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Chapter Overview
1. 2. 3. 4. 5. 6. 7. 8. Organizing for Exports Indirect Exporting Direct Exporting Mechanics of Exporting Role of the Government in Promoting Exports Managing Importsthe Other Side of the Coin Mechanics of Importing Gray Markets
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Introduction
Exporting is the most popular way for many companies to become international. Exporting is usually the first mode of foreign entry used by companies. Selling to foreign markets involves numerous high risks, arising from a lack of knowledge about and unfamiliarity with foreign environments, which can be heterogeneous, sophisticated, and turbulent. Manufactured goods accounted for almost 60 percent of the exports of developing countries (see Exhibit 17-1).
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Introduction (contd.)
Because of every export transaction, there is, by definition, an import transaction as well. Aside from differences between the procedure and rationale for exports and imports, both are largely the same the world over. For successful development of export activities, systematic collection of information is critical.
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Research for Exports: The first step is to use available secondary data to research potential markets. The identification of an appropriate overseas market involves the following criteria: 1. Socioeconomic characteristics 2. Political and legal characteristics 3. Consumer variables (lifestyle, preferences, culture, taste, purchase behavior) 4. Financial conditions
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Export Market Segments Homogeneous market segments and clusters Geographical and psychographic segments Issues of standardization vs. adaptation
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2. Indirect Exporting
Indirect exporting involves the use of independent middlemen to market the firms products overseas. Combination Export Manager (CEM) Export Merchants Export Broker Export Commission House Trading Companies (sogoshosha; see Exhibit 17-1) Piggyback Exporting
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3. Direct Exporting
Direct exporting occurs when a manufacturer or exporter sells directly to an importer or buyer located in a foreign market (see Exhibit 17-2). Export Department Export Sales Subsidiary Foreign Sales Branch
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4. Mechanics of Exporting
The Automated Export System (AES) on the Internet In the U.S., the AES which was launched in October 1999, enables exporters to file export information at no cost over the Internet. AES is a nationwide system operational at all ports. Legality of Exports Export license (general or validated license) Export Transactions The terms of sale
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Export promotion activities generally comprise: 1. Export service programs 2. Market development programs Export Enhancement Act of 1992 Export - Import Bank (Ex-Im Bank; see Exhibit 17-7) Tariff Concessions Foreign Trade Zones Foreign Sales Corporation (FSC)
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American Export Trading Company The Export Trading Company Act of 1982 Export Regulations: The Trade Act of 1974 The Foreign Corrupt Practices Act (FCPA) of 1977 COCOM (Coordinating Committee for Multilateral Exports) U.S. Antitrust Laws
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For organizations in the United States, importing is considerably easier than for most firms in the rest of the world. About 60 percent of the worlds trade is still denominated in U.S. dollars. Most of the time, a U.S. importer does not have to bother with hedging foreign exchange transactions or with trying to accumulate foreign currency to pay for imports.
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7. Mechanics of Importing
Steps in Importing: Finding a bank that either has a branch in the exporters country or has a correspondent bank Establishing a letter of credit with the bank Deciding on the mode of transfer of goods from exporter to importer Checking compliance with national laws of the importing country Making allowances for foreign exchange fluctuations
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8. Gray Markets
Gray market channel refers to the legal export/import transaction involving genuine products into a country by intermediaries other than the authorized distributors. From the importer side, it is also known as parallel imports. Three conditions are necessary for gray markets to develop: 1. Products must be available in other markets. 2. Trade barriers must be low enough for parallel importers.
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How to Combat Gray Market Activity (see Exhibit 17-9): Reactive Strategies: Strategic Confrontation Participation Price cutting Supply interference Promotion of gray market product limitations Collaboration
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