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Export and Import Strategies: Phases, Modes, and Documentation

This article explores the different phases of export development, including initial exporting and advanced stages. It also discusses export entry modes such as indirect export, direct export, and cooperative export. Furthermore, the article delves into import strategies and the role of customs agencies in facilitating the import process.

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Export and Import Strategies: Phases, Modes, and Documentation

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  1. Preengagement • Companies selling goods and services solely in the • domestic market • Those companies considering but not currently exporting Phase 1 • Initial Exporting • Companies that do sporadic, marginal exporting • Companies that see lots of potential in export markets • Companies unable to cope with exporting demands Phase 2 • Advanced • Companies become regular exporters • Companies gain extensive overseas experience • Companies may use other strategies for entering markets Phase 3 Export and Import Strategies Phases of Export Development

  2. Export Entry Mode A firm’s products are manufactured in the domestic market or a third country, and then transferred either directly or indirectly to the host market. • Indirect export • Direct export • Cooperative export

  3. Indirect Export Mode • Using independent organizations located in the producer’s country. • The sale is like a domestic sale. • Least cost and risk • Potential problem with this mode?

  4. Indirect Export Mode (cont’) Export buying agent (export commission house) Broker Export management company/export house Trading company Piggyback

  5. Direct Export Modes Sells directly to an importer or buyer located in a foreign market area, including export through foreign-based agents and distributors (independent intermediaries). • Distributors -- the exclusive representatives of the company and are generally the sole importers of the company’s product in their markets. -- often take care of the after-sale service -- paid according to the difference b/t the buying and selling prices • Agents -- could be exclusive, semi-exclusive, and non-exclusive in representing export companies -- works on behalf of exporter but do not buy products. -- paid by commission

  6. Choice of an Intermediary • Asking potential customers to suggest a suitable agent. • Obtaining recommendations from institutions such as trade associations, chambers of commerce and government trade departments. • Using commercial agencies. • Poaching a competitor’s agent. • Advertising in suitable trade papers. Contracts with Intermediaries

  7. Cooperative Export Modes/Export Marketing Groups Small companies ally to export through a common foreign-based agent. E.g., Companies A, B, C A-Living room furniture B-Dinning room furniture C-Bedroom furniture The cooperation among the manufacturers can be tight or loose. -- tight: Create a new export association, acting as the exporting arm of all the member companies -- loose: sell their own brands through the same agent.

  8. Freight Forwarder • Freight forwarder—an import or export specialist dealing in the movement of goods from producer to consumer • Intermodal transportation—movement of goods across different modes from origin to destination • Increasing reliance on airfreight

  9. Documentation • Export license • Pro forma invoice • Commercial invoice • Bill of lading • Certificate of origin • Shipper’s export declaration • Export packing list

  10. Export Financing • Method of payment—flow of money across borders requires the use of special documents • Draft (bill of exchange)—the drawer directs the drawee to make a payment • documentary drafts • sight drafts • time drafts

  11. Method of Payment (cont.) • Letter of credit • forms—sight versus time • Revocable • Irrevocable • confirmed letter of credit • open account • usually for members of the same corporation

  12. Export Financing (cont.) • Insurance • Countertrade • Barter—goods are exchanged for goods of equal value without any flow of cash • Offset trade—exporter sells products for cash and then helps to promote exports from the importing country in order to help it earn foreign exchange

  13. Import Strategies • Importing—bringing of goods and services into a country • Results in the importers paying money to the exporter in the foreign country • Two basic types of imports • Industrial and consumer goods and services provided to customers unrelated to exporter • Intermediate goods and services provided to customers that are part of the firm’s global supply chain • Why companies import?

  14. Import Strategies (cont.) • Types of importers include those: • Importing requires expertise in dealing with institutions and documentation • Import broker

  15. Role of Customs Agencies • Customs—a country’s import and export procedures and restrictions • Customs agencies—assess and collect duties and ensure import regulations are adhered to • Broker or import consultants—help importer minimize import duties by: • Valuing products to qualify to receive more favorable duty treatment • Qualifying for duty refunds through drawback provisions • Deferring duties by using bonded warehouses and foreign trade zones • Marking import’s country of origin

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