Contents
CHAPTER 5 ..................................................................................................................................................................... 2
5.1 CHOSING ENTRY STRATEGY ....................................................................................................................... 2
5.2 INDIRECT EXPORT ......................................................................................................................................... 2
5.3 PRODUCING ABROAD ................................................................................................................................... 3
5.4 E-COMMERCE ............................................................................................................................................ 3
5.5 COMPETITION IN A FOREGN MARKET ...................................................................................................... 4
5.6 INTERNATIONAL INFLUENCES ON THE CHOICE OF DISTRIBUTION CHANNEL....................... 4
5.7 MERGERS AND ACQUISITIONS ................................................................................................................... 4
5.8 STRATEGIC ALLIANCES ............................................................................................................................... 4
CHAPTER 6 ................................................................................................................................................................. 5
6.1 ORGANIZATION OF FINANCIAL POLICY .................................................................................................. 5
6.2 VARIOUS FINANCIAL CH OF AN EXPORT BUSINESS ............................................................................. 5
6.3 COVERING AGAINST CURRECNY RISKS .................................................................................................. 5
6.4 POLICY RELATING TO DEBTORS ................................................................................................................ 6
6.5 EXPORT CREDIT INSURANCE ...................................................................................................................... 7
6.6 INTERNATIONAL PAYMENTS ...................................................................................................................... 7
6.7 FINANCIAL DOCUMENTS ............................................................................................................................. 8
6.8 (bank) GUARANTEES....................................................................................................................................... 8
CHAPTER 7 (251-291) ................................................................................................................................................ 8
7.1 LOGISTICS AT THE STRATEGIC LEVEL ..................................................................................................... 8
7.2 CUSTOMS POLICY .......................................................................................................................................... 9
7.3 LOGISTICS AT THE TACTICAL LEVEL ..................................................................................................... 10
7.4 CUSTOMS AT THE TACTICAL LEVEL ...................................................................................................... 11
7.5 LOGISTICS AT THE OPERATIONAL LEVEL ............................................................................................. 11
7.6 CUSTOMS AT THE OPERATIONAL LEVEL .............................................................................................. 12
,CHAPTER 5
5.1 CHOSING ENTRY STRATEGY. In selecting sales channels international companies are led by one principle: naïve
principle (same entry strategy for all markets). Pragmatic p (a workable entry strategy for each foreign market). Strategic
p (various entry strategy are compared and the choice is made by fitting sales channel and company’s market objectives).
The approach to a foreign market can be divided in: →
Entry strategy (distribution policy) determines how the product is distributed through the sales outlets abroad, via which
channel will be sold. The methods of exporting can be direct, indirect, cooperative. There are many factors that influence
that choice:
Internal factors – The size of the company (type of management, knowledge of entrepreneurship. Small companies with
small resources, may use third parties for sale and marketing). Nature of the c – (a company with a culture of delegating
may use third parties). Experience of the company. Nature of the product (value, weight. For expansive watches
companies want to keep control. For soft drinks the products are passed on to others. Some products may also require
different marketing strategy for different countries).
External factors – Socio-cultural aspect. Market size and growth
(the bigger the market, the more a company will be incline to
market the product themselves). Situation in the foreign market
(if the competition is high, entry strategy more flexible so that it
can be changed). Marketing objective
The extent to which a company is willing to tie itself to the foreign
market depends on the attractiveness of the location, the
company’s capacity, and risks. →
5.2 INDIRECT EXPORT. Most small/medium size companies
work the foreign market through indirect exports. The methods
employed in indirect market are:
- The agent = 75% European companies have worked with an agent. Mainly first phase of internalization. The
agent should be familiar with the sector, have sale experience, estimate turnover, have good contracts with
costumers, be aware of competition. A contract with an agent should specify the product, region, conditions,
duties of the agent. Main risk is the very limited extent to which the principal can influence the agent’s work.
- Importing re-seller and/or wholesale dealer = buys goods for his own account and his risk. He then passes
them to the wholesale dealer in his country. Risk, the company have little or no control. It is unknown to the
company who buy its products. Type of contracts – distribution agreement (no obligations), exclusive re-seller
(the exporter will sell only to this re-seller), ex purchasing agr (re-seller buy from that exporter only), selective
distribution agr (distributors need to meet some standards).
- Trading house/wholesale dealer = trading houses work selected markets at their own risk and account.
Reasons- turnover will be generated in difficult markets, trading house has expertise in foreign market, low
costs. Dis – control is relinquished, exporter cannot expect great attention for certain products, as tr house has
many products in its range.
