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CHAPTER XXVI EXPORT ENTRY STRATEGIES & EXPORT INTERMEDIARIES. Export Entry Strategies Indirect Exporting Direct Exporting Direct Foreign Investment Export Intermediaries Buying agents Export Management Companies Export Trading Companies. Export Entry Strategies.

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chapter xxvi export entry strategies export intermediaries
CHAPTER XXVI EXPORT ENTRY STRATEGIES & EXPORT INTERMEDIARIES
  • Export Entry Strategies
    • Indirect Exporting
    • Direct Exporting
    • Direct Foreign Investment
  • Export Intermediaries
    • Buying agents
    • Export Management Companies
    • Export Trading Companies

Copyright(c) 2012 Dr. Chase C. Rhee

export entry strategies
Export Entry Strategies
  • How to enter foreign markets?
    • Indirect Exporting
    • Direct Exporting
    • Foreign Direct Investment

Copyright(c) 2012 Dr. Chase C. Rhee

indirect exporting
Indirect Exporting
  • Lets another company handle exports as an intermediary
  • Immediate access to foreign markets
  • Minimizes cash outlays and risks of exporting
  • Minimizes staff efforts
  • May lose control over foreign sales

Copyright(c) 2012 Dr. Chase C. Rhee

direct exporting
Direct Exporting
  • Takes charge of all exporting activities
  • Requires more time, personnel, and corporate resources
  • Maintains more control over overseas distribution
  • Gets higher profit & closer ties with foreign buyers

a. Manufacturer's Agents

      • Take no title to the goods
      • Carry catalogs and samples
      • Usually paid commission on sales

Copyright(c) 2012 Dr. Chase C. Rhee

direct exporting5
Direct Exporting

b. Distributors

  • Merchants who buy the goods from U.S. exporters and resell them in a foreign market at a profit
  • Carry inventory of products & spare parts & Provide after-sale service
  • Advertising and promotion activities with allowance from the exporter
  • Extend credits to local buyers

Copyright(c) 2012 Dr. Chase C. Rhee

direct exporting6
Direct Exporting
  • Exporting to foreign retailers
      • Foreign department or chain stores
        • Traveling salesmen
        • Catalogs, brochures or samples

d.Exporting to end-users

      • Foreign governments
      • Institutions: Hospitals, Schools
      • Foreign manufacturers who use U.S. products as components

Copyright(c) 2012 Dr. Chase C. Rhee

foreign direct investment
Foreign Direct Investment
  • Foreign branch, sales office, distribution hub, assembly operation or manufacturing facility in the foreign country
  • Requires extensive personnel and financial commitment
  • Exposed to political and economical risks
  • A long wait for a return of investment
  • Direct control over manufacturing and distribution

Copyright(c) 2012 Dr. Chase C. Rhee

export intermediaries
Export Intermediaries
  • Buying Agents
      • Finders of U.S. products for foreign buyers: Foreign government’s buying mission, Chain stores, Dept stores.
      • Register products with them

Copyright(c) 2012 Dr. Chase C. Rhee

export intermediaries9
Export Intermediaries
  • Export Management Companies (EMCs)
  • An EMC acts as the export department of one or several manufacturers of noncompetitive products: Supply-driven
  • Provides domestic manufacturers with immediate access to foreign markets
  • Does not take title to the goods
  • Compensation:
    • Sales commission
    • Salary
    • Basic salary plus commission
  • Small firms: 60% 6 or fewer employees
  • When exports reach 15 to 20% of manufacturer's total sales or export sales grow over $1 million, manufacturers tend to have their own export department for direct export.

Copyright(c) 2012 Dr. Chase C. Rhee

export intermediaries10
Export Intermediaries
  • Export Trading Companies (ETCs)
    • An ETC provides the same export facilitation services as an EMC
    • Focus is on procurement of products for foreign buyers. No loyalty to manufacturers: Demand-driven
    • Conducts business in its own own name
    • Takes title to the goods and pays the manufacturers directly

Copyright(c) 2012 Dr. Chase C. Rhee

export trading company act of 1982 of the u s
Export Trading Company Act of 1982 of the U.S.
  • To promote and encourage the formation of ETC's
  • To utilize economies of scale and diversification of risks in penetrating foreign markets
  • Provides exemption from U.S. antitrust law for joint export activities:
    • Export Trade Certificate of Review from USDC with concurrence of USDJ
    • Available at Office of Export Trading Companies Affairs (OETCA, www.ita.doc.gov/oetca)

Copyright(c) 2012 Dr. Chase C. Rhee

export trading company act of 1982 of the u s12
Export Trading Company Act of 1982 of the U.S.
  • Permits bank's participation: Bank Trading Companies
  • Permits cooperatives to form ETC Cooperatives: Agricultural industry like Sunkist
  • ETCA has not been successful in establishing U.S. Trading Companies similar to Foreign Trading Companies such as
    • Japanese trading companies (Sogo-shosha)
    • Korean trading companies (Jonghap Sangsa)

Copyright(c) 2012 Dr. Chase C. Rhee