Transcript Exporting and Importing

Exporting and Importing
Chapter 13
15 - 2
The Problems and Pitfalls
of Exporting
• Firms that do not export lose out on huge
opportunities for growth and cost reduction
• Large firms are pro-active in seeking foreign
opportunities
• Medium and small-sized firms are slower
- Too busy with local side of business
- Ignorance of potential opportunities
- Intimidated by mechanics of exporting to a foreign
country
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Information sources
• U.S. Department of Commerce
- International Trade Administration
- United States and Foreign Commercial service agency
- Provide “best prospects” list, “comparison shopping
service,” and customized market research survey
- Organizes exhibitions at international trade fairs to help
potential exporters make foreign contacts and explore
export opportunities
- Matchmaker program
• Trade Commissions
- Maintained by many large cities
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© 2007, 2009 The McGraw-Hill Companies, Inc.,
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15 - 4
Export Strategy
• Risks can be decreased by taking few steps
- Hire an export management company or experienced
export consultant
- Focus on a few markets - learn what is needed
- Enter on a small scale
- Invest time and managerial commitment
- Build strong, enduring relationships with local
distributors and customers
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International Business, 6/e, 7/e
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All Rights Reserved.
15 - 5
Export and Import Financing
• Lack of trust between international trading partners
due to several factors
- Parties often have never met
- Language, cultural, and legal system differences
- Difficulties in tracking down a party in case of default
• Problem solved by using a third party trusted by
both as an intermediary – normally a reputable bank
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Tools Used to Aid Transactions
• Letters of Credit (LOC)
- Bank guarantee on behalf of importer to exporter assuring
payment when exporter presents specified documents
• Drafts (Bill of Exchange)
- Written order by exporter, telling an importer to pay a
specified amount of money at a specified time
• Bill of Lading
- Issued to exporter, by carrier
- Serves as receipt, contract, and document of title
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Letter of Credit
• Issued by a bank at the request of the importer
• Bank pays a specified sum to a beneficiary, normally
the exporter, on presentation of particular, specified
documents
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Bill of Lading
• Issued to the exporter by the common carrier
transporting the merchandise
• Serves three purposes:
- Receipt - merchandise described on document has been
received by carrier
- Contract - carrier is obligated to provide transportation
service in return for a certain charge
- Document of title – can be used to obtain payment or a
written promise before the merchandise is released to the
importer
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International Business, 6/e, 7/e
© 2007, 2009 The McGraw-Hill Companies, Inc.,
All Rights Reserved.
15 - 9
Typical International
Transaction
McGraw-Hill/Irwin
International Business, 6/e, 7/e
© 2007, 2009 The McGraw-Hill Companies, Inc.,
All Rights Reserved.