International Export Strategy

1. International Export Strategy
Sudhanshu Bhatt (https://www.linkedin.com/in/sudhanshu-bhatt-b3665115/)
MBA –IBA
20.05.2023
References
Bulatov, A. (2023). World Economy and International Business Theories, Trends, and Challenges. In Springer. https://doi.org/10.12737/16614
Hill, C. W. L. (2022). Global Business Today 12e Charles.
Hill, C. W. L. (2023). International Business: Competing in Global Marketplace. In McGraw Hill LLC. https://doi.org/10.4324/9780203879412
Shenkar, O., Luo, Y., & Chi, T. (2022). International Business, Routledge. Routledge.
Images sourced from the internet

2. What type of firm benefits from exporting?
• Both large and small firms can benefit from exporting
• The volume of export activity in the world economy is increasing as exporting has
become easier thanks to
• the decline in trade barriers under the WTO
• regional economic agreements such as the European Union and the North
American Free Trade Agreement

3. What do firms that want to export need to do?
• Firms wishing to export must
• identify export opportunities
• avoid a host of unanticipated problems associated with doing business in a
foreign market
• become familiar with the mechanics of export and import financing
• learn where to get financing and export credit insurance
• learn how to deal with foreign exchange risk

4. What are the benefits of exporting?
• The benefits from exporting can be great--the rest of the world is a
much larger market than the domestic market
• Larger firms may be proactive in seeking out new export
opportunities, but many smaller firms take a reactive approach to
exporting
• Many novice exporters have run into significant problems when first
trying to do business abroad, souring them on following up on
subsequent opportunities

5. What are the pitfalls facing exporters?
Common pitfalls for exporters include
• poor market analysis
• poor understanding of competitive conditions
• a lack of customization for local markets, poor distribution
arrangements, bad promotional campaigns
• a general underestimation of the differences and expertise required
for foreign market penetration
• difficulty dealing with the tremendous paperwork and formalities
involved

6. How can exporters improve their performance?
To improve their success, exporters should
• acquire more knowledge of foreign market opportunities
• consider using an export management company
• adopt a successful export strategy

7. Export Management Companies -What assistance
can exporters get from EMC?
Export management companies are export specialists that act as the export
marketing department or international department for client firms
• EMCs
1. start exporting operations for a firm with the understanding that the firm will
take over operations after they are well established
2. start services with the understanding that the EMC will have continuing
responsibility for selling the firm’s products

8. What steps should exporters take to increase their
chances of success?
Exporters:-
1. can hire an EMC to help identify opportunities and navigate paperwork and
regulations
2. start by focusing initially on just one or a few markets
3. enter a foreign market on a fairly small scale in order to reduce the costs of
any subsequent failures
4. recognize the time and managerial commitment involved in building export
sales
5. devote attention to building strong and enduring relationships with local
distributors and customers
6. hire local personnel to help the firm establish itself in a foreign market
7. keep the option of local production

9. Company Readiness to Export

10. Lack of Trust
• Exporters and importers have to trust someone who may be very difficult to track
down if they default on an obligation
• Each party has a different set of preferences regarding the configuration of the
transaction
• Exporters prefer to be paid in advance, while importers prefer to pay after
shipment arrives
• Problems arising from the lack of trust can be solved by using a third party who is
trusted by both - normally a reputable bank
• Various mechanisms for financing exports and imports have evolved over the
centuries in response to lack of trust that exists in export transactions

11. How is payment actually made in an export
transaction?
• Most export transactions involve a draft, also called a bill of exchange
• A draft is an order written by an exporter instructing an importer, or
an importer's agent, to pay a specified amount of money at a
specified time
1. Sight draft is payable on presentation to the drawee
2. Time draft allows for a delay in payment - normally 30, 60, 90, or
120 days

12. Letter of credit
• A Letter of Credit is issued by a bank at the request of an importer
and states the bank will pay a specified sum of money to a
beneficiary, normally the exporter, on presentation of particular,
specified documents.
• This system is attractive because both parties are likely to trust a
reputable bank even if they do not trust each other

