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MBA of International Trade Management

These are some brief notes on International Trade Management - 1

Dr.  S.  Maurer,  
MBA Professor

The issuing bank needs to track thë amendments to determine if the beneficiary has either accepted or rejected the change.  If the beneficiary accepts the amendment,  it can change the liability the applicant has with the LC.

For doing business overseas,  you will want to choose one that offers short-term and medium-term export financing,  foreign credit,  commercial letters of credit,  collection or discount export drafts,  and purchase and sale of foreign exchange.

Sell the standard products you make for your country market in as many foreign markets as will accept them.  Adapt your standard products to meet foreign market needs more closely.  Adapt your products to meet both foreign and domestic market criteria at the same time,  i.e.  create a universal [global] product.

If a country's standard of living is lower than that of the United States,  a manufacturer may find a market for less sophisticated product models that have become obsolete in the United States.

While many enterprises recognize the potential of the global marketplace,  the idea of taking it on can be extremely daunting.  Experts agree that the process starts with a deep commitment.  And with that commitment come resources of money,  time and effort to research markets,  learn about new cultures and create a strategic business plan that specifically addresses the new realities.

Companies in lesser developed countries that have achieved local success may find it necessary to adopt an “up-market strategy” whereby the product may have to be designed to meet world class standards.

In a survey of 328 of the U.S.'s fastest growing enterprises,  globally focused enterprises anticipated 1992 growth rates of 26.4 percent compared to 22.5 percent for firms that aren't involved in selling internationally.

Studies reveal that enterprises willing to invest,  to innovate and design their products for a specific export market are most likely to succeed.

If an exporter can find a virgin market that is devoid of current and potential competition,  there may be no need to adapt or localize the product since the potential buyers have no choice.  But it is very hard to find a country in the current market environment where there is no competition.

As the shipment approached Chicago,  Lowe’s customs agent,  Fritz enterprises,  directed Hanjin to release the shipment to a motor carrier so that it could be taken to a U.S.  Customs facility for an intensive customs examination.  After the inspection had been completed,  the container sat for over a week in Channel’s unprotected yard,  and was eventually stolen.

Because of the warming of relations with the West,  the Vietnamese market is opening up.  Many of the Vietnamese living here have strong links with family and friends still living in their native country.  The same is true of the Hispanic population.  Owners of small businesses should be looking at an Hispanic workforce as a strategic opportunity.

If you choose to sell your commodity directly,  you can market your goods through direct mail,  advertising and promotions in magazines with overseas circulation as well as in local publications and other media.

The level of income,  the level of education,  and the availability of energy are all factors that help predict the acceptance of a product in a foreign market.

If brand name is relatively unimportant,  or if your market is limited and concentrated,  then media advertising will probably play a minor role in your overall promotion efforts.  One of the best ways to build overseas sales is by participating in trade shows,  both here in the United States and overseas.

Let’s assume that we have a buyer,  a broker/middleman,  and a supplier/manufacturer.  At the request of the broker,  a buyer applies for a letter of credit,  but this time there is no mention of the letter of credit needing to be transferable?

These are some brief notes on International Trade Management - 2

Dr.  S.  Maurer,  
MBA Professor

Once a letter of crëdit [LC] is issued and the beneficiary has had a chance to review the document,  the need for an amendment may become apparent.  Or perhaps the applicant realizes they made an error when they completed the application after the letter of credit has already been issued.  Whatever the circumstances may be,  it isn’t unusual for someone involved in a transaction to need to amend an existing letter of credit.

Instruction or maintenance manual,  for example,  should be made available in centimeters,  weights in grams or kilos,  and temperatures in degrees Celsius.

In defining their price,  most exporters choose from three common methods.  You can base your overseas price on your domestic one,  then add in export costs.  You can use incremental cost pricing,  determining a basic unit cost that takes into account production and exporting costs plus an additional markup for profit.  Or you can reduce the quality of your product,  using cheaper materials or simplifying production processes.

Simply stated exporting refers to the marketing of goods produced in one country into another.

Many firms still hold onto the frontier mentality left over from the railroads.  But the frontier has moved offshore.  Only one-third of U.S.  small businesses export and they do it incidentally,  not as a purpose.  In Europe,  every other transaction is a foreign one.

Delivery is the placement of the vehicle in a position for unloading.

The level of income,  the level of education,  and the availability of energy are all factors that help predict the acceptance of a product in a foreign market.

In the final analysis the extent of adaptation will be driven by the corporate culture,  customer and market orientation,  the market potential for the product scheduled to be exported and the importance of international marketing for corporate growth and survival.

The commitment and expertise of the distributor are paramount to us, stresses Cenogenics owner Michael Katz.  Once we've found the right person,  the country is no longer difficult.  We have a guide through the maze.

The greater the cultural differences between the two target markets the greater the need for adaptation.

Documentation is important not only for the amount of additives,  but also the source of the product; secondary or indirect additives are also regulated in most countries.

it would make perfect sense to develop [unless such products are already available] and export dehydrated vegetables in some country markets.

When potential customers have limited purchasing power,  the exporter may actually need to develop an entirely new product [innovation] designed to address the market opportunity at a price point that is within the reach of a potential target market.

American enterprises are more sophisticated and much more capable in many dimensions,  including marketing techniques,  technology,  experience and access to a lot of high quality products.

The decision to market your product directly or indirectly should be based on several important factors: the size of your firm,  the nature of your product,  previous export experience,  and business conditions in your selected overseas market.

