Chapter 5 Export Channels of Distribution

1. Distinguish between direct and indirect channels of distribution. What are the advantages and
disadvantages of using indirect channels?

Ans : A direct distribution channel allows consumers to buy and receive goods directly from the
manufacturer. An indirect channel moves products from the manufacturer through various
intermediaries for delivery to the consumer.

Direct distribution allows you to:

 collect valuable data on customer buying habits

 distinguish yourself from the competition
 respond to product performance and customer feedback
 get your products to consumers faster
 avoid sharing profits with a third-party distributor
 build relationships with your customers
Despite the positives, direct distribution also has some potential drawbacks.

One of the biggest challenges is the sizeable costs that can come with direct
distribution. For example, you may need to purchase trucks, hire drivers and rent
storage space. You may also find it harder to reach potential customers without the
network an established distributor provides.

Indirect distribution
 share shipping and storage costs
 make it easier for customers to find your products
 benefit from your third-party’s experience, infrastructure and salesforce
 avoid the complexity of managing distribution logistics
The main challenge with indirect distribution is the distance it puts between you and
your customers. By adding an intermediary, you are also increasing the amount of time
it takes for your product to reach the buyer.

It’s also harder to establish brand loyalty when you are not interacting directly with your
customer. Still, it is a good way of bringing your product to market without burdening
yourself with the start-up costs of establishing your own distribution channels.
If you decide to go the indirect route, it’s important to clearly define the terms of your
agreement with your partner from the beginning. You should agree on roles and
responsibilities, training and customer support, reporting and performance monitoring,
among other issues

2. Discuss three major determinants of channel selection to market products abroad.

Ans: A company which has a strong financial base can evolve its own channels. On the other hand,
financially weak companies would have to depend upon middlemen.

 Cost: A manufacturer should select such a channel of distribution which is less costly and also
useful from other angles. ...
 Availability: ...
 Possibilities of Sales:

3. Do firms that export high-technology products exercise high levels of control?

Ans: Export control regulations are federal laws that govern how technology, technical data,
technical assistance, and items or materials are physically or electronically exported, shipped,
transmitted, transferred, or shared from the country to abroad so yes firm that export high-
technology products exercise high level of control.

4. Discuss the role and function of manufacturer’s export agents.

Ans: As such they operate much like domestic wholesaler. Specifically they purchase goods from a
large number of manufacturers, ship them to foreign countries, and take full responsibility for their
marketing. Sometimes they utilize their own organizations but more commonly they sell through
middlemen.

5. Discuss the disadvantages of using export management companies.

Ans: The disadvantages of using EMCs are the costs associated with doing business with them, which
means lower profit margins for entrepreneurs. The EMC incurs expenses and risks in marketing,
selling, shipping and collecting receivables for the products they sell.

6. What are the differences between export trading companies and export management
companies?

Ans: Export trading companies are associated with the operations of the client, such as the
process/logistics of moving and storing products. On the other hand, export management
companies tend to handle more of the marketing duties.

7. Briefly describe Webb-Pomerene Associations (WPAs).

Ans: Webb-Pomerene Association is an association engaged in exporting that handles the products
of similar producers for overseas sales.
 8. What are some of the disadvantages of using overseas distributors?

Ans: Disadvantages of using an overseas distributor

 In return for taking on your trade-related risks and burdens, distributors will expect heavy
discounts and generous credit terms from you.
 You may lose control of the way your products are marketed and priced.
 If you use a sales agent, you can use the commission structure to motivate them - there's no
similar mechanism with a distributor.
 Distributors often demand a long period of exclusivity, so you need to be sure that you choose
one that has experience selling your type of products and has customers for the kind of goods
you sell

9. State some of the clauses (provisions) in representation agreements.

Ans: representation:

is an assertion or statement of fact, given by one party (maker) to induce another party (recipient)
to enter into a contract or take some other action;

1. may apply to the past or present;

2. may be express or implied

10. Briefly describe force majeure.

Ans: Force majeure is a provision in a contract that frees both parties from obligation if an extraordinary
event directly prevents one or both parties from performing.

