Chapter 13EXPORT AND IMPORT

MANAGEMENT

Prepared by Robin RobertsGriffith University

Learning objectives

After studying this chapter you should be able to:•Describe the importance of exporting for Australian organisations•Identify the key internal factors and decision criteria that underpin successful exporting strategies•Describe indirect and direct export strategies

Learning objectives

• Outline the mechanics of exporting and the risks involved

• Discuss the role of governments in exporting

• Outline the mechanics of importing• Describe strategies for dealing with grey

market activities

The role of exporting for Australian organisations

• Exporting is the key international market entry strategy for Australian businesses

– historically more of a role for large businesses (32% of sales) than SMEs (4% of sales)

– high growth potential in traditional markets

• strong growth in commodities

– nearly 60% of the fastest growing companies in Australia are successful exporters

Snapshot of Australian exports and imports

Figure 13.1

Snapshot of Australian exports and imports

Figure 13.1 Continued

Snapshot of Australian exports and imports

Figure 13.1 Continued

Organising for exports

• Are companies ready for export?– commitment and resources• financial and time costs high

– long term

– products and Services• consider international competition as a

benchmark

– marketing• comprehensive understanding of customers

– perhaps first gained from experience with domestic customers

Organising for exports

• Are companies ready for export?– management• dedicate time to the export strategy

– supply capacity• timeliness and availability

– finance• making provision for adequate financial resources

– research• accessing information• applying the learning

Research for exports

• Many elements to a successful export – identification of key segmentation variables– researching language and cultural differences

• One Chinese language does not ‘fit all’– many different dialects spoken throughout

the Chinese world• Hokien in Singapore• Cantonese in south of China• sub-dialects throughout the region

Indirect exporting options

1. Combination export manager– an export representative that acts as the export

department to a small exporter or a large producer with small overseas sales

2. Export merchants– trading organisations that buy and resell goods

3. Export commission houses– export representative acts on behalf of a foreign

buyer

Indirect exporting options

4. Export trading organisations– import and export from home markets,

offering a large range of services

5. Piggyback exporting– cooperative agreement for one company to

buy products of another and market them overseas

Direct exporting

When an exporter sells directly to an importer or buyer located in a foreign market•Export Department– an internal department dedicated to exporting and

operates independently of domestic operations• Export sales subsidiary– a separate legal entity that purchases and sells in

overseas markets from its parent manufacturer•Foreign sales branch– a branch within an organisation that handles all sales,

distribution and promotional work throughout a designated area

Direct and indirect exporting

Figure 13.2 Comparison of direct and indirect exporting

Mechanics of exporting

• Legality of exports– goods exported from any country are

covered by the laws and regulations of that country• many countries have restricted groups of

products and services that come under special consideration– explosives– defense related production– navigation and avionics

Mechanics of exporting

• Export transactions– customs receipt• a document of proof of delivery to the assigned

party

– bill of lading• contract between exporter and shipper

– shipper accepts responsibility of goods– agrees to transport in return for payment

– commercial invoice• a bill for the good stating basic information about

the transaction

Terms of shipment and sale

• The exporter, importer and logistics provider all have responsibilities to one another– these are spelled out in the export contract

• INCOTERMS– a universally recognised set of definitions of

international terms of trade

Figure 13.3 Terms of shipment

Terms of shipment and sale

Payment terms

• In addition to shipping terms there are also terms of payment to consider

• When considering these terms, certain risks also need to be evaluated– credit risk– foreign exchange risk– transfer risk– political risks

Role of governments in promoting exports• Governments across the world provide

assistance to businesses interested in exporting

• Free Trade Agreements– AUSFTA– Australia-Japan Trade and Economic

Framework

Role of governments in promoting exports• Local government regulations– favoured status for exporters

• DFAT– working towards international security,

national economic and trade performance

• Development Grants– Austrade’s Export Market Development Grant

(EMDG)

Managing imports

• Many considerations– inherent risks in managing imports• counterparty• foreign exchange

– sanctions• Zimbabwe in 2008

– different set of skills to exporting required• regulations can be different

e.g. quarantine regulations

Model of importer buyer behaviour

Figure 13.5

Mechanics of importing

• Support from a suitable bank– has branches in the exporters country or a

correspondent bank located in that country

• Establishing a letter of credit– establishes terms of payment and how

payment is made• provides a certain ‘insurance’ in the transaction

by having the bank involved

• Deciding on the mode of transfer

– how are the goods transferred from exporter to importer

• providing ‘proof’ to the exporter’s bank

–exporter presents the importer’s bank

– importer’s bank transfers funds

Mechanics of importing

Mechanics of importing

• Checking compliance with national laws– both importing and exporting country

• Making allowances for foreign exchange fluctuations

• Fixing liabilities for payment of import duties and demurrage and warehousing in case goods are delayed– payment for delay is usually the responsibility

of the importer

Import duties

• Major impact on importers

– usually designed to protect home industries

– reduction of these globally as countries open their doors to international trade

• WTO driven

Grey markets

• Legal export/import transactions involving the importation of genuine products into a country by intermediaries other than the authorised distributors– also known as ‘parallel imports’

• Some countries regulate against it but most don’t– Australia once protected its music industry

from parallel imports but no longer

Grey markets

• How do they arise?– currency fluctuations• difference in prices is produced by movements in

currency– allows the parallel importer to take an ‘arbitrage’

advantage

– differences in market demand• a product is in great demand in country A but not

in country B– parallel importer brings (now discounted) product from

country B to country A

Grey markets

• Segmentation strategy– a product is priced differently in different

countries to cater for different segments• presents the parallel importer with an arbitrage

opportunity

• Parallel importing can mean a loss of control of the brand by the company who owns the brand to the parallel importer– no control over price or distribution

Summary

You should now have an understanding of:• Describe the importance of exporting for

Australian organisations• Identify the key internal factors and

decision criteria that underpin successful exporting strategies

• Describe indirect and direct export strategies

Summary

• Outline the mechanics of exporting and the risks involved

• Discuss the role of governments in exporting

• Outline the mechanics of importing• Describe strategies for dealing with grey

market activities