Importing Exporting and Sourcing Global Marketing Chapter 8

Importing, Exporting, and Sourcing Global Marketing Chapter 8 1

Introduction • This chapter looks at: – Export selling and export marketing – Organizational export activities – National policies on imports and exports – Tariff systems – Key export participants 8 -2 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Export Selling vs. Export Marketing • Export selling involves selling the same product, at the same price, with the same promotional tools in a different place • Export marketing tailors the marketing mix to international customers 8 -3 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Requirements for Export Marketing • An understanding of the target market environment • The use of market research and identification of market potential • Decisions concerning product design, pricing, distribution and channels, advertising, and communications 8 -4 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Potential Export Problems 8 -7 © 2011 Pearson Education, Inc. publishing as Prentice Hall

National Policies Governing Exports and Imports • Most nations encourage exports and restrict imports • Goods and services imported into the U. S. almost doubled in seven years • In 2008, the total was $2. 5 trillion 8 -8 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Share of U. S. Apparel Market by Exporting Country, 2008 1. China 35. 4 2. India 5. 6 3. Mexico 5. 5 4. Vietnam 5. 3 5. Indonesia 4. 3 6. Bangladesh 3. 6 7. Pakistan 3. 2 8. Honduras 2. 7 9. Cambodia 2. 4 10. Italy 2. 4 8 -9 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Government Programs that Support Exports • Tax incentives • Subsidies • Governmental assistance •

Governmental Actions to Discourage Imports and Block Market Access • Tariffs ( “Three R’s”) • Nontariff barriers – Quotas – Discriminatory procurement policies – Restrictive customs procedures – Arbitrary monetary policies Port Authority of Thailand: Laem Chabang – Restrictive regulations 8 -11 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Examples of Trade Barriers • Table 8. 3 p. 277 • EU- 16. 5% antidumping tariffs on Shoes from China • 10% on shoes from Vietnam • China- 28% on foreign made auto parts 8 -12 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Governmental actions to discourage imports • A nontariff trade barrier (NTB) is any measure other than a tariff that is an obstacle to the sale of products in a foreign market. NTBs are also known as hidden trade barriers. • A quota is a government-imposed limit or restriction on the number of units or the total value of a particular product or product category that can be imported. – In 2005, for example, textile producers in Italy and other European countries were granted quotas on 10 categories of textile imports from China. • Discriminatory procurement policies can take the form of government rules and administrative regulations that give local vendors priority. – The Buy American Act of 1993 © 2011 Pearson Education, Inc. publishing as Prentice Hall 8 -13

Governmental actions to discourage imports • Discriminatory exchange rate policies distort trade in much the same way as selective import duties and export subsidies. • Restrictive administrative and technical regulations can also create barriers to trade. These may take the form of antidumping regulations, product size regulations, and safety and health regulations. – VW diesel engines in US – Restrictions on Japanese imports 8 -14 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Tariff Systems • Single-column tariff – Simplest type of tariff – Schedule of duties in which rate applies to imports from all countries on the same basis • Two-column tariff – General duties plus special duties apply 8 -15 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Tariff Systems Sample Rates of Duty for U. S. Imports 8 -16 © 2011

Preferential Tariff • Reduced tariff rate applied to imports from certain countries • GATT prohibits the use, with three exceptions: – Historical preference arrangements already existed – Preference is part of formal economic integration treaty – Industrial countries are permitted to grant preferential market access to LDCs 8 -17 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Customs Duties • Ad valorem duty – Expressed as percentage of value of goods • Specific duty – Expressed as specific amount of currency per unit of weight, volume, length, or other unit of measurement • $1 per pair of Shoes • Compound or mixed duties – Apply both ad valorem and specific on the same items 8 -18 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Other Duties and Import Charges • Anti-dumping Duties – Dumping is the sale of merchandise in export markets at unfair prices – Special import charges equal to the dumping margin • 48. 5% added to tax against Chinese imports of bicycles in EU • Countervailing Duties – Added duties to offset the subsidies granted in the export countries • Temporary Surcharges © 2011 Pearson Education, Inc. publishing as Prentice Hall 8 -19

Key Export Participants • Foreign purchasing agents • Export brokers • Export merchants • Export management companies • Export distributor • Export commission representative • Cooperative exporter • Freight forwarders • Manufacturer’s export representatives 8 -20 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Organizing for Exporting in the Manufacturer’s Country • Exports can be handled – As a part-time activity performed by domestic employees – Through an export partner – Through an export department within an international division – For multi-divisional companies; each possibility exists for each division 8 -28 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Organizing for Exporting in the Market Country • Direct market representation – Advantages: control and communications • Representation by independent intermediaries – Advantages: best for situations with small sales volume 8 -29 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Export Financing and Methods of Payment • Documentary credits (letter of credit) • Documentary collections (bill of exchange) • Cash in advance • Sales on open account 8 -30 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Flow Chart of Documentary Credit 8 -31 © 2011 Pearson Education, Inc. publishing as

8 -32 © 2011 Pearson Education, Inc. publishing as Prentice Hall

8 -33 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Sourcing • Must emphasize benefits of sourcing from country other than home country • Must assess vision and values of company leadership • Advantage can be gained by – Concentrating some of the marketing activities in a single location – Leveraging company’s know-how – Tapping opportunities for product development and R&D 8 -35 © 2011 Pearson Education, Inc. publishing as Prentice Hall

8 -36 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Factors that Affect Sourcing • • Management vision Factor costs and conditions Customer needs Logistics Country infrastructure Political risk Exchange rate, availability, and convertibility of local money 8 -37 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Duty Drawback • Refunds of duties paid on imports that are processed or incorporated into other goods AND re-exported • Reduce the price of imported production inputs • Used in the U. S. to encourage exports • After NAFTA, U. S. reduced drawbacks on exports to Canada and Mexico • China had to reduce drawbacks in order to join the WTO 8 -38 © 2011 Pearson Education, Inc. publishing as Prentice Hall