W1: Hill & Hult (2022). Chapter 16 Flashcards
Exporting
An important mode of foreign market entry
Countertrade
Allows payment for exports with goods and services instead of money
Great promise of exporting
Large revenues and profit opportunities, as the international market is normally much larger than the domestic market
Economies of scale
Can be achieved by expanding the size of the market, consequently lowering firms’ unit costs
Inexperienced exporters
Have a number of ways to gain information about foreign market opportunities and avoid common pitfalls that tend to discourage and frustrate novice exporters
U.S. Department of Commerce
Dedicated to providing businesses with intelligence and assistance for attacking foreign markets. U.S. firms can increase awareness of export opportunities through it
‘Best prospects’ list
Gives names and addresses of potential distributors in foreign markets
Trade events
Potential exporters can get in touch with foreign contacts and explore export opportunities
Private organisations
E.g. banks, beginning to provide assistance to potential exporters
Freight forwarders
Facilitate transportation for companies that ship internationally. They combine smaller shipments into a single large shipment. In this way, combining freight leads to a cost reduction
Export management company (EMC)
Offers services to companies that have not previously exported. They offer full menus of services to handle all aspects of exporting, similar to having an internal exporting department within a firm
Export trading companies
Export products for companies that contract with them
Export packaging companies/export packers
Provide services to companies that are unfamiliar with exporting, thereby helping them to make packages meet country-specific requirements, minimise packaging, and maximise the number of items to be shipped
Customs brokers
Can help companies avoid the pitfalls involved in customs regulations
Confirming houses/buying agents
Represent foreign companies that want to buy your products, typically at the lowest price
Export agents, merchants, and remarketers
Buy products directly from the manufacturer and package and label the products in accordance with their own wishes and specifications. They sell internationally through their own contracts and assume all risks
Piggyback marketing
An arrangement whereby one firm distributes another firm’s products. Successful piggyback marketing requires complementary products and the same target market of customers
Export processing zones (EPZ)
More than 600 exist, which include foreign trade zones, special economic zones, bonded warehouses, free ports, and customs zones. Many companies use EPZs to receive shipments of products that are then reshipped in smaller lots to customers through the surrounding areas
Export-import service providers
Help firms engage in international trade
EMC
Can identify opportunities and navigate the paperwork and regulations
Company Readiness to Export Tool (CORE)
One of the various resources that inexperienced exporters can use to gain information about foreign market opportunities and avoid common pitfalls. It is available on the GlobalEdge website. It assesses the company’s as well as the product’s readiness to be exported
GlobalEdge website
Marked as the top-ranked website for international business resources
Letter of credit (L/C)
The bank’s promise to pay on the importer’s behalf. This is trusted by the exporter. It states that the bank will pay the exporter upon the presentation of particular documents. A drawback for the importer is the fee that must be paid and the fact that the L/C is a liability against them, so it may reduce the ability to borrow funds
Bill of lading
The title to the products given to the bank. It issued to the exporter by the common carrier transporting the merchandise. It is a receipt (indicates that the carrier has received the merchandise), a contract (carrier is obligated to provide a transportation service), and a document of title (obtaining payment or a written promise)
