Chapter 14: exporting, importing, and countertrade

In a positive move for international trade, the gradual decline in trade barriers under the umbrella of the ------ (see Chapter 7), along with regional economic agreements such as the ------ and the ------ (see Chapter 9), has significantly increased export opportunities

-World Trade Organization -European Union (EU) -North American Free Trade Agreement (NAFTA)

At the same time, ----- and ----- have alleviated the logistical problems associated with exporting

-modern communication -transportation technologies

Identifying export opportunities is made even more complex because almost ---- countries with widely differing cultures compose the world of potential opportunities

196

ITA regularly publishes

A Guide to Exporting

---- are composed of some 1,500 volunteers appointed by the U.S. Secretary of Commerce to help U.S. business be more competitive internationally

DECs

Affiliated with the U.S. Department of Commerce and its USEAC offices is a set of ------ (DECs; connected also via the National District Export Council)

District Export Councils

The SBA also coordinates -----, a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters

ELAN

----- is a tremendously important mode of foreign market entry, preferred by more than 90 percent of all companies engaging in the global marketplace

Exporting

A similar function is provided by the ---------, which is always on the lookout for export opportunities

Japanese Ministry of International Trade and Industry (MITI)

Japan's Ministry of International Trade and Industry

MITI

----- exporters tend to underestimate the time and expertise needed to cultivate business in foreign countries

Novice

Through -----, the SBA oversees some 11,500 volunteers with international trade experience to provide one-on-one counseling to active and new-to-export businesses

SCORE

Importantly, these ---- also make up more than 80 percent of companies going international from almost every country in the world

SMEs

Another governmental organization, the---------, can help potential exporters

Small Business Administration (SBA)

Unlike their German and Japanese competitors, many ---- firms are relatively blind when they seek export opportunities; they are information-disadvantaged

U.S.

The most comprehensive source of information is the ------ and its district offices all over the country (U.S. Export Assistance Centers, USEAC)

U.S. Department of Commerce

Within that department are two organizations dedicated to providing businesses with intelligence and assistance for attacking foreign markets:

U.S. and Foreign Commercial Service and International Trade Administration (ITA)

The U.S. and Foreign Commercial Service and International Trade Administration are governmental agencies that provide the potential exporter with a "-----" list, which gives the names and addresses of potential distributors in foreign markets along with businesses they are in, the products they handle, and their contact person

best prospects

The reason exporting is preferred by such a large portion of companies engaging in the global marketplace is that most small- and medium-sized enterprises (SMEs) prefer exporting as a relatively low ----- to getting their products or services out globally

commitment

In addition, the Department of Commerce has assembled a "------" for countries that are major markets for U.S. exports

comparison shopping service

Also, many would-be exporters, particularly smaller firms, are often intimidated by the

complexities and mechanics of exporting to countries where business practices, language, culture, legal systems, and currency are very different from those in the home market

The process can be made more problematic by currencies that are not freely------

convertible

Over the last two decades, firms have increasingly used e-commerce and international air services to reduce the ----, -----, and ---- associated with exporting

costs distance cycle time

This is where ------ comes in as a potential solution, and why we have made ------ a focus in this chapter

countertrade

Often, there are many markets for a firm's product, but because they are in countries separated from the firm's home base by ----, ----, -----, and ----, the firm does not know of them

culture language distance time

By expanding the size of the market, exporting can enable a firm to achieve -----, thereby lowering its unit costs

economies of scale

German and Japanese firms can draw on the large reservoirs of ----, -----, ----- and other resources of their respective export-oriented institutions

experience skills information,

The SBDCs around the country provide a full range of ------ to business, particularly small companies new to exporting

export assistance

Despite institutional disadvantages, U.S. firms can increase their awareness of

export opportunities

In Germany—one of the world's most successful exporting nations—trade associations, government agencies, and commercial banks gather information, helping small firms identify

export opportunities

Consequently, it is not unusual to find thriving exporters among small companies. In fact, of U.S. companies that trade internationally, some 85 percent of them are SMEs, and they generally do so via

exporting

Consequently, it is not unusual to find thriving exporters among small companies. In fact, of U.S. companies that trade internationally, some 85 percent of them are SMEs, and they generally do so via -----

exporting

Simple ignorance of the potential opportunities is a huge barrier to

exporting

The accompanying Management Focus, which documents the experience of Embraer, illustrates cultural barriers that sometimes can hinder both ---- and ----

exporting importing

What we find is that the first international level for both involvement and commitment was the ----- (outbound international activity) and ----- (inbound international activity) options

exporting importing

The bottom line is that as the global marketplace becomes more viable for many companies over time, companies must also adapt to this opportunity by strategically engaging in

exporting and operationally go about seeking opportunities globally

The United States has also established a set of 17 Centers for International Business Education and Research (CIBERs), which assist with ------

exporting needs

However, the United States has not yet created an institutional structure for promoting ----- similar to that of either Germany or Japan

exports

Many foreign customers require ----- negotiations on their home turf

face-to-face

The Department of Commerce also organizes trade events that help potential exporters make

foreign contacts and explore export opportunities

This chapter discusses all these issues, with the exception of ------

foreign exchange risk

One reason more firms are not proactive is that they are unfamiliar with

foreign market opportunities; they simply do not know how big the opportunities actually are or where they might lie

