you do not deal direct with the customer and may miss receiving important feedbackimportant feedback

page 268~269


Fore ign Buyer

Fore ign Buyer

Fore ign Brokeror

trading com pany

Fore ign buyer

Fore ign Brokeror

trading com pany


trading house

Fore ign buyer


Fore ign buyer


Exporter

Export - Foreign Intermediary - Foreign Buyer


- they have specialized knowledge of the foreign environment - they have specialized knowledge of the foreign environment

- they have good contacts in shipping and government, customs, docks, - they have good contacts in shipping and government, customs, docks, railines etc.railines etc.


- they have add in costs which you cannot verify- they have add in costs which you cannot verify

- they can block or hinder direct communication with the customer/buyer- they can block or hinder direct communication with the customer/buyer

- you still have to have the expertise on the export side- you still have to have the expertise on the export side

page 268~269


Fore ign Buyer

Fore ign Buyer

Fore ign Brokeror

trading com pany

Fore ign buyer

Fore ign Brokeror

trading com pany


trading house

Fore ign buyer


Fore ign buyer


Exporter

Export - Export Intermediary - Foreign Intermediary - Foreign BuyerExport - Export Intermediary - Foreign Intermediary - Foreign Buyer


- staff can focus on core activity of producing the product- staff can focus on core activity of producing the product

- almost complete avoidance of risk cause others- almost complete avoidance of risk cause others


- complete reliance on others at both ends- complete reliance on others at both ends

- costs are higher when more people involved- costs are higher when more people involved

page 268~269


Fore ign Buyer

Fore ign Buyer

Fore ign Brokeror

trading com pany

Fore ign buyer

Fore ign Brokeror

trading com pany


trading house

Fore ign buyer


Fore ign buyer


Exporter

Export - Magazine publisher - Mail Order - Foreign Buyer


-- can control how much you produce (JIT) you ship out can control how much you produce (JIT) you ship out

- can eliminate many customs procedures for personal orders- can eliminate many customs procedures for personal orders

- you can directly provide custom made service & product- you can directly provide custom made service & product


-- shipping small packages each time is costly shipping small packages each time is costly

- you need some person in the host country to receive rejections, - you need some person in the host country to receive rejections, warranty and handle complaints - unless you can do this from homewarranty and handle complaints - unless you can do this from home


Fore ign Buyer

Fore ign Buyer

Fore ign Brokeror

trading com pany

Fore ign buyer

Fore ign Brokeror

trading com pany


trading house

Fore ign buyer


Fore ign buyer


Exporter

Export - On Line Service - Foreign Buyer


- costs minimized- costs minimized

- you receive their money in advance, usually- you receive their money in advance, usually

- can communicate directly with your customer - by email/tel- can communicate directly with your customer - by email/tel

- a lot of info can be provided about using the product- a lot of info can be provided about using the product

(better info on using a product leads to better customer satisfaction)(better info on using a product leads to better customer satisfaction)


- customer hesistant with payment methods not secure- customer hesistant with payment methods not secure

- not many brand names available, usually only small companies- not many brand names available, usually only small companies


Exporting, the options

Foreign Buyer

Foreign Buyer

Foreign Brokeror

trading com pany

Foreign buyer

Foreign Brokeror

trading com pany


trading house

Foreign buyer


Foreign buyer


Exporter

E xp an d ed exp lan tion o f "F ore ig n B u yer"

B an k(le tte r o f c red it)

L oca l tran sp orta tion com p an y

w areh ou se com p an y

C u s tom er

R eta ile r

D is trib u to r


Transportation Issues

Air Transport Air Transport Electronic TransportElectronic Transport Rail Transport Rail Transport - handles 40 foot containers- handles 40 foot containers Truck Transport Truck Transport - handles 40 foot containers- handles 40 foot containers Sea Transport Sea Transport - handles 40 foot containers- handles 40 foot containers

Transportation costs are a major consideration Transportation costs are a major consideration in the physical movements of products from in the physical movements of products from point of production to the foreign buyer.point of production to the foreign buyer.

5 Major forms5 Major forms


Payment Methods

an important consideration in the export an important consideration in the export processprocess

payment in advance - eliminates risk to the payment in advance - eliminates risk to the sellerseller

extend credit - encourages the buyerextend credit - encourages the buyer specification of the currency of the paymentspecification of the currency of the payment


Export - Documentation

Bills of ladingBills of lading Commercial invoicesCommercial invoices Export licensesExport licenses Insurance certificatesInsurance certificates Certificate of product of originCertificate of product of origin Inspection certificatesInspection certificates Payment documents - most common is LCPayment documents - most common is LC

““confirmed and irrevocable”confirmed and irrevocable”

page 272page 272


Product Preparation

packagingpackaging extremely important so the product arrives extremely important so the product arrives

in good conditionin good condition has to arrive at the destination in good has to arrive at the destination in good

shapeshape labelinglabeling

correct information regarding product correct information regarding product standardsstandards

translation if necessarytranslation if necessary


Intermediate level of foreign involvementIntermediate level of foreign involvement LicensingLicensing

involves granting the right to use patents, logos and trademarks to involves granting the right to use patents, logos and trademarks to mfg. a product exactly similar to that made in the home countrymfg. a product exactly similar to that made in the home country

contractingcontracting most contracts involve a licensing agreement as part of the most contracts involve a licensing agreement as part of the

negotiationsnegotiations foreign contractors mfg. products for sale in the host country, and foreign contractors mfg. products for sale in the host country, and

sometimes also produce for the home countrysometimes also produce for the home country franchisingfranchising

have to determine if the market will appreciate the same product/service as home have to determine if the market will appreciate the same product/service as home country doescountry does

can you transfer factors of successcan you transfer factors of success


Advanced level of foreign involvement“Ownership”“Ownership”

establishing a subsidiary operationestablishing a subsidiary operation or buying an existing operationor buying an existing operation

both strategies imply a long-term both strategies imply a long-term commitmentcommitment

more difficultmore difficult more expensivemore expensive more time consumingmore time consuming involves more people from head officeinvolves more people from head office


