Export and Import Strategies
•To introduce the ideas of export and import
•To identify the elements of export and exporting strategies •To compare direct and indirect selling of exporting
•To identify the elements of import and import strategies •To discuss the types and roles of third-party intermediaries in exporting •To discuss the role of countertrade in international business
The first part of Chapter Thirteen is devoted to an examination of export and import strategies. Table 13.1 identifies the steps to consider when developing an export (or import) business plan. Next, the roles of a wide variety of third-party intermediaries are discussed. The chapter concludes with a discussion of the major issues related to export financing, including the use of countertrade as a form of payment mechanism.
OPENING CASE: Grieve Corporation—A Small Business Export Strategy
A small firm located near Chicago, Grieve Corporation manufactures laboratory and industrial ovens, furnaces, and heat processing systems for the U.S. market. Grieve began losing business as (i) foreign competitors began to penetrate the U.S. market and (ii) its customers began to move overseas and started sourcing locally. With the help of the International Trade Administration of the U.S. Department of Commerce, Grieve was able to identify potential Asian distributors. During a business trip to Asia, the president of Grieve met with potential candidates and successfully recruited exclusive agents for each country visited. Once Grieve had gained sufficient experience in the Asian market, export activities were expanded to other regions. Moving into international markets has proved to be a major factor in the firm’s continued growth and success.
Teaching Tip: Review the PowerPoint slides for Chapter Thirteen and select those you find most useful for enhancing your lecture and class discussion. For additional visual summaries of key chapter points, also review the figures and tables in the text.
Whereas exporting represent goods and services flowing out of a country, importing represent goods and services flowing into a country. Exports result in receipts and imports result in payments. Although export and import activities are a natural extension of distribution strategy, they also include elements of product, promotion and pricing factors, and decisions. Both exporting and importing entail a lower level of risk than foreign direct investment, but while exporting offers less control over the marketing function, importing offers less control over the production function. This chapter will focus primarily on the issue of a company’s motivations for and development of an export strategy (Figure 13.1).
A firm’s choice of entry mode depends on various factors, such as the ownership advantages of the firm, the location advantages of the market and the internalization advantages of specific assets, international experience and/or the ability to develop differentiated products. In general, firms that possess few ownership advantages either do not enter foreign markets, or they use the lower-risk entry modes of exporting and licensing. Still in all, the decision to export must fit a company’s overall strategy and take into account global concentration (the presence of relatively few major players), synergies (the gains from sharing corporate expertise on a global basis) and strategic motivations (the firm’s competitive reasons to enter a given market). A. Strategic Advantages of Exports
Companies export in order to increase sales revenues, achieve economies of scale in production, diversify markets, and minimize risk. All of these objectives are ultimately motivated by the potential for greater profitability. Companies can often sell their products at a greater profit abroad than at home due to differences in the...