International Management (6013B0536Y)
Summary of all chapters (ISE International Business Competing in the Global Marketplace, 13th Ed., by Charles Hill) and articles
covered by Markus Paukku for the midterm exam.
Week 1: International Business Functions 2
Chapter 16 – Exporting, Importing and Countertrade 2
Week 2: Global Production and Supply Chain Management 6
Chapter 17 – Global Production and Supply Chain Management 6
Manage the Suppliers That Could Harm Your Brand – Short & Toffel (2021) 14
Week 3: Global Marketing and Business Analytics 16
Chapter 18 – Global Marketing and Business Analytics 16
Rethinking Marketing – Rust, Moorman & Bhalla (2010) 25
Multiple Choice Exam Questions 27
,Week 1: International Business Functions
Chapter 16 – Exporting, Importing and Countertrade
Exporting
• More than 90 percent of all companies engaging in the global marketplace export.
• Most small- and medium-sized enterprises (SMEs) prefer exporting as a relatively low commitment to getting their
products or services out globally.
• The volume of export activity in the world economy has increased as exporting has become easier from a large
number of countries.
o The gradual decline in trade barriers (WTO) along with regional economic agreements (EU, NAFTA) has
significantly increased export opportunities.
o Modern communication and transportation technologies have alleviated the logistical problems associated
with exporting.
▪ Firms have increasingly used e-commerce and international air services to reduce the costs, distance,
and cycle time associated with exporting.
The Promise and Pitfalls of Exporting
• The great promise of exporting is that large revenue and profit opportunities are to be found in foreign markets for
most firms in most industries.
o The international market is normally so much larger than the firm’s domestic market that exporting is nearly
always a way to increase the revenue and profit base of a company.
o By expanding the size of the market, exporting can enable a firm to achieve economies of scale, thereby
lowering its unit costs.
• Studies have shown that while many large firms tend to be proactive about seeking opportunities for profitable
exporting—systematically scanning foreign markets to see where the opportunities lie for leveraging their technology,
products, and marketing skills in foreign countries—many medium-sized and small firms are very reactive.
o Reactive firms consider exporting only after their domestic market is saturated.
o One reason more firms are not proactive is that they are unfamiliar with foreign market opportunities; they
simply do not know the size or the location of the opportunities.
▪ A common pitfall of exporting is a poor understanding of competitive conditions in the foreign market
o Also, many would-be exporters, particularly smaller firms, are often intimidated by the complexities and
mechanics of exporting to countries where business practices, language, culture, legal systems, and currency
are very different from those in the home market.
o Many neophyte exporters run into significant problems when first trying to do business abroad, and this
sours them on future exporting ventures.
o Exporters often face voluminous paperwork, complex formalities, and many potential delays and errors.
Improving Export Performance
• International comparisons
o The way to overcome ignorance is to collect information
o Trading houses, trade associations, government agencies, and commercial banks gather information, helping
small firms identify export opportunities.
o Other countries may have more experience in trade.
▪ In Germany—one of the world’s most successful exporting nations—trade associations, government
agencies, and commercial banks gather information, helping small firms identify export opportunities.
▪ A similar function is provided by the Japanese Ministry of International Trade and Industry (MITI),
which is always on the lookout for export opportunities.
▪ Many Japanese firms are affiliated in some way with the sogo shosha, Japan’s great trading houses.
• Japan’s sogo shosha have offices all over the world, and they proactively and continuously
seek export opportunities for their affiliated companies large and small.
• Information sources
o Firms can increase their awareness of export opportunities.
o The most comprehensive source of information is the U.S. Department of Commerce and its district offices all
over the country (U.S. Export Assistance Centres, USEAC).
▪ Within that department are two organisations dedicated to providing businesses with intelligence and
assistance for attacking foreign markets: U.S. and Foreign Commercial Service and International Trade
Administration (ITA).
• The U.S. and Foreign Commercial Service and ITA are governmental agencies that provide
the potential exporter with a “best prospects” list, which gives the names and addresses of
potential distributors in foreign markets along with businesses they are in, the products they
handle, and their contact person.
