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Negotiatng and Price Trap
Negotiatng and Price Trap
In negotiating price and payment, what should the price the exporter quotes relate to?
The complete set of contract terms: size of order, terms of delivery, terms of payment, warranty
provisions and so on.
How can the exporter avoid the “price trap” occurred in many negotiations when the
buyer demands concessions about delivery time, method of payment, etc?
As items in the contract are negotiated, the exporter should assess the influence of each factor on
price, and adjust the price accordingly. Sometimes the exporter improves his terms without
adjusting the price, but only in order to create goodwill for future deals, to ensure that the
exporter gets the order, or for some other business reason.
What are the 5 steps in negotiating payment?
Mode of payment: How will payment be made?
Timing: What is the date of payment?
Place of payment: Where must the money be before payment is considered complete?
Delay: What delay in payment is excusable?
Results of delay: What are the results of non-excusable delay in payment?
Why payment in international trade tightly controlled?
Because in international business, trust is rare, court is far away and unpredictable.
What are the common methods of payment in international trade?
There are 4 common methods of payment in international trade:
Payment on open account with no security.
Payment on open account secured by export credit insurance.
Payment on open account secured by a payment guarantee
Payment by letter of credit.
What is payment by open account? What are the risks for the exporter if he accepts
payment by open account?
Open account means the exporter ships the goods to the buyer and just waits till a forced date as
agreed in their contract for payment from the the buyer. Normally, the exporter only accepts open
account method of payment if he has known the buyer quite well and they have established a
long-term and trustworthy business relationship.
What are methods of payment in small purchases?
Cash on delivery.
Cash against invoice.
Cash with order.
What are payment insurances?
Bank guarantee.