Exporting provides opportunities to increase profits by accessing larger markets. However, it also presents challenges such as navigating foreign regulations, financing, and cultural differences. Export management companies can help smaller firms overcome these challenges by providing expertise in market analysis, distribution, and paperwork. Establishing trust is also important in export transactions, which is why letters of credit, drafts, and bills of lading involving reputable banks are commonly used. Countertrade arrangements, such as bartering or offset agreements, provide an alternative means of trade for countries with liquidity constraints.
The document provides an overview of exporting, importing, and countertrade. It discusses the promise and pitfalls of exporting, improving export performance, export strategy, export and import financing including letters of credit and bills of lading. It also covers export assistance programs, countertrade arrangements including barter, counterpurchase, offset, buyback, and switch trading.
This document provides an overview of international business. It begins by defining international business as carrying out business activities across national borders, including trade of goods, services, capital, and foreign direct investment. It then discusses the objectives of international business such as sales expansion, resource acquisition, risk minimization, and diversification. Next, it compares international business to domestic business, noting greater complexities in international business from varying political, legal, and cultural environments across countries. It outlines several modes of entering international business, including direct/indirect exports, counter-trade, and contractual agreements. Finally, it lists advantages such as increased welfare, wider markets, reduced effects of business cycles, and opportunities provided to domestic firms.
Lecture 8 - Analyzing International Opportunities and Selecting Entry ModesChormvirak Moulsem
This document discusses screening potential international markets and selecting entry modes. It recommends identifying basic appeal and national business environment factors, then measuring market or site potential. For industrialized markets, factors like competitors and distribution are analyzed. For emerging markets, variables like market size, growth, and infrastructure are considered. The document also discusses difficulties conducting international research and primary/secondary data sources. Finally, it outlines exporting, contractual arrangements like licensing, and investment entry modes like wholly owned subsidiaries and joint ventures.
This document discusses various modes of international market entry for companies looking to expand globally. It describes exporting, both direct and indirect; offshore services; international licensing; franchising; turnkey projects; contract manufacturing; and management contracts. For each entry mode, it provides brief definitions and discusses their pros and cons. Management contracts, turnkey projects, and contract manufacturing are referred to as "specialized entry modes" since they involve shorter-term investments and less financial risk than other options. The document aims to help companies understand the different options available for entering international markets.
This document discusses international trade concepts including exporting, importing, countertrade, and related financing instruments. It provides an overview of why companies export to access new markets and lower costs. When exporting, companies must consider financing, insurance, and currency exchange risks. Countertrade involves trading goods for other goods rather than cash. The document also examines letters of credit, bills of exchange, bills of lading, and other common trade financing tools used between importers and exporters.
This document discusses globalization and international business. It defines globalization as the broadening set of interdependent relationships among people from different parts of the world. International business consists of all commercial transactions between two or more countries. International business differs from domestic business due to physical factors like a country's geography, social factors like laws and culture, and competitive factors in foreign markets. Companies engage in international business to expand sales, acquire resources, and minimize risks.
This document discusses different modes that companies can use to enter international business, including exporting, licensing, franchising, foreign direct investment, and strategic alliances. It describes the key features and differences between indirect exporting, direct exporting, intra-corporate transfers, licensing, franchising, contract manufacturing, management contracts, turnkey projects, greenfield investment, mergers and acquisitions, and joint ventures. It also provides the advantages and disadvantages of each entry mode.
The document provides an overview of exporting, importing, and countertrade. It discusses the promise and pitfalls of exporting, improving export performance, export strategy, export and import financing including letters of credit and bills of lading. It also covers export assistance programs, countertrade arrangements including barter, counterpurchase, offset, buyback, and switch trading.
This document provides an overview of international business. It begins by defining international business as carrying out business activities across national borders, including trade of goods, services, capital, and foreign direct investment. It then discusses the objectives of international business such as sales expansion, resource acquisition, risk minimization, and diversification. Next, it compares international business to domestic business, noting greater complexities in international business from varying political, legal, and cultural environments across countries. It outlines several modes of entering international business, including direct/indirect exports, counter-trade, and contractual agreements. Finally, it lists advantages such as increased welfare, wider markets, reduced effects of business cycles, and opportunities provided to domestic firms.
Lecture 8 - Analyzing International Opportunities and Selecting Entry ModesChormvirak Moulsem
This document discusses screening potential international markets and selecting entry modes. It recommends identifying basic appeal and national business environment factors, then measuring market or site potential. For industrialized markets, factors like competitors and distribution are analyzed. For emerging markets, variables like market size, growth, and infrastructure are considered. The document also discusses difficulties conducting international research and primary/secondary data sources. Finally, it outlines exporting, contractual arrangements like licensing, and investment entry modes like wholly owned subsidiaries and joint ventures.
This document discusses various modes of international market entry for companies looking to expand globally. It describes exporting, both direct and indirect; offshore services; international licensing; franchising; turnkey projects; contract manufacturing; and management contracts. For each entry mode, it provides brief definitions and discusses their pros and cons. Management contracts, turnkey projects, and contract manufacturing are referred to as "specialized entry modes" since they involve shorter-term investments and less financial risk than other options. The document aims to help companies understand the different options available for entering international markets.
This document discusses international trade concepts including exporting, importing, countertrade, and related financing instruments. It provides an overview of why companies export to access new markets and lower costs. When exporting, companies must consider financing, insurance, and currency exchange risks. Countertrade involves trading goods for other goods rather than cash. The document also examines letters of credit, bills of exchange, bills of lading, and other common trade financing tools used between importers and exporters.
This document discusses globalization and international business. It defines globalization as the broadening set of interdependent relationships among people from different parts of the world. International business consists of all commercial transactions between two or more countries. International business differs from domestic business due to physical factors like a country's geography, social factors like laws and culture, and competitive factors in foreign markets. Companies engage in international business to expand sales, acquire resources, and minimize risks.
This document discusses different modes that companies can use to enter international business, including exporting, licensing, franchising, foreign direct investment, and strategic alliances. It describes the key features and differences between indirect exporting, direct exporting, intra-corporate transfers, licensing, franchising, contract manufacturing, management contracts, turnkey projects, greenfield investment, mergers and acquisitions, and joint ventures. It also provides the advantages and disadvantages of each entry mode.