These are some brief notes on International Trade Management - 3

Dr.  S.  Maurer,  
MBA Professor

Establishing local customer preferënces and evaluating competitive products and enterprises in the target market is elemental.

The greater the cultural differences between the two target markets the greater the need for adaptation.

If you choose to sell your commodity directly,  you can market your goods through direct mail,  advertising and promotions in magazines with overseas circulation as well as in local publications and other media.

The United States is virtually alone in its adherence to a non-metric system,  and U.S.  firms that compete successfully in the global market have found metric measurement to be an important detail in selling to overseas customers.

Once the endorsement is taken care of,  the bank will issue a document or letter titled Assignment of Proceeds addressed,  in this case,  to the supplier.  The content of this document will indicate that an assignment of proceeds has been made in their favor with a stated value.  it will also indicate that if and when payment is made under the letter of credit,  payment will automatically be made under the assignment.

One area in which you should definitely seek assistance is market research.  You can get up-to-date information from the U.S.  Commerce Department's trade information Center and the SBA.  The SBA and its volunteer offshoot,  the Service Corps of Retired Executives [SCORE],  can also help you with marketing or distributing your commodity.

If a beneficiary has a certain timeframe to either accept or reject the amendment and the bank doesn’t hear from the beneficiary during the stipulated timeframe,  this practice is seen as trying to change the nature of the irrevocable letter of credit,  and may even be contrary to the laws in the country of the beneficiary.  As a result the practice is strongly discouraged.

There's another side to the owner-distributor relationship that causes many exporters to urge caution.  Distributors frequently demand exclusive market rights to your product while reserving the right to service your competitors, warns an article in World trade magazine.  Don't expect commitment.

A thorough corporate self analysis or self audit is needed to understand to what extent the exporter is willing to gather information and invest in adaptation of the product for customers in a specific country market or region of the world.

A major change in the cultural shift is taking place within the corporate world,  and the “one size fits all” business practice is becoming obsolete.

Disputes often occur in the distribution cycle over which party must bear the loss of a shipment due to a contention that the carrier had not yet taken control of the shipment or had made a “delivery” according to the bill of lading.

Strong warranties may be required to break into a new market,  especially if the enterprise is an unknown supplier.  In other cases warranties similar to those in the home country market may not be expected.

To successfully establish your niche,  you should target a few selected countries.  You will want to investigate national wealth and any cost barriers,  such as tariffs and import regulations,  as well as taxation laws and restrictions on foreign investments.

When potential customers have limited purchasing power,  the exporter may actually need to develop an entirely new product [innovation] designed to address the market opportunity at a price point that is within the reach of a potential target market.

A world of opportunity awaits outside the U.S.  borders.  Despite calls for protectionism by a number of business and government leaders,  trade agreements and the reconfiguration of nations are creating a global marketplace that offers new horizons for enterprises willing to venture out.

These are some brief notes on International Trade Management - 4

Dr.  S.  Maurer,  
MBA Professor

Most owners of small businesses vënturing overseas often don't have the extra capital they need and must turn to outside financing sources.  In recognition of the importance of exporting building at all governmental levels,  new sources of funding are springing up.

Distributors purchase goods at a significant discount,  acquire title and then market the product.  Sales representatives,  don't purchase goods but instead place orders for them.

Foreign government product regulations now common in international trade are expected to expand in the future.

You should also research existing treaties and any currently under development,  such as GATT and the North American free trade Agreement [NAFTA].  [These trade agreements are still evolving,  so be sure to monitor them closely.]

Engineering changes needed: Environmental Requirements—Combustion engines,  for example,  may be required to use unleaded fuel only.

In order to speed up the amendment process,  the issuing bank may be tempted to add a clause to their amendment indicating that the beneficiary has a certain timeframe to either accept or reject the amendment.

When an LC amendment is made,  the beneficiary has the right to either accept or reject the amendment in its entirety.  However,  nowhere is it stipulated just how long the beneficiary has to make this decision.

What flies off the shelves in Chicago may not necessarily be a great seller in Munich.  Cultural differences and varying product standards can present serious barriers if you aren't willing to adapt your commodity to your new target market.

The packaging design should be based on the customer needs.  In industrial products the pack should be considered for its usage and for its amenability to storing,  pouring,  re-use,  etc.

The availability,  performance and level of sophistication of commercial infrastructure will warrant a need for adaptation or localization of products.  For example,  an exporter may decide not to market its frozen line of food products in countries where retailers do not have adequate freezer space.

Delivery of a rail car is normally affected when the car is placed on a team track or spotted.  Republic Carloading & Distribution Co.  v.  Missouri Pacific R.R.  Co.,  302 F.2d 381,  386 [8th Cir.  1962].

In the final analysis the extent of adaptation will be driven by the corporate culture,  customer and market orientation,  the market potential for the product scheduled to be exported and the importance of international marketing for corporate growth and survival.

There's another side to the owner-distributor relationship that causes many exporters to urge caution.  Distributors frequently demand exclusive market rights to your product while reserving the right to service your competitors, warns an article in World trade magazine.  Don't expect commitment.

Let’s assume that we have a buyer,  a broker/middleman,  and a supplier/manufacturer.  At the request of the broker,  a buyer applies for a letter of credit,  but this time there is no mention of the letter of credit needing to be transferable?

Keep in mind most letters of credit are irrevocable,  meaning that no change can be made to the LC without the agreement of all parties.