Chapter 6 International Logistics, Risk, and Insurance

Discuss the importance of logistics to international trade.

2. What is the systems approach to logistics?

3. State the external factors that influence international logistics decisions.

4. What is materials management and how does it differ from physical distribution?

5. State some of the differences between domestic and international logistics.

6. What are political risks in foreign trade? How can it be managed?

7. What kinds of risks does marine insurance cover? How does an FPA policy differ from WA policy?

8. A shipper obtains a marine policy covering the shipment of textiles from China to Poland. The
declared value of the shipment was $15,000 although the real (market) value of the merchandise was
$7,500. If the goods are lost at sea, is the insurance company liable for $15,000?
9. How does actual total loss differ from constructive total loss? What is general average loss? You
receive compensation from a marine insurance company because your goods were jettisoned from a
ship as a general average act. Does the insurance company have a claim for general average against the
ship owner and the other cargo owners?

10. Discuss typical steps followed in claims from carriers or insurers with respect to loss or damage to
cargo.

Chapter 7 Pricing in International Trade

1. High markups are common in industries with relatively few competitors. Discuss and provide
examples.

2. The large influx of shrimp imports into the United States from Asia and Latin America depressed
wholesale prices by over 40 percent between 1997 and 2002. Despite such lower prices, shrimp entrées
at some seafood restaurants in the United States rose by about 28 percent during the same period.
Discuss why prices (shrimp prices at sea food restaurants) are not aligned with costs.

3. What is the difference between marginal and cost-based pricing?

4. Seller agreed to deliver 300 tons of coffee to buyer DES port of Montreal, Canada. The goods were
transported and unloaded at the port and kept at customs shed for inspection and payment of duties.
The buyer was notified of the arrival of the merchandise and its location. Before the buyer picked up the
goods, the customs shed (including the merchandise in it) was destroyed by fire. The buyer claims
refund of the purchase price stating that she did not receive the goods. Is the seller responsible?

5. In reference to question 4, would the outcome be different if the contract had been DEQ port of
Montreal?

6. Seller in New York agrees to ship goods to buyer in Lima, Peru, under a CIF contract. The goods were
loaded on the ship and seller tendered the necessary documents to buyer for payment (in New York).
The buyer refused payment claiming that it will only pay after inspection upon arrival of the goods at the
port of destination. Is the seller entitled to payment before arrival of the goods?

7. Discuss the major differences between CIF and arrival contracts such as DES.

8. State the major differences between Incoterms 1990 and Incoterms 2000.

9. What are the limitations of Incoterms? Compare and contrast Incoterms with the Uniform
Commercial Code.

10. In what cases would export-import managers prefer to use Group C (shipment) terms?

Chapter 9 Trade Documents and Transportation

1. What is the difference between a bill of exchange and a bill of lading? Are straight bills of lading
negotiable?
2. What is the significance of these documents for importers: certificate of origin, destination control
statement, pro forma invoice?

3. What factors are likely to contribute to the growth in air freight in future? Is it a major mode of
transportation for cargo?

4. What are the three major types of ocean carriers?

5. What is the carrier’s duty under a bill of lading? Discuss the “Himalaya clause.”

6. State the major differences between the Hamburg rules and the Hague/ Hague-Visby rules on carriage
of goods by sea.

7. Discuss the difference between a freight forwarder and NVOCC.

8. BG, a stevedoring company in the employment of Tatek shipping, negligently dropped several
containers of soft drinks as it was loading them on the ship from Port Everglades, Florida. Is the
container a package under the Carriage of Goods by Sea Act? The contents of the container were
described in the bill of lading as 2,300 cases of soft drinks, with each case containing four six-packs. Can
the shippers claim from Tatek and/or BG?