MODES OF ENTRY INTO INTERNATIONAL MARKETS:Export intermediaries, Export and import management

<< INTERNATIONAL MARKETING RESEARCH PROCESS:Problems with data, Comparative Analysis

MODES OF ENTRY INTO INTERNATIONAL MARKETS:Licensing contract, Licensing risks >>

International Marketing MKT630

Lesson # 22

MODES OF ENTRY INTO INTERNATIONAL MARKETS

Exporting

Modes of entry into international markets:

Exporting

International Licensing

International Franchising

Specialized Modes

Foreign Direct Investment

Countertrade

Exporting:

· Simple mode of internationalizing a domestic business

· Advantages

allows a firm to quickly enter the foreign market

often involves less financial exposure

permits a firm to enter a foreign market gradually, and in this way allows it to assess local

conditions and fine-tune its products to better suit the needs of the customers in the host country

· Disadvantages

little control over marketing and distribution in the host country

can quickly lose market to other firms

in case of many goods, transportation costs may be high rendering the exported products too

expensive for host markets

Forms of exporting:

Indirect exporting

occurs when a firm sells its products to a domestic customer, who in turn exports the product, in

either its original form or a modified form

Direct exporting

involves sales to customers - either distributors or end-users - located outside the firm's home

country

Intracorporate transfers

is selling of goods / services by a firm in one country to an affiliated firm in another

Export intermediaries:

· Export management companies

a firm which acts as a client's export department - an EMC's staff are typically knowledgeable

about the legal, financial and logistical details of exporting and importing.

can be commission agents or may take title of goods by profiting from the difference between

International Marketing MKT630

local buying price and selling price to the foreign customer

· Enterprise networks

a group of companies producing related or complementary products pooling resources together to

form marketing companies

· International trading companies

are firms which are directly engaged in importing and exporting a wide variety of goods on their

own account

Export and import management:

Terms of Shipment

· Ex-works (EXW) - at the point of origin

The exporter agrees to deliver the goods at the disposal of the buyer to the specified place on the

specified date or within a fixed period. All other charges are borne by the buyer.

· Free Alongside Ship (FAS) - at a named port of export

The exporter quotes a price for the goods, including charges for delivery of the goods alongside a

vessel at a port. The seller covers the costs of unloading and wharfage. Loading onto the ship,

ocean transportation, insurance, unloading and wharfage at a port of destination and transport to

the site required by the buyer are on the importer's account.

· Free on Board (FOB) - at a named port of export

In addition to FAS, the exporter undertakes to load the goods on the vessel to be used for ocean

transportation and the price quoted by the exporter reflects this cost.

· Cost and Freight (CFR) - to a named overseas port of disembarkation

The exporter quotes a price for the goods, including the cost of transportation to a named

overseas port of disembarkation. The cost of insurance and the choice of the insurer are left to the

importer.

· Cost, Insurance and Freight (CIF) - to a named overseas port of disembarkation

The exporter quotes a price including insurance and all transportation and miscellaneous charges

to the port of disembarkation from the ship or aircraft. CIF costs are influenced by port charges

(unloading, wharfage, storage, heavy lift, demurrage), documentation charges (certification of

invoice, certification of origin, weight certificate) and other miscellaneous charges (fees of freight

forwarder, insurance premiums).

· Delivery Duty Paid (DDP) - to an overseas buyer's premises

The exporter delivers the goods with import duties paid including inland transportation from the

docks to the importer's premises.

Terms of payment of an export transaction:

· Cash with order

Cash payment when order is placed

· Confirmed irrevocable letter of credit

A letter of credit issued by the importer's bank and confirmed by a bank, usually in the exporter's

country. The obligation of the second bank is added to the obligation of the issuing bank to honor

International Marketing MKT630

drafts presented in accordance with the terms of credit.

· Unconfirmed irrevocable letter of credit

A letter of credit issued by the importer's bank. The issuing bank still has an obligation to pay.

· Revocable letter of credit

A letter of credit that may be withdrawn from the beneficiary at any time without prior notice to

the exporter. It does not carry a bank's obligation to pay.

· Sight Draft

A draft so drawn as to be payable on presentation to the drawee (usually the buyer).

· Time Draft

A draft maturing at a certain fixed time after presentation or acceptance.

· Open Account

No draft drawn; transaction payable when specified on invoice.

· Consignment

A shipment that is held by the importer until the merchandise has been sold, at which time

payment is made to the exporter.

Other export documents / terms:

· A bill of lading

is a contract between the exporter and the shipper indicating that the shipper has accepted

responsibility for the goods and will provide transportation in return for payment.

A straight bill of lading is non-negotiable.

A shipper's order bill of lading is negotiable; it can be bought, sold or traded while the goods are

still in transit, (title of goods can change hands) - normally the original bill of lading is needed to

take possession of goods.

· Air way bill a contract between the exporter and the air-cargo company.

· Country of origin certificate certifying where the goods were manufactured

· Commercial invoice / Consular invoice from consulate office of importing country in importing

country language

· LC margin a percent of payment of the total import amount paid by the importer to his bank for the

bank to issue a letter of credit for the whole value of the import

· Pre-Shipment inspection inspection of the goods done by or on behalf of the importer before the

shipment

· Export packing list a list in the export documents listing the packaging and items in each packing

· Insurance certificate issued by an insurer for the insurance of the export merchandise

· Export / Import registration required in various countries to allow firms to import or export goods

· Export / Import license a license needed in some countries for specific imports or exports

International Marketing MKT630

· Freight forwarder a company involved in packing and shipment of export goods

· Customs / Clearing Agent company involved in dealing with the customs clearance of imported or

exported goods

· Bonded warehouse a designated warehouse where imported goods may be stored prior to the

payment of import duties. Importers pay customs duties when they take the goods out of the bonded

warehouse

· Marking of the shipments markings on the outer packaging of the export consignment for the

purpose of identification

· Marine cargo insurance (special one time / open policy) export goods' insurance for the

transportation

· Containers metal containers ( normally 20 or 40 feet long) for safe transportation of cargo by sea

· Bulk-break normally goods are transported by sea in large metal containers some exporters may

not have enough cargo to fill a container then the cargo companies combine cargos from a number of

exporters to fill a container for shipment to a destination

Table of Contents: