INTRODUCING

IMPORT/EXPORT
CHAPTER 1

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Learning expectations
Defining and classifying Export
and Import
Recognizing the differences
between international business
and domestic business
Identifying internal and external
factors that may affect
import/export.

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Defining and classifying Export
and Import
Exports: goods and services flowing out of
a country
Exporting: the sale and delivery of goods
and services by a firm based in one country
to customers residing in a different country
◦ results in receipts from the customers
◦ affords less control over the marketing function
Imports: goods and services flowing into a
country
Importing: the purchase of goods and
services by a firm based in one country from
sellers that reside in a different country
◦ results in payments to the sellers
◦ affords less control over the production function

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Import-Export
Management
Import- Export Management: all
activities of a company which aim at:
◦ Strategic planning
◦ Organizing, Implementing
◦ Supervising and Controlling
of all import/export activities from the
beginning until the end of a business
operation cycle.
A business operation cycle ranges from
searching and contract negotiation to
the end of the contract implementation.
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Strategic Advantages of Exports
Increase revenues and
profitability
Achieve economies of scale in
production and research
Alleviate excess capacity in
domestic operations
Minimize risk (as compared to
licensing and foreign direct
investment)
Diversify markets

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Strategic Advantages of Imports
Decrease costs and increase
competitiveness and profitability
Secure essential inputs and
products
Secure higher quality products,
supplies, materials, and/or
components
Minimize risk and investment
Diversify suppliers

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Major forms of Export
Direct exports: goods and services sold
directly to an independent party
(foreign customer) outside of the
exporter’s home country
Indirect exports: goods and services
sold to or via an intermediary in the
domestic market, who in turn sells
them to a foreign customer
Third-party intermediaries: independent,
i.e., unrelated, firms that facilitate
international trade transactions by
assisting both importers and exporters

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Indirect selling/exporting: selling products to
or through an independent (third-party)
intermediary
• Export intermediaries may perform any or all
of the following functions:
◦ stimulate sales, obtain orders, and conduct market
research
◦ perform credit investigations and payment-collection
activities
◦ handle foreign traffic arrangements and shipping
details
◦ provide support for a client’s sales, distribution, and
promotion staff
 Export intermediaries may be Export
Management Companies (EMC) and Piggyback
Exporting
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Indirect Exporting: Export
Management Companies (EMC)
Export management company (EMC): a
firm that either acts as a manufacturer’s
representative or buys merchandise
from manufacturers for inter-national
distribution
EMCs generally operate on a contractual
basis, provide exclusive representation
in a well-defined foreign territory, and
act as the export arm of a manufacturer.

EMCs normally take title to the goods

and assume all risks associated with
doing business in other countries.
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Indirect Exporting: Piggyback
Exporting
Piggyback exporting: a foreign
distribution operation where
products are sold along with those
of another manufacturer.
Used by companies that have
related or complementary but non-
competitive products.
EX: piggyback exporting of hair-
brushes manufacturer and a
shampoo company.
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Advantages of piggyback
exporting
Offer more complete line of
products with little or no
additional investment.
Increase revenue and profits

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Direct Exporting
Direct selling: exporting through sales
agents to distributors, foreign retailers, or
final end users
 Direct selling:
◦ gives exporters greater control over the
marketing function
◦ offers exporters the potential to earn
higher profits
a sales agent: a company
representative, who usually operates on
a commission basis within an exclusive
territory
 a distributor: a merchant who purchases
goods from a manufacturer and stocks,
services, and resells them to retailers at
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Environmental Forces that effect
the success of import/export
Forces that importers/ exporters
can control
Forces that importers/ exporters
can not control.

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Forces that importers/
exporters can control
Availability of capital
Finances
Raw materials
Personnel
Production and Marketing
capabilities
Technology

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Forces that importers/ exporters can not control.

Economic and socioeconomic conditions

of the home and host countries
◦ Foreign exchange rates, inflation, interest
rates, GDP per capita, unemployment, budget
deficits, etc.
Physical conditions
◦ Geographical location, natural resources,
market size, climate, trading relationship
Political and legal conditions
◦ Stability of the government and their
attitudes toward free trade, friendly (hostile)
political atmosphere.
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Forces that importers/ exporters can not control.

Regulations and legal systems

◦ Common laws, Civil laws, custom regulations
Cultural conditions
◦ Aesthetics: sense of beauty and good taste; color,
messages, etc
◦ Attitudes and beliefs: attitude toward time
◦ Religion: Christianity, Buddhism, Islam, Protestantism.
◦ Material culture: technological degree, using of
advertising, finance, management.
◦ Language: low context or high context, verbal and non-
verbal communications .
Financial conditions:
◦ Fluctuation of foreign exchange currency and risks
◦ Spot rate and forward rate;

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THE END

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