...Journal of Comparative Business and Capital Market Law 5 (1983) 347-351 North-Holland ADVANTAGES AND DISADVANTAGES OF COUNTERTRADE * Jacques de MIRAMON ** 1. Introduction Countertrade practices have expanded during the past decade. Long associated primarily with East-West trade, they appear to be spreading to other areas. The international community, however, has not been effective in addressing these practices which are, in large measure, contrary to the basic tenets of free and multilateral trade. The Eastern countries had refused to discuss the matter with their trading partners until a meeting with Western countries at the U.N. Economic Commission for Europe (Geneva) in November 1981. Unfortunately, this meeting ended in a deadlock. In light of the fundamental differences between centralized Eastern European economies and the decentralized Western markets, it is not surprising that the two sides have divergent opinions on countertrade. The Eastern European countries are almost unanimously in favor of such deals, the inference being that they find countertrade mainly to their advantage. Western opinion of countertrade, however, has been mostly unfavorable. 2. Reasons why the Eastern European countries find countertrade attractive With few exceptions (e.g. Hungary), there has been no public discussion of the advantages and disadvantages of countertrade in the Eastern European countries. The ambiguity of the terms used, especially the confusion between industrial and commercial...
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...try IBA 4010. SPRING 2014. LECTURER: DR.CAREN OUMA. TERM PAPER. NAME: ABDI MILA MOHAMED. ID NUMBER: TOPIC: INTERNATIONAL BUSINESS ENTRY. Contents EXECUTIVE SUMMARY 3 1.0 INTRODUCTION 4 1.1Background 4 1.2 Purpose of International Business Entry 4 1.3 Scopeof international Business Entry 4 1.4 Basic Issues an Organisation Faces 5 1.5 Strategies used by Firms 5 ENTRY STRATEGIES 6 2.0 EXPORTING 6 2.1 Advantages and Disadvantages of Exporting 7 2.2 Passive exports Vs Aggressive exports 7 2.3 Direct and Indirect Export 8 2.4 Case Study 9 3.0 PIGGYBANKING…………………………………………………………………………………….10 4.0COUNTERTRADE……………………………………………………………………………………10 4.1 Forms of Countertrade…………………………………………………………………………….10 4.2 Examples of Countertrade…………………………………………………………………………11 4.3 Disadvantages of Countertrade……………………………………………………………………11 5.0 BARTER………………………………………………………………………………………………11 5.1 Forms of Barter Trade…………………………………………………………………………….11 6.0 FOREIGN PRODUCTION……………………………………………………………………………14 6.1 Licensing…………………………………………………………………………………………..14 6.2 Joint Ventures……………………………………………………………………………………..15 6.3Ownership………………………………………………………………………………………….16 6.4 Exports Processing zones………………………………………………………………………….17 7.0 ANALYSIS AND CONCLUSION…………………………………………………………………...17 7.1 Conclusion and Recommendation………………………………………………………………..17 8.0 REFERENCES………………………………………………………………………………………...
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...there are a variety of options open to it. These options vary with cost, risk and the degree of control which can be exercised over them. The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of the former, or countertrade, in the case of the latter. More complex forms include truly global operations which may involve joint ventures, or export processing zones. Having decided on the form of export strategy, decisions have to be made on the specific channels. Many agricultural products of a raw or commodity nature use agents, distributors or involve Government, whereas processed materials, whilst not excluding these, rely more heavily on more sophisticated forms of access. These will be expanded on later. Chapter Objectives The objectives of the chapter are: Structure of the Chapter The chapter begins by looking at the concept of market entry strategies within the control of a chosen marketing mix. It then goes on to describe the different forms of entry strategy, both direct and indirect exporting and foreign production, and the advantages and disadvantages connected with each method. The chapter gives specific details on "countertrade", which is very prevalent in global marketing, and then concludes by looking at the special features of commodity trading with its "close coupling" between production and marketing. Basic issues An organization wishing to "go international" faces three major issues: i) Marketing...
