Different ways a company/corporation can enter a foreign markets —advantages/disadvantages:

 1.  Name the various modes for entering a foreign market and describe some advantages and disadvantages of each.

2. What is the Eximbank and what is its mission?  How does it pursue its mission?

3. What is meant by distribution strategy?  How should a firm determine its distribution strategy in individual foreign markets?

4. Describe the various steps that international firms can take to enhance the success of their expatriate managers.

5. What is countertrade and what are its advantages and disadvantages for a firm?

6.  Name and describe the factors that should be considered by a U.S. firm when selecting a location for production in a foreign country.

7.  When engaging in international commerce, documents such as letters of  credit, bills of exchange, and bills of lading are used in the process.  Explain the nature of each aforementioned item and explain how each is used, when each is used, and why each is important.

8.  What is the difference between an efficiency frontier and an experience curve?  What is the role of each?  Do the two tell you the same thing in a different way?  Explain.

Discussion #1

  1. Some of the various modes of entry include exporting, joint ventures, licensing, foreign direct investment, and franchising. Advantages to exporting is it expands more opportunities from other markets and leads to bigger production than just staying at home. Disadvantages to exporting is it makes the business have less focus at home which hurts their products there and it will be hard to manage the business at many different places at once. Advantages to joint ventures is that you have a partner with the same focus on expanding their similar business and makes it more easier to run a business oversees than just by themselves. Disadvantages to joint ventures are that both partners need to pull their weight in ensuring the business thrives because if one does not then it is sure to fail and this could lead to poor cooperation that causes the international business to fail. Advantages to licensing are that it helps jump international barriers and allows for the business to claim a product as its own which reduces theft. Disadvantages are is that it doesn’t mean both parties will get the revenue they were looking for based on signed agreements and their is an expiration date that might not last long. Advantages for Foreign Direct Investment are it creates new jobs and opportunities worldwide and allow them to get various amounts of material worldwide. Disadvantages include it lowers investment in the domestic country and negative political changes in the country can easily affect the business. Advantages to franchising are that a business can become a recognized brand and gives a small business a chance to attempt to compete with bigger businesses. Disadvantages include that it could cost a lot of the money for the business that it couple afford by franchising and if the brand gets a bad reputation then sales will decline.

    2. The Eximbank is a export-import bank that assists people like Americans in exporting their good and services along with the many factors that come with it like the finances. It does this when private lenders aren’t willing to help so they give the American businesses the needed supplies to be able to ship oversees and compete in the foreign competition.

    3. Distribution strategy is what a business might use to spread a product or service to successfully make revenue and new customers. A firm can determine its distribution strategy in individual foreign markets by the factors of the product. This includes how it is delivered, sold, manufactured, and a variety of other things to satisfy the foreign consumers.

    4. There are steps an international firm can take to enhance their expatriate manager’s success. This includes regularly communicating with them, provide training, give information about the country they will be working in, encourage building relationships in the foreign country, and many other things that will have the expatriate manager be successful.

    5. A countertrade is when the goods and services are traded for another goods and services. Advantages are that it allows for more sales from a goods and services instead of one from a product losing popularity and allows easier entry to other foreign markets. The disadvantages are complex negotiations could be involved that make the trade not worth it anymore and there’s a possibility that one party with the traded product isn’t making the business as much revenue as they thought they would have with the product and there’s no going back to get the one they had.

    6.  There are factors a U.S. firm should take when picking a location for production in a certain country. The first being the people and their culture to ensure that the people from the foreign country would actually be interested in the product because if not then the business will be wasting time and money there. Next, the foreign country’s barriers that could cost, legalities, and a lot to get through and other negatives that wouldn’t make it worth it for the business to produce products there. Also, the foreign government can come into play which affects the business like how the currency exchange rates positively or negatively, politics, and new immigration laws. Lastly, the cases of business where a business can analyze the foreign market to see how they can fully adapt their business to be successful and see if it is the right direction for the company to make.

