International Trade and Distribution Strategies
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What is the fundamental characteristic of international trade?

  • The exchange of goods and services within a country.
  • The production of goods and services in a single country.
  • The establishment of sales facilities in a single country.
  • The exchange of goods and services crossing national borders. (correct)

    • Which factor primarily drives the shift of production overseas, as described in the context?

  • Government regulations promoting domestic production.
  • A decrease in demand for products.
  • Similar production costs in all countries.
  • Different production costs across countries. (correct)

    • In which phase of internationalization does a company establish its own sales and production facilities outside its home market?

  • Phase 2: Production overseas.
  • Phase 4: Company becomes multinational.
  • Phase 1: Export and increase of sales.
  • Phase 3: Establish own sales- and production facilities outside home market/overseas. (correct)

    • Which of the following industries is explicitly mentioned as having shifted production overseas?

    <p>Textile industry. (C)</p> Signup and view all the answers

    What does the final of the internationalization phases outlined by F. Root indicate?

    <p>The company becomes multinational. (D)</p> Signup and view all the answers

    What is a primary factor influencing the design of supply chains?

    <p>Corporate strategic challenges, targets, and sustainability goals. (B)</p> Signup and view all the answers

    Which distribution strategy aims to maximize market penetration by utilizing as many outlets as possible?

    <p>Intensive Distribution. (A)</p> Signup and view all the answers

    A company that limits its product availability to a few select outlets in order to maintain its brand image is using which distribution strategy?

    <p>Exclusive Distribution (C)</p> Signup and view all the answers

    A manufacturer chooses to sell products through specific retailers in specific locations. This strategy is best described as...

    <p>Selective Distribution. (A)</p> Signup and view all the answers

    What is true of a company using an exclusive distribution strategy?

    <p>They limit the number of locations to maintain brand exclusivity. (D)</p> Signup and view all the answers

    What is the main characteristic of a consignment agreement?

    <p>Payment for goods happens after they are sold by the agent. (D)</p> Signup and view all the answers

    Which of the following is a primary driver for a company to pursue internationalization?

    <p>To seek growth through market development and diversification. (D)</p> Signup and view all the answers

    What is a disadvantage of free trade?

    <p>It may discriminate against developing countries. (C)</p> Signup and view all the answers

    What primarily determines the value of import duty?

    <p>The good's value (C)</p> Signup and view all the answers

    Which of the following is another term for import duty?

    <p>Customs Duty (B)</p> Signup and view all the answers

    Which of the following is a function of the International Monetary Fund (IMF)?

    <p>To foster international financial stability. (C)</p> Signup and view all the answers

    Which type of dumping is primarily aimed at eliminating competition?

    <p>Strategic dumping. (A)</p> Signup and view all the answers

    What does the Common Customs Tariff (CCT) ensure within the EU?

    <p>Standardized duty rates across member states. (D)</p> Signup and view all the answers

    Which of the following arguments is NOT typically permitted as a justification for trade protectionism?

    <p>The pauper-labor argument. (B)</p> Signup and view all the answers

    What is NOT considered a main type of duty or tax applied on imported goods?

    <p>Sales Tax (B)</p> Signup and view all the answers

    What are Incoterms primarily used for?

    <p>Standardizing terms of trade for the sale of goods. (B)</p> Signup and view all the answers

    What is a ‘specific’ import duty?

    <p>A fixed amount per volume of the product. (C)</p> Signup and view all the answers

    What is a tariff quota?

    <p>Import duties levied after a maximum quantity is reached. (C)</p> Signup and view all the answers

    Which of these is considered a reactive motive for a company to leave their home market?

    <p>Overproduction (C)</p> Signup and view all the answers

    What does a structural export approach involve?

    <p>Establishing market objectives (A)</p> Signup and view all the answers

    Which type of trade agreement involves multiple countries?

    <p>Multilateral agreement. (C)</p> Signup and view all the answers

    Which of these is an example of a non-tariff barrier?

    <p>Stringent health and safety regulations. (B)</p> Signup and view all the answers

    What characterizes managed trade?

    <p>Trade influenced by government intervention and other non-market factors. (C)</p> Signup and view all the answers

    What is the primary aim of trade agreements like the one between the EU and Mercosur?

    <p>To facilitate trade by removing barriers, such as import duties and improving market access. (B)</p> Signup and view all the answers

    Which of the following is a major concern for French farmers regarding the EU-Mercosur trade agreement?

    <p>The potential for unfair competition from cheaper agricultural imports. (C)</p> Signup and view all the answers

    Why are some EU countries like the Netherlands and France critical of the EU-Mercosur trade agreement?

    <p>They fear the agreement will result in unfair competition and harm the environment. (C)</p> Signup and view all the answers

    What does 'importing' primarily involve in international trade?

