This chapter looks at
Export selling and export marketing
Organizational export activities
National policies on imports and exports
Tariff systems
Key export participants
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Chapter 6 Global MKIS
Chapter 7 Global STP
Chapter 8 Importing , Exporting and Sourcing
Final
Exam
Chapter 9 License and Investments
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Export selling involves selling the same product, at the same price, with the same promotional tools, in a different place
tailors the marketing mix to international customers
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An understanding of the target market environment.
The use of *market research and identification of market potential;
There is no substitute for a personal visit to size up the market firsthand and begin the development of an actual export marketing program
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A market visit should do several things:
First, it should confirm (or contradict) assumptions regarding market potential.
A second major purpose is to gather the additional data necessary to reach the final go/no-go decision regarding an export marketing program.
Certain kinds of information simply cannot be obtained from secondary sources.
A third reason for a visit to the export market is to develop a marketing plan in cooperation with the local agent or distributor.
 Agreement should be reached on necessary product modifications, pricing, advertising and promotion expenditures, and a distribution plan. If the plan calls for investment, agreement on the allocation of costs must also be reached.
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One way to visit a potential market is through a trade show or a state- or federally sponsored trade mission .
Each year hundreds of trade fairs, usually organized around a product category or industry, are held in major markets.
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National Policies Governing
Exports and Imports
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Government Programs that Support Exports
Tax incentives : lower rate taxes on export or by refunding taxes already paid on income associated with exporting.
The tax benefits offered by export-conscious governments include varying degrees of tax exemption or tax deferral on export income, and generous tax treatment of overseas market development activities.
Subsidies
Governments also support export performance by providing outright subsidies , which are direct or indirect financial contributions that benefit producers.
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Government Programs that Support Exports
Governmental assistance :It provides a great deal of government information concerning the location of markets and credit risks. Assistance may also be oriented toward export promotion.
Free trade zones : are geographic areas that offer manufacturers simplified customs procedures, operational flexibility, and a general environment of relaxed regulations.
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Governmental Actions to Discourage
Imports and Block Market Access
Nontariff barriers : designed to limit the inward flow of goods
Quotas : is a government-imposed limit or restriction on the number of units or the total value of a particular product or product category that can be imported. Quotas are designed to protect domestic producers.
Customs procedures Discriminatory exchange rate policies Discriminatory procurement policies can take the form of government rules and administrative regulations that give local vendors priority.
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Governmental Actions to Discourage Imports and Block Market Access
Restrictive customs procedures : are considered restrictive if they are administered in a way that makes compliance difficult and expensive.
Discriminatory exchange rate policies Arbitrary monetary policies: China is pursuing policies that ensure an artificially weak currency, which results in Chinese goods having competitive price edge in world markets
Restrictive regulations and technical regulations :can create also barriers to trade. These may take the form of antidumping regulations, product size regulations, and safety and health regulations. U.S. safety and pollution regulations in the auto industry have forced some automakers to withdraw certain models and are expensive with which to comply.
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Governmental Actions to Discourage Imports and Block Market Access
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Single-column tariff
Simplest type of tariff
Schedule of duties in which rate applies to imports from all countries on the same basis
Two-column tariff
General duties plus special duties apply
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Sample Rates of Duty for U.S. Imports
Under the two-column tariff, column 1 includes “general” duties plus “special” duties indicating reduced rates determined by tariff negotiations with other countries. Rates agreed upon by “convention” are extended to all countries that qualify for normal trade relations- NTR , it favors nation within the framework of the WTO.
Column 2 shows rates for countries that do not enjoy NTR status .
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Reduced tariff rate applied to imports from certain countries
GATT prohibits the use, with three exceptions
Historical preference arrangements already existed such as the British Commonwealth preferences and similar arrangements that existed before GATT
Preference is part of formal economic integration treaty such as free trade areas or common markets,
Industrial countries are permitted to grant preferential market access to LDCs
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Duties As defined by one expert on global trade, duties are “taxes that punish individuals for making choices of which their governments disapprove.”:
Ad valorem duty %
Expressed as percentage of value of goods
Specific duty #
Expressed as specific amount of currency per unit of weight, volume, length, or other units of measurement
Compound or mixed duties
Apply both ad valorem and specific on the same items
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Dumping is the sale of merchandise in export markets at unfair prices
Special import charges equal to the dumping margin as the dumped products injured local companies
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Countervailing duties (CVDs): are additional duties levied to offset subsidies granted in the exporting country.