    7. Letters of credit are something a bank issues to let someone know that the bank themselves will be making payments under certain circumstances. They will be used by the person when they can’t afford to make the payment. It’s important because they let both parties, business and consumer, that the item will be payed for no matter what. Bills of exchange is when a exporter writes an order to the importer a deadline that they need to pay a specific amount of money before it hits that date and time. This is used by the exporter to send out a warning to the importer that they need to pay the money they owe or else they will face the consequences. This is important because it makes sure that the importer doesn’t get away with not paying for the goods and services provided by the exporter. Bill of lading is when a issued document is sent to an exporter by a common carrier. It can be many things such as a receipt, document of title, and contract. This used used because they are required for an exporter to keep when providing a goods and services. This is important because it is paperwork that holds evidence of the exporters transactions that they could use as proof if something were to happen.

    8. Efficiency frontier is the many positions that firms adopt to add to its product value and its low cost. The role of this is to ensure that the investors are able to get everything can out of their investments from the risks and returns in the portfolio. Experience Curve is the reduction in systematic product cost that occurs over the legs of the product. The role of this is that it shows the products life experience overtime to see if it’s good or bad and whether or not to keep selling it. The two do kind of tell you the same thing as it does relate to time, however, efficiency frontier is more analytical and the people involved can see the positive or negative turnouts that come from it. Experience curve is less analytical as it can easily see if the product has been doing as well as they’ve hoped for during its time and whether to keep using it or not.

Discussion #2

1.)  Different ways a company/corporation can enter a foreign markets —advantages/disadvantages:

o   Exporting: When a company/corporation directly sells domestically produced goods into another country. Some advantages of exporting are the fast entry into the foreign market and no investment is needed in foreign production sense the goods are domestically produced. Some disadvantages are the company doesn’t have much local knowledge of the market, they have minimal control of marketing/distribution of their goods after exporting, and they do not get the advantage of staking out foreign competition. 

o   Licensing / Franchising: When a company/corporation makes an agreement with a foreign company to sell/use their goods or when a company.corporation allows a foreign company/corporation to use its brand name to sell their goods/services. Some advantages of licensing/franchising are large profit returns as it doesn’t cost the domestic company much as the foreign company produces and markets the product/service and it is a fast entry into the foreign market. Some disadvantages are the low control over the foreign companies as most contracts allow them to do as they please and the chance that they may end up becoming a competitor. 

o   Partnering / Strategic Alliance: When multiple enterprises (foreign and domestic) come to a contractual agreement for a time being to achieve a common purpose. Some advantages include the local foreign firm has the knowledge base for their market and the local firm may have a well recognized and reputable name with locals in the foreign market, which will allow the domestic company in the partnership to profit. Some disadvantages are the lack of control over the entire agreement along with the foreign company’s business and the risk that the foreign company’s interest are not the same as the domestics. 

o   Acquisition: When a company/corporation gains control over another buy purchasing its stock, exchanging their stock for a portion of its own, or paying owners a purchase price. Some advantages of acquisitions are the fast entry due to the immediate control over a company and it allows fast production in a foreign market sense there is already established business operations. Some disadvantages of acquisitions are the high cost to acquire another business and integration issues with the home office(s). 

o   Foreign Direct Investments / Subsidiaries:  When a company/corporation directly begins business operations in a foreign country by transferring home resources, capital, and personnel to build up the business in the foreign market. Some advantages include tight controls over the subsidiary (an independent company owned by a foreign firm – the parent company) and the benefits of being exempt from foreign domestic laws that hinder business in the domestic company. Some disadvantages are it’s extremely expensive as they are building their entire business from the ground up in a foreign market and it is very high risk with the chance of the foreign company going under. 

2. What is the Eximbank and what is its mission?  How does it pursue its mission?

The Eximbank is the Export-Import Bank of the United States, which is the official export credit agency of the US federal government where it is a wholly owned federal government corporation. The goal of the Eximbank ever sense it was established in 1934 by executive order from President Franklin D Roosevelt is to aid in financing and to facilitate exports and imports and the exchange of commodities between the United States and foreign delegates. They perform these duties by equipping US exporters and customers with access to buyer financing and export credit insurance.

3. What is meant by distribution strategy?  How should a firm determine its distribution strategy in individual foreign markets?

 Distribution Strategies are the processes a.corporation performs to make a product or service available to consumers and businesses who need it. For international distribution strategies, the three different options are international departments, working with distributors, and online distribution. International departments is when a company directly sets up business in a foreign market, this gives complete control over distribution, but doesn’t take in account personnel, culture, compensation, or training. Working with distributors occurs when export management companies arrange a companies distribution in a foreign market, these companies directly handle a companies distribution in foreign markets with lots of experience and expertise. Online “distribution” is mainly the way domestic companies attract foreign attention to purchase their products as shipping companies still handle direct distribution. Corporations may use many of these strategies depending on their intent, such as if a company is directly trying to expand into a foreign market they would use the international departments strategies, but if they just want foreign consumers they may just use the online strategy. 

