International Business Chapter 16

What are the pros and cons of countertrade? When is countertrade most useful? (16.5)

--Pros: (1) it that it can give a firm a way to finance an export deal when other means are not available (2) may be required by the government of a country to which a firm is exporter Ing foods or services --Cons: (1) firms would prefer to be paid in cash, may involve exchange of unusable or poor-quality foods that the firm cannot dispose of profitability --They are most attractive to large, diverse multinational enterprise that can use their worldwide network of contract to dispose of good

What are the different types of counter trade? (16.5)

1) Bartering 2) Counter purchase 3) Offset 4) Switch trading 5) buy back

What are the main types of Service providers? (16.2)

1) Freight forwarders 2) Export management company 3) Export packaging companies 4) Customer brokers 5) Confirming houses 6) Export agents and merchants 7) Piggyback marketing 8) Economic processing zones

What are the two factors that determine if a company overall is ready to export? (16.2)

1) Product Readiness 2) The Readiness of the company.

What are the two types of drafts? (16.3)

1) Sight draft 2) Time draft

What are the steps in a successful exporting strategy? (16.2)

1) hiring an EMC or at least an experienced export consultant to find opportunities and navigate the paperwork and regulations. 2) focus only one market or a handful of markets 3) enter on a small scale 4) needs to recognize the time and managerial commitment involved in building export sales and should hire additional personnel to oversee 5) devote attention to building a strong and enduring relationship with local distributors and customers 6) hire local personnel to help the firm establish itself in a foreign market 7) must be proactive in seeking export opportunities 8) exporter should retain the option of local production

What are reasons why firms are not proactive when finding export opportunities? (16.1)

1) unfamiliar with foreign market opportunities 2) intimidated by the complexity and mechanics of exporting such as business practices, language, culture, legal systems, etc. 3) negative past experiences with exporting such as poor analysis or product catering

Link the HR and technological needs of the U.S. business community with the international education, language training, and research capacities of universities across the country. (16.2)

CIBERs, (Center for International Business Education and Research)

represent foreign companies that want to buy your products. Try to get the product at the lowest price and are paid a commission buy their foreign clients. (16.2)

Confirming houses

Help deal with customs regulations for exporting companies. (16.2)

Customer brokers

Is composed of some 1,500 volunteers appointed by the U.S. Secretary of Commerce to help U.S. business be more competitive internationally. (16.2)

DECs (District export councils)

Export products for companies that contract with them. They identify and work with companies in foreign countries that will market and sell the product. (16.2)

Export packaging companies

How are many medium to small sized firms reactive to exporting? (16.1)

Exporting is not considered until their domestic's market is saturated and the mergences of excess productive capacity at home forces these firms to look for growth opportunities in foreign markets.

combine smaller shipments into a single large shipment to lower shipping costs. (16.2)

Freight forwarders

What is the best guide for exporting for small to medium sized firms? (16.2)

International Trade Administration (ITA) who regularly publishes A Guide to exporting.

Japanese ministry of international Trade and Industry. (16.2)

MITI

is an arrangement whereby one firm distributes another firm's products. (16.2)

Piggyback marketing

Agency of the U.S. Government whose mission is to provide aid in financing and facilitate exporter and imports. Must have "reasonable assurance of repayment" and should supplement and not compete with private capital lending. (16.4)

The Export-Important Bank

What is the most comprehensive source of information in the United state on learning about exporting opportunities? (16.2)

U.S. Department of Commerce (Includes both the Foreign Commerical Service and International Trade Administration or ITA)

When a time draft is drawn on and accepted by a bank. (16.3)

banker's acceptance

The direct exchange of goods and services between two parties without a cash transaction. What are the two downsides of this method? (16.5)

barter 1) If good are not exchanged at the same time, one party ends up financing the other for a period 2) Firms engaged in barter run the risk of having to accept goods they do not want, cannot use, or have difficulty reselling a reasonable price --Often used as a one-time-only deals

An order written by an exporter instructing an importer, or an importer's agent to pay a specified amount of money at a specific time. Also known as a draft (16.3)

bill of exchange

A document issued to an exporter by a common carrier transporting merchandise. it serves as a receipt, a contract, and a document of title. (16.3)

bill of lading

Agreement to accept a percentage of a plant's output as payment for contract to build a plant. (16.5)

buyback

A reciprocal buying agreement. It occurs when a firm agrees to purchase a certain amount of material back from a country to which a sale is made. (16.5)

counter purchase

The trade of goods and services for other goods and services. They are an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent. such as when a government does not allow for convertibility of currency. (16.5)

countertrade

An order written by an exporter telling an importer what and when to pay. (16.3)

draft

The party to whom the draft is presented. (16.3)

drawee

Protects the exporters for importer defaulting on payments. If the customer defaults the insurance firm will cover a major portion of the loss. Provide by agencies such as Foreign Credit Insurance Association (FCIA). (16.4)

export credit insurance.

Export specialist that acts as an export marketing department for client firms. (16.2)

export management company (EMC)

These include foreign trade zones (FTZs), special economic zones, bonded warehouse, free ports, and customs zones. (16.2)

export processing zones (EPZs)

buy products directly from the manufacturer and package and label the products in accordance with their own wishes and specifications. They then sell the products internationally through their own contracts under their own names and assume all risks. (16.2)

exporting agents, merchants, and remarketers

What is the great promise of exporting? (16.1)

is that large revenue and profit opportunities being to be found in foreign markets? Exporting firms can both sell more and achieve economies of scale lowering cost as compared to domestic firms.

Issued by a bank, indicating that they will make payments under specific circumstances. Explain this process. (16.3)

letter of credit --checks credit of the importer for LOC --> takes collateral --> gives LOC to exporter's bank with requirements of how to ship --> exporter bank then takes a draft --> If the bank of the importer aspects the draft, then it will send the payment back to the exporter -->

The business or person initiating the draft. (16.3)

maker

Agreement to purchase goods and services with a specified percentage of proceeds from an original sale in that country from any firms in the country. The difference between this and a counter purchase is that this party can fulfill the obligations with any firms in the country to which the sale is made. Give the exporter greater opportunity to trade with any importer. (16.5)

offset

Which three factors are considered pitfalls of exporting? (SB)

poorly executed promotional campaign not changing products to meet the foreign markets difficulty securing financing

a draft payable on presentation to the drawee. This is accepted by a notice of acceptance. (16.3)

sight draft

Japanese trading companies; a key part of the keiretsu, the large Japanese industrial groups. Have offices all over the world, they are proactively, continuously seek export opportunities for their affiliated companies large and small. (16.2)

sogo shosha

Use of specialized third-party trade house in a countertrade arrangement. In countertrade agreement the firms end up with counter purchase credits which can the used to purchase goods from that country. This house is used to spend those credits. (16.5)

switch trading

A promise to pay by the accepting party at some future date. such as 30, 60, 90, or 120 days. This is accepted by a notice of acceptance. (16.3)

time draft

when a draft is drawn on and accepted by a business firm. (16.3)

trade acceptance