This may be as simple as feeling unable to select and manage a ---- or not knowing how to sell products in a -----

foreign supplier new country

Firms that do not export often lose out on significant opportunities for

growth and cost reduction

In part, this reflects ------

historical differences

Companies wishing to export must

identify foreign market opportunities, avoid a host of unanticipated problems that are often associated with doing business in a foreign market, familiarize themselves with the mechanics of export and import financing, learn where they can get financing and export credit insurance, and learn how they should deal with foreign exchange risk

This is changing; both ---- and ----- now play a greater role in the U.S. economy than they did 20 years ago

imports exports

The volume of export activity in the world economy has-----as exporting has become easier from a large number of countries

increased

The way to overcome ignorance is to collect

information

This means that ----, ----, and ---- often are lacking, and smaller enterprises, in particular, can find the exporting process intimidating

knowledge data experience

One big impediment to exporting is the simple lack of

knowledge of the opportunities available

The great promise of exporting is that ----- and ---- opportunities are to be found in foreign markets for most firms in most industries

large revenue profit

But keep in mind that, by some accounts, 90 percent of the products and services that are needed locally are not produced

locally

Few realize the amount of ------resources that have to be dedicated to this activity

management

Companies that have traditionally operated within national or regional trading groups may feel ill equipped to extend their

market horizon

And so, ----- are globally available everywhere and exporting and importing fill these voids

market opportunities

For a small fee, a firm can receive a customized ----- on a product of its choice

market research survey

This survey provides information on

marketability, the competition, comparative prices, distribution channels, and names of potential sales representatives

The department also has a -----, in which department representatives accompany groups of U.S. businesspeople abroad to meet with qualified agents, distributors, and customers

matchmaker program

To make matters worse, many ---- exporters run into significant problems when first trying to do business abroad, and this sours them on future exporting ventures

neophyte

Each study is conducted on site by an

officer of the Department of Commerce

That places a lot of emphasis on exporting and importing as modes of ------ for many companies, and we think that this area deserves more coverage; thus, this chapter is devoted to digging deeper into the knowledge of operations ("nuts and bolts") of exporting and importing as well as the unique case of countertrade

operations

Exporters often face voluminous -------

paperwork, complex formalities, and many potential delays and errors

Common pitfalls include

poor market analysis, a poor understanding of competitive conditions in the foreign market, a failure to customize the product offering to the needs of foreign customers, a lack of an effective distribution program, a poorly executed promotional campaign, and problems securing financing

MMO's experience is common, and it suggests a need for firms to become more ------ about seeking export opportunities

proactive

Despite examples such as Marlin Steel Wire Products, studies have shown that while many large firms tend to be proactive about seeking opportunities for profitable exporting—systematically scanning foreign markets to see where the opportunities lie for leveraging their technology, products, and marketing skills in foreign countries—many medium-sized and small firms are very ----

reactive

The international market is normally so much larger than the firm's domestic market that exporting is nearly always a way to increase the

revenue and profit base of a company

In some way, we can say that importing is exporting in ---- since the importing country and its companies buy from companies in other countries that are exporting

reverse

Typically, such reactive firms do not even consider exporting until their domestic market is -----and the emergence of excess productive capacity at home forces them to look for ------- in foreign markets

saturated growth opportunities

This is, after all, the lowest level of involvement and the lowest level of commitment a company can make when going international:

selling to foreign markets (exporting) or purchasing raw materials, component parts, or finished goods for operations (importing)

Still, more than 90 percent of products and component parts still logistically get shipped via large ----- around the world

ships

In addition, many Japanese firms are affiliated in some way with the ------, Japan's great trading houses

sogo shosha

Japanese trading companies; a key part of the keiretsu, the large Japanese industrial groups

sogo shosha

The ----- have offices all over the world, and they proactively, continuously seek export opportunities for their affiliated companies large and small

sogo shosha

they are shipped in from ----

somewhere else

This could mean using

suppliers from developing nations, importing products from new sources, or exporting products to new markets

An exporter may have to spend months learning about a country's ------, ------, and more before a deal can be closed

trade regulations business practices

Both Germany and Japan have long made their living as-----, whereas until recently, the United States has been a relatively self-contained continental economy in which ------ played a minor role

trading nations international trade

This combination of ---- and ----- probably explains why exporters still account for only a tiny percentage of U.S. firms, less than 5 percent of firms with fewer than 500 employees, according to the Small Business Administration

unfamiliarity intimidation

Arranging payment for exports to countries with ------ can be a problem

weak currencies