4. Describe the various steps that international firms can take to enhance the success of their expatriate managers. 

Ways to enhance the success of a companies expatriate are:

– Provide cultural training: Before a expatriate goes to a foreign area, to receive training on local cultural norms, beliefs, values, and behaviors will all create a better understanding of the host areas culture which can contribute to the expatriates success. 

– Bring other expatriates closer & local employees closer: By bringing other expatriates and local employees closer to the new one, they are more likely to adjust better with the social support, friendship, and job assistance (basically a mentor) which can lead to their success.  

– Reward Opportunity: My offering rewards to expatriates, such as financial benefits or home leave which will allow them to stay connected to family and friends, will keep production up and lead to success sense the expatriate will be focused on work rather than home sickness. 

– Include the Whole Family: By including the entire family of the expatriate, it can lead to the success of the expatriate as it is normal for early repatriation due to the family members being unable to adapt, so by bringing them along with the expatriate it can lead to success. 

5. What is countertrade and what are its advantages and disadvantages for a firm?

 Countertrade in international trade is when two parties trade using goods rather than currency, meaning instead of buying goods with monetary currency, two parties will trade goods of the same momentary value with one another. Advantages of countertrade include the conservation of foreign currency which is needed for developing countries, lower unemployment, higher sales and profit, easy market entry, and better capacity utilization. Disadvantages of countertrade include is uncertainty in value proposition, complex negotiations, potentially high costs, and logistical issues. 

6.  Name and describe the factors that should be considered by a U.S. firm when selecting a location for production in a foreign country.

Factors that should be taken into consideration for selecting a location in a foreign country —

–       Culture: Depending on the culture on the foreign country, the business could be success or a complete failure. If the need of the product is not there for the local market, there is no point in a consumer purchasing it. If the community the product/service the company will be producing does not value for them, the company will fail. 

–       Local Regulations/Laws: If the local regulations and laws hinder the business or create barriers for trade, it would lead to a decline in profit and the business in general. Businesses should consult professional international legal council before expanding overseas and especially on a specific location to be sure that it would be profitable for the company to enter that particular market due to their laws and regulations. 

–       Government: When a business is entering a foreign countries market they must consider the government of the country they are attempting to expand their business too. The government of the foreign country a business is trying to expand too not only sets the laws and regulations, but they also can effect the currency exchange rate, set government business assistance opportunities, change/set immigration/employment laws, and effect a businesses access to needed resources and materials. 

7.  When engaging in international commerce, documents such as letters of  credit, bills of exchange, and bills of lading are used in the process.  Explain the nature of each aforementioned item and explain how each is used, when each is used, and why each is important.

–       Letter of Credit: A letter of credit is used in international trade as a payment mechanism to provide a economic guarantee from a creditable bank to a exporter of goods. This letter from a bank is a guarantee from a buyer to a seller that they will receive the correct payment on time, and if a buyer is unable to cover a payment to a seller, the bank is required to cover the entire or remaining payment. 

–       Bill of Exchange: A bill of exchange in economics facilities a formal piece of evidence between buyer and seller for the seller to claim payment from a buyer, and if the buyer is unable to produce payment, they are able to use this document with the bank or facilitator to make a claim for the payment from them. This is used between two parties in international trade as a written order to receive payment on demand or at a fixed date. 

–       Bill of Lading: A bill of lading in international trade law is a legal document that is extremely important when it comes to shipping cargo as this detailed document that proves ownership of all cargo and proof of shipment. 

8.  What is the difference between an efficiency frontier and an experience curve?  What is the role of each?  Do the two tell you the same thing in a different way?  Explain

An efficiency frontier is a set portfolio that represents the highest offer of return at its defined level of risk, or the lowest risk offer with its expected return. These portfolios are designed to represent the best return with its expected risk, and that is considered “efficient” if it represents the best return, the purpose of these portfolios is to illustrate the investment to strategic values in relation from return to risk. An experience curve is a graphical representation of the production versus cost of production, where it is normally represented by a firm producing more of a particular good/service, and productivity costs go down, and this is considered “efficient”. These two are essentially telling the same story as one another, just using different methods and using different models to represent the data shown, which normally reads as the same thing. 

