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What do you have to consider when entering a new market?
- business environment
- company's competency
institutional arrangement by which a firm gets its products, technologies, human skills, or other resources into a market
What are the three types of entry mode?
- exporting, importing, countertrade
- contactual entry
- investment entry
What is the most common method of buying and selling goods internationally?
exporting and importing
What are the three main reasons why companies export?
- Expand sales (domestic is saturated, lower fixed costs)
- Diversify sales (offset slow sales)
- Gain experience (low cost, low risk way of starting international business)
What is the Four Step Model to developing an export strategy?
- Identify a Potential Market
- Match Needs to Abilities
- Initiate Meeting
- Commit Resources
In the Four step model to developing an export strategy, what step seeks a market with potential demand for your product?
1. Identify a Potential Market
What should beginner in exporting do in the first step of the export strategy model?
- focus on one or only a few markets
- seek expert advice on regulations, processes, and special issues related to the target market
In the Four step model to developing an export strategy, which step decides if you are capable of satisfying the target market's needs?
2. Match Needs to Abilities
In the Four step model to developing an export strategy, which step focuses on the initial contact with the target market? What is it's focus?
- 3. Initiate Meetings
- focus on building trust and cooperative climate
In the Four step model to developing an export strategy, which step has the company's human, financial, and physical resources working in the target market? How long should objectives be projected for?
- 4. Commit Resources
- 3 - 5 years
Entrepreneurs and small/medium sized firms use _____ that specialize in getting products from one market into another; while large companies usually perform all of their export activities themselves
_____ is the practice by which a company sells its products directly to buyers in a target market
When exporting to foreign markets, what are the two methods of involvement?
- direct exporting (sales reps, distributors)
- indirect exporting (agents, export trading companies, export management companies)
What are the forms of direct exporting?
- sales reps (promote products, attend trade fairs)
- distributors (take ownership of products when it enters their country)
What are the forms of indirect exporting?
- export trading companies
- export management companies
What are the forms of entry and operations?
- wholly-owned subsidiary
- joint venture
- contract manufacturing
- management contracts
- turn-key projects
What are the Methods of Involvement concerning entry modes into foreign markets?
- exporting to foreign markets
- entry & operations in foreign markets
- strategic alliances (partial method of involvement)
What is a wholly-owned subsidiary
own company completely in foreign market
What is a joint venture agreement?
share the ownership operation with someone in the target market
What does licensing and franchising entail?
deals with intangible property and the franchisor/licensor receives licensing
What does contract manufacturing involve?
contract out the production in the target market but does not own the production site
What does management contracts involve?
one company supplies another with managerial expertise for a specific period of time for a fee
What does a turn-key project involve?
build site and offer contract management for a certain period of time before turning it ove (only open to big companies
What is involved in a strategic alliance?
a cooperative undertaking between two or more companies for a limited purpose and duration (ex. airline lease lounges, summer abroad classes)
What are the factors influencing the choice of method when selecting an entry mode?
- amount of investment (how much $ is required)
- return on investment (profitability)
- payback period (# yrs to cover initial investment)
- degree of management control
- favorable environmental factors (cultural, political)
- cost of doing business (rent, payroll, taxes)
- management experiences with international business
What are the methods of payment involved in exports/imports and is it more of a risk to the importer or exporter?
- open account(exporter risk)
- documentary collections (more exporter risk)
- letters of credit (more importer risk)
- advance payment (importer risk)
What are the shipping documents involved in imports and exports?
- invoice/packaging list
- documentary collections (draft)
- letter of credit
- bill of lading
- customs document
What are the two types of documentary collection document?
- sight draft - upon presentation it has to be paid
- time draft - post-dated check
What are the types of letters of credit documents?
- revokable - can be modified by the issuing bank without approval
- irrevocable - bank issuing letter can modify after approval from both exporter and importer
- confirmed - guaranteed by both exporter's bank and importer's bank
What are the three types of Bill of Lading documents?
- airway bill of lading
- ocean/sea bill of lading
- land bill of lading
What are the forms of countertrade?
- counterpurchase (specific product, specific time)
- offset (not specified product, not specified time)
- switch trading (third party)
- buyback (export of industrial equipment in return for products produced by that equipment)
when a company sells its products directly to buyers in a target market using local sales reps and distributors
when a company sells its products to intermediaries who then resell to buyers in a target market
individuals or organizations that represent one or more indirect exporters in a target market
company that exports products on behalf of indirect exporters
export management company (EMC)
What is the biggest advantage of an EMC?
its deep understanding of the cultural, political, legal, and economic conditions of the target market
company that provides services to indirect exporters in addition to activities related directly to clients' exporting activities
- export trading company (ETC)
- mostly implemented in the East
specialist in export-related activities such as customs clearing, tariff schedules, and shipping and insurance fees
practice of selling goods or services that are paid for, in whole or in part, with other goods or services
exchange of goods or services directly for other goods or services without the use of money
sale of goods or services to a country by a company that promises to make a future purchase of a specific product from the country
agreement that a company will offset a hard-currency sale to a nation by making a hard-currency purchase of an unspecified product from that nation in the future
practice in which on company sells to another its obligation to make a purchase in a given country
export of industrial equipment in return for products produced by that equipment
export/import financing in which an importer pays an exporter for merchandise before it is shipped
export/import financing in which a bank acts as an intermediary without accepting financial risk
document ordering an importer to pay an exporter a specified sum of money at a specified time
draft (bill of exchange)
contract between an exporter and a shipper that specifies merchandise destination and shipping costs
bill of lading
export/import financing in which the importer's bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document
letter of credit
export/import financing in which an exporter ships merchandise and later bills the importer for its value
practice by which one company owning intangible property grants another firm the right to use that property for a specified period of time
practice by which companies use licensing agreements to exchange intangible property with one another
practice by which one company supplies another with intangible property and other assistance over an extended period
practice by which one company designs, constructs, and tests a production facility for a client firm
relationship whereby two or more entities cooperate to achieve the strategic goals of each