Rabu, 23 November 2011
INTERNATIONAL BUSINES OPREATION EXPORTING, IMPORTING, AND COUNTERTRADE
Exporting is not an activity just for large multinational enterprises; many small firms such as Artais have benefited significantly from the moneymaking opportunities of exporting. Evidence suggests that the volume of export activity in the world economy, by firms of all sizes, is likely to increase in the near future.
Nevertheless, exporting remains a challenge for many firms. While large multinational enterprises have long been conversant with the steps that must be taken to export successfully, smaller enterprises can find the process intimidating. The firm wishing to export must identify foreign market opportunities, avoid a host of unanticipated problems that are often associated with doing business in a foreign market, familiarize itself with the mechanics of export and import financing, learn where it can get financing and export credit insurance, and learn how it should deal with foreign exchange risk.
The Promise and Pitfalls of Exporting
The great promise of exporting is that huge revenue and profit opportunities are to be found in foreign markets for most firms in most industries. Despite the obvious opportunities associated with exporting, studies have shown that while many large firms tends to be proactive about seeking opportunities for profitable exporting, systematically scanning foreign markets to see where the opportunities lie for leveraging their technology, products, and marketing skills in foreign countries, many medium sized and small firms are very reactive.
To make matters worse, many neophyte exporters have run into significant problems when first trying to do business abroad and this has soured them on future exporting ventures. Common pitfalls include poor market analysis, a poor understanding of competitive conditions in the foreign market, a failure to customize the product offering to the needs of foreign customers, lack of an effective distribution program, and a poorly executed promotional campaign in the foreign market.
Improving Export Performance
An International Comparison
One big impediment to exporting is the simple lack of knowledge of the opportunities available. Often there are many markets for a firm's product, but because they are in countries separated from the firm's home base by culture, language, distance, and time, the firm does not know of them. The way to overcome ignorance is to collect information. In Germany, one of the world's most successful exporting nations, trade associations, government agencies, and commercial banks gather information, helping small firms identify export opportunities. The sogo shosha have offices all over the world, and they proactively, continuously seek export opportunities for their affiliated companies large and small. The great advantage of German and Japanese firms is that they can draw on the large reservoirs of experience, skills, information, and other resources of their respective exportoriented institutions.
Despite institutional disadvantages, US firms can increase their awareness of export opportunities. The most comprehensive source of information is the US Department of Commerce and its district offices all over the country. Within that department are two organizations dedicated to providing businesses with intelligence and assistance for attacking foreign markets: the International Trade Administration and the United States and Foreign Commercial Service Agency.
These agencies provide the potential exporter with a "best prospects" list, which gives the names and addresses of potential distributors in foreign markets along with businesses they are in, the products they handle, and their contact person. The Department of Commerce also organizes trade events that help potential exporters make foreign contacts and explore export opportunities. The department organizes exhibitions at international trade fairs, which are held regularly in major cities worldwide.
A number of private organizations are also beginning to gear up to provide more assistance to would-be exporters. Commercial banks and major accounting firms are more willing to assist small firms in starting export operations than they were a decade ago.
Utilizing Export Management Companies
One way for first-time exporters to identify the opportunities associated with exporting and to avoid many of the associated pitfalls is to hire an export management company (EMC). EMCs are export specialists who act as the export marketing department or international department for their client firms. EMCs normally accept two types of export assignments. They start up exporting operations for a firm with the understanding that the firm will take over operations after they are well established. In another type, start-up services are performed with the understanding that the EMC will have continuing responsibility for selling the firm's products. In theory, the advantage of EMCs is that they are experienced specialists who can help the neophyte exporter identify opportunities and avoid common pitfalls.
In addition to using EMCs, a firm can reduce the risks associated with exporting if it is careful about its choice of exporting strategy. A few guidelines can help firms improve their odds of success. The probability of exporting successfully can be increased dramatically by taking a handful of simple strategic steps. First, particularly for the novice exporter, it helps to hire an EMC or at least an experienced export consultant to help with the identification of opportunities and navigate through the web of paperwork and regulations so often involved in exporting. Second, it often makes sense to initially focus on one market, or a handful of markets. The idea is to learn about what is required to succeed in those markets, before moving on to other markets. Third, as with 3M, it often makes sense to enter a foreign market on a small scale to reduce the costs of any subsequent failure. Fourth, the exporter needs to recognize the time and managerial commitment involved in building export sales and should hire additional personnel to oversee this activity. Fifth, in many countries, it is important to devote a lot of attention to building strong and enduring relationships with local distributors and customers . Local people are likely to have a much greater sense of how to do business in a given country than a manager from an exporting firm who has previously never set foot in that country.
Finally, it is important for the exporter to keep the option of local production in mind. Once exports build up to a sufficient volume to justify cost-efficient local production, the exporting firm should consider establishing production facilities in the foreign market.
Export and Import Financing
Letter of Credit
A letter of credit L/C, stands at the center of international commercial transactions. Issued by a bank at the request of an importer, the letter of credit states that the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents.
Let us assume the Bank of Paris is satisfied with the French importer's creditworthiness and agrees to issue a letter of credit. The letter states that the Bank of Paris will pay the US exporter for the merchandise as long as it is shipped in accordance with specified instructions and conditions. After the exporter has shipped the merchandise, he draws a draft against the Bank of Paris in accordance with the terms of the letter of credit, attaches the required documents, and presents the draft to his own bank, the Bank of New York, for payment.
Also, an exporter may find that having a letter of credit will facilitate obtaining preexport financing. This loan may not have to be repaid until the exporter has received his payment for the merchandise. As for the French importer, the great advantage of the letter of credit arrangement is that she does not have to pay out funds for the merchandise until the documents have arrived and unless all conditions stated in the letter of credit have been satisfied.