Discussion #3

1. Name the various modes for entering a foreign market and describe some advantages and disadvantages of each. 

Entry TypeAdvantageDisadvantage
Foreign Direct InvestmentReduction in cost of production, access to global marketUnstable or unpredictable foreign economy, unstable political systems
ExportingLow risk, Fast EntryUnstable control, Potential negative environmental impacts
Strategic AlliancesShared costs reduce needed investments, reduced riskHigher cost than exporting
AcquisitionsFast entry, Established operationsHigh cost, integration issues
Licensing &FranchisingLow risk, low cost, fast entryLicensee may become competitor, less control
  • What is the Eximbank and what is its mission?  How does it pursue its mission?

 The Exim bank is the official export credit agency of the United States federal government. The EXIM bank’s mission is to support and create American jobs through the means of exports. It also provides guarantees of working capital loans for US exporters. EXIM pursues their mission by creating American jobs and protecting American made products from foreign competitors. 

  • What is meant by distribution strategy?  How should a firm determine its distribution strategy in individual foreign markets? 

A distribution strategy is a process of making products and services available to businesses and target customers for their use. How a firm should determine its distribution strategy in individual foreign markets is that it should use a global distribution strategy. One piece of the global distribution strategy is the creation of international departments so you can have complete control over international distribution. 

  • Describe the various steps that international firms can take to enhance the success of their expatriate managers.

 Some steps that international firms can take to enhance the success of their expatriate managers is to provide cultural training or pre departure training for those who are expected to leave. These include the geography, the economy, the religion and the history of where they will be working from. Another step an international firm can take is to offer benefits for leaving home, such as financial benefits. The final step an international firm can take is to create a support group so employees can receive job support, social support and friendships. 

  • What is countertrade and what are its advantages and disadvantages for a firm?

 Countertrade is the international trade by exchange of goods rather than by currency purchase. Some of the advantages of countertrading is lower employment, better utilization of capacity, and higher sales. Some disadvantages of countertrading is the value of goods may be unknown and the high transaction costs. 

  • Name and describe the factors that should be considered by a U.S. firm when selecting a location for production in a foreign country.

 Some factors that should be considered by a U.S. firm when selecting a location for production in a foreign country comes down to 5 traits. The first one is how are the people in said country, and how would they react to a US run business in their country. The second one is the economy. What is the foreign country’s economy like? The third one is government regulations and how they affect businesses. You don’t want to move your business into a country with high government restrictions. The fourth one is how corrupt or is their political groups corrupt over there in that country. The fifth one is what are the true costs of moving your business to that country.  

  • When engaging in international commerce, documents such as letters of  credit, bills of exchange, and bills of lading are used in the process.  Explain the nature of each aforementioned item and explain how each is used, when each is used, and why each is important.

 Letters of credit are bank issued letters sent to other banks to serve as a guarantee for special payments made to a specific person. They are used as a guarantee to other banks that the buyer’s payment will be received by the seller on time. The importance of this is because if two individuals don’t know each other that well, this is a perfect way for both sides not to be scammed. A bill of exchange is a written order to a person requiring the person to make a specified payment to the signatory. It’s used to guarantee a specific amount of money and it’s important because it helps counter some risks of exporting. A bill of lading is a detailed list of a shipment of goods in the form of a receipt given by the carrier to the person consigning the goods. This document is used as a contract between a shipper and carrier. Its important because its used as an agreement for the movement of goods. 

  • What is the difference between an efficiency frontier and an experience curve?  What is the role of each?  Do the two tell you the same thing in a different way?  Explain. 

The efficiency frontier is defined as an investment portfolio which occupies the “efficient” parts of the risk–return spectrum. The purpose of it is to ensure that investors are able to get the maximum amount they can out of their investments without all the risks from their portfolio. Experience curve is a representation of the inverse relationship between the total value-added costs of a product and the company experience in manufacturing and marketing it. The difference is the efficiency frontier shows the risks within a spectrum and is more on the analytical side. The experience curve is not as complicated to use and is more understandable for those aren’t as experienced enough to use the efficiency frontier. However, both of them show the same thing but in a different way. 