- Piggy-backing = cooperation between 2 companies in the home market in which one (the rider) uses the
distribution channels of the other (carrier). Carrier’s ad - The rider’s products are usually complementary so do
not compete with carrier. Rider’s ad – low costs, maximal control on marketing plan. Suitable for beginners.
There are three distribution channels poss: one/two/three – step
- Joint selling = a company in
a country uses the sale organization of a foreign one for its exports. This foreign company does the same. So
, exchange of product ranges. Standardization of the product. Ad for both – drop in product cost, independence
of the partner, few financial demand, swift access to foreign market. Dis – exporter has no influence on how the
marked is worked because the other party is responsible for that.
- Export combination = cooperation between limited number of companies which form a central body to which
participating companies delegate one or more export functions, as doing market research, establishing contracts
with agents, executing strategies. This cooperation may be based on joining part product ranges, a common
interest a shared need, financial reasons.
- International joint venture = strategic alliance between 2 or more companies from more than one country
which remain independent. Reasons – companies complement each other in technology or management, faster
way to enter the market, global investment are too costly without a foreign partner, avoiding trade barriers.
Companies assess each other to finances, organization, production, institutional, possible attitude in negotiation.
5.3 PRODUCING ABROAD. Instead of use distribution channels, companies can produce abroad because production
costs are lower, company can change process without a change in home country, faster delivery, avoid import
restrictions. Producing abroad may be done in the form of :
- Licensing = form of collaboration with a company abroad. The licensor grants the licensee the right to make
use of his industrial property. Licensing out reasons – licensor keep technological control of product
development, licensor is too small in the fields of finance management and marketing to be able to invests
aboard himself. Product’s life cycle can be extended in a new market, if government regulations impose
restrictions, exporting voluminous but low value product is not viable, so better to produce them abroad.
Licensing in reasons – bring new products onto the market fast, generating cash flow. Licensing is short term.
Dis of in and out – licensee may become competitor and more independent. Control of the quality of the product
is difficult. If any friction happen between them, the licensee can do little to protect the investment.
- Franchising = contract of collaboration whereby the foreign producer/distributor (franchisee) is allowed to
make use, wholly or partially, of the marketing strategy of the company gathering the franchising (franchisor).
The contract provide for the application of methods and sale of the production, brand name, logo, sale method.
Hard franchising – decisions are taken centrally and commercial independence of the franchisee is limited. Soft
fr – franchisee has more influence to determine policies, pricing and promo. Sometimes a master franchise is
granted, so that he has control of a certain area and can sub-franchises.
- Contract manufacturing = international company has its product manufactured by local producer. Producer
has reasonability on the production and the international company is responsible for all marketing activities.
International c does not invest in production facilities. That is chosen in aeras with high degree of protection by
tariff, or where technology is high but expertise low (Asia).
- Assembly = implies that an international company arranges for the final phase of production to take place in
the country of export. Investment is not too high and operations profitable because low labour costs in the host
country. 3 forms. Management contracting, the foreign country provide the know-how in the form of
management. Usually when risks abroad are high. Dis is that this export of know-how turns into competitors.
Joint ownership, where the exporter provides part of the capital for production. Local production, the export
company built a factory abroad.
5.4 E-COMMERCE. E-commerce is leading to a shift in power from producers to the end users for 4 reasons. Desire for
convenience – the internet gives customers the ability to collect information and buy goods and services directly.
Incorporation of the net in the buying process – pre-buying and post-sale behaviour have increased. Shift in loyalty
– customer appear to be loyal to online sellers and repeat the purchase. A change in business practice.
E-commerce can shift from a push strategy to a pull strategy of the manufacturer. Internet also make it possible for
manufacturer and customer to have a direct contact, so companies can shift from indirect to direct export.
- For B2B e-c – companies in the industrial sector are increasing the use of a virtual marketplace.
- B2C e-c – customers are now approached directly by companies.
- C2B e-c – the buyer take the initiative for transaction instead of the seller.
- B2G and G2B e-c – concerns tenders. Businesses can submit tenders and gov bodies put out invitations for
tenders for movable property and real estate.
E-commerce Ad – save money because low sale and transaction costs. Leads to more efficient distribution because
fewer channels. Offer opp to develop direct relationship. Reduce delivery time. Opp for customer service. Dis – customer
can not examine the product physically. Exchange of knowledge and in-depth info is limited. Extra logistic costs like
packaging. Difficult to attract new customers.
