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MBA of International Trade Management

These are some brief notes on International Trade Management - 1

Dr.  S.  Maurer,  
MBA Professor

Strong warranties may be requirëd 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.

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.

Factors such as topography,  humidity and energy costs can affect the performance of a product or even define its use in a foreign market.

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.

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.

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.

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

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.

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.

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.]

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.

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.

The question of how you will sell,  deliver and service your product abroad is far more important than you may realize.  In answering this question,  the first decision you will want to address is method of distribution.

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.

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.

These are some brief notes on International Trade Management - 2

Dr.  S.  Maurer,  
MBA Professor

Disputes often occur in the distribution cyclë over which party must bear the loss of a shipment due to a contention that the carrier had not yet taken control of the shipment or had made a “delivery” according to the bill of lading.

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.

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

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

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.

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.

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.

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.

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.

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.

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

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.

The cost of petroleum products along with a country's infrastructure,  for example,  may mandate the need to develop products with a greater level of energy efficiency.

In view of this phenomenon,  the decision to be made by the exporter should not rest on whether or not it should adapt.  The decision,  more appropriately,  should track,  “What aspects of product offering should we adapt and what aspects should we standardize.”

These are some brief notes on International Trade Management - 3

Dr.  S.  Maurer,  
MBA Professor

The supplier tries to contact thë broker/middleman,  only to find out that the phone has been disconnected and they appear to have left town.  The supplier’s prospect for payment at this point isn’t very good.  For this very reason,  suppliers or manufacturers may shy away from this arrangement.  It’s never a perfect world!

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.

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.

Local customs,  such as religion or the use of leisure time,  often determine whether a product will gain market acceptance.  The sensory impact of a product,  such as taste or visual impact,  may also be a critical factor.  The Japanese consumers’ desire for beautiful packaging,  for example,  has led many U.S.  enterprises to redesign cartons and packages specifically for this market.

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.

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.

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].

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.

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.

If you choose to export directly,  you must be willing to devote more time,  money,  personnel and other enterprise resources.

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.

If an exporter can find a virgin market that is devoid of current and potential competition,  there may be no need to adapt or localize the product since the potential buyers have no choice.  But it is very hard to find a country in the current market environment where there is no competition.

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.

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.

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.

These are some brief notes on International Trade Management - 4

Dr.  S.  Maurer,  
MBA Professor

Let’s assume that we havë a buyer,  a broker/middleman,  and a supplier/manufacturer.  At the request of the broker,  a buyer applies for a letter of credit,  but this time there is no mention of the letter of credit needing to be transferable?

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.

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.

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 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.

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.

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.

Engineering changes needed: Electrical Requirements—cycles and voltages.

If a country's standard of living is lower than that of the United States,  a manufacturer may find a market for less sophisticated product models that have become obsolete in the United States.

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].

Disputes often occur in the distribution cycle over which party must bear the loss of a shipment due to a contention that the carrier had not yet taken control of the shipment or had made a “delivery” according to the bill of lading.

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

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.

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.

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.