Chapter 13 - Export import management. The main goals of this chapter are to: Describe the ‘nuts and bolts’ of exporting, and how basic export–import transactions work, uderstand the role of INCOTERMS in export–import operations, examine the main methods of payment in an international sale, outline the main form of trade financing techniques (e.g. credit, factoring, forfaiting),...
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Chapter 13 Export–import management
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Lecture plan
• Negotiation of an international sale
• Main methods of payment
• Trade finance techniques
– credit, factoring, forfeiting, counter trade
• Australia’s exporters
• Export management in a multinational company
• Exports of small and medium enterprises
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Major steps in the negotiation of an international sale
Exporter
in
Country
A
Importer in
Country B
1.Enquiry
2 Quotation/offer
3 Order
4 Order acceptance/contract
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Incoterms
Incoterms 2000
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The four contractual relationships
1 International Sale of Goods Contract
– exporter and importer
2 Letter of Credit (L/C)
– importer and importer’s bank
3 Bill of Lading
– carrier and exporter (under CFR/CIF) or with the importer (under an FOB sale)
4 Insurance contract
– insurance company and exporter (CIF) and importer (CFR/CIF)
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Export marketing issues
Channels of distribution
• National market: producer-export agent-import
agent-major wholesaler-small wholesaler
• Modus operandi is different
Pricing
1 requiring prices in export markets that yield higher
returns that are available in domestic market
2 ‘one-price’ strategy
3 pricing to yield lower returns, at least in short run
4 pricing to sell production in excess of domestic
needs
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Trade financing: methods of
payment
• Cash in advance
• Documentary letters of credit
– revocable credits
– irrevocable credits
– confirmed credits
• Draft (bill of exchange): the instrument normally used in international commerce to effect
payment.
– drawer (‘maker’) and drawee
– sight drafts and time drafts
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ANZ BANK
L / C
AUSTRALIAN EXPORT SALE
TO EUROPE
European Bank
Aussie Exporter
European Importer
Export sale with payment by L/C
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Trade financing: bank finance
• Credit to importer
– supplier credit (by the exporter)
– buyer credit (directly to the foreign
buyer)
• Short term (up to 2 years)
• Medium term (2–5 years)
• Long term (over 5 years)
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Trade financing: non-bank finance
• Government loans and guarantees (export credit insurance): EFIC, COFACE
• Factoring
of 2–4%
• Forfeiting
• Countertrade
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Countertrade
• Main forms
– barter
– offsets (local content)
• Proactive vs reactive counter trade
• Disadvantages: time-consuming; costly
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Government loans and guarantees
• Export credit insurance-guarantee
programs
• France: over 20% of exports
• Japan: low interest loans to export
companies
• Brazil: favourable exchange rates to
exporters
• US–EXIMBANK
– ‘mixed credit’
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Australian exporters
• Small size by international standards
US$300m)
billion)
• Primary products dominate the top 50 placings
• ETMs: the fastest growing export sector
• Foreign ownership plays a dominant role
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Selected indicators regarding top 50
exporters in Australia and Canada
Australia (1996–97) Canada (1999)
Range of exports sales
(US$ million)
Median of export sales for
top 50 (US$ million)
570 510
Break-down of top 50 exporters by main export line (% out of 50) primary products (%) machinery & equipment (%) other manufactures (%) services (%) 68
10
12
10
10
28
48
14
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Export management for the MNE
• More international options
(exports and foreign production)
• Exports of complete products or only parts
• Changes in foreign business strategy
(step 5 – business plan)
• More local market knowledge than non-MNEs
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SMEs in global business activities
• Worldwide: 37,000 transnational
enterprises with over 205,000 affiliates
• Contribution of SMEs to nation's exports
– Taiwan 60%
– Sweden 30%
– France 26%
– Australia <10%
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Australia's small and medium
enterprises
• Total number of Australian SMEs: about 530,000
• Internationalised small and medium enterprises (ISMEs)
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Import management
• Importing a neglected aspect of
international business strategy
• Importing channels: direct and indirect
• Importing a part of the purchasing function
• MNE imports from off-shore manufacturing affiliates