Direct exporting involves sales to customers located outside the firm’s home country. Although one-third of firms exporting for the first time are responding to an unsolicited order, subsequent efforts are usually the result of a deliberate effort, allowing a firm to gain valuable international business experience. EMERGING OPPORTUNITIES The Bottom of the Pyramid This box discusses two opposing views of the growth potential offered to businesses to enter and do business with the low income population segments in man of the Emerging Markets. C.K. Prahadam argues that the potential is large, and the the key is the need for the company’s to adapt their products to local market conditions. On the other hand, Aneel Karnane, who believe that the size of this market is much smaller that projected by Prahalad. An intracorporate transfer is the selling of goods by a firm in one country to an affiliated firm in another. Intracorporate transfer has become more important as the sizes of MNCs have increased, and today represents some 40 percent of all U.S. merchandise exports and imports. Export Intermediaries: A firm may market and distribute its goods via an intermediary, a third party specializing in the facilitation of exports and imports. There are several types of export intermediaries including export management companies, Webb-Pomerene associations, and international trading companies.
An export management company (EMC) is a firm that acts as its client’s export department. Several thousand EMCs operate in the U.S., providing clients with information about the legal, financial, and logistical details of exporting. Some EMCs act as commission agents, while others take title to the good. A Webb-Pomerene association is a group of U.S. firms that operate within the same basic industry and that are allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws. Fewer than 25 associations exist today, providing market research, overseas promotional activities, freight consolidation, contract negotiations, and other services for members. An international trading company is a firm directly engaged in trading a wide variety of goods for its own account. Unlike an EMC, an international trading company participates in both exporting and importing. Japan’s sogo sosha are the most important trading companies in the world. The success of the sogo soshas is a result of several factors. First, they are able to continuously obtain information about economic conditions and business opportunities anywhere in the world. Second, they have a ready source of financing from the keiretsu, and a built-in source of customers (fellow keiretsu members.) See Table 12.3 INTERNATIONAL LICENSING Licensing is an arrangement whereby a firm, the licensor , sells the rights to use its intellectual property to another firm, the licensee , in return for a fee. Firms operating in countries with weak intellectual property protection are not advised to use licensing. However, in cases where
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- Fall '07
- International Trade