Discussion #4

  1. Modes of entry into a foreign market can include exporting, turnkey projects, licensing, franchising, joint ventures, and wholly owned subsidiaries. A benefit entering a foreign market by exporting is that a firm can often avoid the high costs of establishing manufacturing operations in the new country. A disadvantage of exporting is that tariff barriers can significantly increase the cost of exporting making it uneconomical. An advantage of turnkey projects are that they you benefit from the processes already in place and can also be seen as slightly less risky. One of its disadvantages is that firms that enter into a turnkey deal typically do not have long-term interest in that foreign country and can also inadvertently create a competitor by selling off the technology or production process to make a competing product.  An advantage of entering by licensing agreement is that a firm does not have to bear the development cost and risks associated with opening operations in a foreign market, as those cost would be with the licensee firm. A disadvantage is that the original firm lose much of the control over the manufacturing, marketing, and strategy in the new market along with also not having control over the production operation in the new foreign market.  An advantage of a joint venture is that a firm can share the costs and risks of opening a new operation with its local partner in that market. A disadvantage of joint ventures is that the shared ownership agreement between the two partner firms can lead to conflicts and control disputes. An advantage of operating a wholly owned subsidiary, specifically for technological businesses, is that the firm is able to keep tight control over the competence and processes of that technology.
  2. Eximbank is the Export-Import Bank of the United States and is the official export credit agency of the United States. The mission of Eximbank is to support American jobs by helping to support the export of U.S. goods and services in the international marketplace. Eximbank provides American businesses with the financing tools needed to compete in the global market when private sector lenders are unable or unwilling to provide financing.
  3. A distribution strategy refers to the means that a firm chooses to deliver its product to consumers. The way the product is delivered is determined by entry strategy of the firm. Distribution channels of a product differ between various worldwide systems. The main difference between distribution systems are retail concentration, channel length, channel exclusivity, and channel quality.
  4. Ways for international firms to enhance the success of their expatriate mangers are to improve their selection procedures for expatriate mangers by understanding that managers who perform well in domestic markets may not perform well abroad and firms should review ways managers will be successful in foreign cultures. Another way to enhance success is to ensure the firm and its managers have a global mindset in order to better deal with high levels of complexity and ambiguity by being more open minded. Lastly, the additional training of expatriate managers with practical skills needed to operate in a foreign market including cultural training, language training, practical training, and also the repatriation of expatriates or the training and development to prepare expatriate managers for reentry back into their home-country organization.
  5. Countertrade is a form of structuring an international sale similar to bartering, where a firm trades a good or service for a different good or service from the other firm. Countertrade transactions include bartering, counterpurchases, offset agreements, buybacks, and switch trading which requires the use of a third-party in the transaction. An advantage of countertrade include the ability to gain financing of an export deal when other means are not available. Countertrades agreements can also be beneficial when used to strategically to negotiate intense competition in a market created by government regulations or policies. Disadvantages, however, can be substantial including the fact that hard currency isn’t used, the trades may involve unusable or poor-quality goods, and the high cost and time needed to setup in-house trading departments to determine how to handle the sell and profitability of the traded goods.
  6. Factors that a firm must consider when selecting a location for production of a product or service in a foreign country include country factors, technological factors, and production factors. Country factors refers to how political, economic, culture, and relative factors affect the costs of doing businesses in different countries. Technological factors refer to how manufacturing activities are performed based on fixed costs, the minimum efficient scale, and the flexibility of manufacturing technology. Production factors that influence the location of production facilities include product features, locating production facilities, and the strategic roles for production facilities. These include the use of offshore factors, source factories, server factories, contribution factories, outpost factories, or lead factories.
  7. A letter of credit is a statement from a bank stating that the bank will make payments under specific circumstances outlined in the letter. They are used in transactions between firms to ensure the funding from the purchasing firm is available and helps reduce some rick from the selling company. Letters of credit are also used by firms to show creditworthiness in obtaining pre-export financing. They are important in facilitating transactions between firms to ensure payment and reduce risks. Bills of lading are document issued to an exporter by the carrier transporting the goods. It is used as a receipt, a contract, and a document of title of the goods been transferred. They are important because they can be used to obtain payment or a written promise of payment before the goods are released to the importer. Bills of exchange, also referred to as a draft, is an order written by an exporter instructing an importer or its agent to pay a specified amount of money at a specified time. They are used in international practices to settle trade transactions, and they are important because they direct how payments are made in a transaction over time that ensure trust between firms in different countries.
  8. An efficiency frontier refers to the different positions, or risks taken, that a firm can adopt to add value to a product while lowering cost. The efficiency frontier ultimately shows pros or cons of those positions or risks taken and can be used to show how to maximize profits by lower costs to a certain point. An experience curve refers to the systematic reductions in the cost of production over the life of a product. Both of these charting observations show the learning effects of cost savings. The efficiency frontier shows these learning effects based on the choices made or risks taken, whereas the experience curve shows the relationship between the cost and output of a product over time as cumulative output doubles.

