The Exporting Process (PowerPoint)

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					International Distribution
• Direct foreign investment
   – Perform all distribution functions on your own
     through ownership of distributors/retailers

   Domestic Intermediaries                    Foreign Intermediaries

                   Internet                X owns/operates
                                      or   its own             Foreign
 U.S. Company
                   Direct marketing        distribution &      consumer
                                           retail entities

                                              Foreign            Foreign
                                              distributor        Retailer

    Capital intensive!
International Distribution

 Three general exporting alternatives
   1. Sell directly through your own sales force.
   2. Sell indirectly through independent
   3. Sell indirectly through an outside
      distribution system with regional or global
      coverage (e.g., Export Management
 International Distribution Alternatives:
  Domestic Intermediaries               Foreign Intermediaries
                    Internet     X Sales office
U.S. Company                                                       Foreign
                    E-commerce                                     consumer


        Export Management                                   Distributor
        Company (EMC)


                                 Foreign Sales
                                 Corporation (FSC)
Intermediaries: two general types
•   Types of intermediary relationships
    – Distributors; buy & resell; longer term
    – Agency; works on sales commissions
      a) agents – short term; e.g., one time
      b) representatives – longer term; independent sales
         people that represent your company’s products.
What do intermediaries do?
(the short list)

• purchase inventory from the manufacturer or export
  intermediary; assumes risk for selling the product to
  smaller distributors, retailers and/or end users in the
  foreign market.
• Provide a sales force that is large enough to cover
  the country or region in which it is located.
• local advertising & promotion
• warehousing for the product.

See also Table 11.2, p. 337, text
                                    JPG consulting, Going Global, Evaluating
                                      Foreign Distributors; http://www.going-
What to consider when selecting
foreign intermediaries (pp.336-345)

INTERNAL                        EXTERNAL
  Company objectives –           Customer characteristics -
   cost vs. control               what needs should be
  Character; nature of            satisfied?
   product                         • When, where, how?
  Capital resources              Culture – to what extent do
   available to company           we need to adapt?
  Continuity of relationships    Competition – what
   with intermediaries            intermediaries do
  Coverage                        competitors use?
Channel Design Considerations

• Coverage
  – The number of areas & retail outlets
    in which a product is represented
    and the quality of that
• Types of coverage
  – Intensive
  – Selective
  – Exclusive
Locating & selecting intermediaries

Locating Intermediaries - lists provided by gov’ts,
   chambers of commerce, business publications, etc.
   (Jan 16 lecture)
Selecting Intermediaries - screen carefully, be precise
   about what functions you want performed

Intermediary Evaluation Checklist:
• company characteristics: health of the business
• experience & reputation
• performance: sales force, territory, promotions, product movement
• compatibility:
 Motivating intermediaries;
 provide incentives

• Inventory Financing
• Cumulative Rebates
              for larger quantities, early payments,
              achieving sales targets, maintaining inventory
              levels, performing sales promotions, etc.
• Returns of Unsold Merchandise
• Promotion & Merchandising Assistance
  In-store Displays
  Financial Assistance
Terminating intermediaries
Terminating Intermediaries - be aware that some
   countries have provisions to protect intermediaries
   from termination

• Honduras
• distributors/agents protected by wrongful
   termination law (Law of Agents, Distributors and
   Representatives of Foreign Enterprises)
• Requires “just cause” for termination (fraud,
   negligence, failed sales targets)
• terminating a distributor may require compensation
The Distributor Agreement
Typical terms include
• Contract duration
      • Typically short periods initially
• Geographic and customer boundaries
      • Well-defined territories and channels
• Compensation
      • Amounts, how and in what currency
• Products and conditions of sale
      • Products to be sold; terms and conditions of sales
• Means of communication between parties
Logistics: transportation of goods
Shipping Guinness beer to Bertoua, Cameroon
From port to patrons

          4 days from Douala to Bertoua
Check Export Requirements

• Department of Commerce, Bureau of Industry &
  Security (formerly Bureau of Export Controls
• What types of products have restrictions:
   – primarily weapons, technology, defense related
• U.S. boycotts:
   – Iran, Iraq, Cuba, Libya
     Bureau of
     Industry &

Export Documents

 l   Export Declaration
 l   Consular Invoice or Certification of Origin
 l   Bill of Lading
 l   Commercial Invoice
 l   Insurance Policy or certificate
 l   Licenses
 l   Others
     u Health Certificates
     u Packing Lists
     u Etc.

Logistics Specialists

   Intermodal Marketing Companies (IMCs)
      IMC arranges entire distribution system from factory to
      customer’s port of entry
      a broker: takes a percentage of the cost
   Foreign-Freight Forwarder
    arranges documentation          checks export restrictions
    advises on scheduling, routing offers insurance
    & rates                        provides warehouse storage
    checks consular, licensing, & will pack/containerize
    labeling requirements


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