Variable import levies: applies to certain categories of imported agricultural products. the effect of these levies would be to raise the price of imported products to the domestic price level.
Temporary surcharges have been introduced from time to time by certain countries, such as the United
Kingdom and the United States, to provide additional protection for local industry and, in particular, in response to balance-of-payments deficits.
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Home-country issues involve deciding whether to assign export responsibility inside the firm or to work with an external organization specializing in a product or geographic area.
Most firms handle export operations within their own in-house export organization. Depending on the company’s size, responsibilities may be incorporated into an employee’s domestic job description. Alternatively, these responsibilities may be handled as part of a separate division or organizational structure.
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Direct market representation
Advantages—control and communications
Representation by independent intermediaries
Advantages—best for situations with small sales volume
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Foreign purchasing agents
Export brokers
Export merchants
Export management companies
Export distributor
Export commission representative
Cooperative exporter
Freight forwarders
Manufacturer’s export representatives
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Many CFOs with international experience know that there are generally fewer collections problems on international sales than on domestic sales, provided the proper financial instruments are used. The reason is simple: A letter of credit can be used to guarantee payment for a product.
The export sale begins when the exporter/seller and the importer/buyer agree to do business. The agreement is formalized when the terms of the deal are set down in a pro forma invoice contract, fax, or some other document. Among other things, the pro forma invoice spells out how much, and by what means, the exporterseller wants to be paid.
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A number of factors must be considered, including currency availability in the buyer’s country, creditworthiness of the buyer , and the seller’s relationship to the buyer. Finance managers at companies that have never exported often express concern regarding payment.
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Documentary credits (letter of credit)
Documentary collections (bill of exchange)
Cash in advance
Sales on open account
Sales on consignment basis
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Irrevocable L/C:
Bank get 1/8 of 1 percent of the value of credit With $80
Min.
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In today’s competitive global marketplace, companies are under intense pressure to lower costs ; one way to do this is to locate manufacturing and other activities in China,
India, and other low-wage countries., the decision of where to locate key business activities depends on other factors besides cost.
Accordingly , sourcing decision is one of the most complex and important decisions faced by a global company.
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Management vision
Factor costs and conditions
Customer needs
Logistics
Country infrastructure
Political risk currency fluctuation
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Management Vision : Some chief executives are determined to retain some or all manufacturing in their home country. Swatch watches are manufactured in Switzerland.
Canon keeps 60 percent of manufacturing in Japan and focuses on high value-added products rather than manufacturing location.
Factor costs : are land, labor, and capital costs. Basic direct labor costs in manufacturing today range from less than $1 per hour in an emerging country to $6 to $12 per hour in a developed country. In certain U.S. industries, direct labor costs in manufacturing exceed $20 per hour without benefits. German hourly compensation costs for production workers in manufacturing are 160 percent of those in the
United States, while those in Mexico are only 15 percent of those in the United States.
Labor costs in nonmanufacturing jobs also vary. A software engineer in India may receive an annual salary of $12,000; an

Customer needs : Although outsourcing can help reduce costs, sometimes customers are seeking something besides the lowest possible price. Dell
Computer recently rerouted some of its call center jobs back to the United States after complaints from key business customers that Indian tech support workers were offering scripted responses and having difficulty answering complex problems. In such instances, the need to keep customers satisfied justifies the higher cost of home-country support operations.
Logistics : To facilitate global delivery of products , transportation. speeds up delivery times at lowers costs. In Europe, Latin America, and elsewhere, the trend toward regional economic integration means fewer border controls.
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Infrastructure includes power, transportation and roads, communications, service and component suppliers.
Political risk : Protectionist laws may cause
Japanese automakers establish production facilities in the United States. U.S.-produced cars are not subject to tariffs or quotas.
Change in commodities price and currency fluctuation : If the dollar, the yen, or the mark becomes seriously overvalued, a company with production capacity in other locations can achieve competitive advantage by shifting production among different sites.
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Must emphasize benefits of sourcing from country other than home country
Must assess vision and values of company leadership
Advantage can be gained by
Concentrating some of the marketing activities in a single location
Leveraging company’s know-how
Tapping opportunities for product development and R&D
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Global market entry strategies: licensing, investment, and strategic alliances
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