    <p>Purchasing goods and services from abroad and bringing them into the home country. (C)</p> Signup and view all the answers

    What potential benefit does the EU expect from the Mercosur trade agreement, beyond reducing trade barriers?

    <p>Enhanced access to essential raw materials crucial for the energy transition. (B)</p> Signup and view all the answers

    Which of the following best describes 'exporting' in the context of international trade?

    <p>The sale of products made in the home country to foreign countries. (D)</p> Signup and view all the answers

    What is the estimated annual savings for European companies due to the EU-Mercosur trade agreement?

    <p>Approximately 4 billion euros in levies. (A)</p> Signup and view all the answers

    What does the term 'market needs' directly influence in international trade?

    <p>The movement of capital, goods, and services across international borders. (B)</p> Signup and view all the answers

    What is understood by 're-importation' in the context of Dutch trade?

    <p>The export of previously imported goods with minimal additional value. (B)</p> Signup and view all the answers

    Which of the following best describes a 'transit' trade activity for the Netherlands?

    <p>Shipping goods through the Netherlands with no further processing or value addition. (A)</p> Signup and view all the answers

    In the context of international trade, what is a 'deemed export'?

    <p>The release of controlled technology or information to a foreign entity. (A)</p> Signup and view all the answers

    Which benefit is most directly associated with the export of goods and services?

    <p>Increased sales volumes and market potential for businesses. (A)</p> Signup and view all the answers

    What is a key disadvantage for a company engaging in international import?

    <p>Increased dependency on foreign suppliers and markets. (C)</p> Signup and view all the answers

    A buyer's bank promises to pay an exporter upon receiving specific documentation. What payment method does this describe?

    <p>Letter of credit (C)</p> Signup and view all the answers

    Which payment method requires the importer's bank to request permission to pay the seller before payment?

    <p>Documentary collections (D/C) (A)</p> Signup and view all the answers

    What is one way that exporting can help businesses?

    <p>It helps to sell excess production capacity, turning it into profit. (D)</p> Signup and view all the answers

    Flashcards

    International Trade

    Exchange of goods and services across national borders.

    Import & Export Management

    Overseeing the flow of goods in and out of a country.

    Internationalisation phases

    Stages a company goes through in becoming international.

    Production overseas

    Manufacturing goods in foreign countries to reduce costs.

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    Multinational Company

    A corporation that operates in multiple countries.

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    Transport modalities

    Different methods of transporting goods, each with pros and cons.

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    Intensive Distribution

    A strategy to use as many outlets as possible to reach the market.

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    Selective Distribution

    Choosing specific outlets for distribution based on the product fit.

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    Exclusive Distribution

    Limiting product availability to select outlets for brand image.

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    Multimodal transportation

    Using more than one transport mode for goods delivery.

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    Consignment

    Goods are paid for by an agent only after sold.

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    Import Duty

    A tax collected on imports and some exports by customs authorities.

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    Common Customs Tariff (CCT)

    A standardized system of tariffs used by all EU member states.

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    VAT (Value Added Tax)

    A consumption tax added to goods based on their value at each stage of production.

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    Incoterms

    Pre-defined commercial terms published for international trade, established in 1919.

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    Proactive Motives for Exporting

    Reasons for a company to leave its home market, such as tax benefits and opportunities abroad.

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    Reactive Motives for Exporting

    Reasons to leave the home market due to competition or market saturation.

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    Structural Export Approach

    A strategic plan for companies to engage in overseas market activities.

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    EU-Mercosur Agreement

    A trade deal between the EU and four South American countries for easier trade.

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    Importing

    Buying goods and services from foreign sources to bring into the home country.

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    Exporting

    The sale of products and services in foreign countries sourced from the home country.

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    Mutual Trade Agreement

    An arrangement that facilitates trade between two or more countries by reducing barriers.

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    Criticism of Trade Deals

    Concerns raised about unfair competition and environmental impact of trade agreements.

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    Economic Impact of Agreements

    The effects and benefits of trade agreements on domestic economies, like savings and market access.

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    Market Access

    The ability for companies to sell their goods and services in foreign markets with fewer restrictions.

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    Trade Collaboration

    Cooperative efforts between countries to enhance trade relations and share resources.

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    Motives for internationalization

    Reasons companies seek to expand globally: growth, risk spread, and profits.

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    Revenue growth reasons

    Home market limitations and excessive R&D drive companies to seek international markets.

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    Free trade advantages

    Benefits include efficient competition, no trade wars, price stability, and international rules.

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    Drawbacks of free trade

    Comparative costs can hurt, especially for developing countries.

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    GATT

    General Agreement on Tariffs and Trade aimed at facilitating international trade.

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    Forms of dumping

    Strategies like strategic dumping and subsidized dumping that disrupt fair trade.

