Foreign Country Selection..Ppt

PowerPoint PresentationCourse: EXPORT MANAGEMENT
Instructor: Ahmad Imran Khan
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Firm Specific Characteristics Provide the Lens to Assess the Foreign Market Entry Decision. Product Selection, Country Selection, Mode of Entry, Strategy, and Timing All Depend on Firm Specific Characteristics.
1. Firm Specific Characteristics
Competitive Environment
2. Objectives of Market Entry (Cont.)
“Companies gain advantage against the world’s best competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home based suppliers, and demanding local customers”
Michael Porter
“Without Coke, Pepsi would have a tough time being an
original and lively competitor…..And on the other side of the fence, I’m sure the folks at Coke would say that nothing contributes as much to the present day success of the Coca-Cola Company than…Pepsi”
Roger Enrico
Innovation and Economic Clusters
Strategic Implications:
Choosing location not only based on input cost. Consideration of Potential for Innovation is a critical factor for long term success.
Alexander Consulting Enterprise
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“If you are going to be the world’s best furnishing
company, you have to show you can succeed in
America, because there is so much to learn here.”
Goran Carstedt
segments. Analyses of Market
Proactive Motivator: Motivators that pull firm into foreign market as opportunities available.
Reactive Motivator: Motivator that push firm into foreign market as profit decreasing in local market.
4. Exporting
Exporting is the most popular way for many companies to become international.
Exporting is usually the first mode of foreign entry used by companies.
Selling to foreign markets involves numerous high risks, arising from a lack of knowledge about and unfamiliarity with foreign environments, which can be heterogeneous, sophisticated.
Manufactured goods accounted for almost 60 percent of the exports of developing countries.
For successful development of export activities, systematic collection of information is critical.
What are the pitfalls facing exporters?
Common pitfalls for exporters include:
1. poor market analysis
2. poor understanding of competitive conditions
3. a lack of customization for local markets, poor distribution arrangements, bad promotional campaigns
4. a general underestimation of the differences and expertise required for foreign market penetration
5. difficulty dealing with the tremendous paperwork and formalities involved -
4. Exporting
Indirect exporting involves the use of independent middlemen to market the firm’s products overseas.
Combination Export Manager (CEM)
Example of Indirect exporting:
Intel & HP.
If Hewlett Packard (US firm) buys microchips from Intel (US firm) to use in manufacturing computers and then exports those to Europe. So Intel chips are indirectly exported.
Open new markets without expertise or investment
TCs cover market well and service products they sell
Disadvantages
Product may not get attention it deserves
Engaged in exporting and importing of wide variety of goods.
Provide a full array of services including market research, customs, documentation, transportation, distribution, marketing and financing.
Agents and offices worldwide
Japan’s Sogo sosha
Indirect Export – Export Management Companies
EMC staff typically is knowledge about the legal, financial and logistical details of exporting. Basically operate in two ways:
a. Some act as commission agent for exporters. They handle the details of shipment, clearing customs and document preparation on agreed fee.
b. Other EMC take title of goods. They make money by buying the goods from exporter and reselling them at higher price.
Advantages
Sales are on commission basis (variable cost)
Potentially better feedback than TC
Disadvantages
EMCs may spread themselves too thin with too many customers
Product may not get attention it deserves
Market expertise/contacts can be limited to one or two countries
Direct Exporting :
Direct exporting occurs when a manufacturer or exporter sells directly to an importer or buyer located in a foreign market.
Export Department
Company develops in-house expertise
Disadvantages
Costs are higher than with indirect exporting
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Followed its deliberate approach entering the Russian Market.
It began shipping ice-cream to country in 1990 from company owned plants in Canada and Texas. Over 5year period company opened 74 retail outlets.
Only after gaining a thorough understanding of the Russian market and invest 830M in new ice cream plant in Moscow with 30 new flavors to please Russian people.
The Automated Export System (AES) on the Internet
In the U.S., the AES which was launched in October 1999, enables exporters to file export information at no cost over the Internet. AES is a nationwide system operational at all ports.
Legality of Exports
Export Transactions
The terms of sale
Monitoring the transportation and delivery of the goods to the assigned party
Shipping and obtaining the bill of lading
Bill of lading
A shipper’s order bill of lading
Terms of Shipment and Sale
INCOTERMS 2000 (International Commercial Terms)
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Export promotion activities generally comprise:
1. Export service programs
2. Market development programs
Export - Import Bank (Ex-Im Bank; see Exhibit 17-7)
Tariff Concessions
Export policies
5. Strategy and Time of Entry (Cont.)
Export and Import Financing
Question: How can firms deal with the lack of trust that exists in export transactions?
See the next slide.
Exporting Conundrum
A German firms wants to sell goods to a new client in China.
The German firm wants to get paid first then it will ship the goods.
The Germans would say, “Of course we trust the Chinese. We just want to see their money first.”
The Chinese firm wants to see the goods before paying for them.
The Chinese, of course, trust the Germans; they just want to be sure the goods are what they ordered.
How do they solve this problem?

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Foreign Country Selection..Ppt