Learning Objectives學習目標
 

Distribution Channels后勤

Logistics風險管理與保險

Risk and Insurance國際貿易定價

International Trade Pricing分銷渠道

Distribution Channels主要渠道

2 Principal Channels間接渠道
Indirect Channels:
 

firms export through an independent local middleman who assumes responsibility for moving products overseas公司通過一個獨立的本地中間人，誰負責移動產品的海外出口

Manufacturer incurs no start-up cost制造商不會招致啟動成本

Small firms with little experience小企業與小經驗

Disadvantages缺點

Manufacturer loses control over marketing of its products overseas制造商失去了其產品在海外市場的控制權

Manufacturer’s success totally depends on the initiative and efforts of chosen intermediary制造商的成功完全依賴于選擇中介機構的倡議和努力
 

Direct Channels
Firm sells directly to foreign distributors, retailers or trading companies
Agents located in a foreign country
Can be expensive and time consuming
Offers opportunities to learn about their markets
Forge better relationships with their trading partners
Greater control over various activities

直接渠道
公司直接銷售到國外分銷商，零售商或貿易公司
在國外的代理
可以是昂貴和費時的
提供了機會，以了解其市場
建立更好的關系，與他們的貿易伙伴
更好地控制各種活動

How to choose distribution channel
International marketing objectives of the firm
Manufacturer’s resources and experience
Availability and capability of Intermediary
Customer and Product Characteristics
Marketing Environment
Control and Coverage
Types of Intermediaries

Customer and Product Characteristics
 

Large and concentrated in major population centres, direct or multiple channels of distribution
Customers habits (certain channels)
Geographically homogenous with similar buying habits – direct channels
Industrial equipment of considerable size and value that requires after sales service- direct channels
Products of a perishable nature or high unit value- direct channels
Custom made or highly differentiated- direct channels

Control and Coverage
 

Direct or integrated channel- more control over its distribution
Not practical option for firms that do not have International Business Operations Management courseware adequate foreign market knowledge and/or necessary financial, operational and strategic capabilities
Indirect control mechanisms
Process Controls:#p#分頁標題#e#
Selling techniques, servicing procedure, promotion etc…
Output Controls:
Monitoring sales volume, profits and other performance based indicators.

Process controls less effective on performance outcomes, good for ensuring quality of customer relationships reason: manufacturer’s inadequate knowledge of foreign marketing procedures
Highly technical and sophisticated products need high levels of control (process and output controls) over foreign intermediaries in order to protect their proprietary rights (trade secrets/ know-how).

Types of Intermediaries
Location
Producer’s country- indirect channel
Foreign country- direct channel
Agents, distributors or other middlemen can be both.
Ownership
Who owns it
50% ownership.
Indirect Channels
Exporter that sell on behalf of the manufacturer
Exporters that buy for their overseas customers
Exporters that buy and sell for their own accounts

Exporters that sell on behalf of the manufacturer
Manufacturer’s Export Agents (MEAs)
Export Management Companies (EMCs)
Export Trading Companies (ETCs)
Exporters that buy for their overseas customers
Export Commission Agents (ECAs)
Exporters that buy and sell for their own accounts
Export Merchants
Cooperative Exporters (Ces)
Export Cartels

Manufacturer’s Export Agents (MEAs)
Represent various manufacturers of related and noncompeting products
Widespread or thin overseas market
Handle direct marketing, promotion, shipping and sometimes financing of merchandise
Takes possession but not the title of the good
Works on commission
Risk of loss remains with the manufacturer
Represents the manufacturer on a continuous or permanent basis (defined by the contract)

Export Management Companies (EMC)
Export department for one or several manufacturers of non competitive products
Services: market analysis, documentation, financial and legal services, purchase for resale and agency services (locating and arranging sales).
Usually specialise by product, foreign market or both.
Can use their own name or manufacturer’s name depending on a commission, salary or retainer plus commission.
Occasionally they buy for their name and sell to their customers

