Chapter export and import management. After studying this chapter you will be able to understand: The variety of distribution channels and how they affect cost and efficiency in marketing, the Japanese distribution structure and what it means to Japanese customers and to competing importers of goods, How distribution patterns affect the various aspects of international marketing,...
GLOBAL MARKETING MANAGEMENT Seventh Edition MASAAKI KOTABKE | KRISTIAAN HELSEN Chapter 16 PowerPoint Export and Import Management Chapter Overview Organizing for Exports Indirect Exporting Direct Exporting Mechanics of Exporting Role of the Government in Promoting Exports Managing Imports—the Other Side of the Coin Mechanics of Importing Gray Markets Chapter 16 Copyright © 2017 John Wiley & Sons, Inc Introduction • Exporting is the most popular way for many companies to become international • Exporting is usually the first mode of foreign entry used by companies • Selling to foreign markets involves numerous high risks, arising from a lack of knowledge about and unfamiliarity with foreign environments, which can be heterogeneous, sophisticated, and turbulent • Furthermore, conducting market research across national boundaries is more difficult, complex, and subjective than its domestic counterpart Chapter 16 Copyright © 2017 John Wiley & Sons, Inc Introduction • With every export transaction there is an import transaction • Aside from differences between the procedure and rationale for exports and imports, both are largely the same the world over • For successful development of export activities, systematic collection of information is critical Chapter 16 Copyright © 2017 John Wiley & Sons, Inc Organizing for Exports • Research for Exports: First use available secondary data to research potential markets – The identification of an appropriate overseas market involves the following criteria: Socioeconomic characteristics Political and legal characteristics Consumer variables (e.g., lifestyle, preferences, culture, taste, purchase behavior, and purchase frequency) Financial conditions Chapter 16 Copyright © 2017 John Wiley & Sons, Inc Organizing for Exports • It is also to be noted that export research for markets such as China and the former Soviet Republics must still be done largely in the field because their data are often not reliable • Export Market Segments – Homogeneous market segments and clusters – Geographical and psychographic segments – Issues of standardization vs adaptation Chapter 16 Copyright © 2017 John Wiley & Sons, Inc Indirect Exporting • Indirect exporting involves the use of independent intermediaries or agents to market the firm’s products overseas • Combination Export Manager (CEM) • Export Merchants • Export Broker • Export Commission House • Trading Companies (sogo shosha) (See Exhibit 16-1.) • Piggyback Exporting Chapter 16 Copyright © 2017 John Wiley & Sons, Inc Direct Exporting • Direct exporting occurs when a manufacturer or exporter sells directly to an importer or buyer located in a foreign market (Exhibit 16-2) - Export Department - Export Sales Subsidiary - Foreign Sales Branch Chapter 16 Copyright © 2017 John Wiley & Sons, Inc Exhibit 16-1: Comparison of Direct and Indirect Exporting Chapter 16 Copyright © 2017 John Wiley & Sons, Inc Mechanics of Exporting • The Automated Export System (AES) on the Internet – In the U.S., the AES was launched in October 1999 It allows exporters, freight forwarders, and consolidators to file shippers’ export declaration information in an automated, cost-free way at all ports – AES was incorporated into the Automated Commercial Environment (ACE) system in 2014 • Legality of Exports – Can be proactively dealt with – Export license (general or validated license) Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 10 Exhibit 16-4: Terms of Payment in an Export Transaction Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 17 Role of the Government in Promoting Exports • Export promotion activities generally comprise: Export service programs Market development programs • Export Enhancement Act of 1992 • Some governments engage in attracting inward foreign direct investment (FDI) in the hope their countries could increase exports (e.g., Argentina) • Export-Import Bank (Ex-Im Bank) • Tariff Concessions – Foreign Trade Zone Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 18 Role of the Government in Promoting Exports • American Export Trading Company – The Export Trading Company Act of 1982 • Export Regulations – The Foreign Corrupt Practices Act (FCPA) of 1977 – U.S Antitrust Laws – Tariffs and local laws of foreign governments may include: tariffs, local laws relating to product standards and classification, and taxes Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 19 Managing Imports— the Other Side of the Coin • • • For organizations in the United States, importing is considerably easier than for most firms in the rest of the world About 81 percent of the world’s trade is still denominated in U.S dollars Most of the time, a U.S importer does not have to bother with hedging foreign exchange transactions or with trying to accumulate foreign currency to pay for imports Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 20 Exhibit 16-5: Model of Importer Buyer Behavior Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 21 Managing Imports— the Other Side of the Coin – Model of Importer Buyer Behavior Stage Need recognition and problem formulation (triggered by competition and unavailability) Stage Search (guided by country characteristics, vendor characteristics, and information sources) Stage Choice (vendors evaluation and selection) Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 22 Mechanics of Importing • Steps in Importing – Finding a bank that either has a branch in the exporter’s country or has a correspondent bank – Establishing a letter of credit with the bank – Deciding on the mode of transfer of goods from exporter to importer – Checking compliance with national laws of the importing country – Making allowances for foreign exchange fluctuations – Fixing liability of payment of import transactions and warehousing Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 23 Mechanics of Importing • Import Documents and Delivery – Entry documents filed by the consignee: • • • • • • Entry manifest Customs form 7533 Customs form 3461 Packing list Commercial invoice Also accompanied by evidence that a bond is posted with customs to cover any potential duties, penalties, and taxes – For Special Permit for Immediate Delivery, use Customs form 3461 for fast release after arrival Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 24 Mechanics of Importing • Import Duties – – – – – – Ad valorem duty Specific duty Compound duty Antidumping import duty Countervailing duty Duty drawback: • Direct identification drawback • Substitution drawback • All countries have procedures allowing for the temporary importation of goods for across their borders Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 25 Gray Markets • Gray market channel refers to the legal export/import transaction involving genuine products into a country by intermediaries other than the authorized distributors • From the importer side, it is also known as parallel imports • Three conditions are necessary for gray markets to develop: Products must be available in other markets Trade barriers must be low enough for parallel importers Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 26 Gray Markets Price differentials among various markets must be great enough to provide the basic motivation for gray marketers Such price differences arise for various reasons: • • • • • • Chapter 16 Currency fluctuations Differences in market demand Legal differences Opportunistic behavior Segmentation strategy The World Wide Web Copyright © 2017 John Wiley & Sons, Inc 27 Gray Markets • How to Combat Gray Market Activity (See Exhibit 16-6.) – Reactive Strategies • • • • • • • Chapter 16 Strategic Confrontation Participation Price cutting Supply interference Promotion of gray market product limitations Collaboration Acquisition Copyright © 2017 John Wiley & Sons, Inc 28 Gray Markets – Proactive Strategies • • • • • • • Chapter 16 Product/service differentiation and availability Strategic pricing Dealer development Marketing information systems Long-term image reinforcement Establishing legal precedence Lobbying Copyright © 2017 John Wiley & Sons, Inc 29 Exhibit 16-6: How to Combat Gray Market Activity Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 30 Exhibit 16-6: How to Combat Gray Market Activity, cont’d Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 31 ... (Exhibit 1 6- 2) - Export Department - Export Sales Subsidiary - Foreign Sales Branch Chapter 16 Copyright © 2017 John Wiley & Sons, Inc Exhibit 1 6- 1: Comparison of Direct and Indirect Exporting Chapter. .. Inc 29 Exhibit 1 6- 6: How to Combat Gray Market Activity Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 30 Exhibit 1 6- 6: How to Combat Gray Market Activity, cont’d Chapter 16 Copyright © 2017... foreign risk in the export transaction Chapter 16 Copyright © 2017 John Wiley & Sons, Inc 16 Exhibit 1 6- 4: Terms of Payment in an Export Transaction Chapter 16 Copyright © 2017 John Wiley & Sons,