Brief Concepts and Definition
The Barriers
Traditional Trade Theories
Modern Theories of International Trade
Government Intervention & Protectionism
Trade Barriers
The document discusses Michael Porter's Diamond Model, which analyzes the competitive advantages of nations and industries. The model identifies four key attributes that determine national advantage: factor conditions, related and supporting industries, demand conditions, and firm strategy/rivalry. It provides an example analysis of the mobile telecommunications industry using the Diamond Model framework. The model can help organizations identify national-level factors that build advantages and inform internationalization strategies.
This document discusses production strategy and acquiring physical resources for international operations. It covers capacity planning, facilities location planning, process planning, facilities layout planning, and the make or buy decision. It also discusses acquiring raw materials and fixed assets. Key production concerns discussed include quality improvement efforts, shipping and inventory costs, and decisions around reinvestment vs divestment. The document concludes by covering different options for financing business operations such as borrowing, issuing equity, and internal funding.
This document discusses various modes of international trade that companies can use to enter foreign markets. It describes exporting, franchising, licensing, joint ventures, countertrade, turnkey contracts, contract manufacturing, mergers and acquisitions, and third country locations. For each mode, it provides details on what they are, examples, and potential advantages and disadvantages from the perspective of the company. The key modes covered are exporting, franchising, licensing, joint ventures, and mergers and acquisitions.
The Role and Impact of WTO - Why are countries becoming members of the World Trade Organization? What are its roles and impact on the lives of businessmen?
This document discusses various group members and modes of entry for international business. It provides examples of companies like Floreal Knitwear, Toyota Australia, Larsen and Toubro, Oracle Corporation, Pizza Hut, BATA, Apollo Hospitals Group, Toyota Mauritius, Indian Oil Corporation, and Oracle that use different modes of entry such as exporting, turnkey projects, licensing, franchising, joint ventures, and wholly owned subsidiaries. The modes of entry discussed provide both advantages and disadvantages for international market expansion.
Counter trade refers to exchanging goods or services for other goods or services instead of money. Common types of counter trade include barter, counter-purchase, buyback, offset, tolling, and clearing arrangements. Counter trade can help countries with foreign exchange shortages import needed goods and services. However, it also presents challenges in finding appropriate goods to exchange and managing long term agreements. Government organizations like India's STC help facilitate large counter trade agreements between domestic firms and international partners.
Governments intervene in trade for economic and noneconomic reasons. Economically, they aim to protect domestic industries and jobs through measures like tariffs and quotas. Noneconomically, reasons include national security, cultural preservation, and political influence. However, intervention can backfire and harm consumers through higher prices. It may also lead to retaliation. While companies initially seek government protection, they must also innovate and adjust to global competition over time. Measures include relocating production, focusing on market niches, and internal efficiency gains. Overall, the effects of subsidies, quotas and other policies on trade are complex, with both benefits and unintended consequences requiring consideration.
International financial management involves managing finances across borders to maximize shareholder wealth. It emerged as countries liberalized and opened their economies. Managing international finances differs from domestic finances in areas like foreign exchange risk, political risk, market imperfections, and enhanced opportunities. Companies can raise capital abroad through licensing, franchising, subsidiaries, strategic alliances, and exports. Proper international financial management helps organizations operate efficiently in global markets.
The document discusses various considerations for international pricing strategies. It outlines different pricing methods like cost-based pricing, market-based pricing, and competitive pricing. It also discusses factors that affect international pricing such as competition, costs, product differentiation, exchange rates, and economic conditions of importing countries. The document then provides examples of pricing strategies such as using a standard worldwide price, competitive pricing based on market prices, and marginal pricing. It also gives the example of how Tata Nano might be priced if launched in the European market. Finally, it briefly introduces INCOTERMS which are international commercial terms of sale.
This document discusses various methods of payment for export sales, including cash in advance, open account, letters of credit, sight bills, and usance bills. Cash in advance requires upfront payment before goods are shipped. Open account allows goods to be shipped before payment is due, usually within 30-90 days, but carries the highest risk for exporters. Letters of credit provide a bank guarantee of payment if terms are met. Sight bills require payment on delivery of documents, while usance bills allow acceptance of payment within an agreed credit period after delivery.
To introduce the idea of exporting and profile its elements
To introduce the idea of importing and profile its elements
To identify the problems and pitfalls that challenge international traders
To identify the resources and assistance that helps international traders
To discuss the idea of an export plan
To outline the practice of countertrade
Product decisions in International Marketing management includes market segment decision, positioning and communication decisions. The term product decision includes product strategy, product planning and product management.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/ZEcPAc
International marketing involves planning and executing marketing strategies across national borders. There are some key differences between domestic and international marketing. For international marketing, companies must consider various legal, political, cultural, economic and technological factors in different countries. When developing marketing strategies, companies segment target markets and aim to "think globally but act locally". Successful international marketing requires an understanding of cultural and structural differences between countries.
The document discusses several major trade blocs around the world including their objectives and impacts. It provides details on the European Union (EU), describing it as the world's largest trading bloc. It outlines the goals and benefits of the North American Free Trade Agreement (NAFTA) for the US, Canada, and Mexico. It also briefly discusses the South Asian Association for Regional Cooperation (SAARC) and the Association of Southeast Asian Nations (ASEAN) as important trade blocs in other regions.