13. The bill of Lading
The bill of lading is issued to the exporter by the common carrier transporting the
merchandise: The Bill of Lading is a document issued by the carrier (common carrier or shipping
company) to the exporter (shipper). It serves as proof that the carrier has received the goods from
the shipper for transportation. The carrier issues the Bill of Lading to the exporter after the goods
have been loaded onto the vessel or other mode of transportation. It contains important information
about the goods, such as the quantity, description, packaging, and any specific instructions for
handling or delivery.
The Bill of Lading serves three main purposes:
1. Receipt: As a receipt, the Bill of Lading acknowledges that the carrier has received the goods in the
specified quantity and condition mentioned in the document. It serves as evidence that the goods have
been loaded onto the carrier's vessel or other mode of transportation. The shipper can use the Bill of Lading
as proof of delivery and to track the progress of the shipment.
2. Contract: The Bill of Lading functions as a contract between the shipper (exporter) and the carrier. It
outlines the terms and conditions of the transportation agreement, including the obligations and
responsibilities of both parties. It specifies details such as the agreed-upon freight charges, the destination,
and any special instructions or requirements for the shipment.
3. Document of Title: The Bill of Lading also serves as a document of title to the goods being transported. It
represents ownership or control over the goods. The shipper holds the original Bill of Lading, which
can be transferred or endorsed to another party, enabling them to claim the goods at the destination
port. It can be used for various purposes, including obtaining financing, presenting to customs authorities
for clearance, or transferring ownership during trade transactions.
These three purposes collectively make the Bill of Lading a vital document in international trade and
shipping. It serves as a receipt, a contract, and a document of title, ensuring the smooth and
secure movement of goods from the exporter to the importer.

14. Lack of Trust
Preference of the U.S.
Exporter.
Preference of the French
Importer.

15. Use of 3rd party

16. A Typical International Trade Transaction

17. A typical international trade transaction between
U.S. exporter and the French importer.
1. The French importer places an order with the U.S. exporter and asks the American if he would be
willing to ship under a letter of credit.
2. The U.S. exporter agrees to ship under a letter of credit and specifies relevant information such as
prices and delivery terms.
3. The French importer applies to the Bank of Paris for a letter of credit to be issued in favor of the
U.S. exporter for the merchandise the importer wishes to buy.
4. The Bank of Paris issues a letter of credit in the French importer’s favor and sends it to the U.S.
exporter’s bank, the Bank of New York.
5. The Bank of New York advises the exporter of the opening of a letter of credit in his favor.
6. The U.S. exporter ships the goods to the French importer on a common carrier. An official of the
carrier gives the exporter a bill of lading.
7. The U.S. exporter presents a 90-day time draft drawn on the Bank of Paris in accordance with its
letter of credit and the bill of lading to the Bank of New York. The exporter endorses the bill of
lading so title to the goods is transferred to the Bank of New York.

18. A typical international trade transaction between
U.S. exporter and the French importer.
8. The Bank of New York sends the draft and bill of lading to the Bank of Paris. The Bank of Paris
accepts the draft, taking possession of the documents and promising to pay the now-accepted draft
in 90 days.
9. The Bank of Paris returns the accepted draft to the Bank of New York.
10. The Bank of New York tells the U.S. exporter that it has received the accepted bank draft, which
is payable in 90 days.
11. The exporter sells the draft to the Bank of New York at a discount from its face value and
receives the discounted cash value of the draft in return.
12. The Bank of Paris notifies the French importer of the arrival of the documents. She agrees to pay
the Bank of Paris in 90 days. The Bank of Paris releases the documents so the importer can take
possession of the shipment.
13. In 90 days, the Bank of Paris receives the importer’s payment, so it has funds to pay the
maturing draft.
14. In 90 days, the holder of the matured acceptance (in this case, the Bank of New York) presents it
to the Bank of Paris for payment. The Bank of Paris pays.

19. INCOTERMS
Incoterms (International Commercial Terms) are a set of standardized rules
that define the responsibilities and obligations of buyers and sellers in
international trade. They help both parties understand who is responsible for
tasks like shipping, insurance, customs clearance, and delivery of goods.
1.EXW (Ex Works): The seller's responsibility is to make the goods available
at their own premises. The buyer is responsible for all transportation,
customs clearance, and risks associated with delivering the goods to the
final destination.
2.FCA (Free Carrier): The seller delivers the goods to a carrier or another
person nominated by the buyer at a specific location. The seller is
responsible for export clearance, while the buyer takes care of
transportation, import clearance, and any risks after the delivery.
3.FAS (Free Alongside Ship): The seller is responsible for delivering the
goods alongside the vessel at the designated port. The buyer handles all
further transportation, insurance, and risks from that point.
4.FOB (Free On Board): The seller's responsibility is to deliver the goods on
board the vessel at the specified port. The buyer takes care of
transportation, insurance, and risks from that point.

