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International Business Chapter 16
28 cards·by lizarusakova
Benefits of exporting
Access to larger market;can achieve economies of scale;
What behavior is common for a typical firm?
Being reactive rather than proactive;not to export until domestic market is saturated
Reasons why firms are not proactive
Unfamiliar atmosphere abroad;common pitfalls;tons of paperwork,complex formalities
What are main pitfalls?
Poor-market analysis,competitive understanding,promotion;fail to customize,secure
finance,distribute effectively
What is the way to overcome ignorance about export markets?
Collect information with the help of trade association,commercial banks,government
agencies,export-oriented institutions(CSAs)
What are export management companies(EMC)?
Export specialists that act as export marketing or international departments
fortheirclient firms
Functions and characteristics of EMCs
Helps to identify opportunites and overcome common pitfalls;has network of contact in
potential market and overall experience
Main steps of export strategy
Small scale enter;add products;hire locals to promote;build personal relationships;be
proactive looking for export opportunities
What does Uppsala theory state?
Familiar countries-FIRST;Justify local production only when makes sense;gradual
increase of commitments to foreign country
How do two parties decide lack of trust problem in export-import financing?
The use of the third party as an owner of good for a certain time (bank)
What is the letter of credit?
Issued by bank at request of importer stating the bank will pay money to
beneficiary(exporter) presenting specified document
In which case the bank will pay the letter of credit?
If product is shipped in accordance with specified rules and conditions
What is draft or "bill of exchange"?
An order written by an exporter instructing an importer to pay a specified amount of money at a
specified time
What is bill of landing?
Issued to the exporter by the common carrier transporting merchandise.Includes
receipt,contract,document of title
What is receipt?
Documnet that indicates that carrier has received the merchandise described on the face of
the document
What is the contract?
Document that specifies that the carrier is obligated to provide transportation service in
return for a certain charge
What is document of title?
Document that can be used to obtain payment or written promise of payment before merchandise
is released to importer
What is export-import bank (Ex-Im bank)?
Independent agency of the government that provides financing aid and facilitates
export,import and exchange of commodities
What is export credit insurance?
Insurance against default on payment in transactions without a letter of credit
What is countertrade and what is its main principle?
It is a range of barterlike agreements;principle is to trade goods and services for other
goods and services when formal trade is impossible
What is barter?
Direct exchange of goods and services
WHat is counterpurchase?
A reciprocal buying agreement(agree to sell goods and buy another goods)
WHat is counterpurchase?
A reciprocal buying agreement(agree to sell goods and buy another goods)
What is offset?
A reciprocal buying agreement but one party agrees to purchase goods with a specified
percentage of the proceeds from original sale
What is the switching trade?
Type of countertrade with the use of the third party to solve a counterpurchase issue
What is buyback?
A special deal where firm builds a plant in one country and recieves an output from the same
plant as a payment
What are the main advantages of countertrade?
A way to finance an export deal when other means are not available;sometimes required by
government(strategic weapon in front of rivals)
Main drawbacks of countertrade
Risk of receiving unusable,poor-quality goods that cant be disposed of
profitability;expensive,time-consuming