Discussion #5

  1. Name the various modes for entering a foreign market and describe some advantages and disadvantages of each.

  The main five modes for entering a foreign market are joint venture, licensing agreement, exporting directly, online sales and purchasing foreign assets. Advantages of joint lecture include; profit at a low cost, flexible nature and shared costs, expenses, benefits, and risk. Some disadvantages of joint lecture include; flexibility being restricted, assets and claims, and equal involvement being impossible. Licensing agreement advantages consist of; quick, easy entry into foreign markets, allowing a company to “jump” border and tariff barriers along with lower capital requirements. Disadvantages of licensing agreement are loss of control over your invention, relying on the licensee’s ability to effectively commercialise your patent and risk of poor strategy or execution damaging the product’s success. Advantages of exporting directly include; full control over the product, effective after sale service, and intensive market cultivation. Disadvantages of exporting directly include; greater initial outlay, difficulty in maintenance of stocks and higher distribution costs. Online sales advantages are lower set up and running costs than an offline business, less time intensive and higher margins and better cash flow. Disadvantages of online sales include; increased competition, lack of physical contact with the product, and delivery time and shipping costs may sometimes be a deterrent. Lastly, purchasing foreign asset advantages consist of; increased employment and economic growth, human resource development, and increase in exports. Some disadvantages of purchasing foreign assets include; an unstable and unpredictable foreign economy, unstable political systems, and underdeveloped legal systems.

  • What is the Eximbank and what is its mission?  How does it pursue its mission?

  Eximbank is an independent Executive Branch agency with a mission of supporting American jobs by facilitating the export of U.S. goods and services. This agency aims to promote U.S. goods and services at no cost to U.S. taxpayers, protecting “made in America” products against foreign competition in overseas markets and encouraging the creation of American jobs.

  • What is meant by distribution strategy?  How should a firm determine its distribution strategy in individual foreign markets?

  Distribution strategy is the method of disseminating goods or services to end-users. The most efficient distribution method for your business is key to obtaining revenue and retaining customer loyalty. Some companies opt to use multiple distribution methods to adhere to different consumer bases.A distribution strategy in marketing pertains to the product or service available to the target customers through its supply chain. The distribution strategy for marketing is often called the place. 

  • Describe the various steps that international firms can take to enhance the success of their expatriate managers.

  There are many different steps that different international firms can complete to gain success for their expatriate managers. Some steps that international firms take to enhance the success of their expatriate managers include; provide cultural training, bring expats & local employees closer, offer rewards, include the whole family, and they do not forget repatriation.

  • What is countertrade and what are its advantages and disadvantages for a firm?

  Countertrade is defined as exchanging goods or services which are paid for, in whole or part, with other goods or services, rather than with money. Benefits of countertrade for a firm include; lower unemployment, higher sales, better capacity utilization, and ease of entry into challenging markets. Disadvantages of countertrade for a firm consist of; a major drawback of countertrade is that the value proposition may be uncertain, particularly in cases where the goods being exchanged have significant price volatility.

  • Name and describe the factors that should be considered by a U.S. firm when selecting a location for production in a foreign country.

  Factors that should be considered by a U.S. firm when selecting a location for production in a foreign country all depends on their resources and partners. These factors include; the most important consideration when evaluating a location for a business is the people, true costs, innovation is the name of the game, and government regulations.

  • When engaging in international commerce, documents such as letters of credit, bills of exchange, and bills of lading are used in the process.  Explain the nature of each aforementioned item and explain how each is used, when each is used, and why each is important.

