Global Marketing Management

Masaaki Kotabe & Kristiaan Helsen

Third Edition
John Wiley & Sons, Inc., 2004
Chapter 17 Kotabe & Helsen's Global Marketing 1
Management, Third Edition, 2004
 Chapter 17

Export and Import Management

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 Chapter Overview

1. Organizing for Exports

2. Indirect Exporting
3. Direct Exporting
4. Mechanics of Exporting
5. Role of the Government in Promoting Exports
6. Managing Imports—the Other Side of the Coin
7. Mechanics of Importing
8. Gray Markets

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 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.
 Manufactured goods accounted for almost 60
percent of the exports of developing countries (see
Exhibit 17-1).
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 Introduction (contd.)

 Because of every export transaction, there is, by

definition, an import transaction as well.
 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.

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 1. Organizing for Exports

 Research for Exports: The first step is to use

available secondary data to research potential
markets.
– The identification of an appropriate overseas
market involves the following criteria:
1. Socioeconomic characteristics
2. Political and legal characteristics
3. Consumer variables (lifestyle, preferences,
culture, taste, purchase behavior)
4. Financial conditions
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 1. Organizing for Exports (contd.)

 Export Market Segments

– Homogeneous market segments and clusters
– Geographical and psychographic segments
– Issues of standardization vs. adaptation

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 2. Indirect Exporting

 Indirect exporting involves the use of independent

middlemen to market the firm’s products overseas.
 Combination Export Manager (CEM)
 Export Merchants
 Export Broker
 Export Commission House
 Trading Companies (sogoshosha; see Exhibit
17-1)
 Piggyback Exporting

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 3. Direct Exporting

 Direct exporting occurs when a manufacturer or

exporter sells directly to an importer or buyer
located in a foreign market (see Exhibit 17-2).
 Export Department
 Export Sales Subsidiary
 Foreign Sales Branch

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 4. Mechanics of Exporting

 The Automated Export System (AES) on the

Internet
– In the U.S., the AES which was launched in
October 1999, enables exporters to file export
information at no cost over the Internet. AES is
a nationwide system operational at all ports.
 Legality of Exports
– Export license (general or validated license)
 Export Transactions
– The terms of sale
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 4. Mechanics of Exporting (contd.)
– Monitoring the transportation and delivery of
the goods to the assigned party
– Shipping and obtaining the bill of lading
» Bill of lading
 A straight bill of lading
 A shipper’s order bill of lading
– Commercial invoice
– Freight forwarders
 Terms of Shipment and Sale
– INCOTERMS 2000 (International Commercial
Terms)
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 4. Mechanics of Exporting (contd.)

– Terms of Shipment (see Exhibit 17-5):

» Ex-Works (EXW) at the point of origin
» Free Alongside Ship (FAS)
» Free on Board (FOB)
» Cost and Freight (CFR)
» Carriage Paid To (CPT)
» Cost, Insurance and Freight (CIF)
 Payment Terms (see Exhibit 17-6)
– Advanced Payment

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 4. Mechanics of Exporting (contd.)
– Confirmed irrevocable letter of credit
– Unconfirmed irrevocable letter of credit
– Documents Against Payment (D/P)
– Documents Against Acceptance (D/A)
– Open account
– Consignment
 Currency Hedging
– It is done through a banker or the firm’s
treasury in case there is a foreign risk in the
export transaction.
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 5. Role of the Government in
Promoting Exports
 Export promotion activities generally comprise:
1. Export service programs
2. Market development programs
 Export Enhancement Act of 1992
 Export - Import Bank (Ex-Im Bank; see Exhibit
17-7)
 Tariff Concessions
– Foreign Trade Zones
– Foreign Sales Corporation (FSC)

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 5. Role of the Government in
Promoting Exports (contd.)
 American Export Trading Company
– The Export Trading Company Act of 1982
 Export Regulations:
– The Trade Act of 1974
– The Foreign Corrupt Practices Act (FCPA) of
1977
– COCOM (Coordinating Committee for
Multilateral Exports)
– U.S. Antitrust Laws
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 5. Role of the Government in
Promoting Exports (contd.)
– Tariffs and local laws of foreign governments
which may include: tariffs, local laws relating
to product standards and classification, and
taxes.

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 6. 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 60 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.
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 6. Managing Imports – the Other
Side of the Coin (contd.)
– Model of Importer Buyer Behavior (see Exhibit
17-8):
Stage 1. Need recognition and problem
formulation (triggered by competition and
unavailability)
Stage 2. Search (guided by country
characteristics, vendor characteristics, and
information sources)
Stage 3. Choice (vendors evaluation and
selection)
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 7. 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
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 7. Mechanics of Importing (contd.)

– Fixing liability of payment of import

transactions and warehousing
 Import Documents and Delivery
– Entry documents filed by the consignee:
» The bill of lading
» Customs form 7533
» Customs form 3461
» Packing list
» Commercial invoice

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 7. Mechanics of Importing (contd.)

» 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.
 Import Duties in the United States:
– Ad valorem duty
– Specific duty
– Compound duty
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 7. Mechanics of Importing (contd.)

– Antidumping import duty

– Countervailing duty
– Duty drawback:
» Direct identification drawback
» Substitution drawback

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 8. 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:
1. Products must be available in other markets.
2. Trade barriers must be low enough for
parallel importers.
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 8. Gray Markets (contd.)
3. Price differentials among various markets
must be great enough to provide the basic
motivation for gray marketers. Such price
differences arise for various reasons:
 Currency fluctuations
 Differences in market demand
 Legal differences
 Opportunistic behavior
 Segmentation strategy

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 8. Gray Markets (contd.)
 How to Combat Gray Market Activity (see Exhibit
17-9):
– Reactive Strategies:
» Strategic Confrontation
» Participation
» Price cutting
» Supply interference
» Promotion of gray market product
limitations
» Collaboration
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 8. Gray Markets (contd.)

» Acquisitions
 Proactive Strategies:
» Product/service differentiation and
availability
» Strategic pricing
» Dealer development
» Marketing information systems
» Long-term image reinforcement

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 8. Gray Markets (contd.)

» Establishing legal precedence

» Lobbying

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 Copyright © John Wiley & Sons, Inc., 2004

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