Incoterms 2010 and International Business - 101
Incoterms 2010 and International Business - Wild - Quick Study - Chapter 13
Incoterms 2010 and International Business - 101
International Business: The Challenges of Globalization, 8th Edition, Wild & Wild
Incoterms 2010 and International Business - Wild - Quick Study - Chapter 13
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Quick Study
Quick Study 1
- Q: What are the four steps, in order, involved in creating an export strategy?
A: Companies should not simply respond to international requests for their products, but develop a detailed export strategy. First, they should identify a potential market. In order to identify clearly whether demand exists in a particular target market, market research should be performed and results interpreted. Second, they should match the needs of the market to their abilities to satisfy the needs of the market. Third, they should initiate meetings. Early meetings with potential distributors, buyers, and others are a must. Initial contact should focus on building trust and a cooperative climate among all parties. Beyond building trust, successive meetings are designed to estimate the potential success of any agreement if interest is shown on both sides. Fourth, they must be willing to commit the resources needed to get the job done. After all the meetings, negotiations, and contract signings, it is time to put the company’s human, financial, and physical resources to work.
- Q: When a company sells its products to intermediaries who then resell to buyers in a target market it is call what?
A: Indirect exporting occurs when a company sells its products to intermediaries who then resell to buyers in a target market. Indirect exporters can use several different types of intermediaries including agents, export management companies, and export trading companies.
- Q: What is the name of a specific type of countertrade?
A: Countertrade is the practice of selling goods or services that are paid for, in whole or part, with other goods or services. Countertrade can provide access to markets that are otherwise off-limits because of a lack of hard currency.
- Barter is the exchange of goods or services directly for other goods or services without the use of money.
- Counterpurchase is the sale of goods and services to a country by a company that promises to make a future purchase of a specific product from that country.
- Offset is an agreement that a company will offset a hard-currency sale to a nation by making a hard-currency purchase of an unspecified product from that nation in the future.
- Switch trading is countertrade whereby one company sells to another its obligation to make a purchase in a given country.
- Buyback is the export of industrial equipment in return for products produced by that equipment.
Quick Study 2
- Q: Export/import financing that presents the most risk for exporters is called what?
A: Open account is export and import financing in which an exporter ships merchandise and later bills the importer for its value. Open account reduces the risk of nonshipment that the importer faces under the advance payment method. However, it increases the risk of nonpayment for exporters.
- Q: Export/import financing in which a bank acts as an intermediary without financial risk is called what?
A: Documentary collection is export and import financing in which a bank acts as an intermediary without accepting financial risk. This method is common when there is an ongoing business relationship between two parties.
- Q: Export/import financing in which the importer’s bank issues a document stating that the exporter will get paid when it fulfills the terms of the document is called what?
A: A letter of credit is export/import financing in which the importer’s bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document.
Quick Study 3
- Q: What is the name of a specific type of contractual entry mode?
A: A company can use a variety of contractual modes, such as, licensing, franchising, management contracts, and turnkey projects to market highly specialized assets and skills in markets beyond its national borders.
- Q: What is it called when companies use agreements to exchange intangible property?
A: Licensing is a contractual entry mode in which a company owning intangible property (the licensor) grants another firm (the licensee) the right to use that property for a specified period of time.
- Q: A disadvantage of both management contracts and turnkey projects is what?
A: A disadvantage of both management contracts and turnkey projects is that a future competitor may be created.
Quick Study 4
- Q: What is the name of a specific type of investment entry mode?
A: There are three common forms of investment entry modes: wholly owned subsidiary, joint ventures, and strategic alliances
- Q: A wholly owned subsidiary is a facility owned and controlled by what?
A: A wholly owned subsidiary is a facility entirely owned and controlled by a single parent company.
- Q: What is the name of a specific type of joint venture?
A: A joint venture is a separate company that is created and jointly owned by two or more independent entities to achieve a common business objective. In the forward integration joint venture, the parties choose to invest together in downstream business activities. In the backward integration joint venture, the parties choose to invest together in upstream business activities. In the buyback joint venture, its input is provided by and output is absorbed by each of its partners. In the multistage joint venture, one partner integrates into downstream activities and one partner integrates into upstream activities.
- Q: A strategic alliance is similar to a joint venture except for that it doesn’t involve what?
A: A strategic alliance is similar to a joint venture except for that it doesn’t involve the formation of a separate firm.
Quick Study 5
- Q: When selecting a partner for cooperation it is important to remember what?
A: Every partner must be firmly committed to the goals of the venture or agreement. Trust is also important, so that often firms naturally prefer to partner with firms that they have had a favorable experience in the past, Finally, in an international arrangement, each party’s managers must also be comfortable working with people of other cultures and with traveling to (even perhaps living in) other cultures, and a suitable partner must have something valuable to offer the company.
