CHAPTER XXVI EXPORT ENTRY STRATEGIES

1
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

2
Export Entry Strategies

• How to enter foreign markets?
• Indirect Exporting
• Direct Exporting
• Foreign Direct Investment

3
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

4
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

5
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

6
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

7
Foreign Direct Investment (FDI)

• 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

8
Export Intermediaries

• Buying Agents
• Finders of U.S. products for foreign buyers
  Foreign governments buying mission, Chain
  stores, Dept stores.
• Register products with them

9
Export Intermediaries

• Export Management Companies (EMCs)
• Act as the export department of one or several
  manufacturers of noncompetitive products
  Supply-driven
• Provide domestic manufacturers with immediate
  access to foreign markets
• Do 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.

10
Export Intermediaries

• Export Trading Companies (ETCs)
• Provide the same export facilitation services as
  an EMC
• Focus on procurement of products for foreign
  buyers. No loyalty to manufacturers
  Demand-driven
• Conduct business in their own name
• Take title to the goods and pay the manufacturers
  directly

11
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)

12
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)