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MBA of International Trade Management

These are some brief notes on International Trade Management - 1

Dr.  S.  Maurer,  
MBA Professor

According to NFIB statistics,  almost every international markët is growing faster than the U.S.  For example,  Latin America is experiencing annual growth of five percent; the Middle East,  nearly that.  The Four Tigers - Hong Kong,  Singapore,  South Korea and Taiwan - and their neighbors Thailand,  Malaysia and Indonesia,  are averaging six percent growth annually - and that's when they're having an unremarkable year.

Similar to domestic expansion,  moving into international markets requires capital.  You need funds for inventory,  receivables and promotion activities.  In addition,  if you intend to open foreign branch offices,  you'll need cash for facilities and related operating expenses.

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.

On ramp-to-ramp rail traffic,  delivery by the railroad is completed when the railroad delivers the car to the destination ramp and notifies the consignee that the shipment is available for pick up.

Motivating Factors for Product Adaptation Marketers often find the need for some changes to be obvious while other changes may require in-depth analysis of societal customs and cultures,  the local economy,  technological sophistication of people living in the country,  customers’ purchasing power and purchase behavior.

Fred Budetti's United Steel Products of Corona,  New York,  is now a 50 percent partner in a Russian joint venture thanks to his relationship with a Russian engineer once assigned to his government's New York mission.  The manufacturer of steel security products,  such as commercial rolling doors and grills,  enjoyed a 15-year relationship with the mission prior to doing business overseas.

Perhaps you think you've tapped out your market in the U.S.  and believe exporting could breathe some life back into your product.  Before you start pouring in time and other resources,  step back and candidly assess your potential for success.  This assessment should include a look at manufacturer trends,  your firm's domestic position in the manufacturer,  the effect exporting will have on your present operations,  the status of your resources and the anticipated demand for your commodity.

The way you market your product in the United States can provide helpful clues for developing methods of selling it internationally.

'Made in America' is still a high-powered statement.  And the low value of the U.S.  dollar means that our goods are currently so cheap,  we have an even greater competitive edge.

Whilst exporting requires no direct manufacturing in a foreign country,  successful exporting warrants a need for significant investments in marketing related initiatives.  Done right it can be an expensive but lucrative proposition.

The court also reversed the lower court’s finding that O’Hare Services and Channel Distribution were not liable,  and remanded the matter back for further proceedings to determine if they could be liable under Illinois law as bailees,  since there was evidence of very lax security precautions.

California has overseas trade offices in five countries and its State Department of Food and Agriculture and California Energy Commission [to name just two agencies] sponsor trade shows and offer financial assistance to prospective exporters.

An example: While the issue centered on whether a claim was timely filed,  the court discussed the issue of the carrier’s liability,  and noted that there would have been no delivery so long as anything remained to be done by the carrier,  such as unloading.  However,  the court granted summary judgment for the carrier due to the claimant’s failure to file a claim within nine months from the date delivery should have been made.

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.

As tariff barriers [tariffs,  duties and quotas] are eliminated around the world in accordance with the requirements of participation in the World trade Organization [WTO],  other non-tariff barriers,  such as product standards,  are proliferating.

These are some brief notes on International Trade Management - 2

Dr.  S.  Maurer,  
MBA Professor

California has overseas trade officës in five countries and its State Department of Food and Agriculture and California Energy Commission [to name just two agencies] sponsor trade shows and offer financial assistance to prospective exporters.

The letter of credit is issued,  sent to the advising bank who in turn advises it to the beneficiary,  also known as the broker or middle man.

Trademark protection and patent law comprise another critical area that requires your attention.  A vexing problem for many U.S.  enterprises doing business abroad,  especially in developing countries,  has been the pirating of intellectual property.  The Western idea of owning an idea is as foreign to many cultures as the idea of private property.

Industry trade associations are also useful,  as are private consulting firms [such as Terence Barber's BHP Associates] and the business departments located within major universities.

The way you market your product in the United States can provide helpful clues for developing methods of selling it internationally.

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.

The great complaint of most exporters is distributors who are poised to hop aboard the fastest train and move whatever product is currently hot

However,  the savviest exporters manage to make the relationship work.

On ramp-to-ramp rail traffic,  delivery by the railroad is completed when the railroad delivers the car to the destination ramp and notifies the consignee that the shipment is available for pick up.

As tariff barriers [tariffs,  duties and quotas] are eliminated around the world in accordance with the requirements of participation in the World trade Organization [WTO],  other non-tariff barriers,  such as product standards,  are proliferating.

We have the supplier sitting back patiently waiting for payment.  After two or three weeks,  they may contact the bank asking about the status of payment against the assignment only to hear that documents have yet to be presented against the letter of credit.  The supplier will be referred to the line in the assignment of proceeds that payment will be made to them if and when payment under the letter of credit is made.

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

Your bank can also be an excellent resource if you choose one that has an international department and is committed to serving small business.  Such an institution can help you with all aspects of an export transaction and introduce you to the federal and state government export financing programs that actively support small firms.  State governments are another prime source of assistance.

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.