The document summarizes several theories of international trade, including mercantilism, absolute advantage, comparative advantage, and the Heckscher-Ohlin theory. It also discusses the product life cycle theory proposed by Vernon. Mercantilism held that nations should aim for a trade surplus to accumulate gold and silver. Absolute advantage refers to a country's ability to produce a good at a lower absolute cost. Comparative advantage argues that trade benefits all parties when each country specializes in what it can produce at the lowest relative cost. Heckscher-Ohlin suggests trade patterns are determined by differences in factor endowments like capital and labor. The product life cycle theory proposes that a good will be successively produced and exported from
> To define globalization and international business and show how they affect each other
> To understand why companies engage in international business and why international business growth has accelerated
> To discuss globalization’s future and the major criticisms of globalization
> To become familiar with different ways in which a company can accomplish its global objectives
> To apply social science disciplines to understanding the differences between international and domestic business
> To define globalization and international business and show how they affect each other
This chapter discusses international pricing. It identifies the objectives, factors, and approaches that determine export prices. There are two main types of costs in export marketing: production costs and selling/delivery costs. Pricing is affected by objectives, costs, competition, differentiation, exchange rates, markets, image, and governments. Cost is a key factor along with supply, demand, and competition. The chapter also covers transfer pricing, pricing steps, quotations, and information needs.
This document discusses various barriers to international trade, including tariffs, protectionism, and non-tariff barriers. It outlines arguments for and against protectionism such as protecting domestic industries and jobs. However, tariff barriers can also increase inflation, weaken international relations, and restrict supply sources and consumer choice. The document also examines dumping, the role of the WTO and IMF in facilitating trade, and examples of regional economic communities that promote free trade.
Countertrade is the exchange of goods or services without using money, where payment is made in whole or in part through other goods or services. It occurs when countries lack hard currency or when traditional market trade is impossible. There are several types of countertrade, including barter, switch trading, offset, counterpurchase, buyback, and compensation trade. While countertrade can help conserve foreign currency and facilitate entry into new markets, it also brings risks like uncertain value, complex negotiations, and higher costs.
Countertrade involves exchanging goods or services for other goods or services instead of money, and can take several forms. It is used to address shortage of convertible currencies, liquidity problems, stimulate jobs and industry, and ensure future contracts. The main types of countertrade include barter (direct exchange), switch trading (involving three parties), counterpurchase (reciprocal buying agreements), buyback (partial payment through future plant output), compensation trade (part goods and part currency), and offset (future unspecified product purchase). An example is India's 2000 barter deal with Iraq to exchange wheat and rice for oil.
Brief Concepts and Definition
The Barriers
Traditional Trade Theories
Modern Theories of International Trade
Government Intervention & Protectionism
Trade Barriers
The document discusses Michael Porter's Diamond Model, which analyzes the competitive advantages of nations and industries. The model identifies four key attributes that determine national advantage: factor conditions, related and supporting industries, demand conditions, and firm strategy/rivalry. It provides an example analysis of the mobile telecommunications industry using the Diamond Model framework. The model can help organizations identify national-level factors that build advantages and inform internationalization strategies.
This document discusses production strategy and acquiring physical resources for international operations. It covers capacity planning, facilities location planning, process planning, facilities layout planning, and the make or buy decision. It also discusses acquiring raw materials and fixed assets. Key production concerns discussed include quality improvement efforts, shipping and inventory costs, and decisions around reinvestment vs divestment. The document concludes by covering different options for financing business operations such as borrowing, issuing equity, and internal funding.
This document discusses various modes of international trade that companies can use to enter foreign markets. It describes exporting, franchising, licensing, joint ventures, countertrade, turnkey contracts, contract manufacturing, mergers and acquisitions, and third country locations. For each mode, it provides details on what they are, examples, and potential advantages and disadvantages from the perspective of the company. The key modes covered are exporting, franchising, licensing, joint ventures, and mergers and acquisitions.
The Role and Impact of WTO - Why are countries becoming members of the World Trade Organization? What are its roles and impact on the lives of businessmen?
This document discusses various group members and modes of entry for international business. It provides examples of companies like Floreal Knitwear, Toyota Australia, Larsen and Toubro, Oracle Corporation, Pizza Hut, BATA, Apollo Hospitals Group, Toyota Mauritius, Indian Oil Corporation, and Oracle that use different modes of entry such as exporting, turnkey projects, licensing, franchising, joint ventures, and wholly owned subsidiaries. The modes of entry discussed provide both advantages and disadvantages for international market expansion.
Counter trade refers to exchanging goods or services for other goods or services instead of money. Common types of counter trade include barter, counter-purchase, buyback, offset, tolling, and clearing arrangements. Counter trade can help countries with foreign exchange shortages import needed goods and services. However, it also presents challenges in finding appropriate goods to exchange and managing long term agreements. Government organizations like India's STC help facilitate large counter trade agreements between domestic firms and international partners.
Governments intervene in trade for economic and noneconomic reasons. Economically, they aim to protect domestic industries and jobs through measures like tariffs and quotas. Noneconomically, reasons include national security, cultural preservation, and political influence. However, intervention can backfire and harm consumers through higher prices. It may also lead to retaliation. While companies initially seek government protection, they must also innovate and adjust to global competition over time. Measures include relocating production, focusing on market niches, and internal efficiency gains. Overall, the effects of subsidies, quotas and other policies on trade are complex, with both benefits and unintended consequences requiring consideration.
International financial management involves managing finances across borders to maximize shareholder wealth. It emerged as countries liberalized and opened their economies. Managing international finances differs from domestic finances in areas like foreign exchange risk, political risk, market imperfections, and enhanced opportunities. Companies can raise capital abroad through licensing, franchising, subsidiaries, strategic alliances, and exports. Proper international financial management helps organizations operate efficiently in global markets.
The document discusses various considerations for international pricing strategies. It outlines different pricing methods like cost-based pricing, market-based pricing, and competitive pricing. It also discusses factors that affect international pricing such as competition, costs, product differentiation, exchange rates, and economic conditions of importing countries. The document then provides examples of pricing strategies such as using a standard worldwide price, competitive pricing based on market prices, and marginal pricing. It also gives the example of how Tata Nano might be priced if launched in the European market. Finally, it briefly introduces INCOTERMS which are international commercial terms of sale.
This document discusses various methods of payment for export sales, including cash in advance, open account, letters of credit, sight bills, and usance bills. Cash in advance requires upfront payment before goods are shipped. Open account allows goods to be shipped before payment is due, usually within 30-90 days, but carries the highest risk for exporters. Letters of credit provide a bank guarantee of payment if terms are met. Sight bills require payment on delivery of documents, while usance bills allow acceptance of payment within an agreed credit period after delivery.
