final review
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ch16-exporting-importingandcountertrade.pptxExporting, importing and countertrade
Chapter 16
Why export?
Expanding size of market can help firm achieve economies of scale
Diversify seasonality
Generate sales when domestic market is slow
What are the barriers (for SMEs)
Not aware of the market size and opportunities
Intimidated by complexities and mechanics of exporting
Lack of knowledge about local operating environment
Financing
Other risks
Export service providers
Export management companies (EMC)
Export trading companies
Export packing companies
Freight forwarders and customs house brokers
Banks
Ship and pray, or pay and pray?
Trust issues
Buyer sends $ in advance – assumes all risks
Seller sends PRODUCTS before payment – assumes all risks
Solution – letters of credit
Issued by a bank at the request of an importer (who has provided collateral), the letter of credit states that the issuing bank will pay a specified sum of money to the beneficiary (the exporter or seller) after the beneficiary has submitted the required documentation.
Assurances to Seller that they will be paid for performance
Assurances to the Buyer, that their $ will be paid to the Seller, only after performance.
HELPS TO SOLVE TRUST ISSUE
Export import bank of the united states
Offers export credit insurance
Allows exporter to issue payment terms to buyer (upto 180 days)
Pays 90% of invoice value if buyer defaults on payment
Medium and Long Term financing guarantees
