Exporting, Importing, and
countertrade
Chapter 15
Exporting, Importing, and
countertrade
Main objectives
1. Explain the promises and risks in exporting
2. How to improve export performance
3. Understand the information sources and
govt programs that exist to help exporters
4. Check the basic steps involved in export
financing.
5. Articulate how countertrade can be used
to facilitate exporting.

The promise and pitfalls of
exporting
The great promise of exporting is
revenue and profit opportunities. And
then economies of scale and cost
reduction.
 Small and medium size reactive.
 Intimidated by complexities
 Ignorance of potential opportunities
 Poor market analysis and competitive
conditions

The promise and pitfalls of
exporting
Failure to customize
 Lack of effective distribution systems.
 Poorly executed promotional campaign.
 Paper work
 Poor negotiation abilities.

Improving export performance
Lack of knowledge of opportunities
available.
 Collect information. The govt bodies help
in providing information. Japan and
Germany are role model countries in this
regard.

The promise and pitfalls of
exporting
-Information sources: US department of
Commerce .
Now the internet can be a source.
Agencies and Govt agencies providing
systematic, rigorous and useful
information.
Trade associations.
Export Management Companies
EMCs are export specialists who act as
the export marketing dept or
international department for its client
firm.
 They have the knowledge and expertise

Export Strategy
3M strategy
Enter on a small scale to reduce risk.
2. Add additional product lines once
exporting operations start to become
successful.
3. Hire locals to promote the firm’s products.
4. New exporters can use EMCs
5. Building relationships.
6. Collecting information
7. Step to FDI
1.
Export and Import Financing
Lack of trust between the exporter and
importer- payment against the shipment
issue.
 Bank and letter of credit.
 A bill of lading: title of the products is
given to the exporter by the carrier of
the shipment as a receipt, a contract, and
a document of title.
 Draft: the document for requesting the
payment for the exporter.

Exercise
Play with your partner exporter, importer
game using the text book example.
 Describe your experience as an exporter
or importer or a bank.
 Final topic is countertrade.

Countertrade
When Govts restrict the convertibility of
its currency, countertrade is the way out
to this problem. Currency convertibility in
chapter five.
 Countertrade: an agreement to trade
goods for goods and services for services
when they can not be traded for money.
 KSA agreed to buy 10 747 jets from
Boeing with payment in crude oil,
discounted at 10%

Types of countertrade
Barter: direct goods for goods
 Counter-purchase: A deal where RollsRoyce sold jet parts to Finland and agreed
to use some of the proceeds from sale to
purchase TVs from Finland and sell them
in the UK.
 Offset: the same as the counter-purchase
but you can buy TVs or any other product
from any other firm in the country.

Types of Countertrade
Switch trading: occurs when a third party
trading house buys the firm’s counterpurchase credits and sells them to
another firm that can use them better.
 Compensation or buybacks: US and
Venezuela agreed to build a huge refinery
in exchange of supply of petrol for 50
years.

Countertrade
It can be a strategic competitive weapon
or a strategic marketing weapon. Boeing
and an Indian company- exchanging parts
for jets countering Airbus and limiting
Airbus compeitition.
 Its disadvantages:
 Lose of flexibility.