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

If you have found that direct mail has paid off for you at home,  chances are good that it will also help you reach buyers in foreign markets.

These are some brief notes on International Trade Management - 3

Dr.  S.  Maurer,  
MBA Professor

Many of the same organizations that sponsor trade shows and fairs - such as thë SBA,  manufacturer groups and government agencies - also sponsor trade missions to target countries that enable you to hear from local officials and meet prospective buyers.

Today,  the miracle of the marketplace - fax machines,  modems,  international 800 telephone numbers and credit cards - has brought a new accessibility.  The new technology enables small and medium-size organizations to move to areas where they can prosper as surely as people in the 1800s were able to move to new territories using barbed wire,  windmills and other technology of their times.

When establishing your export price,  begin by taking into account your customers' perception of value,  what differentiates your product from that of your competitors and the role price will play in sales volume and profit.

Regulations for food additives,  for example,  differ from country to country.  The U.S.  Generally Recognized as Safe [GRAS] additives may have maximum content levels or may be prohibited altogether in foreign countries.

A country's standard of living and the target market’s purchasing power can also determine whether a enterprise needs to modify a product.

Those who do decide to venture abroad must realize that exporting success is not achieved overnight.  The requirements are the same as when you first started your business in this country.  That is,  you must be willing,  even enthusiastic,  about making a long-term commitment,  agree many experienced exporters.

Cultural considerations and customs may influence branding,  labeling and package considerations.  Certain colors used on labels and packages may be found unattractive or offensive.

Physical Infrastructure: it is often necessary for an exporter to adapt its product to account for geographic and climatic conditions.

'Made in America' is still a high-powered statement.  And the low value of the U.S.  dollar means that our goods are currently so cheap,  we have an even greater competitive edge.

Market-driven thinking is sweeping the globe.  People don't talk of countries anymore, notes Dr.  N.E.  Okeke,  former president of the Nigerian Chamber of Commerce and manufacturer.  They talk of markets.

Doing business in foreign markets can be very different from doing business here at home,  so don't be afraid to ask for help.

A common carrier can affect delivery by merely depositing the merchandise at the consignee's place of business without acceptance or rejection by the consignee.

To make purchases of mass marketed consumer products more affordable in lesser developed country,  makers of products such as razor blades,  cigarettes,  chewing gum,  ball point pens and candy bars have been known to have repackaged them in small single units rather than multiple units prevalent in the developed and more advanced economies.

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.

U.S trade Representative Carla Hills say: A new world order of trade is on the horizon

With this new order come opportunities for small enterprises that now find their domestic markets have matured or are even shrinking.

These are some brief notes on International Trade Management - 4

Dr.  S.  Maurer,  
MBA Professor

Companies in lesser dëveloped 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.

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.

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

Cultural considerations and customs may influence branding,  labeling and package considerations.  Certain colors used on labels and packages may be found unattractive or offensive.

Motivating Factors for Product Adaptation Marketers often find the need for some changes to be obvious while other changes may require in-depth analysis of societal customs and cultures,  the local economy,  technological sophistication of people living in the country,  customers’ purchasing power and purchase behavior.

Some export programs are tied into state or local economic development funds; while others have special funding sources dedicated to supporting exports.  All of the existing programs are designed to streamline access to available funds,  to support programs of federal agencies,  or both.

An important component in making your export commitment is figuring out whether you have anything an international market would want to buy.

Invent new products to satisfy both your domestic and foreign markets.  If management is uncertain that the profit potential in foreign markets is large enough to recover costs for product adaptations or it is driven by a risk-averse culture,  it is likely to limit its export activity to products that require only minimal changes to existing domestic products by exporting the products to only those countries that are politically,  physically and culturally similar to their own.

The decision to adapt a product is based in part on the degree of commitment to the foreign market.

Whatever methods you choose to promote your products,  you'll find that direct exporting offers distinct advantages: lower inventory,  control over your product,  potentially higher profits and a closer relationship to foreign buyers and the marketplace.  However,  these advantages come with a price.

Firms that market their products and services internationally expect higher growth rates than those which concentrate exclusively on domestic markets,  reports financial consulting firm Coopers & Lybrand.

The buyer,  not knowing that an assignment of proceeds has been issued,  may be thrilled at the prospect of not having to pay their bank an examination fee under the LC and embrace the open account proposal.

Perhaps you think you've tapped out your market in the U.S.  and believe exporting could breathe some life back into your product.  Before you start pouring in time and other resources,  step back and candidly assess your potential for success.  This assessment should include a look at manufacturer trends,  your firm's domestic position in the manufacturer,  the effect exporting will have on your present operations,  the status of your resources and the anticipated demand for your commodity.

The applicant is always the party that contacts the issuing bank to request the amendment.  Typically the issuing bank grants the request of their customer and issues the amendment.  So far it’s a pretty typical transaction.

Often recent immigrants understand the international trade advantages best.  Not only have they had a chance to compare U.S.  goods with those of our foreign competitors firsthand,  they also maintain ties to their homelands.  These ongoing relationships give immigrant entrepreneurs a natural and almost immediate market,  and they obviously don't have to worry about learning the nuances of the importing culture.