Disadvantages of EMCs
Loss control over foreign sales (regular reports on marketing efforts, promotion, sales and so forth)
EMCs working on commission may loose interest if sales do not happen immediately
Less interest in new and unknown products
Small clients may not get sufficient attention
Manufacturer may not learn
EMCs provide economies of scale, obtain low freight rates

Export Trading Companies (ETCs)
Demand driven, identify the needs of overseas customers and often act as independent distributors linking buyers and sellers to arrange transactions#p#分頁標題#e#
Buy and sell goods as merchants taking title to the merchandise
May also handle goods on consignment
Diadvantages of ETCs are similar to the ones mentioned for EMCs

Some differences between EMCs and ETCs
Trading companies offer more services and have more diverse product lines.
Trading companies are larger.
Trading companies are also engaged in production, resource development and commercial banking (Korea- Daewoo, Hyundai, Japan- Mitsubishi, Japan- Cobec).

Export Commission Agents (ECAs)
These represent foreign buyers as import firms and large industrial users and seek to obtain products that match the buyer’s preferences and requirements.
They reside and conduct business in the exporter’s country and are paid a commission by their foreign clients.
In certain cases, these may be foreign government agencies or quasi-governmental firms empowered to locate and purchase desired goods

Exporters that buy and sell for their own Accounts-
Export Merchants: These purchase products directly from manufacturers, pack and mark them accordingly to their own specifications, and resell to their overseas customers.
They take title to the goods and sell under their own names, and, hence, assume all risks associated with ownership. Export merchants usually handle undifferentiated products or products for which brands are not important.
Cooperative Exporters (CEs): These are manufacturers or service firms that sell the products of other companies in foreign markets along with their own. This generally occurs when a company has a contract with an overseas buyer to provide a wide range of products or services.
Export Cartels: These are organizations of firms in the same industry for the sole purpose of marketing their products overseas. They include the Webb Pomerene Associations (WPAs) in the U.S., as well as certain export cartels in Japan. These organizations are exempt from antitrust laws under the U.S. Export Trade Act of 1918 and permitted to set prices, allocated orders, sell products, negotiate and consolidate freight as well as arrange shipment.

Direct Channels
A company could use different avenues to sell its product overseas employing the direct channel structure. Direct exporting provides more control over the export process, potentially higher profits and a closer relationship to the overseas buyer and the market place. However, the firm needs to devote more time, personnel and other corporate resources that are needed in the case of indirect exporting.
Direct Marketing from the Home Country: A firm may sell directly to a foreign retailer or end-user, and this is often accomplished through catalog sales or traveling sales representatives who are domestic employees of the exporting firm.
Marketing through overseas agents and distributors

Logistics
The interdependence of functional activities has been articulated through various new approaches or concepts:#p#分頁標題#e#
1.  The systems approach: The systems concept is based on the premise that the flow of materials within and outside the firm should be considered only in the context of their interaction (Czinkota et al., 1998).
2.  Total cost approach: This is a logistics concept based on evaluation of the total cost implications of various activities.
3.  The opportunity cost approach: This approach considers the trade–off in undertaking certain logistic decisions. For example, the benefits and costs of sourcing components abroad versus buying from domestic sources.

The International Logistics Approach
In export–import transactions, the following steps represent the approximate order of physical movement and distribution of goods to a foreign buyer:
Step 1:  As a result of previous correspondence between the prospective seller and buyer, the prospective customer (buyer) places an order to purchase the desired merchandise, including such essential items as terms of sale, payment method, and other conditions. The parties must ensure that there are no restrictions on the export or import of the merchandise in question.
Step 2:  A freight forwarder arranges for goods to be picked up and delivered to a carrier. The freight forwarder selects the transportation mode (airline, ship, truck, etc.), the carrier, as well as books the necessary space for the cargo. Such decisions will influence packing and documentation requirements.