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    Trade protectionism

    Policies aimed at protecting domestic industries from foreign competition.

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    Import duties

    Tariffs applied to imported goods, including specific and ad valorem types.

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    Non-tariff barriers

    Regulations and restrictions, like health laws, that hinder trade without tariffs.

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    Managed trade

    Trade influenced by government intervention rather than market forces.

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    Netherlands Exporting Economy

    The Netherlands exports 54% of its GDP, focusing on specific markets.

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    Types of Exportation

    Different forms include physical and deemed export of products and technologies.

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    Import Definition

    Goods that arrive in the Netherlands and enter free trade.

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    Export Advantages

    Increased sales, higher profits, and risk spreading are key benefits of exporting.

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    Import Disadvantages

    Risks include dependency, higher communication costs, and vulnerability to exchange rates.

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    Payment Methods in Trade

    Various payment methods include cash in advance, letter of credit, documentary collection, and open account.

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    Re-importation

    The process of exporting imports with little added value back to the original country.

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    Transit Shipping

    Shipping goods through the Netherlands without value addition, like containers or coal.

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    Study Notes

    Cross Border Supply Chains

    • Cross-border supply chains involve international trade and import/export management.
    • A "Monthly Review Report (MRR)" example is available for current end-to-end supply chains.
    • The report includes product details, sourcing, production, and assembly locations.
    • Transport modes, routes, and estimated transport costs are also included in the report for both local and cross-border transport.
    • Hub locations and (crane) handling costs are also included per TEU and final product.

    International Trade

    • International trade is the exchange of goods and services across national borders.
    • International trade developments include different production costs between countries, resulting in shifts of production to countries with lower costs (e.g., textile and ship building industries).

    Internationalisation Phases (F. Root)

    • Internationalisation starts with exporting and increasing sales.
    • Then, production moves overseas.
    • Establishing own sales and production facilities outside the home market follows.
    • The company then becomes multinational.
    • Lastly, international acquisitions or joint ventures occur.

    Motives for Internationalisation (1)

    • Companies may pursue internationalization to maintain continuity, spread risks, improve profits, and diversify markets.
    • Expanding revenue may drive internationalization where the home market is too small or when the company has excess capacity.
    • Finding high-quality staff overseas can also be a motivating factor.

    Motives for Internationalization (2)

    • Following customers internationally is an important driver for expanding businesses.
    • Attractive market arrangements can also be a key motivation.
    • Competition, where competitors are establishing a presence in the home market, may also drive businesses to seek international markets.

    Trade Policies and the European Union

    • Free trade offers efficient competition, technological innovation, and price stabilization.
    • It avoids trade wars, and international rules are established.
    • In contrast, drawbacks include the possibility of comparative costs and discrimination against developing countries.

    International Trade Organizations

    • The International Monetary Fund (IMF) fosters international financial stability.
    • The World Trade Organization (WTO) resolves international trade disputes.

    GATT Distinguishes Different Forms of Dumping

    • Strategic dumping aims to eliminate competition.
    • Social dumping involves setting wages and benefits below the actual value.
    • Subsidized dumping utilizes government subsidies for export.
    • Price discrimination involves charging different prices across different markets.

    Trade Protectionism

    • Not permitted protectionist arguments include those based on the labor standards or balance of payments.
    • Permitted arguments include infant-industry protection for emerging industries and anti-dumping measures against unfair pricing practices.
    • Check the given web address for additional information.

    Forms of Protectionism– Import Duties

    • Specific duties are fixed amounts per unit volume.
    • Ad valorem duties are based on the value of the product.
    • Sliding/variable duties adjust tariffs based on the product price.
    • Prohibitive tariffs are so high that imports are essentially impossible.
    • Implicit tariffs use varying tariff rates for raw materials versus finished products.

    Forms of Protectionism– Quotas

    • Quantity quotas restrict the total quantity of imported goods.
    • Tariff quotas levy import duties once the quota limit is reached.
    • Quotas can be bilateral (between two countries), multilateral (between multiple countries), or global (for everyone).

    Forms of Protectionism– Trade Agreements

    • Bilateral or multilateral trade agreements may involve developing countries or nations that aren't members of the WTO.

    Forms of Protectionism– Non-tariff Barriers

    • Rules regarding axle weights for trucks, health and safety regulations, and customs formalities are non-tariff barriers.
    • Administrative procedures, like test specifications, are also considered non-tariff barriers to trade.

    Forms of Protectionism – Managed Trade

    • Government trade relations still exist in countries like China and Cuba.
    • Managed trade is influenced by factors besides market forces, such as government intervention, particularly in strategic goods like aircraft.
    • (Example: Airbus vs Boeing in Saudi Arabia.)

    New Forms of Protectionism

    • Agreements to divide markets and offer subsidies by sector or specific countries exist.
    • The OECD may reorganize industry or agriculture.
    • Trade agreements may use direct subsidies (credit arrangements, financial support) as protectionist practices.