20. INCOTERMS
5. CFR (Cost and Freight): The seller is responsible for the costs and freight to transport the
goods to the named destination port. However, the risk transfers to the buyer once the goods
are loaded onto the ship.
6. CIF (Cost, Insurance, and Freight): Similar to CFR, the seller is responsible for costs, freight,
and also insurance to transport the goods to the named destination port. The risk transfers to
the buyer once the goods are loaded onto the ship.
7. CPT (Carriage Paid To): The seller arranges and pays for the transportation of the goods to
the named destination. However, the risk transfers to the buyer once the goods are handed over
to the carrier.
8. CIP (Carriage and Insurance Paid To): Similar to CPT, the seller arranges and pays for
transportation and insurance to the named destination. The risk transfers to the buyer once the
goods are handed over to the carrier.
9. DAT (Delivered at Terminal): The seller is responsible for delivering the goods to a named
terminal at the destination port or place. The buyer takes care of unloading, customs clearance,
and further transportation.
10. DAP (Delivered at Place): The seller is responsible for delivering the goods to the buyer at a
named place. The seller bears the risk and cost until the goods are unloaded at the specified
destination.
11. DDP (Delivered Duty Paid): The seller is responsible for delivering the goods to the buyer at
the named place and covers all costs, including duties, taxes, and customs clearance. The
buyer is only responsible for unloading the goods at their premises.

21. Source: https://stenn.com/resources/blog/incoterms-2022

22. Where can exporters get financing help?
(US context)
U.S. exporters can draw on two forms of government-backed assistance to help their
export programs
1. they can get financing aid from the Export-Import Bank
2. they can get export credit insurance from the Foreign Credit Insurance Association
The Export-Import Bank (Eximbank) is an independent agency of the U.S.
government. Its mission is to provide financing aid that will facilitate exports,
imports, and the exchange of commodities between the U.S. and other
countries
Export Credit Insurance - In the U.S., export credit insurance is provided by
the Foreign Credit Insurance Association (FICA). FICA provides coverage
against commercial risks and political risks

23. Where can exporters get financing help?
(Indian context)
1.Export Credit Guarantee Corporation of India Ltd. (ECGC): ECGC is a government-owned
company that provides export credit insurance to Indian exporters. It offers various insurance
products to protect exporters against commercial and political risks associated with export
transactions. ECGC provides coverage for non-payment, insolvency of buyers, and political risks
such as war, import restrictions, or currency inconvertibility.
2.Reserve Bank of India (RBI): The RBI plays a significant role in facilitating and regulating India's
foreign trade. It provides guidelines and regulations related to export financing, foreign exchange,
and trade finance. Indian exporters can refer to RBI's policies and guidelines to understand the
financial and regulatory aspects of their export activities.
3.Export Promotion Councils (EPCs): EPCs are industry-specific organizations established by the
Government of India to promote and support exports in various sectors. There are multiple EPCs
covering sectors such as textiles, engineering, pharmaceuticals, gems and jewelry, and more.
These councils provide market intelligence, export promotion activities, assistance in trade fairs
and exhibitions, and networking opportunities for Indian exporters.
4.Indian Banks and Financial Institutions: Several banks and financial institutions in India offer
export finance and credit facilities to exporters. These institutions provide working capital finance,
pre-shipment and post-shipment finance, export factoring, and other trade finance services to
support exporters in their export transactions.
5.Directorate General of Foreign Trade (DGFT): The DGFT is a government department
responsible for formulating and implementing India's foreign trade policies. It provides guidance,
information, and support to exporters regarding export-import regulations, export promotion
schemes, export incentives, and export documentation requirements.

24. Popular International Carrier
1.Maersk Line: Maersk Line is one of the world's largest container shipping companies. It
operates a vast network of vessels and offers a range of container shipping services, including
Full Container Load (FCL) and Less than Container Load (LCL) shipments.
2.Mediterranean Shipping Company (MSC): MSC is another major global container shipping
company. It operates a large fleet of container vessels and provides services for containerized
cargo transportation worldwide.
3.CMA CGM: CMA CGM is a French container transportation and shipping company. It offers a
comprehensive range of container shipping services, including door-to-door transportation,
specialized cargo handling, and logistics solutions.
4.Hapag-Lloyd: Hapag-Lloyd is a German-based container shipping company with a global
presence. It provides containerized shipping services for a wide range of cargo, including
specialized goods.
5.Evergreen Line: Evergreen Line is a Taiwan-based container shipping company. It operates a
global network of vessels and offers container shipping services to various destinations.
6.COSCO Shipping Lines: COSCO Shipping Lines is a Chinese state-owned shipping company.
It provides container shipping services and has an extensive global network.
7.A.P. Moller-Maersk: A.P. Moller-Maersk is a Danish conglomerate that operates in various
industries, including shipping and logistics. It owns Maersk Line, which is one of its core
business units.
8.NYK Line: NYK Line, or Nippon Yusen Kaisha, is a Japanese shipping company that offers a
wide range of transportation services, including container shipping, bulk shipping, and car
transportation.

25. • To be Continued……………………..