Step 3:  The carrier loads the cargo and the merchandise is transported to the customer. Unless otherwise stipulated in the contract, the buyer is responsible for the cost of pre-shipment inspection.
Step 4:  The customs broker submits documents to customs to obtain release of the merchandise. In some countries, assessed taxes and duties have to be paid before release of the merchandise. Customs may also physically examine the merchandise.
Step 5:  If the terms of sale provide for the seller to obtain release of merchandise from customs and deliver to the consignee, the forwarder picks up the merchandise from customs and arranges for delivery to the consignee.

Logistics Functions
Labeling:  Importers are required to comply with domestic labeling laws. Even though an imported product may comply with the labeling requirements of the country where it was manufactured, it may not comply with the labeling laws of the importing country. Labeling requirements are imposed in many countries to ensure proper handling (e.g., Do Not Roll; Keep Frozen) or to identify shipments (e.g., Live Animals).
The cartons or containers to be shipped must be labeled with the following: shipper’s mark, or purchase order number, country of origin, weight in both pounds and kilograms, the number of packages, handling instructions, final destination and port of entry, and whether the package contains hazardous material.
Packing:  The rigors of long–distance transportation of goods require protection of merchandise from possible breakage, moisture, or pilferage. This means that goods in transit must be packed not only to allow the overseas customer to take delivery of the merchandise but also to ensure its arrival in a safe and sound condition.#p#分頁標題#e#

Traffic Management:  Traffic management is the control and management of transportation services. Such functions include selection of mode of transportation carriers, consolidation of small cargo, documentation, and filing of loss and damage claims.
Inventory and Storage:  The proper management of an export–import firm’s inventory is a critical logistics function. The costs associated with holding inventories can easily account for 25 percent or more of the value of the inventories themselves and could potentially create liquidity problems for many firms. In addition to this are the cost of storage, interest paid on borrowed money, and the risks of deterioration and obsolescence.

Risks in Foreign Trade
Political Risks
Many export–import businesses are potentially exposed to various types of political risks.
Wars, revolution, or civil unrest can lead to destruction or confiscation of cargo.
A government may impose severe restrictions on export–import trade, such as limitation or control of exports or imports, restrictions of licenses, currency controls, and so on.
Monitoring Political Developments http://www.ttc-switch.com/ibm/
Private firms offer monitoring assistance to assess the likelihood of political instability in the short and medium term.
Insuring Against Political Risks
Most industrialized nations provide insurance programs for their export firms to cover losses due to political risks.

Foreign Credit Risks
A significant percentage of export trade is conducted on credit, and this means that the risk of delays in payment or nonpayment could have a crucial effect on cash flow and profits.
Appropriate Credit Management: involves the review of credit decisions based on current and reliable credit reports on overseas customers.
Requiring Letters of Credit and Other Conditions:  A confirmed, irrevocable letter–of–credit transaction avoids risks arising from late payments or bad debts because it ensures that payments are made before the goods are shipped to the importer.
Insuring Against Credit Risks:  Many export firms do not insure trade receivables, and yet, such cover is as necessary as fire or car insurance.
Foreign Exchange Risk
Changes in currency values that could reduce future exporter’s receipts or increase importer’s payments in foreign currency.
Managing foreign exchange risk: Shifting the risk to the other party or to third parties.
Transportation Risk: Loss or damage to merchandise during transit.

Insurance
Two essential principles:
The Principle of Insurable Interest : A financial interest based on some legal right in the preservation  of the insured property.
The Principle of Subrogation : On paying the insured’s claim, the insurer stands in the position of the former ( the insured ) to claim from other parties who are responsible for the loss or damage.#p#分頁標題#e#
 
Marine Insurance
Types of policy:
Perils only policy 
This policy generally covers extraordinary and unusual perils that are not expected during a voyage.
The standard perils only policy covers loss or damage to cargo attributable to fire or explosion, stranding, sinking, collision of vessel, general average sacrifice, and so on.
All risks policy
The all risks policy provides the broadest level of coverage except for those expressly excluded in the policy.

