IUT_SBL 2024 Fall Trade Business PDF

IUT_SBL_2024_Fall Trade Business Seulki Lee Professor / Ph.D. Schoo...

IUT_SBL_2024_Fall Trade Business Seulki Lee Professor / Ph.D. School of Business & Logistics INHA UNIVERSITY IN TASHKENT Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited.  ❖ Factors of International Trade What is International Trade ? Domestic Trade Trade International Trade Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 2  ❖ Risks of International Trade Risks of International Trade Transactions between strangers in the distance Occurrence of time lapse ✓ Credit Risk : Risk of collecting money ✓ Mercantile Risk : Risk of goods receipt ✓ Exchange Risk : Risk of exchange rate fluctuations due to time lapse ✓ Market Risk : Risk of market price fluctuations due to time lapse Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 3  ❖ International Trade related Law & Regulations United Nations Convention on Contract for the International Sales of Goods (CISG) - mainly used as reference rule when signing contract between seller & buyer Basic Contract ‘INCOTERMS’ (International Rules for the Interpretation of Trade Terms, 2020) - a series of pre-defined commercial terms relating to international commercial law International Hague Rules (1924) Sea Trade Law & Hague-Visby Rules (1968) Regulations Transportation Contract Warsaw Convention (1929) Air Uniform Rules for a Combined Transport Document (1973) Accessory Marine Insurance Acts (1968) Insurance Contract Contract Institute Cargo Clause(ICC) Uniform Rules for Collection (1995) Payment Contract UCP (Uniform Customs and Practices for the Documentary Credits, 2007 -UCP 600) Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 4  ❖ The Process of International Trade 1 Item Selection & Overseas Market Research 2 Import / Export Marketing 3 Discovery of Trading Partners & Credit Investigation 4 Negotiation and Acceptance of Trade Terms & Conditions 5 Sign a Trade Contract 6 Issuing & Accepting of L/C 7 Selection of Transportation Company & Sign an Insurance Contract 8 Import / Export Customs Clearance and Payment & Acceptance 9 Claim & Arbitration Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 5  ❖ The Process of International Trade 1 Item Selection & Overseas Market Research 1) Select Target Items Evaluate the competitiveness and differentiation factors of the goods to be exported Primary Consideration : Price Quality Usage Design Major Consumer Secondary Consideration : Differentiation factors Comparative Advantage & Disadvantage 2) Select the Market Select the market that best matches the target item Market Demand Phase : Introduce : Grow Mature Potential Economic Development Phase : Under Developed Developing Developed Market Opening Phase : Unopened : Partially Opened Opened Fully Opened Competitive Elements : Monopoly : Oligopoly Potential Competitor Government Interference : Strong : Medium Weak Other Elements : Culture Climate : Religion Propensity to Consume Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 6  ~ China Marketing ~ Red Golden yellow Jade green Good- luck Fortune Nobility Passion Honor Elegance Black & White Yellow Green & Blue Death Disorder Hanky-panky Misfortune Unfaithful Shallow-minded Low http://www.genesbmx.com/2008-bmx-olympic01.jpg 2008 August 8 8 O’clock 8 minute 8 second Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited.  ~ Social Structure ~ China Hierarchy of Relationships Indian Caste System CEO Family Extended Family Former Classmates Strangers Dalit Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited.  ~ Business Culture ~ East Asia Central Asia ? Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited.  ❖ The Process of International Trade 1 Item Selection & Overseas Market Research 3) Target Market Research ① Set scope of research : Country Overview Economic Index Culture Overview Macro scope : Micro Scope: : Propensity to Consume by Item Sales Index Most recent Trends & Issues Competitors ② Set survey items by Region ※ Considerations Propensity to Sales by Gender Availability Trend of Consume by Age Period Cost by Occupation Subject Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 7  ❖ The Process of International Trade 1 Item Selection & Overseas Market Research 3) Target Market Research ③ Set survey method Search Documents : Professional Magazine Periodicals Yellow Pages Reports Inquiry :Expatriate Foreign residents Other related person Visit : Business trip Field trip Domestics companies ※ Points to note when visiting Pre-visit request : Number of visitor Date Purpose Send check list : Key inquiries Requested materials Need to prepare : Company introduction material Simple gift (giveaway, souvenir etc.) Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 8  ❖ The Process of International Trade 1 Item Selection & Overseas Market Research ▪ Trade Statistics Trade Association ▪ Consumption Information by Product Chamber of Commerce ▪ Market Research Report Trade related Organizations ▪ Business Trip & Field Survey Trade Portal ▪ Purchase Trend Report Economic Publications Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 9  ❖ The Process of International Trade 2 Import / Export Marketing Professional Trade Portal ▪ Trade Portal Registration Self-produced or Outsourced ▪ Webpage, Blog Production Ad Agency ▪ On-line Ads Travel Agency or State Organization ▪ Participate in the Exhibition Direct contact or Introduction ▪ Visits and Meetings Chamber of Commerce Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 10  ❖ The Process of International Trade 3 Discovery of Trading Partners & Credit Investigation ▪ Search Engines Trade Association ▪ E-mail, Fax Chamber of Commerce ▪ Exhibition Exhibition Center ▪ Financial statement Import / Export Bank ▪ Credit survey Credit Fund ▪ Visiting