▪ In addition, the Department of Commerce has assembled a “comparison shopping service” for
countries that are major markets for U.S. exports.
, ▪ The Department of Commerce also organizes trade events and exhibitions that help potential
exporters make foreign contacts and explore export opportunities.
▪ The department also has a matchmaker program, in which department representatives accompany
groups of U.S. businesspeople abroad to meet with qualified agents, distributors, and customers.
o Another governmental organisation, the Small Business Administration (SBA), can help potential exporters.
▪ The SBA employs trade officers throughout the United States.
▪ Through its SCORE program, the SBA oversees about 11,500 volunteers with international trade
experience to provide one-on-one counselling to active and new-to-export businesses.
▪ The SBA also coordinates Export Legal Assistance Network (ELAN), a nationwide group of
international trade attorneys who provide free initial consultations to small businesses on export-
related matters.
o The United States has also established a set of 15 Centres for International Business Education and Research
(CIBERs), which assist with exporting needs.
o Additionally, the vast majority of U.S. states, regions, and many large cities maintain active trade commissions
whose purpose is to promote exports.
o A number of private organisations (e.g. commercial banks, major accounting firms, large multinationals) are
also beginning to provide more assistance to would-be exporters.
• Export-import service providers
o Freight forwarders orchestrate transportation for firms that are shipping internationally.
▪ Combine smaller shipments into a single large shipment to minimize the shipping cost.
▪ Take care of documentation, payment, and carrier selection for the company.
o An export management company (EMC) offers services to firms that have not previously exported products.
▪ EMCs offer a full menu of services to handle all aspects of exporting, similar to having an internal
exporting department within your own firm.
▪ Deal with export documents and operate as the firm’s agent and distributor.
▪ The advantage of EMCs is that they are experienced specialists who can help the neophyte exporter.
▪ EMCs are export specialists that act on behalf of their client firms.
▪ An EMC can help new exporters identify opportunities and avoid common pitfalls.
o Export packaging companies, or export packers, provide services to firms that are unfamiliar with exporting.
▪ An export packer has the knowledge of the packaging requirements and specifications for specific
countries, can advise firms on the appropriate design and materials for the packaging for the
packaging of their items, and can assist companies in minimizing packaging to maximize the number
of items to be shipped.
o Customs brokers can help companies avoid the pitfalls involved in customs regulations.
▪ Customs brokers can offer a firm a complete package of services (e.g. knowledge about laws and
documentation regulations) that are essential when a firm is exporting to a large number of countries.
o Confirming houses, or buying agents, represent foreign companies that want to buy your products.
▪ They try to get the products foreign clients want at the lowest prices and are paid a commission.
o Export agents, merchants, and remarketers buy products directly from the manufacturer and package and
label the products in accordance with their own wishes and specifications.
▪ They then sell the products internationally through their own contacts under their own names and
assume all risks.
o Piggyback marketing is an arrangement whereby one firm distributes another firm’s products.
▪ Successful piggybacking usually requires complementary products and the same target market.
o Export processing zones (EPZs) include foreign trade zones (FTZs), special economic zones, bonded
warehouses, free ports, and customs zones.
▪ Many companies use EPZs to receive shipments of products that are then reshipped in smaller lots to
customers throughout the surrounding areas.
o The outside parties take away headaches but also part of your profits!
• Export strategy
▪ 3M has built its export success on three main principles: enter on a small scale to reduce risks, add
additional product lines once the exporting operations start to become successful, and hire locals to
promote the firm’s products.
o A few guidelines can help firms improve their odds of success when choosing an export strategy.
o 1) Hire an EMC or at least an experienced export consultant to identify opportunities and navigate the
paperwork and regulations so often involved in exporting.
o 2) Initially focus on one market or a handful of markets.
o 3) Enter a foreign market on a small scale to reduce the costs of any later failure.
o 4) Recognise the time and managerial commitment involved in building export sales and should hire
additional personnel to oversee this activity.
o 5) Devote attention to building strong and enduring relationships with local distributors and/or customers.
o 6) Hire local personnel to help the firm establish itself in a foreign market.