Advanced level of foreign involvement“100% Ownership”“100% Ownership”

AdvantagesAdvantages more decision making controlmore decision making control eliminates need to bargain with local shareholderseliminates need to bargain with local shareholders no sharing of profitsno sharing of profits

DisadvantagesDisadvantages greater risk - no local partner for “protection”greater risk - no local partner for “protection” no sharing of lossesno sharing of losses may draw hostile attentionmay draw hostile attention political risk is higherpolitical risk is higher


Advanced level of foreign involvement“100% Ownership”“100% Ownership”

Public Sale of Shares - selling shares in foreign Public Sale of Shares - selling shares in foreign operations on the open marketoperations on the open market

raises capital from regional peopleraises capital from regional people helps to reduce political riskhelps to reduce political risk can still maintain controlcan still maintain control good way to raise additional moneygood way to raise additional money

ownership fadeoutownership fadeout over time, the company reduces its ownership over time, the company reduces its ownership

from a minority position - to eventually zerofrom a minority position - to eventually zero

page 279


Ownership

Low OwnershipLow Ownership this option popular when a co. does not this option popular when a co. does not

have the money to pay for everything, or have the money to pay for everything, or may not have experienced management and may not have experienced management and is willing to let a partner leadis willing to let a partner lead

p. 280~282


Ownership

Joint venturesJoint ventures shared ownershipshared ownership have become quite common in int’l businesshave become quite common in int’l business spreading the initial investment costs helps spreading the initial investment costs helps

reduce the riskreduce the risk different skills can be complimentarydifferent skills can be complimentary choosing the right partner is very importantchoosing the right partner is very important Joint Ventures between competitorsJoint Ventures between competitors

(Elf from France and Chevron from USA in the Congo)(Elf from France and Chevron from USA in the Congo)(Beijing Jeep, GMC with Shanghai ???)(Beijing Jeep, GMC with Shanghai ???)


Ownership Joint ventures with governmentJoint ventures with government

Host Govts often act as local partners in big Joint Host Govts often act as local partners in big Joint VenturesVentures

• especially true when Host Govt controls access to especially true when Host Govt controls access to resourcesresources

decision making in gov’t depts is slower than in decision making in gov’t depts is slower than in companiescompanies

problems happen when a change in government occursproblems happen when a change in government occurs political risk ~ nationalization, expropriationpolitical risk ~ nationalization, expropriation govt staff in certain countries need bribesgovt staff in certain countries need bribes

generally, host governments are not very goodgenerally, host governments are not very good

p. 282-283p. 282-283


Making JV’s Successful

detailed examination of a particular partnerdetailed examination of a particular partner want to avoid an unhappy endingwant to avoid an unhappy ending

KEY CONSIDERATIONSKEY CONSIDERATIONS do a limited project first, if possibledo a limited project first, if possible don’t let your experts get hired away by larger partnerdon’t let your experts get hired away by larger partner legal protection is not enough - there has to be a genuine spirit of co-legal protection is not enough - there has to be a genuine spirit of co-

operation for the better goodoperation for the better good keep the mission/goals/objectives small and well definedkeep the mission/goals/objectives small and well defined have clear performance measures which are agreed uponhave clear performance measures which are agreed upon

ie. by this date we will have this done ......ie. by this date we will have this done ...... limit the time frame - sunset datelimit the time frame - sunset date have a “prenuptial” agreement outlining what to do in a breakuphave a “prenuptial” agreement outlining what to do in a breakup


Strategic Alliances

involve non-equity arrangementsinvolve non-equity arrangements examples, a new product, DVD, a new process examples, a new product, DVD, a new process

technologytechnology examples, SONY, HITACHI, TOSHIBA developing a examples, SONY, HITACHI, TOSHIBA developing a

strategic alliance to launch DVDstrategic alliance to launch DVD example, several recycling companies developing an example, several recycling companies developing an

alliance to have access to a source of used material alliance to have access to a source of used material provided by local municipal waste management govtprovided by local municipal waste management govt

Strategic alliances do not create a new Strategic alliances do not create a new company with shared ownershipcompany with shared ownership

page 286


Strategic Alliances

Strategic Alliances are increasingStrategic Alliances are increasing reasonsreasons

technological changetechnological change global competitionglobal competition firms do not have enough resources to launch a new firms do not have enough resources to launch a new

product globallyproduct globally shared access to limited resourcesshared access to limited resources co-operation to access to new customer co-operation to access to new customer some govt legislation prevents such alliances as anti-some govt legislation prevents such alliances as anti-

trust and anti-monopoly - ie. computer software, oil, trust and anti-monopoly - ie. computer software, oil, banking, insurance, shipping and air travelbanking, insurance, shipping and air travel

Slide 1 Professor W. Tim G. Richardson Export routes.

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