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Factors contributing to the growth in international trade over the last 60 years are...
-Economic development
-cost of travel, shipment, and telecommunications declined
-more firms trading internationally; small firms getting involved.
Benefits of International trade are...
- 2% job growth in the U.S. between 1990-2008 from tradable sectors;
- 5,600 jobs created for every $1billion exports
- higher sales, higher employment, higher wages
- the U.S. is an under exporter
-(jobs, growth, business)
Impact of free trade agreements, Generalized System of Preferences:
-Reduces trade barriers
- exports to those countries grow at a faster rate than non-FTA countries
- The GSP: aids the economic development of poor countries by granting them duty-free treatment on a selection of thousands of goods, from vehicle parts to jewelry.
-NAFTA: North America Free Trade Agreement ( between Mexico Canada and the U.S.)
Process used to identify potential foreign markets:
-Previous Experience
- Past trade leads
- past sales
- Opportunity to expand
- competitor behavior
- domestic trade shows
- industry experts
- trade organizations
- related industry or company
- input from customers
Process used to rank potential foreign markets:
1. Develop list of indicators
2. Convert data (assign point value)
3. weigh each factor (assign relative importance)
4. analyze the results
5. Conduct What-If Analysis
Market Selection:
Advantages of Relative Strategy...
-easy, low cost, fast
- learn from competitor's mistakes
Disadvantages of Relative strategy...
- lose first-mover advantage
- competitors/consumers might be wrong
- mismatched market vs product lifecycle
- increased/ misplaced mgt. time
- Higher % of mistakes
Proactive Market Selection...
-a global assessment of market opportunity, independent of previous sales or competitor action, avoids missing overlooked or optimal markets
- stimulus from inside your company
- target/focus on a set of number markets
- more up-front costs
Global Indicators:
-Demographics/Social:
Size, Age, Age distribution, density, growth rate,
Per capita income, education, literacy
Religion, language, receptive to U.S. products
- Macroeconomic:
GDP, inflation, currency stability, potential for recession, emerging vs. mature markets
- Government:
Import controls, tariffs, regulations, labeling,
intellectual property protection, political risk
labor practices, taxation
-Environmental:
weather, geography, infrastructure, telecommunications
-Industry (specific indicators):
entry barriers (access to distribution),
rivalry (intensity of competition),
supplier power (concentration of suppliers)
buyer power (maturity of distribution channel)
growth/stability/risk in industry
The impact of import tariffs...
import tariffs are taxes applied to all import goods; it is a way for the local gov. to protect local industries and locally produced products. Can be more costly to export a product
Impact/Example of Non-Tariff barriers...
Non-Tariff barriers are policies and actions that have the effect of reducing the number of items imported in a specific country, usually set forth by governments. Examples: Quotas - gov. imposed limits on the import qty. Import Licenses, Gov. Standards and Testings. The impact of these barriers is that they can potentially keep your product out of the market.
HS Code vs. Schedule B:
Harmonized System (HS):
-For IMPORTS
-More detailed
- recognized by 198 countries
- about 17,000 codes
- product has a 6-digit code to determine product's tariff rate.
Schedule B:
- For EXPORTS
- about 9,000 codes
- based on HS code, specific to US after 6 digits
MRP ( Materials requirement planning) and MRP II
tools that allow manufacturing firms to determine what to produce or order from suppliers, and in which qty. in function of their sales forecasts and pending customer orders.
DRP (Distribution Resource Planning)
a tool that allows a retail firm to determine what to order from its suppliers, in which qty., and when, in function of what it sells to retail customers
Absolute Advantage
The ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group.
Competitive Advantage
The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.
Drivers of International Trade:
-Cost Drivers:
Companies increase their sales worldwide to recover their high investment costs. (automobile production)
- Competition drivers:
companies enter foreign markets to keep up their competitors, relegate against them, or enter a market first
- Market Drivers:
Companies enter foreign markets bc their customers expect them to be present in those countries
-Technology drivers:
companies enter foreign markets bc their customers use technology to make purchases from these markets.
Major Importing Countries:
-U.S. 13.8%
-China 10.1%
- Germany 6.3%
-Japan 3.9%
- UK 3.7%
Major Exporting Countries:
- China 13.8%
- U.S. 9.1%
- Germany 8.1%
- Japan 3.8%
- Netherlands 3.4%
Cluster Theory:
Competitive clusters from when companies in the same industry, as well as their suppliers, concentrate in one geographic area. When this happens the companies "feed" on each other's know-how, pushing them to innovate faster. They become so efficient and innovative that they become world class suppliers
Tax Calculation:
Ad valorem...
tax is based on the value of the property, not usage tax, and follows the property from owner to owner.
based on:
1. Market Value
2. Property classification
3. Mileage Rate
Calculation of Duties:
For most countries, the "dutiable amount" is the amount on which duty is calculated, it is the "landed value" of the goods (Cost +Freight)
Trade Promotion Authority (TPA)
TPA is constitutional; congress and the president share constitutional authority over trade and international agreements, TPA is an exercise of Congress's constitutional authority. TPA does not exclude congress from playing a meaningful role in the negotiation and approval of trade agreements. It is designed to empower congress.
Exporting Controls:
-"Commerce Control List": Lists what items can/cant be shipped to which countries; Was - Everything not explicitly authorized needs a license; Now - Everything is authorized, unless it is specifically prohibited.
Does my shipment require a license?
Maybe: a U.S. export license requirement from the Department of Commerce can be triggered by several important factors specific to your transaction:
-the item being exported
- where it is going
- who is going to use it
- what will they be using it for
ECCN
(Export Control Classification Number)
If your product is restricted, it gets one of these numbers, and you have to have permission to sell; These are found on the commerce control list and identify the reasons for control which indicate licensing requirements to certain destinations. Other reasons an export license may be required for your shipment relate to concerns about the parties to the transaction and the end use item.
-5 digit code
EAR99
Items that fall under U.S. Department of Commerce jurisdiction and are not listed on the CCL. These generally consist of low-technology consumer goods and do not require a license in many situations.