To introduce the idea of exporting and profile its elements
To introduce the idea of importing and profile its elements
To identify the problems and pitfalls that challenge international traders
To identify the resources and assistance that helps international traders
To discuss the idea of an export plan
To outline the practice of countertrade
Product decisions in International Marketing management includes market segment decision, positioning and communication decisions. The term product decision includes product strategy, product planning and product management.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/ZEcPAc
International marketing involves planning and executing marketing strategies across national borders. There are some key differences between domestic and international marketing. For international marketing, companies must consider various legal, political, cultural, economic and technological factors in different countries. When developing marketing strategies, companies segment target markets and aim to "think globally but act locally". Successful international marketing requires an understanding of cultural and structural differences between countries.
The document discusses several major trade blocs around the world including their objectives and impacts. It provides details on the European Union (EU), describing it as the world's largest trading bloc. It outlines the goals and benefits of the North American Free Trade Agreement (NAFTA) for the US, Canada, and Mexico. It also briefly discusses the South Asian Association for Regional Cooperation (SAARC) and the Association of Southeast Asian Nations (ASEAN) as important trade blocs in other regions.
The document summarizes several theories of international trade, including mercantilism, absolute advantage, comparative advantage, and the Heckscher-Ohlin theory. It also discusses the product life cycle theory proposed by Vernon. Mercantilism held that nations should aim for a trade surplus to accumulate gold and silver. Absolute advantage refers to a country's ability to produce a good at a lower absolute cost. Comparative advantage argues that trade benefits all parties when each country specializes in what it can produce at the lowest relative cost. Heckscher-Ohlin suggests trade patterns are determined by differences in factor endowments like capital and labor. The product life cycle theory proposes that a good will be successively produced and exported from
> To define globalization and international business and show how they affect each other
> To understand why companies engage in international business and why international business growth has accelerated
> To discuss globalization’s future and the major criticisms of globalization
> To become familiar with different ways in which a company can accomplish its global objectives
> To apply social science disciplines to understanding the differences between international and domestic business
> To define globalization and international business and show how they affect each other
This chapter discusses international pricing. It identifies the objectives, factors, and approaches that determine export prices. There are two main types of costs in export marketing: production costs and selling/delivery costs. Pricing is affected by objectives, costs, competition, differentiation, exchange rates, markets, image, and governments. Cost is a key factor along with supply, demand, and competition. The chapter also covers transfer pricing, pricing steps, quotations, and information needs.
This document discusses various barriers to international trade, including tariffs, protectionism, and non-tariff barriers. It outlines arguments for and against protectionism such as protecting domestic industries and jobs. However, tariff barriers can also increase inflation, weaken international relations, and restrict supply sources and consumer choice. The document also examines dumping, the role of the WTO and IMF in facilitating trade, and examples of regional economic communities that promote free trade.
Countertrade is the exchange of goods or services without using money, where payment is made in whole or in part through other goods or services. It occurs when countries lack hard currency or when traditional market trade is impossible. There are several types of countertrade, including barter, switch trading, offset, counterpurchase, buyback, and compensation trade. While countertrade can help conserve foreign currency and facilitate entry into new markets, it also brings risks like uncertain value, complex negotiations, and higher costs.
Countertrade involves exchanging goods or services for other goods or services instead of money, and can take several forms. It is used to address shortage of convertible currencies, liquidity problems, stimulate jobs and industry, and ensure future contracts. The main types of countertrade include barter (direct exchange), switch trading (involving three parties), counterpurchase (reciprocal buying agreements), buyback (partial payment through future plant output), compensation trade (part goods and part currency), and offset (future unspecified product purchase). An example is India's 2000 barter deal with Iraq to exchange wheat and rice for oil.
This document discusses various counter trade practices such as barter, switch trading, counter purchase, buyback, compensation trade, and offset. It defines each practice and provides examples. Counter trade refers to exchanging goods or services for other goods and services rather than money. Companies often engage in counter trade due to foreign government requirements or to expand sales and improve efficiency. The document outlines reasons for counter trade such as shortage of convertible currency and developing new markets. It also discusses advantages of counter trade like accessing otherwise closed markets and conserving foreign currency reserves.
Counter-trade involves the exchange of goods, services, or technologies between two trading partners, often used when one party lacks cash or other currency to pay for imports. Some pros of counter-trade include allowing international trade when hard currency is scarce and building long-term partnerships between companies. However, counter-trade can be complex to arrange and administer, and valuing goods or services in a barter deal can be difficult compared to monetary exchanges. The document discusses several online sources that outline pros and cons of counter-trade, and how countertrade can be an innovative approach for marketing goods.
This document defines and describes countertrade, which refers to international trade where payment is made in goods or services rather than money. It is used when countries lack hard currency or when traditional market trade is impossible. Countertrade involves two countries or companies that trade goods and services they each want. Types include barter, switch trading, counterpurchase, and buyback. Advantages are additional hard currency, technology gains, and conserving currency reserves, while disadvantages include handling unfamiliar goods. Various firms use countertrade and references are provided.
Counter trade refers to exchanging goods or services for other goods or services instead of money. There are several variants of counter trade including barter, switch trading, counter-purchase, buybacks, and offsets. Offsets involve one company agreeing to purchase a certain amount of products from another country in the future in exchange for a major contract. Counter trade is commonly used to expand into foreign markets, increase sales, access blocked funds, build relationships, and gain future contracts. However, it also presents financial, industrial, and commercial challenges that require careful planning. Trends suggest counter trade is growing in emerging markets and military deals and that obligations are becoming more difficult and costly for companies to fulfill.
Countertrade is the exchange of goods or services for other goods or services, rather than money. It occurs when countries lack hard currency or when traditional trade is impossible. There are six main types of countertrade: barter, switch trading, offset, counterpurchase, buyback, and compensation trade. Countertrade has benefits like conserving foreign currency and increasing sales, but also risks like uncertain value and higher costs.
