IB Chapter 13

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  1. Exporting
    • Producing products or service in one country, selling in another
    • Popular because of limited risk and cost, and increased flexibility
  2. Exporting Advantages
    • Increased sales volume
    • Increased economies of scale
    • Diversified customer base
    • Stabilizes fluctuations in sales
    • Minimizes foreign market entry costs and risks
  3. Exporting Disadvantages
    • Fewer opportunities to learn about customers, competitors, market aspects
    • Acquire and dedicate capabilities to conduct complex transactions
    • Increased exposure to tariffs, trade barriers, exchange rates
  4. Systematic Approach to Exporting
    • Step 1: Assess global market opportunity
    • Step 2: Organize for exporting
    • Step 3: Acquire needed skills and competencies
    • Step 4: Implement exporting strategy
  5. Indirect Exporting
    • Contract w/ intermediaries in home market
    • Lower risk, less complexity, lower cost
  6. Direct Exporting
    • Contracting w/ intermediaries in foreign market
    • Greater control of export process, closer relationship to market
  7. Company-Owned Subsidiary
    In foreign market, handles marketing, distribution, customer service
  8. Importing/Global Sourcing
    Buying from foreign sources and bringing them home
  9. Documentation
    Official forms and paperwork in export transaction and shipping
  10. Quotation/Pro Forma Invoice
    Info about price and description of product
  11. Bill of Lading
    Basic contract between exporter and shipper
  12. Certificate of Origin
    Birth certificate of shipment
  13. Insurance Certificate
    Protect goods against damage, loss, theft
  14. Incoterms
    Standard terms of sale and delivery (International Commerce Terms)
  15. EXW
    • Delivery of goods takes place at seller’s premises.
    • Buyer arranges all shipping
  16. FOB
    • Free on Board
    • Buyer bears all cost and risk of shipment
  17. CIF
    • Cost, insurance and freight
    • Sellers pays for insurance and delivery, responsibility transfers to buyer at destination
  18. Cash In Advance
    • Pay before shipping.
    • Not popular with buyer
  19. Letter of Credit
    • Contract between buyer and seller that ensures payment upon receipt of goods.
    • Popular with experienced exporters
  20. Irrevocable Letter of Credit
    Cancelled only w/ permission of buyer and seller
  21. Countertrade
    Paying using other goods and services
  22. Barter
    Direct exchange of goods without money
  23. Compensation deals
    Payment in goods and cash
  24. Counterpurchase
    Buyer and seller both agree to purchase certain products from each other
  25. Buy-Back Agreement
    Seller agrees to supply tech, equipment, or facility receive payment in form of goods that facility produces
  26. Countertrade Risks
    • Goods of inferior quality
    • Placing market value on goods is difficult, prices padded
    • Complex and cumbersome
    • Government regulation
  27. Forfeiting
    Exporter sells accounts receivable to financial institution
  28. Factors influencing ability to get credit
    • Creditworthiness of exporter/importer
    • Riskiness and timing of sale
  29. Foreign Distributor
    • Foreign market-based intermediary that works for exporter.
    • Purchase merchandise from exporters at discount and then resell it
  30. Manufacturer’s Representative
    • Represents and sells product of exporter in designated country or territory.
    • Given great autonomy
  31. Trading Company
    • Intermediary that engages in import and export of various commodities and services.
    • Assumes international marketing function
  32. Export Management Company
    • Domestically based, serves as export agent on behalf of client.
    • Negotiates terms of sale, shipping, and is often smaller than trading company
  33. Ways to Find Foreign Intermediaries
    • Country and regional business directories
    • Trade associations
    • Government departments and agencies
    • Commercial attaches
    • Freight forwarders and trade consultants
  34. What do Intermediaries Expect
    • Good, reliable, marketable and profitable products
    • Opportunities to handle other product lines
    • Support for marketing comm and advertising
    • Efficient payment method
    • Training
    • Help in establishing after-sales facilities for repairs and other customer service
  35. Criteria to evaluate intermediary:
    • Organizational strength
    • Product-related factors (knowledge, product quality, security, etc.)
    • Marketing capability
    • Managerial commitment
  36. Outsourcing
    Procurement of value-adding activities from external suppliers
  37. Business process outsourcing (BPO)
    Procurement of services
  38. Back-Office Activities
    Internal, upstream i.e. payroll and billing
  39. Front-Office Activities
    Customer-related, downstream, i.e. marketing
  40. Decision 1: Outsource or no?
    • Internalize value-chain activities considered to be part of core competency
    • Outsource non-core activities
  41. Configuration of value-adding activities
    Pattern or geographic arrangement where value-adding activities are carried out (labor cost advantage, resource location)
  42. Global sourcing is low control, can’t control market, has grown due to:
    • Tech advances in communication (internet)
    • Falling costs of international business
    • Entrepreneurship and rapid economic growth in emerging markets
  43. Captive sourcing
    Focal firm sources from its own subsidiaries or affiliates
  44. Contract manufacturing
    Arrangement in which focal firm contracts independent suppliers to manufacture well-defined, specified products
  45. Offshoring
    Relocation of business process to a foreign country
  46. Characteristics of those benefitted by global sourcing:
    • Large-scale manufacturing
    • High labor intensity
    • Uniform customer needs
    • Established products with predictable sales pattern
    • Information intensity
    • Outputs easily codified over the internet
  47. Benefits of Global Sourcing
    • Cost efficiency (mostly via labor costs)Ability to achieve strategic goals (transformational outsourcing)
    • Faster corporate growth, faster speed to market
    • Access to qualified personnel abroad
    • Improved productivity and service
    • Business process redesign
    • Access to new markets
    • Technological flexibility
  48. Risks of Global Sourcing
    • Lower than expected savingsEnvironmental factors (currency fluctuation, tariff, labor strike, weather)
    • Weak legal environment
    • Inadequate or low-skilled workers
    • Over reliance on suppliers
    • Risk of creating competitors
    • Erosion of morale in home country
  49. Major concerns are of global sourcing
    Job losses in home country, reduced national competitiveness and declining standards of living
  50. Creative destruction
    Destruction of mature jobs or products creates new opportunity
  51. Guidelines for global sourcing
    • Go offshore for the right reasons
    • Get employees on board
    • Choose between captive operation and contracting out
    • Emphasize communication
    • Safeguard own interests
  52. Global Supply Chain
    • Firm’s integrated network of sourcing, production, distribution
    • I.e. Dell and computers
  53. Electronic Data Interchange
    Automatically passes orders from customers to suppliers
  54. Logistics
    Physically moving product through supply chain
  55. Transportation considerations
    • Cost
    • Time
    • Predictability
Card Set:
IB Chapter 13
2017-02-27 03:59:05
IB Final 2
Ni Hao
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