Lecture Global marketing management (7th edition): Chapter 16 - Masaaki Kotabe, Kristiaan Helsen

Chapter export and import management. After studying this chapter you will be able to understand: The variety of distribution channels and how they affect cost and efficiency in marketing, the Japanese distribution structure and what it means to Japanese customers and to competing importers of goods, How distribution patterns affect the various aspects of international marketing,...

5 Role of the Government in Promoting Exports

6 Managing Imports—the Other Side of the Coin

7 Mechanics of Importing

8 Gray Markets

• Exporting is the most popular way for many

companies to become international.

• Exporting is usually the first mode of foreign entry used by companies.

• Selling to foreign markets involves numerous high risks, arising from a lack of knowledge about and

unfamiliarity with foreign environments, which can

be heterogeneous, sophisticated, and turbulent.

• Furthermore, conducting market research across

national boundaries is more difficult, complex, and subjective than its domestic counterpart.

• For successful development of export activities,

systematic collection of information is critical.

1 Organizing for Exports

• Research for Exports:

First use available secondary data to research

potential markets

– The identification of an appropriate overseas market involves the following criteria:

1 Socioeconomic characteristics

2 Political and legal characteristics

3 Consumer variables (e.g., lifestyle, preferences,

culture, taste, purchase behavior, and purchase frequency)

4 Financial conditions

1 Organizing for Exports

• It is also to be noted that export research for

markets such as China and the former Soviet

Republics must still be done largely in the field

because their data are often not reliable.

• Export Market Segments

– Homogeneous market segments and clusters

– Geographical and psychographic segments

– Issues of standardization vs adaptation

• Export Commission House

• Trading Companies (sogo shosha)

(See Exhibit 16-1.)

• Piggyback Exporting

- Export Sales Subsidiary

- Foreign Sales Branch

Exhibit 16-1: Comparison of Direct and

Indirect Exporting

4 Mechanics of Exporting

• The Automated Export System (AES) on the Internet

– In the U.S., the AES was launched in October 1999 It allows exporters, freight forwarders, and consolidators

to file shippers’ export declaration information in an

automated, cost-free way at all ports

– AES was incorporated into the Automated

Commercial Environment (ACE) system in 2014

• Legality of Exports

– Can be proactively dealt with

– Export license (general or validated license)

Exhibit 16-2: U.S Government Departments

and Agencies with Export Control

Responsibilities

4 Mechanics of Exporting

• Export Transactions

– Terms of sale

– Monitoring the transportation and delivery of the

goods to the assigned party

– Shipping and obtaining the bill of lading

4 Mechanics of Exporting

• Terms of Shipment and Sale

– INCOTERMS 2010 (International Commercial Terms)– Terms of Shipment (Exhibit 16-3):

• Ex-Works (EXW) at the point of origin

• Free Carrier (FCA)

• Carriage Paid To (CPT)

• Carriage and Insurance Paid to (CIP)

• Delivered at Terminal (DAT)

• Delivered at Place (DAP)

• Delivered Duty Paid (DDP)

4 Mechanics of Exporting

– Terms of Shipment—Maritime-only Terms (Exhibit 3):

16-• Free Alongside Ship (FAS)

• Free on Board (FOB)

• Cost and Freight (CFR)

• Cost Insurance and Freight (CIF)

Exhibit 16-3: Terms of Shipment

4 Mechanics of Exporting

• Payment Terms (Exhibit 16-4)

– Advanced Payment

– Confirmed irrevocable letter of credit

– Unconfirmed irrevocable letter of credit

– Documents Against Payment (D/P)

– Documents Against Acceptance (D/A)

Exhibit 16-4: Terms of Payment in

an Export Transaction

5 Role of the Government in

Promoting Exports

• Export promotion activities generally comprise:

1 Export service programs

2 Market development programs

• Export Enhancement Act of 1992

• Some governments engage in attracting inward

foreign direct investment (FDI) in the hope their

countries could increase exports (e.g., Argentina)

• Export-Import Bank (Ex-Im Bank)

• Tariff Concessions

5 Role of the Government in

Promoting Exports

• American Export Trading Company

– The Export Trading Company Act of 1982

• Export Regulations

– The Foreign Corrupt Practices Act (FCPA) of 1977

– U.S Antitrust Laws

– Tariffs and local laws of foreign governments may

include: tariffs, local laws relating to product

standards and classification, and taxes

6 Managing Imports—

the Other Side of the Coin

• For organizations in the United States, importing is

considerably easier than for most firms in the rest

of the world.

• About 81 percent of the world’s trade is still

denominated in U.S dollars.

• Most of the time, a U.S importer does not have to

bother with hedging foreign exchange transactions

or with trying to accumulate foreign currency to

pay for imports.

Exhibit 16-5: Model of Importer Buyer

Behavior

6 Managing Imports—

the Other Side of the Coin

– Model of Importer Buyer Behavior

Stage 1. Need recognition and problem formulation (triggered by competition and unavailability)

Stage 2. Search (guided by country characteristics, vendor characteristics, and information sources)

Stage 3. Choice (vendors evaluation and selection)

7 Mechanics of Importing

• Steps in Importing

– Finding a bank that either has a branch in the

exporter’s country or has a correspondent bank

– Establishing a letter of credit with the bank

– Deciding on the mode of transfer of goods from

7 Mechanics of Importing

• Import Documents and Delivery

– Entry documents filed by the consignee:

– For Special Permit for Immediate Delivery, use

8 Gray Markets

• Gray market channel refers to the legal

export/import transaction involving genuine products into a country by intermediaries other than the

1 Products must be available in other markets

2 Trade barriers must be low enough for parallel

importers

8 Gray Markets

3 Price differentials among various markets must be

great enough to provide the basic motivation for gray marketers Such price differences arise for various reasons:

• Marketing information systems

• Long-term image reinforcement

• Establishing legal precedence

• Lobbying

Exhibit 16-6:

How to Combat Gray Market Activity

Exhibit 16-6:

How to Combat Gray Market Activity, cont’d