Chapitre 16

Question 1

why did exporting increase in the last 30 years.

Answer 1

Decline in trade barriers and increase in regional economic agreements.

Advances in technology and communication.

Question 2

Why exporting is intimidating for some firms.

Answer 2

reason : (currency and trade barriers)
Process can be made more problematic by shifting trade barriers.

Another problem arises when currencies are not freely convertible.

Question 3

What is the advantages that exporting offers

Answer 3

Large revenue and profit opportunities in foreign markets for most firms.

Economies of scale.

Question 4

Explain (proactive vs reactive)

Answer 4

Large firms tend to be proactive about exporting; medium-sized and small firms reactive.
why : Unfamiliar or intimidated by foreign market opportunities, & complexities.
Initial efforts may run into problems, sours companies on future ventures.
Less experience and more scared than big firms.

Question 5

What is the consequences of not exporting and what are the pitfallls if you export ( what is the big challenges associated with exporting) .

Answer 5

Reactive firms begin exporting only after domestic market saturation and excess capacity emergence.
Novice exporters often underestimate the time and expertise needed for international business cultivation.
Many underestimate the management resources required for successful exporting.
Foreign customers frequently demand in-person negotiations in their own country.
Exporters might spend months learning a country’s trade regulations and business practices before closing deals.

There is also these consequences that are logic (in powerpoint but not in book:
Voluminous paperwork.
Complex formalities.
Potential delays and errors.
Time and costs are daunting to inexperienced exporters.
Documentary compliance.
Border compliance.

Question 6

Compare institutional structure for promoting exports internationaly (america vs europe and china ) and list an institution from China.

Answer 6

Comparaison : U.S. has not yet created an institutional structure for promoting exports similar to that of Germany or Japan.
They are information disadvantaged (institutional disadvantage)

Name of institution :The Japanese Ministry of International Trade and Industry (MITI), which is always on the lookout for export opportunities. In addition, many Japanese firms are affiliated in some way with the sogo shosha, Japan’s great trading houses. The sogo shosha have offices all over the world, and they proactively, continuously seek export opportunities for their affiliated companies large and small.

Question 7

Name the 3 information soures available in U.S to increase a firms awareness of export opportunities

Answer 7

1) U.S. Department of Commerce (U.S. Export Assistance Centers, U S E A C).
-U.S. and Foreign Commercial Serviceand International Trade Administration (I T A).
District Export Councils.
service : provides businesses with intelligence and assistance for attacking foreign markets

2) Small Business Administration (S B A).
-Small Business Development Centers (S B D C), Service Corps of Retired Executives (SCORE), and Export Legal Assistance Network (E L A N).

3)Centers for International Business Education and Research (C I B E R s).
-State, regional and city trade commissions.

RECAP : US dep. of commerce, SBA , CIBERS+ emergence of private orgs.

Question 8

What is freight forwarders

Answer 8

Combine smaller shipments into a single large shipment to minimize the shipping cost.
Help with documentation, payment, and carrier selection.

Question 9

what is export management companies

Answer 9

Like your internal exporting dept., manage your export affairs
Acts as an export marketing department for client firms.

Question 10

what is export trading companies

Answer 10

Provide comprehensive exporting services, including export documentation, logistics, and transportation

Question 11

what is export packaging companies.

Answer 11

Advise companies on appropriate design and materials for the packaging of their items.
Assist companies in minimizing packaging to maximize the number of items to be shipped.

Question 12

what is a costum broker

Answer 12

Customs regulations can be overwhelming.
Offer a complete package of services essential in dealing with potential pitfalls when a firm is exporting to many countries.

Question 13

what is a confirming house or buying agent

Answer 13

Represent foreign companies that want to buy your products.

Question 14

what are export agents, merchants and remarketers

Answer 14

Buy products directly from the manufacturer and package and relabel the products.

Question 15

what is piggyback marketing

Answer 15

One firm distributes another firm’s products.
Usually requires complementary products and the same target market of customers.
exemple : apple

Question 16

what is an export processing zones

Answer 16

Include foreign trade zones (F T Zs), special economic zones, bonded warehouses, free ports, and customs zones.

Question 17

what are the export strategies seen in this course ? (8 in total)

Answer 17

1) Hire an EMC or at least an experienced export consultant to identify opportunities and navigate the paperwork and regulations in exporting.
2) Initially focus on one market or a handful of markets.
3) Enter a foreign market on a small scale to reduce the costs of any subsequent failure.
4) Recognize the time and managerial commitment involved in building export sales and hire additional personnel to oversee this activity.
5) Devote attention to building strong and enduring relationships with local distributors and/or customers.
6) Hire local personnel to help the firm establish itself in a foreign market.
7) Be proactive about seeking export opportunities.
8) Retain the option of local production.
RECAP :
EMC, one market, small scall, recognize time and managerial commitment, strong and lasting relationships, local personnel, proactive about export opportunity, keep in mind local production possibility.

Question 18

On the globalEDGE exporting tool webiste. What does the Company Readiness to export (CORE) tool is used for ?

Answer 18

Used to assess (1) a company’s readiness to export a product and (2) the product’s readiness to be exported.

Question 19

List the company readiness point to asses to know if the company is ready to export.5

Answer 19

1) Competitive capabilities in domestic market
2) Motivation for going international
3) commitment of owners and top managers
4) experience and training
5) skills , knowledge and resources

Question 20

list some reason why lack of trust happen during international trades.

Answer 20

Firms engaged in international trade must trust someone:
They may have never seen.
Who lives in a different country.
Who speaks a different language.
Who abides by (or does not abide by) a different legal system.
Who could be very difficult to track down if he or she defaults on an obligation.

