Export Management December 14, 2006

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Export ManagementDecember 14, 2006

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Export versus Import

• Why would countries have problems with more
  imports than exports?
• How are these two affected by political actions?
• What does Fair Trade have to do with all of this?

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The export process
Information search
Canvassing
Negotiation
Transport / Carriage
Payment
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Common export techniques

• Canvassing choice of actions, insurance
• Negotiation objectives, phases
• Transport export documents, incoterms
• Payment bank documents, documentary credit

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Canvassing

• What is it?
• Search for potential partners (intermediaries)
  and/or potential clients
• Closely related to the choice of entry mode
• Objectives
• Qualitative choice of partner, relationship,
  coherency
• Quantitative numbers, sales potential,
  profitability, margins

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Identifying potential partners and clients

• Events organized by UE, France, and other
  countries to help exporters
• Use embassy commercial services (Missions
  économiques)
• Buy list from private providers (Kompass,
  Europages)

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Choice of actions
Search for partners in France Search for potential partners/clients abroad
Actions in France Direct marketing in France (mail, phone, e-mail) Participate in trade fairs and other events in France Direct marketing aimed at foreign partners/clients Contact with foreign delegations Invite future partners to France
Actions abroad Trade missions in foreign market Participate in trade fairs and other events in foreign markets
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Choice of actions
COSTS
Low
High

Mail Phone Mission France Invitation Mission abroad Trade fair in France Trade fair abroad
EFFECTIVENESS
High
Low
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Costs are high and effectiveness low we may
want to carry insurance

• So, in other words if possibly the outcomes maybe
  negative rather than positive you are gambling on
  losing everything without insurance
• Think about it personally why should we carry
  insurance on items?

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Canvassing insurance

• Most governments offer some type of canvassing
  insurance to their exporters
• Coface insures financial costs and risks
  related to the search of foreign partners/clients
• For firms with sales lt 150 million
• Concerns all costs market research, product
  adaptation, participation in trade events,
  advertising, HR costs

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Other financing/insurance options

• Banks
• Other types of regional/national/international
  companies

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After canvassing comes

• Negotiation

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International negotiation

• What is negotiated or negotiation?
• In international business, partners have a
  different perception of negotiation, a different
  way of thinking and acting
• Cultural dimension openness and understanding of
  other cultures, effective communication in spite
  of differences

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How to persuade someone

• In negotiation isnt there persuasion?
• How to you get someone to think like you?
• How do you get them to instantly like you?
• Arent these the million dollar questions?
• Lets see what Dr. Lierberman would say on the
  subject? (Not Dr. Phil)

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Negotiation phases

• Pre-negotiation determine who, what, when,
  where date and agenda
• Introduction first impressions and positions
• Observation collect information on partner and
  objectives
• Adjustment/Concession heart of negotiation,
  negotiation strategies, consensus in compliance
  with initial goals
• Conclusion formalize and finalize agreement

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Styles of negotiation
France USA Japan
Debate, conflict Protocol, etiquette Affectivity, emotions Important hierarchy Philosophical reasoning Lively conversation High involvement Precision expected Centralized decisions Expect to wait -Problem-solving, business is business -Horizontal relations -Informal, direct, verbal -Logical process -Check-list -Short term orientation -Competitive -Limited flexibility -Written agreement -Importance of group, team -Vertical relations -Rituals (cards, gifts) -Importance of non-verbal -Time-consuming -Long term orientation -Buyer dominates -Manipulation of information -Search for consensus
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Incoterms

• Incoterms international commercial terms (1936,
  2000)
• ICC international rules that are accepted by
  governments, legal authorities and practitioners
  worldwide for the interpretation of the most
  commonly used terms in international trade,
  they are at the heart of world trade.
• Rights and obligations of the parties to the
  contract of sale with respect to the delivery of
  goods sold
• Reduce or remove uncertainties arising from
  differing interpretations of terms in different
  countries
• Delivery, transfer of risks, division of costs

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Incoterms

• Three letter abbreviation, followed by a
  destination (named place). Ex EXW Angers
• 13 Incoterms divided into 4 categories
• E the seller only makes the goods available to
  the buyer at the sellers own premises.
• F the seller is called upon to deliver the goods
  to a carrier appointed by the buyer
• C the seller has to contract for carriage, but
  without assuming the risk of loss or damage to
  the goods or additional costs due to events
  occurring after shipment or dispatch
• D the seller has to bear all costs and risks
  needed to bring the goods to the place of
  destination

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Important documents

• Bill of lading (B/L) proof of carriage and title
  of goods (evidence of title to the goods for
  collection by the purchaser)
• Issued after mates receipt
• Straight consignee or to order (negotiable
  instrument)
• Reserves clean/dirty
• Fiata B/L when issued by transit agent
• Airway bill (AWB) proof of board and carriage
• Joint/groupage collective AWB
• Exclusive house AWB
• Signature and flight number
• Carriage documents (CMR, trucking B/L, railroad
  B/L) proof of carriage
• Proof of instructions to carrier
• Signature, require at each border

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International payments

• International bank transfer from one account to
  another
• Swift (Society for Worldwide Interbank Financial
  Telecommunication)
• Ipi transfer (International payment instruction)
• Credit card
• Check
• Company check
• Bank check
• Letter of credit documentary credit is very
  popular in international trade

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Documentary credit

• Documentary credit a banks written agreement
  for payment to an exporter against presentation
  of export documents (B/L, AWB, Rail B/L, Truck
  B/L)
• Nature of the credit
• Revocable/irrevocable
• Revocable by issuing bank (provides least
  security to seller)
• Irrevocable cannot be altered without the
  beneficiarys consent (provides more security)
• Confirmed/unconfirmed
• A second bank adds its endorsement to the credit,
  indicating that it too will make payment against
  the specified documents (gives beneficiary
  additional assurance that payment will be made)

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Steps of the confirmed documentary credit

• Buyer and seller enter into the underlying
  contract
• 2. Buyer applies for a letter of credit from
  issuing bank (buyer may pay for letter now or
  later, depending on credit standing)
• 3. Issuing bank instructs confirming bank to pay
  seller on the letter of credit on sellers
  presentation of required documents to confirming
  bank
• 4. Confirming bank pays seller and sends
  documents to issuing bank
• 5. Issuing bank presents documents to buyer
• 6. Buyer presents documents to shipper in
  exchange for goods

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International product policy

• Existence of global product?
• International standard?
• Three common strategies
• Straight extension
• Product invention
• Product adaptation
• Technical adaptation
• Commercial adaptation

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Factors influencing standardization/adaptation
Factors affecting standardization Factors affecting adaptation
Reduced costs Better use of know-how Global image Coherent marketing strategy Better coordination and control Shrinking of world market Cultural differences Govt. and regulatory restrictions Differences in infrastructure Local competition True to marketing concept
Think global, act local, global / local
paradox
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Elements of a product
Augmented product
Installation
Tangible product
Packaging
Core product
Brand name
Features
Core benefit or service
After-sale service
Delivery and credit
Quality
Styling
Adapt or standardize?
Warranty