Professional Documents
Culture Documents
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Chapter Overview
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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.)
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1. Organizing for Exports
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2. Indirect Exporting
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3. Direct Exporting
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4. Mechanics of Exporting
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4. Mechanics of Exporting (contd.)
– Confirmed irrevocable letter of credit
– Unconfirmed irrevocable letter of credit
– Documents Against Payment (D/P)
– Documents Against Acceptance (D/A)
– Open account
– Consignment
Currency Hedging
– It is done through a banker or the firm’s treasury
in case there is a foreign risk in the export
transaction.
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5. Role of the Government in
Promoting Exports
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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5. Role of the Government in
Promoting Exports (contd.)
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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5. Role of the Government in
Promoting Exports (contd.)
– Tariffs and local laws of foreign governments
which may include: tariffs, local laws relating
to product standards and classification, and
taxes.
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6. Managing Imports – the Other
Side of the Coin
Steps in Importing:
– Finding a bank that either has a branch in the
exporter’s 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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7. Mechanics of Importing (contd.)
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7. Mechanics of Importing (contd.)
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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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8. Gray Markets (contd.)
3. Price differentials among various markets
must be great enough to provide the basic
motivation for gray marketers. Such price
differences arise for various reasons:
Currency fluctuations
Differences in market demand
Legal differences
Opportunistic behavior
Segmentation strategy
» Acquisitions
Proactive Strategies:
» Product/service differentiation and
availability
» Strategic pricing
» Dealer development
» Marketing information systems
» Long-term image reinforcement
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