A draft, sometimes referred to as a bill of exchange, is the instrument normally used in international commerce to effect payment. A draft is simply an order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time. International practice is to use drafts to settle trade transactions. This differs from domestic practice in which a seller usually ships merchandise on an open account, followed by a commercial invoice that specifies the amount due and the terms of payment. In domestic transactions, the buyer can often obtain possession of the merchandise without signing a formal document acknowledging his or her obligation to pay. In contrast, due to the lack of trust in international transactions, payment or a formal promise to pay is required before the buyer can obtain the merchandise.
Drafts fall into two categories, sight drafts and time drafts. A sight draft is payable on presentation to the drawee. A time draft allows for a delay in payment--normally 30, 60, 90, or 120 days. It is presented to the drawee, who signifies acceptance of it by writing or stamping a notice of acceptance on its face. Time drafts are negotiable instruments; that is, once the draft is stamped with an acceptance, the maker can sell the draft to an investor at a discount from its face value
Bill of Lading
The third key document for financing international trade is the bill of lading. The bill of lading is issued to the exporter by the common carrier transporting the merchandise. It serves three purposes: it is a receipt, a contract, and a document of title. As a receipt, the bill of lading indicates that the carrier has received the merchandise described on the face of the document. The bill of lading can also function as collateral against which funds may be advanced to the exporter by its local bank before or during shipment and before final payment by the importer.
A Typical International Trade Transaction
The steps are enumerated here.
1. The French importer places an order with the US exporter and asks the American if he would be willing to ship under a letter of credit.
2. The US exporter agrees to ship under a letter of credit and specifies relevant information such as prices and delivery terms.
3. The French importer applies to the Bank of Paris for a letter of credit to be issued in favor of the US exporter for the merchandise the importer wishes to buy.
4. The Bank of Paris issues a letter of credit in the French importer's favor and sends it to the US exporter's bank, the Bank of New York.
5. The Bank of New York advises the US exporter of the opening of a letter of credit in his favor.
6. The US exporter ships the goods to the French importer on a common carrier. An official of the carrier gives the exporter a bill of lading.
7. The US exporter presents a 90day time draft drawn on the Bank of Paris in accordance with its letter of credit and the bill of lading to the Bank of New York. The US exporter endorses the bill of lading so title to the goods is transferred to the Bank of New York.
The Export - Import Bank, often referred to as Eximbank, is an independent agency of the US government. Its mission is to provide financing aid that will facilitate exports, imports, and the exchange of commodities between the United States and other countries. Eximbank pursues this mission with various loan and loanguarantee programs.
Eximbank guarantees repayment of medium and longterm loans US commercial banks make to foreign borrowers for purchasing US exports. The Eximbank guarantee makes the commercial banks more willing to lend cash to foreign enterprises.
Eximbank also has a direct lending operation under which it lends dollars to foreign borrowers for use in purchasing US exports
Export Credit Insurance
For reasons outlined earlier, exporters clearly prefer to get letters of credit from importers. However, at times an exporter who insists on a letter of credit is likely to lose an order to one who does not require a letter of credit. The lack of a letter of credit exposes the exporter to the risk that the foreign importer will default on payment. The exporter can insure against this possibility by buying export credit insurance. If the customer defaults, the insurance firm will cover a major portion of the loss.
· Countertrade is an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent. Nonconvertibility implies that the exporter may not be able to be paid in his or her home currency; and few exporters would desire payment in a currency that is not convertible. Countertrade is often the solution. Countertrade denotes a whole range of barterlike agreements; its principle is to trade goods and services for other goods and services when they cannot be traded for money.
The Growth of Countertrade
Given the importance of countertrade as a means of financing world trade, prospective exporters will have to engage in this technique from time to time to gain access to international markets. The governments of developing nations sometimes insist on a certain amount of countertrade.
Types of Countertrade
First, if goods are not exchanged simultaneously, one party ends up financing the other for a period. Second, firms engaged in barter run the risk of having to accept goods they do not want, cannot use, or have difficulty reselling at a reasonable price.
Counterpurchase is a reciprocal buying agreement. It occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.
Offset is similar to counterpurchase insofar as one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale. The difference is that this party can fulfill the obligation with any firm in the country to which the sale is being made. From an exporter's perspective, this is more attractive than a straight counterpurchase agreement because it gives the exporter greater flexibility to choose the goods that it wishes to purchase.
Switch trading refers to the use of a specialized thirdparty trading house in a countertrade arrangement. When a firm enters a counterpurchase or offset agreement with a country, it often ends up with what are called counterpurchase credits, which can be used to purchase goods from that country. Switch trading occurs when a third-party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them.
Compensation or Buybacks
A buyback occurs when a firm builds a plant in a country--or supplies technology, equipment, training, or other services to the country--and agrees to take a certain percentage of the plant's output as partial payment for the contract.
The Pros and Cons of Countertrade
The main attraction of countertrade is that it can give a firm a way to finance an export deal when other means are not available. Given the problems that many developing nations have in raising the foreign exchange necessary to pay for imports, countertrade may be the only option available when doing business in these countries. Even when countertrade is not the only option for structuring an export transaction, many countries prefer countertrade to cash deals. But the drawbacks of countertrade agreements are substantial. Other things being equal, all firms would prefer to be paid in hard currency. Countertrade contracts may involve the exchange of unusable or poor - quality goods that the firm cannot dispose of profitably.
Given these drawbacks, countertrade is most attractive to large, diverse multinational enterprises that can use their worldwide network of contacts to dispose of goods acquired in countertrading. The masters of countertrade are Japan's giant trading firms, the sogo shosha, who use their vast networks of affiliated companies to profitably dispose of goods acquired through countertrade agreements.
Posted by akmal putra saniba