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International Marketing

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Modes of entry into international markets:

International Licensing
International Franchising
Specialized Modes
Foreign Direct Investment


• Simple mode of internationalizing a domestic business
• Advantages
allows a firm to quickly enter the foreign market
often involves less financial exposure
permits a firm to enter a foreign market gradually, and in this way allows it to assess local
conditions and fine-tune its products to better suit the needs of the customers in the host country
• Disadvantages
little control over marketing and distribution in the host country
can quickly lose market to other firms
in case of many goods, transportation costs may be high rendering the exported products too
expensive for host markets

Forms of exporting:
Indirect exporting

– occurs when a firm sells its products to a domestic customer, who in turn exports the product, in
either its original form or a modified form

Direct exporting

– involves sales to customers - either distributors or end-users - located outside the firm’s home

Intracorporate transfers

– is selling of goods / services by a firm in one country to an affiliated firm in another

Export intermediaries:

Export management companies

a firm which acts as a client’s export department - an EMC’s staff are typically knowledgeable
about the legal, financial and logistical details of exporting and importing.
can be commission agents or may take title of goods by profiting from the difference between

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local buying price and selling price to the foreign customer

Enterprise networks

a group of companies producing related or complementary products pooling resources together to
form marketing companies

International trading companies

are firms which are directly engaged in importing and exporting a wide variety of goods on their
own account

Export and import management:
Terms of Shipment
Ex-works (EXW) - at the point of origin
– The exporter agrees to deliver the goods at the disposal of the buyer to the specified place on the
specified date or within a fixed period. All other charges are borne by the buyer.
Free Alongside Ship (FAS) - at a named port of export
– The exporter quotes a price for the goods, including charges for delivery of the goods alongside a
vessel at a port. The seller covers the costs of unloading and wharfage. Loading onto the ship,
ocean transportation, insurance, unloading and wharfage at a port of destination and transport to
the site required by the buyer are on the importer’s account.

Free on Board (FOB
) - at a named port of export
– In addition to FAS, the exporter undertakes to load the goods on the vessel to be used for ocean
transportation and the price quoted by the exporter reflects this cost.

Cost and Freight (CFR)
- to a named overseas port of disembarkation
– The exporter quotes a price for the goods, including the cost of transportation to a named
overseas port of disembarkation. The cost of insurance and the choice of the insurer are left to the

Cost, Insurance and Freight (CIF)
- to a named overseas port of disembarkation
– The exporter quotes a price including insurance and all transportation and miscellaneous charges
to the port of disembarkation from the ship or aircraft. CIF costs are influenced by port charges
(unloading, wharfage, storage, heavy lift, demurrage), documentation charges (certification of
invoice, certification of origin, weight certificate) and other miscellaneous charges (fees of freight
forwarder, insurance premiums).

Delivery Duty Paid (DDP)
- to an overseas buyer’s premises
– The exporter delivers the goods with import duties paid including inland transportation from the
docks to the importer’s premises.

Terms of payment of an export transaction:

Cash with order
– Cash payment when order is placed
Confirmed irrevocable letter of credit
– A letter of credit issued by the importer’s bank and confirmed by a bank, usually in the exporter’s
country. The obligation of the second bank is added to the obligation of the issuing bank to honor

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drafts presented in accordance with the terms of credit.
Unconfirmed irrevocable letter of credit
– A letter of credit issued by the importer’s bank. The issuing bank still has an obligation to pay.
Revocable letter of credit
– A letter of credit that may be withdrawn from the beneficiary at any time without prior notice to
the exporter. It does not carry a bank’s obligation to pay.
• Sight Draft
A draft so drawn as to be payable on presentation to the drawee (usually the buyer).
• Time Draft
A draft maturing at a certain fixed time after presentation or acceptance.
• Open Account
No draft drawn; transaction payable when specified on invoice.
• Consignment
A shipment that is held by the importer until the merchandise has been sold, at which time
payment is made to the exporter.

Other export documents / terms:

A bill of lading
– is a contract between the exporter and the shipper indicating that the shipper has accepted
responsibility for the goods and will provide transportation in return for payment.
– A straight bill of lading is non-negotiable.
– A shipper’s order bill of lading is negotiable; it can be bought, sold or traded while the goods are
still in transit, (title of goods can change hands) - normally the original bill of lading is needed to
take possession of goods.
Air way bill – a contract between the exporter and the air-cargo company.
Country of origin certificate – certifying where the goods were manufactured
Commercial invoice / Consular invoice from consulate office of importing country in importing
country language
LC margin – a percent of payment of the total import amount paid by the importer to his bank for the
bank to issue a letter of credit for the whole value of the import
Pre-Shipment inspection – inspection of the goods done by or on behalf of the importer before the
Export packing list – a list in the export documents listing the packaging and items in each packing
Insurance certificate – issued by an insurer for the insurance of the export merchandise
Export / Import registration – required in various countries to allow firms to import or export goods
Export / Import license – a license needed in some countries for specific imports or exports

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Freight forwarder – a company involved in packing and shipment of export goods
Customs / Clearing Agent – company involved in dealing with the customs clearance of imported or
exported goods
Bonded warehouse – a designated warehouse where imported goods may be stored prior to the
payment of import duties. Importers pay customs duties when they take the goods out of the bonded
Marking of the shipments – markings on the outer packaging of the export consignment for the
purpose of identification
Marine cargo insurance (special one time / open policy) – export goods’ insurance for the
Containers – metal containers ( normally 20 or 40 feet long) for safe transportation of cargo by sea
Bulk-break – normally goods are transported by sea in large metal containers – some exporters may
not have enough cargo to fill a container then the cargo companies combine cargos from a number of
exporters to fill a container for shipment to a destination

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