International Business Study Guide

Topics: International trade, Export, Globalization Pages: 5 (1811 words) Published: September 14, 2014
Ch 16, 17 18, 19
Chapter 16
Why export?
To serve markets where the firm has no or limited production facilities. To satisfy a host government's requirement that the local subsidiary have exports. To remain price competitive in the home market.

To test foreign markets and foreign competition inexpensively. To meet actual or prospective customer requests for the firm to export. To offset cyclical sales in the domestic market
To achieve additional sales, which will allow the firm to use excess production capacity to lower per-unti fixed costs To extend a product's life cycle by exporting to currently unserved markets where the product will be at the introduction stage of the life cycle To respond strategically to foreign competitors that are in the firm's home market by entering their home market To achieve the success the firm's management has seen others achieve by exporting To improve the efficiency of manufacturing equipment, which usually works better at or near full capacity. The first step in locating foreing markets is to determine whether a market exists for the firm's products Export Marketing Plan

terms of sale – conditions of a sale that stipulate the point at which all costs and risks are borne by the buyer INCOTERMS – universal trade terminology developed by the International Chamber of Commerce. 13 trade terms that describe the responsibilities of the buyer and seller in international trade. FOB (free on board) – pricing policy in which risks pass from seller to buyer at the factory door; U.S. Equivalent of ex-works. Means all costs and risks from that point on are borne by the buyer. FAS (free alongside ship—port of call) – the seller pays all the transportation and delivery expense up to the ship's side and clears the goods for export CIF (cost, insurance, freight—foreign port) – the price includes the cost of the goods, insurance, and all transportation and miscellaneous charges to the named port of final destination CFR (cost and freight—foreign port) – CFR is similar to CIF except that the buyer purchases the insurance, either because it can be obtained at a lower cost or because the buyer's government, to save foreign exchange, insists on use of a local insurance company. DAF (delivered at frontier) – the price covers all costs up to the border, where the shipment is delivered to the buyer's representative. The buyer's responsibilitiy is to arrange for receiving the goods after they are cleared for export, carry them across the border, clear them for importation, and make delivery to the buyer. Export Payment Terms

letter of credit (L/C) – document issued by the buyer's bank in which the bank promises to pay the seller a specified amount under specified conditions confirmed L/C – a confirmation made by a correspondent bank in the seller's country by which it agrees to honor the issuing bank's letter of credit irrevocable L/C – a stipulation that a letter of credit cannot be canceled. Air waybill – issued by the carrier be presented as proof that the shipment has been made. Pro forma invoice – the exporter's formal quotation containing a description of the merchandise, price, delivery time, proposed method of shipment, ports of exit and entry, and terms of sale. Export draft – an uncoditional order drawn by the seller on the buyer instructing the buyer to pay the amount of the order on the presentation (sight draft) or at an agreed future date (time draft) Exporting Financing Private Source

banker's acceptance – a time draft with maturity of less than 270 days that has been accepted by the bank on which the draft was drawn, thus becoming the accepting bank's obligation; may be bought and sold at a discount in the financial markets like other commercial paper factoring – permits the exporter to be more competitive by selling on open account rather than by means of the more costly letter-of-credit method. Discounting without recourse an account receivable forfaiting – the purchase of obligations that...
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