  Documents such as an international letter of credit is a method of payment that is particularly suited to high value/high risk transactions. An international letter of credit is issued by the importer’s bank on behalf of the importer with the exporter being the beneficiary. When engaging in international commerce, a bill of exchange is a written order used primarily in international trade that binds one party to pay a fixed sum of money to another party on demand or at a predetermined date. Lastly, bills of lading are used in the process of international commerce and is defined as a document that the Carrier of goods issues to the “Shipper” of the goods. Bills of lading is a document to provide evidence or proof of shipment. Additionally, this is extremely important in International Trade as it provides ‘title’ as to who legally owns the cargo.

  • What is the difference between an efficiency frontier and an experience curve?  What is the role of each?  Do the two tell you the same thing in a different way?  Explain.

Efficiency frontier is the efficient frontier is an investment portfolio which occupies the efficient parts of the risk–return spectrum. In other words, efficiency frontier is the set of portfolios which satisfy the condition that no other portfolio exists with a higher expected return but with the same standard deviation of return. On the other hand, experience curve is defined as a diagrammatic representation of the inverse relationship between the total value-added costs of a product and the company experience in manufacturing and marketing it. The production of any good or service shows the learning curve or experience curve effect. From my understanding, these two seem to state the similar things just worded in a different way.

Discussion #6

1. Exporting is the easiest way to enter a foreign market, Exporting is when you sell products and services in foreign countries that are sourced from their home country. One of the advantages is you don’t have too establish operations in that new country. A disadvantage would be it can be expensive to transport goods across different countries, and some import tariffs which affects your profits. Another way is licensing and franchising, A international licensing agreement allows a foreign company to sell the products of a producer in exchange for royalty fees. A advantage is licensing can bring you a large investment in return. It also can bring back limited returns. There  is also a thing called  alliances, which have become more popular. They allow companies to share their resources, and give you more flexibility. A disadvantage would be lack of total control and different long term goals.

2.  Eximbank which stands for Export-Import Bank of the United States. It is the official export credit agency of the United States Government. The bank helps finance and facilitate US export of goods and services. They support American jobs, and helps US goods and services. The bank is really important to small businesses, and helps small exporters expand into new markets. 

3. Distribution strategy is a process of making products and services available to businesses. A good distribution strategy should have Cost Reduction, Availability of goods, and protection of goods. Setting up International departments means you entering into another country’s market. Use distributers with experience in shipping and importing. Online sales is the cheapest way to test the market. Treat your partners with respect, like your own employees. distribution is a specialized function that takes practice to be good at.

4. Well you first need to hire the right people for the right positions. Open and frequent communication is very important, like do monthly check ins, and see how their assignment is doing. Doing these global assignments is important and you have too hire people that know what their doing and share that experience. 

5. Countertrade is another form of International Trade in which goods and services are exchanged for other goods and services. It’s more common with countries with limited foreign exchange. It provides the exporting country to offer goods and services in a larger international market. There are 3 different kinds of countertrade barter, counterpurchase, and offset. Some benefits are lower unemployment, higher sales, better capacity, and better entry into challenging markets. Some disadvantages would be more complex negotiations, higher costs, and logistical issues. It can also lead to discrimination based on different trade policies.
6. There are a lot of important factors to consider when entering a new country. Some countries may not be able to afford the products that they sell, that would be a economic reason. You may over invest and make strategic mistakes. You also have to consider like the language barrier, and what food they have and so on. There is also a lot of government interference when it comes to businesses. Sometimes when a country wants too sell you a product they have a lot of differences with what food they eat, their language and other factors.

7.  Letters of credit is when you get a letter from the bank that a buyer’s payment to a seller will be received on time. If they cant make the full payment the bank will be required to make the full payment. It is used mostly in International Trade. There are lots of different types like import/export, restricted/unrestricted, and deferred/usance. Their important for International transactions because it ensures that the payment will be received. A bill of exchange is a document that guarantees the payment of a specific amount of money. It can be used for goods and services in International trade. You can also use it as a negotiating tool. It’s important because it counter’s the risks of exporting and long term trading. A bill of lading is like a receipt or document issued bye a carrier to a shipper. It is a required document for a freight shipment. It’s important because it provides important details and it leaves a paper trail of information.

8. Efficiency frontier is like a  investment portfolio. A experience curve is used to assess declining production costs. The two are very similar because they both deal with economics and investing. Yes, I do agree that they tell you two different things but their similar.

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