Chapter 2, Unit 1
Conducting Cost & Pricing Analysis for Exporting PRODUCTS
A. Why is it important?
To know if the international transaction would be beneficial to
the organization in terms of profits. Also, if the it is really
possible for the organization to commit to the exporting.
B. Process of Analyzing the Cost and Pricing
a. Determine the Cost of Exporting
i. Cost of producing the product such as raw
materials, labor, manufacturing overhead, r&d,
administration, advertising, etc.
ii. Export packing
iii. Labelling/packaging
iv. Marking the cases
v. Strapping
vi. Appropriate costs in regards the Incoterms used
vii. Freight forwarder fees
viii. Terminal charges
ix. Loading
x. Ocean freight if applicable
xi. Insurance
xii. Profit margin
b. Elaborate a Pricing Strategy
To keep the product’s price flexible and responsive to
market conditions such as supply and demand
i. Environmental factors
ii. Market factors
iii. Internal factors
c. Assess the Viability of the Transaction
i. The exporter should assess and review first
before committing to the exportation
transaction. If the transaction will result to loss
for the company or will not cover the cost of
production of the products to be exported the
transaction cannot
C. Incoterms 2020 Obligations
EXW, FCA, FAS, FOB, CPT, CIP,DPU, DAP, DDP
D. Importance of Harmonized Commodity Description and Coding
System
a. Compliance with HC is mandatory
b. HC is used for
i. Determine the duty rates
ii. Negotiate the trade agreements
iii. Maintain the trade statistics
iv. Identify goods and shipments that pose a risk to
health, safety and security
Chapter 2, Unit 3
Conducting Cost & Pricing Analysis for Exporting SERVICES
A. Process of Analyzing Service Export Cost and Pricing
a. Determine the Cost of Exporting Services
b. Elaborate a Pricing Strategy
i. Reasons for calculating a separate price for
each market
1. Costs vary between markets
2. Competitors’ pricing strategies differ
3. Price that end users are willing to pay
will differ
c. Assess the Viability of the Transaction
B. Considerations
a. Modes of International Services
i. Cross-border supply – via online banking,
telephone, distance learning, health care,
architecture and other online services
ii. Consumption abroad – via tourism and
outsources assembly, ship repairs and water
treatment services
iii. Commercial Presence – via the banks, law firms,
accounting firms
iv. Movement of people – via skilled professionals,
business visitors, independent professionals,
and service supplier representatives
b. Marketing approach is different since there is no
product to be advertised
c. Legal issues regulated to the export of services
d. Regulations
e. Payments
i. How much is the exporting cost, what currency,
and when will it be paid and how will it be made
(bank accts etc..)
ii. Who is responsible for bank charges and taxes?
iii. What will happen if the customer defaults?
Chapter 3, Unit 1
Risk Management Process
A. Why is it important?
Because it will serve as guide and tool on how the company
will take the necessary steps in case the inevitable risk will
occur.
B. Risk Management Cycle (IRPRD, DSIM)
1) Identify Issues and Set Context
2) Identify Key Risks
3) Measure Probability and Impact
4) Rank Potential Risks
5) Specify Desired Outcomes
6) Develop Options
7) Select a Strategy
8) Implement the Plan and Its Strategies
9) Monitor, Evaluate, and Adjust
Risk Management Cycle
1) Identify Issues and Set Context
- To which organization it is intended, what are
the objectives of the organization, what may
be the influences or impact of the risks and
how can they be addressed, what it the
tolerance of the organization on the said risks
- Look for the early warning signs of risks such
as unawareness of the management,
unproven or immature technology, unrealistic
or very optimistic projected perfomrance
2) Identify Key Risks
a. Uncontrollable risks. Regulatory, natural
hazards, market risks, operational issues, micro
and macroeconomic risks, credit risks,
environmental risks, political risks, and other
risks as may be related to the case of the
organization.
b. Controllable risks. Management risks,
concentration risks, human error, project delays
due to regulatory approvals, labour shortages,
poor productivity, material shortages, late
deliveries, cost overruns, cash flow squeezes,
loss of profits, changes in technology, design
problems, etc…
c. Generally controllable Legal risks. Licenses,
contractual difficulties due to misinterpretation,
misunderstanding, wrong contract type, force
majeure
3) Measure Probability and Impact
-
Likelihood that the risk may occur and what
would be the impact of the risk to the
company financially and non-financially
whether it is serious, catastrophic, marginal,
critical or negligible
4) Rank Potential Risks
- The measured risks are profiled and be ranked
in terms of its probability and impacting
outcome
5) Specify Desired Outcomes
6) Develop Options
a. Avoidance
b. Reduction
c. Transfer
d. retention
7) Select a Strategy
a. Determine and use a criteria to obtain decisions
to make
b. Use cost-benefit analysis as well as financial
considerations
8) Implement the Plan and Its Strategies
a. Inform all individuals responsible for carrying
out tasks
b. Identify best plans to authorize changes
9) Monitor, Evaluate, and Adjust
a. use performance measures to track ongoing
progress
b. periodically update plans and evaluate changes
to make it effective