Insurance Policy versus Certificates
An insurance company may issue an insurance policy (policy) or a certificate. 
Insurance Policy: If the insurer issues only policies, an application must be completed by the insured for each shipment and delivered to the insurer or agent before a policy is prepared and sent to the former.  This can be time consuming.   
Certificates:  However, in the case of certificates, the insurer provides a pad of insurance certificates to the exporter or importer, and a copy of the completed certificate (with details of goods, destination, type and amount of insurance required, etc.) is mailed to the insurance company whenever a shipment is made. 
Certificates save time and facilitate a more efficient operation of international business transactions.

Determinants of Export Prices
Internal Variables
Cost of production, cost of market research, business travel, product modification and packing, consultants, freight forwarders, and level of product differentiation
External Variables
Supply and demand: The pricing decisions for exports are subject to the influence of the supply of raw materials, parts, and other inputs.
Location and environment of the foreign market: Climatic conditions often require product modification in different markets, and this is reflected in the price of the export product.
Government regulations in the home country: Different regulations in the home country have a bearing on export pricing.

Approaches to Export Pricing
Cost-based pricing: export price is based on full cost and markup or full cost plus a desired amount of return on investment.
Marginal pricing: export price is based on the variable cost of producing the product.
Skimming versus penetration pricing: price skimming is charging a premium price for a product; penetration pricing is based on charging lower prices for exports to increase market share.
Demand-based pricing: export price is based on what the market could bear.
Competitive pricing: export prices are based on competitive pressures in the market.

Terms of Sale
Despite wide differences among national laws, there is a high degree of uniformity in contract practices for the export and import of goods.
The universality of trade practices, including terms of sale, is due to the development of the law merchant by international mercantile custom.#p#分頁標題#e#
Trade terms are intended to define the method of delivery of the goods sold and the attendant responsibilities of the parties.
Such terms also help the seller in the calculation of the purchase price .

Group of Terms of Sale, 2000
All trade terms are classified into four groups based on the point of transfer of risk (delivery) from seller to buyer:
Group E ( Ex Works): Buyer or agent must collect the goods at the seller’s works or warehouse. (Ex Warehouse, Ex Store)
Group F
FCA, free carrier: Place of delivery could be the carrier’s cargo terminal (seller not obligated to unload) or a vehicle sent to pick up the goods at the seller’s premises (seller required to load the goods on the vehicle).
FAS, free alongside ship (named port of shipment): Requires the seller to deliver goods to a named port alongside a vessel to be designated by the buyer. Seller’s responsibilities end upon delivery alongside the vessel.
FOB, free on board (named port of shipment): Seller is obliged to deliver the goods on board a vessel to be designated by the buyer.

Group C
CIF cost, insurance, freight: This term requires the seller to arrange for carriage by sea and pay freight and insurance to a port of destination. Seller’s obligations are complete ( transfer of risk) when the goods are put onboard the ship at the port of departure.
CFR, Cost and freight: It is similar to CIF term except that the seller is not obligated to arrange and pay for insurance.
CPT, carriage paid to: It is similar to CFR term except that it may be used for any mode of transportation.
CIP, carriage and insurance paid to: It is similar to CPT term except that the seller is required to arrange and pay for insurance.

Group D
DAF, Delivery at frontier: seller bears all risk of loss to the goods till the time they have been delivered to buyer at the frontier.
DES, Delivery Ex ship: Applied only for waterborne transportation. This term requires the seller to deliver goods to a buyer at an agreed port of arrival.
DEQ, Delivery Ex quay:  seller is required to deliver goods at the quay at the port of destination.
DDP, Delivered duty paid: goods placed at the buyer’s disposal on any means of transport not unloaded at the port of arrival.
DDU, Delivered duty unpaid: similar to DDU except that the seller pays for import http://www.ttc-switch.com

to require inclusion of a provision that protects the value of its receipts from currency devaluation.