RECAP : TRUST is key

Question 21

What is the solution to that lack of trust ?

Answer 21

The problem is solved by using a third party trusted by both—normally a reputable bank—to act as an intermediary.

Question 22

What is a letter of credit ?

Answer 22

States that the bank will pay a specified sum to a beneficiary, normally the exporter, upon presentation of specified documents.
Issued by a bank at the request of the importer.
Companies are likely to trust reputable banks.
The importer must pay a fee.

Question 23

What is a draft or bill or exchange

Answer 23

Normally used in int. commerce to effect payment.
Indicates specified amount of money to be paid at a specified time.
Used to settle trade transactions.
Exporter is the maker of draft, it initiates the draft to effect the payment for the exported goods.
In int. transactions, payment or a formal promise to pay is required before the buyer can obtain the merchandise.

Question 24

sight draft vs time draft

Answer 24

Sight draft: payable on presentation to the drawee.
Time draft: promise to pay by the accepting party at some future date.
**Time Drafts are negotiable instruments. If exporter does not want to wait until maturity date of the time draft, it can sell it to the bank at a discount and use the cash.

Question 25

bankers acceptance vs trade acceptance

Answer 25

When a time draft is drawn on and accepted by a bank, it is called a banker’s acceptance. It becomes a promise to pay.
When it is drawn on and accepted by a business firm, it is called a trade acceptance.

Question 26

Walk me through a typical international trade transaction.
(aka : he ask this your dead)

Answer 26

1) Importer orders good
2) exporter agrees to fill order under letter of credit
3) importer arrangers for letter of credit with BofP
4) Bop send letter of Credit to BofNY
5) BofNY informs exporter of letter of credit
6) US exporter ships the good and an official of the carrier gives the exporter a bill of landing
7) US exporter present 90 day time draft on the bank of Paris in accordance with its letter of credit and the bill of ladind to BofNY. the exporter endorses the bill of lading so title to the good is transfered to Bof NY
8)BofNY send draft and bill of lading to BofP. BofP accepts to pay in 90 days.
9)BofP returns accepted draft.
10) BofNY tells #9 to exporter
11) exporter sells the draft to BofNY at a discount
12)BoyP tells importer arrival of doc. importers will pay in 90 days. BofP releases doc so importer can get shippment
13) 90 days later BofP is paid
14) BofP pays holder so in this case BofNY
**refer to FIGURE 16.6

Question 26

What is a Bill of Landing and what are the 3 purposes

Answer 26

Issued to the exporter by the carrier transporting the merchandise.
3 purposes:
1) a receipt – carrier has received the merchandise.
2) a contract – carrier is obligated to transport it.
3) a document of title – can be used to get paid or obtain written promise of payment before the merchandise arrive at its destination.
**Can also function as collateral against which funds may be advanced to the exporter by its local bank before or during shipment and before final payment by the importer.

Question 27

What is the Export-Import Bank

Answer 27

Assists in the financing of U.S. exports of products and services to support U.S. employment and market competitiveness.

Supplements private capital lending with various loan and loan-guarantee programs.
-Guarantees repayment of medium- and long-term loans that U.S. commercial banks make to foreign borrowers for purchasing U.S. exports.
-Also lends dollars to foreign borrowers for use in purchasing U.S. exports.

Question 28

what is an export credit insurance and why is it in place?

Answer 28

The lack of a letter of credit exposes the exporter to the risk that the foreign importer will default on payment.
The exporter can insure against this possibility by buying export credit insurance.
**Provided by the Foreign Credit Insurance Association (F C I A).

Question 29

What is countertrade

Answer 29

Trade of goods and services for other goods and services.
Alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent.
Barterlike agreements.

Question 30

Who prefers to do countertrade?

Answer 30

Popular among developing nations that lack the foreign exchange reserves required to purchase necessary imports.
Communist also…

RECAP : lack foreign exchange reserves and non-convertible money country

Question 31

List 5 types of countertrade (don’t define just list)

Answer 31

Barter, Counterpurchase, Offset, switch trading, Compensation/buybacks

Question 32

define Barter and give some risk associated with it

Answer 32

direct exchange of goods and/or services between two parties without a cash transaction.

Risks: First, if goods are not exchanged simultaneously, one party ends up financing the other for a period. Second, firms engaged in barter run the risk of having to accept goods they do not want, cannot use, or have difficulty reselling at a reasonable price.

Question 33

what is counter-purchases?

Answer 33

reciprocal buying agreement.

Question 34

what is Offset?

Answer 34

an agreement to purchase goods and services with a specified percentage of proceeds from an original sale in that country from any firm in the country.

Question 35

what is switch trading?

Answer 35

the use of a specialized third-party trading house in a countertrade/offset arrangement.
sell the arrangement to third party at a discount

Question 36

What is compensation or Buybacks

Answer 36

an agreement to accept a percentage of a plant’s output as payment for contract to build a plant.

Question 37

Pros of countertrade

Answer 37

Can give a firm a way to finance an export deal when other means are not available.

A countertrade agreement may be required by the government of a country to which a firm is exporting goods or services.

Can become a strategic marketing weapon, e.g., between Boeing and Airbus, the one that accepts countertrade offer penetrates the market.

RECAP : good when lack of currency, sometime obligated , marketing strat.

Question 38

cons of countertrade

Answer 38

Firms would normally prefer to be paid in hard currency.

May involve the exchange of unusable or poor-quality goods that the firm cannot dispose of profitably.
**Countertrade is most attractive to large, diverse multinational enterprises that can use their worldwide network of contacts to dispose of goods acquired in countertrading.

RECAP : Not money (unquantified, poor quality)