Credit Information Agency Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 11  ❖ The Process of International Trade 4 Negotiation and Acceptance of Trade Terms & Conditions L/C, D/A, D/P, T/T etc. ▪ Payment Currency & Exchange Rate Exchange Risk Management ▪ Payment Terms, Price, Quantity etc. Selection of LSP ▪ Incoterms Bank, Customs Broker ▪ Transportation Mode, Logistics Cost Cost Analysis ▪ Duty & Tax, Market Price Market Survey Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 12  ❖ The Process of International Trade 5 Sign a Contract Characteristics of International Trade Contract A contract between the parties in different countries International Different languages, customs, trade practices, currency, laws Contract ☞ Need to specify the responsibility of the trading party through the trade term Sales Contract of Corporeal Sales of , Existing goods 〈 Future goods Movables Main contract : Quality, Quantity, Price Main Contract Subsidiary contract : Transportation, Insurance, Letter of Credit, Foreign Exchange & Subsidiary ☞ Need to proceed smooth trade through complex subordinated contract Contract based on main contract Phase 1 : Market Research & Credit Inquiry Step-by-step Phase 2 : Bargaining with Prospective Buyer Establishment Phase 3 : Sales Contract by Offer & Acceptance Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 13  ❖ The Process of International Trade 5 Sign a Contract Types of International Trade Contract International Trade Contract Case by Case Contract Master Contract Exclusive Contract ▪ Exclusive sales contract between ▪ Contract case-by-case designated parties under the condition of ▪ For long-term transactions ▪ Terminate the contract prohibiting any transaction of same or continuous transactions at the close of the commodity of the same goods transaction ▪ Duty of Exporter : ▪ Commodity shipping when ▪ Sales Note, ① Competitive Price necessary after contracting Purchase Order ② Prohibition of selling other importers annual or long-term contract of the same commodity ▪ Agreement on general ③ Prohibition of disguised sales or detour terms & conditions of sales to the importer’s market business ▪ Duty of Importer : ① Maximization of Sales ② Prohibition of importing other exporter’s same commodity ③ MOQ guaranteed Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 14  ❖ The Process of International Trade Distributor or Agent Distributor - an intermediary who purchase and takes title to the goods. - an middleman primarily involved in wholesaling who handles consumer or business goods that may be manufactured or not manufactured, imported or exported, and then sold. - typically purchase goods on their own account and resell them at a higher price, accepting the risks and the rights that come with ownership of the goods. $10/EA $12EA sell Goods resell Goods Import/Export Supplier Buyer Distributor Payment Payment Distributor Is independently owned. Takes title to the goods being distributed. (Ownership passes from the seller to the buyer upon purchase.) Is often classified by product line (such as medical, hardware, or electronics products). Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 15  ❖ The Process of International Trade Distributor or Agent Distributor Full-service Distributor Buying: DB acts as a purchasing intermediary for its customers. Creating assortments: DB purchases goods from a variety of suppliers and maintains an inventory that meets the needs of its customers. Breaking bulk: DB purchases in large quantities and resells to its customers in smaller quantities. Selling: DB provides a sales force to its suppliers. Storing: DB serves in a warehousing capacity for its customers, delivering the goods to its customers at the customers’ request. Transporting: DB arranges for delivery of goods to its customers. Financing: DB provides credit terms to its customers. Drop-shipping Distributor - A distributor who sells merchandise for delivery directly from the supplier to the customer, and does not physically handle the product. - Drop-shipping distributor does take title to the goods before delivery to its customer, Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 16  How drop-shipping works ? Step 1 : Step 2 : Find products Advertise products Step 3 : Internet search Step 4 : Buyers, Seller Find seller Customers Step 5 : Buyer places order and pays Step 6 : Places order and pays Step 7 : Ship to buyers Manufacturer or Wholesaler Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 17  ❖ The Process of International Trade Distributor or Agent Agent - An agent is similar to a distributor in that he is a middleman. - However, an agent does not take title to the goods and provides fewer services than a distributor does. - The agent’s role is to get orders and (usually) earn a commission for his services. - Export agents work in the country in which the product is produced; import agents are based in the country where the product will be sold Import/Export Agent ? Traditional I/E Agent Broker Goods Supplier Buyer Seller Payment for goods $12/EA Agent Is independently owned. Does not take title to the goods being purchased and sold. Is actively involved in the negotiations for either the sale or purchase of the goods Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 18  ❖ The Process of International Trade 5 Sign a Contract Terms and Configuration of International Trade Contract Contract for the sale of goods between countries No unified type or form Bothe written and verbal contracts available Need to specify fulfilment & constraint condition Terms of Terms of ✓ INCOTERMS 2020 Claim & Transaction Contract Arbitration ✓ Quality Fulfilment ✓ Quantity ✓ Shipping ✓ Price ✓ Payment ✓ Packing ✓ Insurance Prof. Seulki Leeⓒ Unauthorized reproduction is prohibited. 19