This document defines and discusses countertrade, which is an exchange of goods or services for other goods or services instead of money, used in international trade when cash payments are difficult. It outlines the history and basic objectives of countertrade, describes common forms like barter, clearinghouse arrangements, switch trade, buyback, counter purchase, and offset agreements. The document also discusses advantages like relieving debt payments and disadvantages like inefficiency. It provides examples of when countertrade can benefit participants and concludes that countertrade will likely continue increasing with global trade.
A presentation (Office 13) describing the shift in India's policy towards foreign collaborations since liberalization. Includes illustrations to support the same. Concept of counter trade arrangements are also mentioned.
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
This document provides an overview of resources available at the University of New Mexico libraries for students. It summarizes key reference tools like MAGIC, LoboVault, and the Center for Southwest Research. It also outlines the different types of sources, the reference interview process, and making referrals to specialized resources when needed. The goal is to train students on how to effectively help patrons find the information they need.
This document provides an overview of countertrading, which involves exchanging goods or services for other goods and services rather than money. It discusses the history of countertrading from pre-World War II to the post-Cold War era. It also defines different types of countertrading such as commercial countertrade including barter and counterpurchase, and industrial countertrade including buybacks and offsets. The document concludes by mentioning examples of countertrading deals and predicting future growth in countertrading through online platforms and proactive corporate strategies.
The document presents an overview of the World Trade Organization (WTO). It discusses the objectives, history, structure, principles, agreements, and role of the WTO. The WTO aims to help trade become more smooth, fair, free and predictable through administering trade agreements and resolving disputes between member nations. It also provides special provisions and assistance to developing countries. The WTO's role is to promote open, fair and undistorted global competition through trade liberalization and economic reforms.
This document provides an overview of organizational behavior. It discusses the importance of interpersonal skills for managers and defines key concepts like management roles and functions. The document also examines the disciplines that contribute to organizational behavior like psychology and sociology. It outlines challenges of OB like globalization and managing diversity. Finally, it defines dependent and independent variables that impact outcomes in organizational behavior.
The Most Challenging economy in Decades Qamar Farooq
This chapter discusses macroeconomic concepts and the factors that influence the stability of an economy. It begins by defining microeconomics as the study of small economic units like individuals and businesses, while macroeconomics examines a nation's overall economy. It then explains the four types of market structures and compares the main economic systems of capitalism, socialism, and mixed economies. The chapter concludes by analyzing how monetary and fiscal policy can be used to manage economic performance and the major global economic challenges faced in the 21st century.
The document discusses various sampling methods used in statistics. It defines key terms like population, sample, sampling, and explains the purposes of sampling. It describes different probability sampling methods like simple random sampling, systematic sampling, cluster sampling and stratified sampling. It also discusses potential sources of bias and error in sampling like sampling error, sampling bias, and non-sampling error. The document provides examples to illustrate different sampling techniques and their advantages and disadvantages.
This document provides an overview of organizational behavior. It discusses the importance of interpersonal skills for managers and defines key concepts like management roles and functions. The document also examines the disciplines that contribute to organizational behavior like psychology and sociology. It outlines challenges of OB like globalization and managing diversity. Finally, it defines dependent and independent variables that are relevant to organizational behavior outcomes.
The document discusses strategic management and entrepreneurship. It outlines the strategic management process for small businesses, including establishing a vision and mission, assessing strengths and weaknesses, identifying success factors, analyzing competitors, setting goals and objectives, formulating strategies, implementing plans, and establishing controls. The key points are that strategic management provides direction and guides a business, and an entrepreneur should focus on strategic thinking, maintain flexibility, and encourage employee participation when developing a strategic plan.
Regression analysis is a statistical technique used to model relationships between variables. It can be used to model both single and multiple relationships between dependent and independent variables. Simple linear regression models a single independent variable, while multiple linear regression models multiple independent variables. Regression analysis aims to minimize the sum of squared errors between observed and predicted values to estimate the relationships.
This document summarizes key concepts from Chapter 15 of the textbook "International Business 7e" by Charles W.L. Hill. It discusses exporting, importing, countertrade, and related concepts. In 3 sentences: Exporting provides opportunities for market expansion but also risks if not properly planned. Firms can utilize various financing and risk mitigation tools for international trade like letters of credit, drafts, and export credit insurance. When conventional payment is difficult, countertrade arrangements like barter, counterpurchase, offset, buyback, and switch trading can facilitate trade through reciprocal exchanges of goods and services.
This document provides an overview of textbook chapters 16-19 which cover topics related to global business including exporting, importing, countertrade, global production, outsourcing, and logistics. Key points include: exporting can increase market size and profits but requires navigating challenges like foreign exchange risk and regulations; common pitfalls of exporting include poor market analysis and underestimating differences in foreign markets; firms can use export management companies or government resources to help with exporting; countertrade arrangements like bartering can help finance exports but involve risks of unusable goods; factors like costs, quality, and responsiveness should influence where companies locate production; outsourcing production requires evaluating make vs buy decisions based on efficiency and asset investments.
1. Countertrade involves bartering goods and services instead of cash payments, and takes various forms like barter, counterpurchase, offset, buyback, and switch trading.
2. India has engaged in countertrade deals, such as exchanging wheat and rice for Iraqi oil.
3. While countertrade can enable trade when cash payments are difficult, it also poses drawbacks like acquiring unwanted goods and needing expertise to handle diverse product categories.
This document summarizes key points from Chapter 15 of the textbook "International Business 7e" by Charles W.L. Hill on the topics of exporting, importing, and countertrade. Some of the main ideas covered include the promise and pitfalls of exporting, improving export performance, export financing mechanisms like letters of credit and bills of lading, utilizing export management companies, and different types of countertrade arrangements.
This document provides an overview of international financial management. It discusses key topics like the balance of payments, determinants of entry modes for international business like exports and counter trade, differences between international and domestic finance, events that increased global trade volumes, and trade agreements. International flow of funds is examined, specifically India's balance of trade. Outsourcing is also discussed as having impacted international trade through increased cross-border purchasing.
International Contracting And Import Finance 1anshiiii
The document discusses various methods of payment in international trade contracts including cash payment, documentary collection, letter of credit, open account, and consignment. It describes key terms like advance payment, documentary collection, letter of credit, open account, and shipment on consignment. Modes of payment like supplier's credit and buyer's credit are also covered along with the requirement for working capital in international trade finance.
