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MBA of International Trade Management

These are some brief notes on International Trade Management - 1

Dr.  S.  Maurer,  
MBA Professor

The packaging design should be basëd on the customer needs.  In industrial products the pack should be considered for its usage and for its amenability to storing,  pouring,  re-use,  etc.

Delivery is the placement of the vehicle in a position for unloading.

Michael Gura,  a Russian living in Orange County,  California,  is the founder of Ortex,  an international trading enterprise,  Gura exports stereos,  personal computers,  cars and other Western goods to his native country.  His business has become so successful that he now employs 250 people in nine offices around the world.  And Gura is not one of a few isolated examples of immigrants in the international trade field.

After determining that your product is highly exportable,  you need to identify your potential customers.  The best way to do this is through market research.

With the Assignment in place,  once the supplier turns over the merchandise to the broker/middleman,  the supplier does lose control of the transaction.

Certain high-technology products are inappropriate in some countries not only because of their cost but also because of their function.  For example,  a computerized industrial washing machine might replace workers in a country where employment is a high priority.  In addition,  these products may need a level of servicing that is unavailable in some countries.

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.”

Instruction or maintenance manual,  for example,  should be made available in centimeters,  weights in grams or kilos,  and temperatures in degrees Celsius.

Legal,  economic,  political,  technological,  and climatic requirements of a country market often dictate some level of localization or adaptation.

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.

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.

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.

If all goes according to plan,  the beneficiary arranges shipment,  obtains the documents necessary to draw against the LC,  presents these documents to the bank,  and the bank makes payment to both the beneficiary and to the holder of the assignment of proceeds.  Again,  this may sound like the perfect solution for the buyer,  broker/middleman and supplier,  but could something go wrong with this approach? Unfortunately,  yes.

If you choose to sell your commodity directly,  you can market your goods through direct mail,  advertising and promotions in magazines with overseas circulation as well as in local publications and other media.

Remember,  most letters of credit are freely negotiable,  meaning that the beneficiary could present documents to any bank.  By endorsing the LC,  any bank that might receive documents will know that an assignment has been made.

These are some brief notes on International Trade Management - 2

Dr.  S.  Maurer,  
MBA Professor

The mere arrival of goods at thëir destination does not reduce the liability of the carrier where anything remains to be done by the carrier to effectuate delivery.  Seaboard Allied Milling Corp.  v.  Consolidated Rail Corp.,  unreported,  [D.  Colo.  1980]; Keystone Motor Freight Lines v.  Brannon-Signaigo Cigar Co.,  115 F.2d 736 [5th Cir.  1940].

If the consignee is to unload the trailer,  this is customary when deliveries are to be made after normal business hours when no employee of the consignee is on duty.  If,  however,  there is a watchman or guard on duty with authority to sign for deliveries,  the carrier should obtain that person’s signature to prove delivery.

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.

If the bank doesn’t hear from the beneficiary during the stipulated timeframe,  it will automatically assume the beneficiary has agreed to the amendment.  From the issuing bank’s perspective,  this arrangement is nice and tidy,  as they can adjust their customer’s liability for the LC at the end of the timeframe without having to do any follow up if they haven’t heard from the beneficiary.

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.

Documentation is important not only for the amount of additives,  but also the source of the product; secondary or indirect additives are also regulated in most countries.

Studies reveal that enterprises willing to invest,  to innovate and design their products for a specific export market are most likely to succeed.

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.

A manufacturer of laser transmission systems,  the enterprise has to alter each system it sells to meet the specific product standards of its client countries.  So does Cenogenics Corp.,  a New Jersey manufacturer of medical diagnostic kits.  Not only has the firm become adept at changing its products to suit local needs,  but it has also had to change its packaging.

'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.

Strong warranties may be required to break into a new market,  especially if the enterprise is an unknown supplier.  In other cases warranties similar to those in the home country market may not be expected.

