Export routes

1. Export routes

2. Exporting, different options Advantages and disadvantages of each option discussed on page 268~269

3. Export - Foreign Buyer Advantages - costs minimized - can communicate directly with your customer Disadvantages - internal specialists needed - the buyer may not know a lot about the import process - the exporter takes a big risk page 268~269

4. Export - Domestic Export Intermediary - Foreign Buyer Advantages - have specialized expertise so fewer mistakes, can effect costs - your firm’s internal resources not tied up in exporting- some financial risk transferred to export intermediary Disadvantages - export intermediary will cost money, sometimes, than adding this job description on to existing staff you do not deal direct with the customer and may miss receiving important feedback page 268~269

5. Export - Foreign Intermediary - Foreign Buyer Advantages - they have specialized knowledge of the foreign environment - they have good contacts in shipping and government, customs, docks, railines etc. Disadvantages - they have add in costs which you cannot verify - they can block or hinder direct communication with the customer/buyer - you still have to have the expertise on the export side page 268~269

6. Export - Export Intermediary - Foreign Intermediary - Foreign Buyer Advantages - staff can focus on core activity of producing the product - almost complete avoidance of risk cause others Disadvantages - complete reliance on others at both ends - costs are higher when more people involved page 268~269

7. Export - Magazine publisher - Mail Order - Foreign Buyer Advantages - can control how much you produce (JIT) you ship out - can eliminate many customs procedures for personal orders - you can directly provide custom made service & product Disadvantages - shipping small packages each time is costly - you need some person in the host country to receive rejections, warranty and handle complaints - unless you can do this from home

8. Export - On Line Service - Foreign Buyer Advantages - costs minimized - you receive their money in advance, usually - can communicate directly with your customer - by email/tel - a lot of info can be provided about using the product (better info on using a product leads to better customer satisfaction) Disadvantages - customer hesistant with payment methods not secure - not many brand names available, usually only small companies

9. Exporting, the options

10. Transportation Issues Transportation costs are a major consideration in the physical movements of products from point of production to the foreign buyer. 5 Major forms • Air Transport • Electronic Transport • Rail Transport - handles 40 foot containers • Truck Transport - handles 40 foot containers • Sea Transport - handles 40 foot containers

11. Payment Methods an important consideration in the export process • payment in advance - eliminates risk to the seller • extend credit - encourages the buyer • specification of the currency of the payment

12. Export - Documentation • Bills of lading • Commercial invoices • Export licenses • Insurance certificates • Certificate of product of origin • Inspection certificates • Payment documents - most common is LC • “confirmed and irrevocable” page 272

13. Product Preparation • packaging • extremely important so the product arrives in good condition • has to arrive at the destination in good shape • labeling • correct information regarding product standards • translation if necessary

14. Intermediate level of foreign involvement • Licensing • involves granting the right to use patents, logos and trademarks to mfg. a product exactly similar to that made in the home country • contracting • most contracts involve a licensing agreement as part of the negotiations • foreign contractors mfg. products for sale in the host country, and sometimes also produce for the home country • franchising • have to determine if the market will appreciate the same product/service as home country does • can you transfer factors of success

15. Advanced level of foreign involvement“Ownership” • establishing a subsidiary operation • or buying an existing operation • both strategies imply a long-term commitment • more difficult • more expensive • more time consuming • involves more people from head office

16. Advanced level of foreign involvement“100% Ownership” • Advantages • more decision making control • eliminates need to bargain with local shareholders • no sharing of profits • Disadvantages • greater risk - no local partner for “protection” • no sharing of losses • may draw hostile attention • political risk is higher

17. Advanced level of foreign involvement“100% Ownership” page 279 Public Sale of Shares - selling shares in foreign operations on the open market • raises capital from regional people • helps to reduce political risk • can still maintain control • good way to raise additional money ownership fadeout • over time, the company reduces its ownership from a minority position - to eventually zero

18. Ownership p. 280~282 • Low Ownership • this option popular when a co. does not have the money to pay for everything, or may not have experienced management and is willing to let a partner lead

19. Ownership • Joint ventures • shared ownership • have become quite common in int’l business • spreading the initial investment costs helps reduce the risk • different skills can be complimentary • choosing the right partner is very important • Joint Ventures between competitors(Elf from France and Chevron from USA in the Congo)(Beijing Jeep, GMC with Shanghai ???)

20. Ownership • Joint ventures with government • Host Govts often act as local partners in big Joint Ventures • especially true when Host Govt controls access to resources • decision making in gov’t depts is slower than in companies • problems happen when a change in government occurs • political risk ~ nationalization, expropriation • govt staff in certain countries need bribes generally, host governments are not very good p. 282-283

21. Making JV’s Successful • detailed examination of a particular partner • want to avoid an unhappy endingKEY CONSIDERATIONS • do a limited project first, if possible • don’t let your experts get hired away by larger partner • legal protection is not enough - there has to be a genuine spirit of co-operation for the better good • keep the mission/goals/objectives small and well defined • have clear performance measures which are agreed upon • ie. by this date we will have this done ...... • limit the time frame - sunset date • have a “prenuptial” agreement outlining what to do in a breakup

22. Strategic Alliances page 286 • involve non-equity arrangements • examples, a new product, DVD, a new process technology • examples, SONY, HITACHI, TOSHIBA developing a strategic alliance to launch DVD • example, several recycling companies developing an alliance to have access to a source of used material provided by local municipal waste management govt • Strategic alliances do not create a new company with shared ownership

23. Strategic Alliances Strategic Alliances are increasing • reasons • technological change • global competition • firms do not have enough resources to launch a new product globally • shared access to limited resources • co-operation to access to new customer • some govt legislation prevents such alliances as anti-trust and anti-monopoly - ie. computer software, oil, banking, insurance, shipping and air travel