Chapter 14 Flashcards
Export and Import
Ownership advantages
the firm’s core competencies
Location advantages
the combination of sales opportunity and investment risk that creates favourable locations in foreign markets
Internalization advantages
reflect companies’ response to market imperfections that often create uncertainties
Direct exporting
involves independent representatives, distributors, or retailers outside of the exporter’s home country
Indirect exporting
products are sold to intermediory in the domestic market, which then exports them
Service exports (invisibles)
are intangible products
Types of exporters include:
- sporadic exporter
- regular exporter
Ownership advantages of the company
location advantages of the market, and internalization advantages from controlling transactions shape how firms enter foreign markets
Resource-constrained or risk-averse companies
that have strong ownership advantages often foreign markets through export
A firm’s characteristics moderate its export activity
Size matters, but often management commitment, productivity, innovativeness, and cost structure matter more
Reasons to import
- Specialization of labour
- Global rivalry
- Local unavailability
- Diversification
- Top management’s outlook
Exporting helps all types of companies
- increase profitability
- improve productivity
- diversify risk
Importing and Exporting: Problems and Pitfalls
- Financial risks
- customer management
- Lack of international business experience
- Marketing challenges
- Top management commitment
- Government regulation
- Trade documentation
Incremental internationalization
The view that as a company gains experience, resources, and confidence, it progressively exports to increasingly distant and dissimilar countries
Two view of export shape interpretation:
the deliberate, sequential dynamic of incremental internationalization and the instant-internationalization of the born-global
Progressively gaining experience in successfully dealing with increasingly dissimilar markets
encourages managers to expand their international horizon
Born-globals, owing to their executives’ international orientation and improving technological options
begin trading internationally at inception
An Export Plan
- Executive Summary
- Company Description
- Product/Service Description
- Foreign Marketplace Analysis
- Market Entry Strategies
- International Law
- Financial Analysis
- Risk Management
- External Assistance
- Implementation Schedule
Countertrade
different arrangement that parties use to trade products via transactions that use limited or no currency or credit
Trends indicate increasing interaction between
the incremental-international and born-global perspectives
Exporters are often proactive decision-makers
Sometimes, however, serendipity-marking fortunate discoveries by accident-initates export activity
Exporting directly involves
independent representatives, distributors, or retailers outside of the exporter’s home country
Indirect exports
are products sold to an intermediary in the home market, which then exports those products to end users in other countries
Several factors shape an SME’s preferred approach to export
notably its mix of ownership, location, and internalization advantages
Imports and exports
are the foundation of international trade
A service import is
a service transaction that does not result in ownership and is rendered by nonresidents to residents
The specialization of labour
is a powerful tool to improve productivity. It benefits the import potential and performance of SMEs and large firms
There are 3 general types of importers:
- Optimizers
- Opportunism
- Arbitrageurs
In principle, arbitrage is the simultaneous
buying and selling of the same product in different markets to exploit differences in price
Common barriers to trade
- Operations
- Strategic
- Financial
- Governmental
- Documentation
SMEs regularly rate financial constraints
as the most daunting barrier to trading internationally
Governments require international traders to
thoroughly document trade transactions
Firms often find themselves in situations where 3rd party assistance
influences the productivity and profitability of their international activities. They can enlist aid from various public or private agents
In the US, as in most countries, public agencies
help firms initiate and develop exports and imports
Trade intermediaries are
third parties that provide exporters a variety of services
Many EMCs are entrepreneurial ventures that
specialize by product, function, or market area
The US exempts ETCs from antitrust provisions
thereby permitting competitors to combine forces in foreign markets
Freight forwarders
the largest export/import intermediary in terms of value and weight of products shipped internationally
ETCs operate based on
demand rather than supply. They identify suppliers who can fill orders in overseas market
A freight forwarder specializes
in moving goods from sellers to buyers
A 3PL is a trade intermediary that
applies sophisticated technologies and systems to supervise trade logistics
A customs broker helps an importer navigate the regulations imposed by customs agencies. It helps importers in matters of
- valuation
- qualification
- deferment
- liability
Enlisting the support of a trade intermediary requires
the trader surrender some degree of operational control
Going international imposes many demands that, collectively, influence
- resource allocation
- executive effectiveness
- operational flexibility
- financial stability
- decision-making
Countertrade is an umbrella term for several sorts of trade transactions
such as bater or offset, in which the seller accepts goods or services, rather than currency or credit, as payment