    Regional Formation of 'Blocks'

    • Regional trade agreements often involve the removal of internal tariffs and the common external tariff.
    • These agreements may also involve harmonization of economic policies.
    • Links between trade blocs and various political integrations are discussed.

    Import and Export Management

    • Import and export involve the exchange of capital, goods, and services across national borders.
    • Exporting involves selling products and services produced domestically.
    • Importing involves buying foreign products and services to bring them into the domestic market.
    • The Netherlands is involved in import and export trade, often acting as a distribution hub.

    Different Forms of Import and Export

    • Exportation covers exporting domestically produced goods.
    • Re-importation entails exporting previously imported goods.
    • Transit imports are when items pass through a country without being added value.
    • Imports introduce foreign goods into the domestic market.

    Types of Import and Export

    • B2B and B2C goods and services are examples of imports.
    • Physical exports and deemed exports, relating to controlled technology, are described.
    • There could be other forms of import and export not covered (direct, indirect, one-time, recurring, etc.).

    Import

    • Advantages of importing include international sourcing for cheaper goods, benefiting from the global economy, and expanding sales volumes.
    • Disadvantages include increased risk, vulnerability to exchange rate fluctuations, and higher communication costs.

    Export

    • Advantages of exporting include increased sales and potential, higher profits, spreading risks, potential for new productivity, and accessing new technologies.
    • Disadvantages include additional logistical costs and challenges.

    Payment Methods

    • Payment methods in international trade include cash in advance, letters of credit, documentary collections, open account, and consignment.
    • Each method has differing levels of security and risk exposure.

    Import and Export Duties (Import Duties only for clarity)

    • Import duties are taxes imposed on imported products.
    • A good’s value typically determines the duty amount.
    • When importing into the Netherlands from non-EU countries, import duties, VAT, and other levies may apply.

    Import and Export Duties (2)

    • All EU member states use a common customs tariff (CCT).
    • Duties and taxes differ depending on the product and origin.
    • Taxes and duties are added to the base price of products in the importing country.

    Incoterms

    • Incoterms are internationally recognized trade terms (published by ICC).
    • Incoterms define the responsibilities of buyer and seller for goods exchange in international trade.
    • Incoterms details are contained through 3 letter trade terms.

    Motives for Leaving Home Market

    • Proactive motives include seeking tax benefits and identifying opportunities in foreign markets.
    • Reactive motives for leaving home markets may include the need to address competition and high production volumes.

    Structural Import/Export Approach

    • More and more companies are focusing on overseas activities that necessitate a structural export method.
    • Setting up an export plan or structure provides insights and awareness of possibilities and market objectives and provides opportunities available on a global scale.

    Transport Modalities

    • Each transport modality has advantages and disadvantages.
    • Combinations of transport modalities (intermodal and multimodal) are frequently used and have their own advantages and challenges.
    • Companies use relevant criteria concerning transport modalities (including sustainability).

    Channels of Distribution

    • Distribution strategies include zero channels, single-level channels, two-level channels, and three-level channels.
    • Logistics channels cover all possible distribution routes for goods from manufacturers to consumers.

    Distribution Strategies

    • Distribution strategies include intensive (numerous outlets for maximum market penetration), selective (limited outlets based on store suitability), and exclusive distribution (minimal outlets aiming to safeguard a brand's differentiation).

    Distribution Profiles

    • Distribution profiles include distributors, wholesalers, retailers, and agents.
    • Each profile has a distinct function in the distribution process (sales, warehousing, retail, and representation).

    Perlmutter Theory

    • The EPRG model suggests four different corporate cultures toward internationalization: ethnocentric, polycentric, regionally centered, and geocentric.
    • Each type of company culture has varying approaches to international markets and trade.

    Ethnocentric Company

    • Ethnocentric companies focus on activities within the home nations.
    • Trade within the home country is prioritized and considered more important than foreign markets.
    • Market penetration relies on chance rather than careful planning.

    Polycentric Company

    • Polycentric companies acknowledge cultural differences.
    • They adopt different business approaches in different markets and countries.
    • They establish independent companies in other territories rather than relying on a single-head office or company culture.

    Regional Company

    • Regional companies adapt their strategy according to distinctions between their various market regions (e.g., North America, EU, and Asia Pacific).
    • The same approach and experience are reflected in the chosen regions and countries.

    Geocentric Company

    • Geocentric companies use similarities and differences in markets in their approach.
    • They establish a worldwide strategy and recognize that country relations are irrelevant to the structure.
    • This corporate structure is often considered ideal for management.

    Next Steps

    • There is a workshop on International Trade – Import & Export, which follows an update of the previously discussed MRR and the subsequent Portfolio additions.

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