This document discusses various options for entering foreign markets, including exporting, licensing, franchising, joint ventures, contract manufacturing, mergers and acquisitions, and fully owned manufacturing facilities. It provides details on each option, describing how they work, their advantages and disadvantages. Overall, the document serves as an overview of common market entry strategies for international business.
There are several options for entering a foreign market. These options vary in cost, risk, and the level of control they provide. One important strategic decision is the mode of market entry. The document then discusses various market entry strategies such as exporting, licensing, franchising, joint ventures, contract manufacturing, mergers and acquisitions, fully owned subsidiaries, countertrade, turnkey contracts, and third country locations. For each strategy, it provides details on how the strategy works, examples, advantages and disadvantages.
The document discusses various strategies and challenges related to international trade, including:
1) Exporting goods to other countries provides opportunities for growth but also risks, as new markets have uncertainties. Financing can be an issue due to the high risk of some emerging markets.
2) Governments and organizations provide resources to help firms navigate exporting, including market research, trade shows, and export management companies. A careful export strategy is advised, starting small and gradually expanding.
3) International trade involves risks that letters of credit and bills of lading help address by building trust between parties in other countries. Government agencies also provide export financing assistance.
The document discusses various strategies and challenges related to international trade, including:
1) Exporting goods to other countries provides opportunities for growth but also risks, as new markets have uncertainties. Financing can be an issue due to the high risk of some emerging markets.
2) Governments and organizations provide resources to help firms navigate exporting, including market research, trade shows, and export management companies. A careful export strategy is advised, starting small and gradually expanding.
3) International trade involves risks that letters of credit and bills of lading help address by building trust between parties in other countries. Government agencies also provide export financing assistance.
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Trade finance is used to mitigate risks in international trade transactions. It exists to reduce payment risk, country risk, and corporate risk. Payment risk is the risk that an exporter will not be paid in full or on time. Country risk refers to risks associated with doing business in a foreign country, such as exchange rate and political risks. Corporate risk relates to the creditworthiness and payment history of the importing/exporting company. Common trade finance tools include letters of credit, documentary collections, open accounts, trade loans, and factoring. Import financing provides credit to importers, while export financing supports exporters. Common import finance types are usance letters of credit, bank guarantees, and invoice financing. Export finance occurs both before and
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2. Why Export?
• Exporting is a way to increase market size and profits
• increasing thanks to lower trade barriers under the WTO and
regional economic agreements such as the EU and NAFTA
• Large firms often proactively seek new export
opportunities, but many smaller firms export reactively
• often intimidated by the complexities of exporting
• Exporting firms need to
• identify market opportunities
• deal with foreign exchange risk
• navigate import and export financing
• understand the challenges of doing business in a foreign market
15-2
3. What Are The
Pitfalls Of Exporting?
• Common pitfalls include
• poor market analysis
• poor understanding of competitive conditions
• a lack of customization for local markets
• a poor distribution program
• poorly executed promotional campaigns
• problems securing financing
• a general underestimation of the differences and
expertise required for foreign market penetration
• an underestimation of the amount of paperwork and
formalities involved 15-3
4. How Can Firms Improve
Export Performance?
• Many firms are unaware of export opportunities
available
• Firms need to collect information
• Firms can get direct assistance from some
countries and/or use an export management
companies
• both Germany and Japan have developed extensive
institutional structures for promoting exports
• Japanese exporters can use knowledge and contacts of
sogo shosha - great trading houses
• U.S. firms have far fewer resources available 15-4
5. What Are Export
Management Companies?
• Export management companies (EMCs) are export
specialists that act as the export marketing department
or international department for client firms
• EMCs normally accept two types of assignments
1. They start export operations with the understanding
that the firm will take over after they are established
• not all EMCs are equal—some do a better job than others
1. They start services with the understanding that the
EMC will have continuing responsibility for selling the
firm’s products
• but, firms that use EMCs may not develop their own export
capabilities
15-5
6. How Can Firms Reduce
The Risks Of Exporting?
• To reduce the risks of exporting, firms should
• hire an EMC or export consultant to identify
opportunities and navigate paperwork and regulations
• focus on one, or a few, markets at first
• enter a foreign market on a small scale in order to
reduce the costs of any subsequent failures
• recognize the time and managerial commitment
involved
• develop a good relationship with local distributors and
customers
• hire locals to help establish a presence in the market
• be proactive
• consider local production 15-6
7. How Can Firms Overcome The Lack
Of Trust in Export Financing?
• Because trade implies parties from different
countries exchanging goods and payment the
issue of trust is important
• Exporters prefer to receive payment prior to
shipping goods, but importers prefer to receive
goods prior to making payments
• To get around this difference of preference,
many international transactions are facilitated
by a third party - normally a reputable bank
• By including the third party, an element of trust
is added to the relationship
15-7
8. How Can Firms Overcome The Lack
Of Trust in Export Financing?
The Use Of A Third Party
15-8
9. What Is A 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
• main advantage is that both parties are likely to trust a reputable
bank even if they do not trust each other
15-9
10. What Is A Draft?
• A draft (also called a bill of exchange) 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
• the instrument normally used in international
commerce for payment
• A sight draft is payable on presentation to the
drawee while a time draft allows for a delay in
payment - normally 30, 60, 90, or 120 days
15-10
11. What Is A Bill Of Lading?
• The bill of lading is issued to the exporter by
the common carrier transporting the
merchandise
• It serves three purposes
1. It is a receipt - merchandise described on document
has been received by carrier
2. It is a contract - carrier is obligated to provide
transportation service in return for a certain charge
3. It is a document of title - can be used to obtain
payment or a written promise before the
merchandise is released to the importer
15-11
12. How Does An International
Trade Transaction Work?A Typical International Trade Transaction
15-12
13. What Is Countertrade?
• Countertrade refers to a range of barter-like
agreements that facilitate the trade of goods
and services for other goods and services when
they cannot be traded for money
• emerged as a means purchasing imports during
the1960s when the Soviet Union and the Communist
states of Eastern Europe had nonconvertible
currencies,
• grew in popularity in the 1980s among many
developing nations that lacked the foreign exchange
reserves required to purchase necessary imports
• notable increase after the 1997 Asian financial crisis 15-13
14. What Are The Forms
Of Countertrade?
