Exporting, Importing, and
Countertrade

15-2

Simple strategic steps for successful exporting

What is meant by counter trade?

Why do firms enter counter trade agreements?
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2

To ship to another country for sale or exchange.
15-4
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15-4
McGraw-Hill/Irwin
Ignorance and
Intimidation
Poor distribution program
Poor market analysis
Poor understanding of competitive conditions
Poorly executed promotional campaign Failure to customize product offering
Problems securing financing
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4

15-5
Information from government sources
Export Management
Companies
Utilizing export strategies
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5
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15-6 www.bundesregierung.de
McGraw-Hill/Irwin www.miti.go.jp
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6

15-7
www.doc.gov
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15-8
Utilizing Export Management Companies


EMCs:

Export specialists who act as the export management department or international department for client firms.
Two types of assignment:


Start operations for a firm with understanding the firm will take over after they are well established.
Start-up services with continuing responsibility for selling the firms products internationally .
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8

15-10
It helps to hire an EMC or, at least, someone with experience.
Focus on one or a few markets.
Enter markets on a fairly small scale until you ‘learn the ropes’. Add new lines after initial success.
Need to recognize the time and managerial commitment.
Build strong and lasting relationships.
Hire locals to help firm establish itself.
Keep the option of local production in mind .
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15-17
Trade carried out wholly or partially in goods rather than money.
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15-18
Countertrade as a Share of World Trade
Value
%
50
40
30
20
10
0
1975 1985 1990 1992 2000
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100
Percent of companies engaged in each countertrade practice
80
60
40
20
73
19
22
60
Offset
Switch Trading
Barter
Buyback
Counterpurchase
3
Figure 15-5
0
15-19
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Typically, 5 kinds of countertrade
Barter
Counterpurchase
Offset
Switch trading
Compensation or Buyback
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15-20

Barter: direct exchange of goods and/or services without a cash transaction.
Counterpurchase: reciprocal buying agreement .
Offset: like counterpurchase, but can buy goods from any firm in country.
Switch trading: uses third-party trading house.
Buybacks: foreign plant takes products as contract payment.
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Gives firms a way to finance an export deal when other means are unavailable.
Foreign governments may require it.
Helps countries that don’t have sufficient foreign currency reserves.
However:
May involve defective goods.
Must invest in in-house trading department expensive and time consuming.
Most attractive to large, diverse multinational enterprises.
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