- Q: What factors may discourage an investment entry mode?
A: The factors to be considered are the cultural environment, the political and legal environment, market size, production and shipping costs, and the firms level of international experience.
- Q: What factors may encourage an investment entry mode?
A: Just as the factors listed to discourage investment, in turn they could also serve to encourage investment entry modes.
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Ethical Challenge |
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You are chief operating officer of a U.S.-based telecommunications firm considering a joint venture inside China with a Chinese firm. The consultant you hired to help you through the negotiations has just informed you that ethical concerns can arise when international companies consider a cooperative form of market entry (such as a joint venture) with a local partner in any market. This is especially true when each partner contributes personnel to the venture because cultural perspectives cause people to see ethical dilemmas differently. This is of special concern to you because the venture had planned to employ people from both China and the United States. In light of this recent information, you are reassessing your entry mode options.
13-5 Do you think your two companies can establish a set of ethical principles before commencing operations that will guide a potential joint venture?
13-6 What ethical issues might arise in conjunction with other entry modes discussed in this chapter?
13-7 Is there a company that succeeded under circumstances that are similar to those that your firm faces?
A: There are many differences between the U.S. and Chinese cultures that can add to the complexity of a joint venture agreement. The differences in saving face, low versus high context culture, and individualism between U.S. and Chinese workers should be considered when developing any cooperative policies. These differences can lead to ethical misconceptions due to different behavioral expectations. Further, up-front and frank discussions of potentially damaging ethical issues can help avoid potentially disastrous results based in ethical dilemmas. Better late than never if the formation has already taken place.
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Teaming Up |
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Negotiation Project. This project is designed to introduce you to the complexity of negotiations and to help develop your negotiating skills.
Background: A Western European automobile manufacturer is considering entering markets in Southeast Asia. The company wants to construct an assembly plant outside Ho Chi Min City, Vietnam, to assemble its lower-priced cars. Major components would come from manufacturing plants in Brazil, Poland, and China. The cars would then be sold in emerging markets throughout Southeast Asia and the Indian subcontinent. Managers are hoping to strike a $100 million joint venture deal with Vietnam’s government. The company would supply technology and management for the venture, and the government would contribute a minority share of financing to the venture. The company considers the government’s main contributions to be providing tax breaks (and other financial incentives) and a stable business environment in which to operate.
Financial capital is flowing into Vietnam at a fair pace. The currency is strong, and inflation remains low. As with other nations in the region, investors are generally wary of the nation’s stability. The new auto assembly plant would boost the local economy, reduce unemployment, and increase local wages. But some local politicians fear the company might be interested only in exploiting the country’s relatively low-cost labor.
Activity: Break into an equal number of negotiating teams of three or four persons. Half the teams are to represent the company and the other half the government. As a group, meet for 15 minutes to develop the team’s opening position and negotiating strategy. Meet with a team from the other side and undertake 20 minutes of negotiations. After the negotiating session, spend 15 minutes comparing the progress of your negotiations with that of the other pairs of teams.
A: This exercise can teach students to evaluate investment projects not only from the standpoint of companies, but also from the perspective of governments. If taken very seriously, the students will also be able to judge their abilities as international negotiators.
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Practicing International Management Case |
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Telecom Ventures Unite the World
13-10 Q: What strengths did AT&T bring to its joint venture with Unisource?
A: AT&T offered a globally recognized brand name and a presence in practically every major market worldwide except Latin America. AT&T also had significant experience in developing international relationships as well as the firm’s association with WorldPartners.
13-11 Q: Can you think of any potential complications that could arise in the AT&T–Unisource joint venture?
A: Perhaps the greatest potential danger is the potential for complications caused by the fact that there are so many partners involved in the venture. Not only can there be conflicts over the direction and goals of the venture, but also partners exiting and entering can cause a loss of strategic focus and intent. Just as things begin going well, one partner may leave or another one may join with different motivations.
13-12 Q: Assess the formation of Global One, Unisource, and other partnerships in this case. Which strategic factors might have influenced the entry mode choices that these firms made?
A: Students should be sure to cover at least the main points listed near the end of the chapter. They should also be encouraged to present other factors that they consider potentially important. Specifically, cultural, legal, regulatory, and technological competencies in each scenario should be assessed and evaluated.
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INTERNATIONAL BUSINESS - FREE DOWNLOADS
International Business: The New Realities, 4th Edition, Cavusgil, Knight & Riesenberger
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International Business, 15th Edition, Daniels, Radebaugh & Sullivan
International Business: A Managerial Perspective, 8th Edition, Griffin & Pustay
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