• There are five distinct versions of countertrade
1. Barter - a direct exchange of goods and/or services
between two parties without a cash transaction
• the most restrictive countertrade arrangement
• used primarily for one-time-only deals in transactions with
trading partners who are not creditworthy or trustworthy
1. Counterpurchase - a reciprocal buying agreement
• occurs when a firm agrees to purchase a certain amount of
materials back from a country to which a sale is made
1. Offset - similar to counterpurchase insofar as one party
agrees to purchase goods and services with a specified
percentage of the proceeds from the original sale
• difference is that this party can fulfill the obligation with any firm in
the country to which the sale is being made
15-14
15. What Are The Forms
Of Countertrade?
4. A buyback occurs when a firm builds a plant in a
country—or supplies technology, equipment, training,
or other services to the country—and agrees to take a
certain percentage of the plant’s output as a partial
payment for the contract
5. Switch trading - the use of a specialized third-party
trading house in a countertrade arrangement
• when a firm enters a counterpurchase or offset agreement
with a country, it often ends up with counterpurchase credits
which can be used to purchase goods from that country
• switch trading occurs when a third-party trading house buys
the firm’s counterpurchase credits and sells them to another
firm that can better use them
15-15
16. What Are The
Pros Of Countertrade?
• Countertrade is attractive because
• it gives a firm a way to finance an export deal when other means
are not available
• it give a firm acompetitve edge over a firm that is unwilling to
enter a countertrade agreement
• In some cases, a countertrade arrangement may be required
by the government of a country to which a firm is exporting
goods or services
15-16
17. What Are The
Cons Of Countertrade?
• Countertrade is unattractive because
• it may involve the exchange of unusable or poor-
quality goods that the firm cannot dispose of
profitably
• it requires the firm to establish an in-house trading
department to handle countertrade deals
• Countertrade is most attractive to large, diverse
multinational enterprises that can use their
worldwide network of contacts to dispose of
goods acquired in countertrade deals 15-17
Editor's Notes
Chapter 15: Exporting, Importing, and Countertrade
If you’ve ever bought something over eBay from a foreign seller, you’ve been directly involved in an export transaction.
Many of the products you use everyday are imported from other countries.
In fact, thanks to the decline in trade barriers promoted by the WTO and regional agreements like NAFTA and the EU, exporting and importing have become easier than ever.
Because it’s easier, we’ve seen the volume of exporting increasing in recent years. Today, firms of all sizes engage in exporting, and face the challenges of identifying export opportunities, dealing with the problems of doing business in foreign markets, working through the process of export financing and getting insurance, and learning how to protect themselves against foreign exchange risk.
We’ve touched on some of these areas in earlier chapters, but in this chapter, we’ll look at the process of exporting and importing in more depth.
Why is exporting attractive?
Well, by exporting, firms can quickly increase the size of their market.
Rather than simply relying on the domestic market for their revenues, by exporting, firms can increase their profits by viewing the world as their market.
As you’ll see in the Management Focus in your text, FCX Systems was able to substantially increase its market by exporting. Similarly, recall from the Opening Case that MD International successfully built a business exporting medical equipment to Latin America.
Despite the opportunities however, we know that while many large firms are proactive about exporting, smaller firms often wait for export opportunities to come to them. We say they take a reactive approach to the process.
Sometimes, this lack of initiative by smaller companies occurs because the firms don’t really know just how great the opportunities are, nor how to pursue them.
In some cases, a bad export experience in the past, can keep a firm from pursuing new export opportunities. In addition, novice exporters sometimes fail to realize just what’s involved in the exporting process, and then react negatively when something goes wrong.
What are the disadvantages of exporting?
Firms can run into numerous pitfalls when they begin exporting including doing a poor market analysis, having a poor understanding of competitive conditions, using a marketing effort that fails to recognize both the need to customize a product or to make appropriate distribution arrangements and promotional campaigns, and simply having a general lack of understanding of the skills required to enter a foreign market.
Some firms are also surprised at the amount of paperwork involved in exporting.
How can firms improve their export performance?
One way to improve the chance for success is to take advantage of export assistance programs that are offered by governments, or hire an export management company.
What type of assistance is available?
The type of assistance offered varies by country.
Germany and Japan for example, have developed extensive institutional structures for promoting exports.
You may have heard of Japan’s Ministry of International Trade and Industry or MITI for instance.
Japanese firms can also take advantage of the knowledge and contacts of the sogo shosha, the country’s great trading houses that have offices and contacts all over the world.
In Germany, trade associations, government agencies, and commercial banks all provide export assistance to firms.
Some companies prefer to hire another company to handle their exporting.
Export management companies, or EMCs, are export specialists that act as the export marketing department or international department for their clients.
EMCs usually work in two different ways.
One way involves setting up the exporting operations for a firm with the understanding that the client will take over once things are established.
The other way involves setting up the exporting process for the client, and then continuing to manage it for the firm.
It’s important to recognize that while the advantage of hiring an EMC is that the EMC is a specialist that should be able to avoid many of the pitfalls of exporting, in reality, the quality level of EMCs varies, so firms need to be careful with their selection process.
Firms can also reduce the risks associated with exporting by choosing their export strategy carefully.
It can be helpful to hire an EMC or other experienced export consultant to help identify the best opportunities and navigate the paperwork and regulations involved in the process.
Firms can also minimize risk by entering the market on a small scale initially, and then expanding once the market is a proven thing.
3M follows this type of strategy. It initially enters a market on a small scale, and then adds in additional products once the market has proven to be successful. 3M also hires locals to promote its products. You can learn more about 3M’s strategy in the Management Focus in your text.
Firms also need to recognize that developing a successful export business takes time and commitment, and that additional personnel may be necessary.
Building strong relationships within the importing country can also help a company avoid the pitfalls of exporting. As you can see in the Management Focus in your text, Red Spot Paint and Varnish found that developing personal relationships with client firms in the importing country was important to its export success.
