International Business - Daniels - 15th Edition - Case Study - Chapter 14

Incoterms 2010 and International Business - 101

International Business: Environments and Operations, 15e (Daniels et al.)

CHAPTER FOURTEEN: EXPORT AND IMPORT

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CHAPTER FOURTEEN: EXPORT AND IMPORT

 

OPENING CASE: SpinCent: Starting-up Export
SpinCent is a small Pennsylvania exporter of laboratory and industrial centrifuges. The company was initially a passive exporter. However, a struggling U.S. economy provided the incentive for the company to focus on international markets. The Asia market became a prime target for the organization. Management looked to develop long-term beneficial relationships with a distribution network in the region. The company did its homework and spent time in the region identifying market potential, competition, price points, and recruiting a sales force. The company discovered that exporting to the region provided more opportunities than risks. They now do a steady stream of business overseas, experiencing low-cost/high-reward endeavor. Successful planning and a commitment to goals are advocated by the organization.

Questions

14-1 List the challenges that SpinCent overcame in developing its export strategy. Describe and evaluate the processes it followed to overcome each challenge.

SpinCent was skeptical about the likelihood of international success, as serving customers in the domestic market kept them busy, and they felt that they lacked both the financial resources and management talent. Additionally, they feared direct competition with experienced exporters from Germany and Japan. The struggling U.S. economy and market trends forced them to either focus on the domestic market and exploit every possible efficiency or expand aggressively into export. While demand for their products domestically was declining, industrialized emerging economies signaled opportunities, which they then began pursuing.

When the decision to export was made, SpinCent decided to focus on long-term growth. So, the focus was on identifying competent and trustworthy distributors, using the services of the U.S. Commercial Services Export Assistance Center in Philadelphia. (LO: 1, Learning Outcome: To introduce the idea of exporting and profile its elements, AACSB: Analytical Skills)

CLOSING CASE: A Little Electronic Magic at Alibaba.com

Electronic commerce is changing the way companies around the world do business. The Internet has opened up a whole new era of business opportunities, making virtual information, on any product from virtually any market accessible readily and inexpensively. Alibaba.com is a Web site that facilitates transactions between importers and exporters around the world. Other Web sites that have created similar online marketplaces include www.koreatradeworld.com, focused on products from South Korea, www.trade-India.com for Indian products, and www.bizeurope.com for Europe. These electronic trading venues have changed the mechanics of importing and exporting and opened up tremendous opportunities, especially for smaller enterprises. The impact has been especially dramatic for small Chinese manufacturers, who now have ready access to a global market for their products.

Questions

14-2 Do you think most international trade might eventually take place through Web sites like alibaba.com? How might that influence your interest in importing and exporting?

With the rapid growth of the use of these sites and the corresponding increase in trade among SMEs, it is very reasonable to speculate that eventually most trade between SMEs might take place in this context. Importing and exporting rises dramatically with powerful tools such as these at a company’s disposal. (LO: 3, Learning Outcome: To identify the problems and pitfalls that challenge international traders, AACSB: Dynamics of the Global Economy)

14-3 Identify a product you would like to import. Visit www.alibaba.com, go to the advanced search field, and enter it. Select required criteria and click on “Search.” Review the list of companies that qualify. Find a suitable seller. Analyze this process for ease, usefulness, and potential value.

This process is very easy, useful, and has tremendous potential value. It takes only seconds to find a long list of potential suppliers. One drawback is the urge to contact too many suppliers to find the best possible terms. The method of contact is made very easy by the use of templates and drop-down menus that help to standardize requests. If the suppliers will respond to these requests in a timely manner, the process has huge potential value. (LO: 2, Learning Outcome: To introduce the idea of importing and profile its elements, AACSB: Use of Information Technology)

14-4 Identify and describe three Web sites like Alibaba to export and import.

Benefits
Low cost
Access to many suppliers/buyers
Quick transaction time
More transparency in transaction
Lower risk of fraud
Easy to make contacts with SMEs

Costs
Listings are free
Searches are free
Personalized Web pages cost additional
Certification costs some
(LO: 3, Learning Outcome: To identify the problems and pitfalls that challenge international traders, AACSB: Analytical Skills)

14-5 Visit www.alibaba.com and www.europages.com. Compare and contrast these Web sites.

Student answers may vary, but the content should address any emphasis on a specific region, the broadness of appeal, and the method of access provided, certifications, or other aspects of the sites. (LO: 4, Learning Outcome: To identify the resources and assistance that help international traders, AACSB: Use of Information Technology)

14-6 Please provide three recommendations that you would offer an SME, based on the opportunities and constraints of electronic Web sites like Alibaba, as it considers engaging in exporting or importing.

Pros

1. Huge range of suppliers
2. Can often find the largest suppliers online
3. They can offer tools and information to help you through the process
4. Easy to contact many suppliers at once and quickly

Cons

1. Risk of fraud (some businesses may not be what they seem)
2. Less of a relationship is established compared to meeting in person
3. Can take a lot of time and effort to communicate back and forth by email

Finally, these sites are primarily set up to assist firms looking identify suppliers for the goods they want to import and not for finding customers for goods they may want to export. (LO: 4, Learning Outcome: To identify the resources and assistance that helps international traders, AACSB: Use of Information Technology)

14-7 How transparent do sites like Alibaba.com make the import-export transaction? Would you still worry about fraud?

These sites increase transparency and reduce the risk of fraud. Alibaba allows suppliers to post information about their companies, including video tours of their facilities. In addition, Alibaba has developed the TrustPass designation. In order to obtain this designation, companies must pass an authentication and verification test from a third-party credit agency. Also available is the “Gold Supplier” designation, which also requires third-party verification of trustworthiness. These mechanisms greatly reduce the risk of fraud, but do not eliminate it entirely. Mechanisms such as letters of credit should still be used to safeguard transactions from commercial risk. (LO: 1, Learning Outcome: To introduce the idea of exporting and profile its elements, AACSB: Analytical Skills)

 

 

 

 

 

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