If a beneficiary has a certain timeframe to either accept or reject the amendment and the bank doesn’t hear from the beneficiary during the stipulated timeframe,  this practice is seen as trying to change the nature of the irrevocable letter of credit,  and may even be contrary to the laws in the country of the beneficiary.  As a result the practice is strongly discouraged.

The availability,  performance and level of sophistication of commercial infrastructure will warrant a need for adaptation or localization of products.  For example,  an exporter may decide not to market its frozen line of food products in countries where retailers do not have adequate freezer space.

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.

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.

These are some brief notes on International Trade Management - 3

Dr.  S.  Maurer,  
MBA Professor

Though there are multiplë complexities in export marketing,  you most concentrate on issues and challenges relating to the need for product adaptation for export markets.

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.

Instruction or maintenance manual,  for example,  should be made available in centimeters,  weights in grams or kilos,  and temperatures in degrees Celsius.

Quality packaging for shipment is vital,  even in this day of containerization and air-freight systems.  Poor quality packaging can mean poor quality product,  costly delivery and storage,  and failure to meet legal requirements.

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.”

A product’s size and packaging may have to be modified to facilitate shipment or to conform to possible differences in engineering or design standards in a country or regional markets.

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.

There's another side to the owner-distributor relationship that causes many exporters to urge caution.  Distributors frequently demand exclusive market rights to your product while reserving the right to service your competitors, warns an article in World trade magazine.  Don't expect commitment.

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.

Once you have made your export commitment,  chosen your market and distribution method and established a price,  you need to translate that information into a strategic exporting plan.

If brand name is relatively unimportant,  or if your market is limited and concentrated,  then media advertising will probably play a minor role in your overall promotion efforts.  One of the best ways to build overseas sales is by participating in trade shows,  both here in the United States and overseas.

it would make perfect sense to develop [unless such products are already available] and export dehydrated vegetables in some country markets.

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

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.

In Seaboard,  a carrier temporarily left a railroad car in constructive placement on some side rails to await orders for the car to be moved for actual placement to the unloading spot.  While the carrier was waiting for orders,  the car was vandalized.  The court held the carrier liable since the car had not been delivered before the damage occurred.

These are some brief notes on International Trade Management - 4

Dr.  S.  Maurer,  
MBA Professor

If a corporate self audit brings to light ethnocëntric 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.”

Transportation is not completed until a shipment has both arrived at its destination and has been delivered.  Danciger v.  Cooley,  248 U.S.  319,  327 [1919].

Once you have made your export commitment,  chosen your market and distribution method and established a price,  you need to translate that information into a strategic exporting plan.

Delivery of a rail car is normally affected when the car is placed on a team track or spotted.  Republic Carloading & Distribution Co.  v.  Missouri Pacific R.R.  Co.,  302 F.2d 381,  386 [8th Cir.  1962].

In Intech,  Inc.  v.  Consolidated Freightways,  Inc.,  836 F.2d 672 [1st Cir.  1987],  the carrier had transported a machine and its accessories in two containers from California to Acton,  Massachusetts.  Upon arrival of the first container at the consignee’s facility,  there was a dispute as to who was responsible to unload the machine.  The container sat there for some six months before C.F.  finally came back and removed it.  Damage was discovered five months later,  when the consignee went to inspect the machine at C.F.’s yard.

If the consignee is to unload the trailer,  the issue then involves whether there was an agreement that delivery was to be accomplished without obtaining a signed delivery receipt.

What flies off the shelves in Chicago may not necessarily be a great seller in Munich.  Cultural differences and varying product standards can present serious barriers if you aren't willing to adapt your commodity to your new target market.

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.

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.

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.

Distributors purchase goods at a significant discount,  acquire title and then market the product.  Sales representatives,  don't purchase goods but instead place orders for them.

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.

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

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.

In a survey of 328 of the U.S.'s fastest growing enterprises,  globally focused enterprises anticipated 1992 growth rates of 26.4 percent compared to 22.5 percent for firms that aren't involved in selling internationally.