Finally, keep in mind that exporting might not be the best option in some cases. Local production may make more sense in certain situations.
Sometimes exporting turns out to be a good way to test a market before making a bigger commitment.
Firms involved with exporting must also deal with collecting payments for their exports.
Remember, when you sell your product to someone in another country, you take on the risk of whether you’ll get paid on time, and whether the currency that you’ll be paid in will be worth what you think it’ll be worth.
But because the buyer is in another country, the typical methods you use to get a delinquent account to pay up, might not work!
From the firm’s perspective, the best way to be paid would probably be cash in advance, in the exporter’s currency!
However, since requiring these terms is likely to put the exporter at a competitive disadvantage, the firm has to be more flexible.
To deal with these issues, various mechanisms have evolved to handle export financing, and the issues of trust that are associated with it.
Let’s begin with the issue of trust.
Exporters have to trust that the importer will actually be true to his word, that he’ll pay according to the agreed upon terms in a timely manner.
Remember, that it can be very difficult to track down an importer who has defaulted on an agreement, especially since the importer lives in a different country, speaks a different language, abides by a different system of law, and so on.
The importer, of course has similar concerns.
If he sends payment in advance to the exporter, what guaranty does he have that he’ll get what he bought, on time, and in good condition?
He would probably prefer that the goods be shipped to him prior to sending payment.
So, because of the different needs of the importer and the exporter, a system using a third party - a reputable bank - has evolved.
As you can see in this process for conducting an export transaction, the third party bank plays a major role. Let’s talk about what’s going on in this transaction.
Rather than dealing directly with each other, the importer and exporter deal with the trustworthy third party, the bank, using a letter of credit.
A letter of credit is issued by a bank at the request of an importer.
The letter states that the bank will pay a specified sum of money to the exporter upon the presentation of specified documents.
It’s sort of a promise to pay.
Once the exporter sees the letter, and knows that he’ll get paid, he ships the goods, and requests payment from the bank.
The bank makes payment.
How is payment made?
A draft, which is sometimes called a bill of exchange, is the instrument that’s usually used for payment.
It’s simply an order written by the exporter instructing the importer or importer’s agent to pay a specified amount of money at a specified time.
There are two types of drafts.
A sight draft is payable immediately, while a time draft allows for a delay in payment.
Another document, called a bill of lading, is also included in the process.
The bill of lading is issued to the exporter by the carrier that’s transporting the goods.
It acts as a receipt, a contract, and as a document of title.
What does a typical international trade transaction look like?
Here you can see the fourteen steps in a typical international trade transaction.
Suppose there’s great potential for your product in a certain market, but that you’ve been having trouble exporting because the government of that country restricts the convertibility of its currency.
Do you walk away?
You might, but you also might see whether another form of payment is an option.
Countertrade refers to a range of barter like agreements that facilitate the exchange of goods and services for other goods and services when they can’t be traded for money.
Boeing sold jets to Saudi Arabia and got paid in oil using a countertrade arrangement.
Similarly, Venezuela traded iron ore for Caterpillar’s earth moving equipment.
How did countertrade evolve?
Countertrade began in the 1960s primarily as a way for the U.S. to trade with the Soviet Union and its neighbors.
Recall from our discussion of the international monetary system in Chapter 10 that at that time, these countries had currencies that were nonconvertible, and so couldn’t be used for trade.
The countries turned to countertrade instead.
During the 1980s, many developing countries turned to countertrade to purchase imports when they didn’t have sufficient foreign exchange reserves.
The incidence of countertrade increased again after the 1997 Asian financial crisis. Many Asian countries had only limited hard currency at the time, and had to find alternative methods of payment.
What are the different types of countertrade arrangements?
Countertrade agreements can be structured in five basic ways barter, counterpurchase, offset, compensation or buyback, and switch trading.
Let’s look at each type.
Barter, which is the most restrictive form of countertrade, involves a direct exchange of goods and/or services between two parties without a cash transaction.
While barter is a relatively simple process, it’s not very common because one party ends up with goods it doesn’t really want, and may even have to wait for the goods. Usually, barter is only used for one-time deals with trading partners that aren’t creditworthy or trustworthy.
Counterpurchase is a reciprocal buying arrangement where a firm agrees to purchase a certain amount of materials back from the country to which the sale is made.
So, when Rolls-Royce sold jet parts to Finland, it agreed to use some of the proceeds of the sale to buy Finnish TVs.
An offset agreement is similar to counterpurchase because one party agrees to purchase goods and services with some percentage of the proceeds of the original sale, but it’s different in that the party can fulfill the obligation with any firm in the country to which the sale is being made. So, it has a little more flexibility than a counterpurchase agreement.
A buyback involves building a plant in a foreign country, or supplying technology, equipment, training, or other services, and then agreeing to take a percentage of the plant’s output as a partial payment for the contract.
Occidental Petroleum used this type of arrangement in Russia where it built several ammonia plants, and then received ammonia as a partial payment.
In a switch trading arrangement, a third party trading house is involved.
The third party buys, at a discount, the counterpurchase credits that a firm has received in a counterpurchase or offset agreement.
The third party then sells them, for a profit, to another firm that can use them more efficiently.
Why is countertrade attractive?
Well, the main advantage of countertrade is, as we discussed earlier, that it gives firms a chance to complete an export deal that might not have otherwise happened because of financing difficulties.
Firms that are unwilling to make countertrade agreements run the risk of losing export opportunities to those firms that are willing to make the deals.
In some cases, countertrade agreements are required by governments.
Keep in mind however, that a firm that gets into a countertrade agreement may end up with unusable or poor quality goods that are difficult to dispose of at a profit.
For this reason, countertrade is usually more attractive to large, diverse MNEs that have a network of contacts around the world to unload the goods that are acquired in countertrade deals.
Japan’s sogo shosha, for example, use their networks to sell countertrade goods. Similarly, 3M’s willingness to enter countertrade arrangements gives it a profit advantage over competitors. 3M has even established its own trading company to manage its countertrade deals.