Keywords: MBA of International Trade Management scholarship distance learning buying a business

MBA of International Trade Management

These are some brief notes on International Trade Management - 1

Dr.  S.  Maurer,  
MBA Professor

As the shipment approached Chicago,  Lowë’s customs agent,  Fritz enterprises,  directed Hanjin to release the shipment to a motor carrier so that it could be taken to a U.S.  Customs facility for an intensive customs examination.  After the inspection had been completed,  the container sat for over a week in Channel’s unprotected yard,  and was eventually stolen.

A major change in the cultural shift is taking place within the corporate world,  and the “one size fits all” business practice is becoming obsolete.

'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.

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.

The level of income,  the level of education,  and the availability of energy are all factors that help predict the acceptance of a product in a foreign market.

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.

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

Buyer preferences in a foreign market may also lead an exporter based in more advanced countries to modify its product.

By providing an unnecessary warranty,  the enterprise may raise the cost of the product higher than the competitors' costs.  When considering this point,  exporters should calculate the cost of servicing the warranties and adapt the warranty service so that it is in sync with local usage conditions and customer expectations.

In order to speed up the amendment process,  the issuing bank may be tempted to add a clause to their amendment indicating that the beneficiary has a certain timeframe to either accept or reject the amendment.

Hot dusty climates of countries in the Middle East and other emerging markets may force the automakers to adapt the automobiles with different types of filters and clutch systems than those used in North America,  Japan and Europe countries.

* Similarities in business culture,  practices and the law.  * Language and other possible communication barriers.  * Spending habits.  * National traditions.  * Religious beliefs.  * The stability of the market's economic and political environment.  * Direct and indirect barriers to initial market entry.  * Product standards in the quality,  safety and technical areas.  * Current market size and growth potential.  * Existing domestic and foreign competition.

Don't ignore the human resources factor in the export equation,  say Terence Barber,  founder of BHP Associates,  a global economic development and management consulting firm in Sacramento,  California.  Concentrate on developing a multicultural workforce.  Opportunities may arise from informal interpersonal contacts.

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.

Scope of Product Adaptation Product adaptation deals with a whole range of issues,  ranging from quality and appearance of products,  to materials,  processing,  production equipment,  packaging,  style and modeling.

These are some brief notes on International Trade Management - 2

Dr.  S.  Maurer,  
MBA Professor

We have the suppliër 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.

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

Language,  legal and cultural differences may require you to consider the need for product changes.  Such changes may include product design,  branding,  labeling,  packaging and service arrangements.

Outline the country or countries in which you plan to do business; identify your export objectives,  both immediate and long-term; define the specific tactics you will use to achieve these objectives,  such as a marketing and promotional plan and strategies; specify your distribution system and pricing; establish implementation and milestone schedules that reflect your objectives and tactics; and detail your allocation of resources.

Domestic,  regional and multinational corporations are scanning the globe to source and market their products,  which is forcing the exporter to critically evaluate the kind and level of adaptation needed for various country markets.

Now that the supplier is holding the Assignment of Proceeds they may feel confident that they will receive payment and release the merchandise to the middleman/beneficiary.

Product adaptations may even include changes in one or more combinations of brand name,  color,  size,  taste,  design,  style,  features,  materials,  warranties,  after sale service,  technological sophistication and performance.

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.

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.

The issuing bank needs to track the amendments to determine if the beneficiary has either accepted or rejected the change.  If the beneficiary accepts the amendment,  it can change the liability the applicant has with the LC.

When analyzing the need for adaptation or determining the extent to which adaptation may be necessary,  a close look at cultural differences between the target customers in home [country of origin] and those in the host country is extremely important.

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.

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.

Engineering changes needed: Electrical Requirements—cycles and voltages.

Many of the same organizations that sponsor trade shows and fairs - such as the 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.

These are some brief notes on International Trade Management - 3

Dr.  S.  Maurer,  
MBA Professor

Often recent immigrants undërstand 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.

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

Because of the warming of relations with the West,  the Vietnamese market is opening up.  Many of the Vietnamese living here have strong links with family and friends still living in their native country.  The same is true of the Hispanic population.  Owners of small businesses should be looking at an Hispanic workforce as a strategic opportunity.

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.

If a corporate self audit brings to light ethnocentric orientation,  the leadership at the top may be seeking to sell the same products around the world with an attitude: “If it is good enough for the U.S.  of A.  it has to be good enough for India,  China,  Malaysia,  South Korea or Japan.”

Once the endorsement is taken care of,  the bank will issue a document or letter titled Assignment of Proceeds addressed,  in this case,  to the supplier.  The content of this document will indicate that an assignment of proceeds has been made in their favor with a stated value.  it will also indicate that if and when payment is made under the letter of credit,  payment will automatically be made under the assignment.

To be successful in marketing products in international markets,  most products require some level of adaptation or localization.

Size of packaging,  material used in packaging,  before and after sale service and warranties may have to be adapted in view of the scope and level of service provided by the distribution structure in the country markets targeted.  In the event post sale servicing facilities are conspicuous by their absence,  enterprises may need to offer simpler,  more robust products in overseas markets to reduce the need for maintenance and repairs.

When analyzing the need for adaptation or determining the extent to which adaptation may be necessary,  a close look at cultural differences between the target customers in home [country of origin] and those in the host country is extremely important.

Worst case scenario would be that the supplier goes ahead and ships the merchandise to the buyer but also contacts them proposing that they not use the LC as the method of payment.  They might even suggest that instead of the LC,  they would be happy to offer open account terms.  They may propose that after the buyer has received the merchandise,  they could wire transfer payment.

For consumer products the pack might have various functions: protective,  informative,  merchandising and conforming to legal requirements and buying habits [e.g.  Americans tend to buy less frequently than Europeans,  so the largest size is more popular in the United States].

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.

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

A world of opportunity awaits outside the U.S.  borders.  Despite calls for protectionism by a number of business and government leaders,  trade agreements and the reconfiguration of nations are creating a global marketplace that offers new horizons for enterprises willing to venture out.

Buyer preferences in a foreign market may also lead an exporter based in more advanced countries to modify its product.

These are some brief notes on International Trade Management - 4

Dr.  S.  Maurer,  
MBA Professor

We have the suppliër 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.

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

Once a letter of credit [LC] is issued and the beneficiary has had a chance to review the document,  the need for an amendment may become apparent.  Or perhaps the applicant realizes they made an error when they completed the application after the letter of credit has already been issued.  Whatever the circumstances may be,  it isn’t unusual for someone involved in a transaction to need to amend an existing letter of credit.

Levels of expectation for product warranties vary from country to country depending on its level of development,  competitive practices,  and the activism of consumer groups,  local standards of production quality,  and differing usage frequency and patterns.

'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.

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.

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.

You should also research existing treaties and any currently under development,  such as GATT and the North American free trade Agreement [NAFTA].  [These trade agreements are still evolving,  so be sure to monitor them closely.]

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.

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 exporters believe the domestic product can be exported without significant changes.  Others seek to consciously develop uniform products [global product design strategy] that are acceptable in all markets with little or mo modification.

You should also consider after-sales requirements such as service,  customary business methods and established distribution channels in the markets you've targeted.  In indirect exporting,  rather than dealing with the customer or a foreign importer directly,  you may rely on the services of foreign sales representatives or agents [equivalent to a manufacturer's rep],  distributors,  retailers or government-controlled trading enterprises.

Companies in lesser developed 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.

You need to weigh many of the same factors you would when pricing for domestic markets,  such as the costs of production,  packaging,  transportation and handling as well as promotion and selling expenses.

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.