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Exporting and other modes of entry

Introduction

This chapter is in two parts and follows the pattern established earlier of dealing separately with the chapters of the textbook. Thus Part A goes beyond structure and into the realms of entry modes and strategic alliances (Chapter 14). In doing so, Part A makes connections with earlier chapters concerning direct investment (Chapter 4) and strategy (Chapter 7). Hill's (2005) Chapter 14 is an excellent condensation of the topics of modes of entry and strategic alliances and needs little elaboration.

The second section of this chapter describes how export-import transactions are carried out. It begins by discussing the problem of identifying export opportunities then goes on to illuminate the documentation associated with exporting and importing. As well, it looks at mechanisms for financing exports and imports and concludes with descriptions of the various forms of countertrade, and the advantages and disadvantages of each of these.

In 'International structure options' (see Chapter 8) we looked briefly at organisation structures for exporting. We noted that responsibility for export matters may be handled initially by people within a product department. As the firm's export business grows, a separate export department may be set up and then an export division or an export subsidiary may be established.

In Part A we also look at exporting as an entry mode and note that exporting has two distinct advantages. The first is that it avoids the cost of establishing a subsidiary in the host country. The second is that exporting may help the firm achieve location and/or experience curve economies by producing in the place with the lowest costs.

In Part B we are concerned with the mechanics of exporting: how to identify export opportunities, arrange finance and insurance, deal with foreign exchange risk and arrangement documentation of the export-import transaction.

Topics

The following is the outline of the topics covered in this chapter.

Learning outcomes

The objectives for this chapter have been carefully constructed to reflect the most significant concepts and ideas we are going to cover and to provide a focus for your work during the chapter. After completing the work you should be able to:

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