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... China has the largest populations in the world along with the fastest growing GDP percentages. Brazil’s population is not as large but does has a high GDP percentage, and also a high Dollar Pre Capital GDP. 2. Why do companies tend to thrive in global markets when their country of origin enjoys a comparative advantage in their industry? When their country of origin has naturally cheap raw materials or if their currency has been undervalued, they are naturally cheaper than their competitors from other countries. This gives them better margins and they thrive. 3. Explain how to calculate the balance of trade. How does the growing United States trade deficit impact the economy? Why? The money being spent to buy things from other countries is much larger than the amount of money where other countries are buying from the U.S. The deficit means we are buying more than we sell. To make up for the difference people and governments from other countries buy U.S. investments assets. 4. Explain the meaning of “strong” currency and “weak” currency. What are the advantages and disadvantages of each? When you have a strong currency you can go to other countries and buy some products or items cheaper, or it'll just be cheaper in general for you to travel. This also benefits the country with the weaker currency, since from this they can make more money and it boosts their economy. 5. Why is...
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...6. EXPORT OF INDUSTRIAL OBJECTIVES (PROJECTS) TOPIC 7. CONSULTING AND ENGINEERING ACTIVITY TOPIC 8. SHORT, MEDIUM AND LONG-TERM FINANCING TECHNIQUES TOPIC 9. SPECIAL FINANCING TECHNIQUES TOPIC 10. EUROMARKET FINANCING TECHNIQUES TOPIC 1. COMBINED COMMERCIAL OPERATIONS 1.1. Countertrade: genesis and determinant factors 1.2. Barter and offsets: specifics of carrying and contracting 1.3. Counter-purchase: participants and the mechanism of carrying. 1.4. Buy-back. 1.5. Re-export: reasons and the mechanism of carrying. 1.6. Re-import operation. Combined commercial operations – international affaires that combine elements of import, export, service rendering etc. in a single transactional mechanism, designed and applied by the foreign trade departments or firms specialized in this domain. Combined commercial operations - more complex character; - Increased transactional value; - more complex juridical basis - usually, they consist of two or more contracts signed, among which there is a certain link; - increased risk; - its realization requires an increased level of professionalism. Forms of combined commercial operations: I. Countertrade: Barter q Offsets (Compensations) Enlarged compensations Clearing...
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...1.List 5 of 8 market potential analysis 1. Market size 2. Market growth rate 3. Market intensity 4. Market consumption capacity 5. Commercial infrastructure 6. Economic freedom 7. Market receptivity 8. Country risk 2. define ethnocentric stuffing and identify their advantage and disadvantages Adv: * re-creating local operations * consistent value sharing * managers company loyalty disadvantages: * higher costs for relocation * barriers to management in the local offices 3. as developing pricing strategies, list the main factors which affects pricing decisions 1. Transfer prices 2. Arms length (or free market prices) 3. Price controls 4. Dumping 4. list 4 common methods which an international company uses to recruit human resources 1. current employees (internal search) 2. recent college graduates 3. local managerial talent 4. non- managerial/skill workers 5. list the major 4 steps for a company which intends to develop the export strategy * Step1- identify a pontential market * Step2- match need to abilities * Step3- initiate meetings * Step4- commit resources 6. briefly differentiate between pull and push promotional strategies; * Pull- create buyers product demand which encourages distributers to stock the companies product (pull customers/buyers). Direct marketing example: procter end gamble, mary kay; amway * push- to preasure distributers to carry the companies...
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...for expanding abroad. The theory of Exchange Rate on Imperfect Capital Market: This is another theory which tried to explain FDI. Initially the foreign exchange risk has been analyzed from the perspective of international trade. However, currency risk rate theory cannot explain simultaneous foreign direct investment between countries with different currencies. The sustainers argue that such investments are made in different times, but there are enough cases that contradict these claims. The Internalisation Theory This theory tries to explain the growth of transnational companies & their motivations for achieving FDI. There are two major determinats of FDI ( Hymer, 1976)--- * One was removal of competiton * The another was the advantages which some firms possess in a...
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...1968 no part may be reproduced without written permission Whilst every precaution has been taken to supply complete and accurate information, Central Institute of Technology assumes no responsibility for any liability, loss or damage caused or alleged to be caused directly or indirectly by the instructions contained in or accompanying this publication. Version 2 Semester 2, 2013 Printed by: Print Central Contents Introduction 4 Study Notes 5 Element 1 – Develop and document strategies for international purchasing 7 Element 2 – Implement international purchasing strategies 10 Element 3 – Undertake more complex international purchasing 12 Element 4 – Determine payment strategies 15 Element 5 – Arrange barter and countertrade 18 Element 6 – Determine logistics strategies 20 Element 7 – Evaluate international purchasing strategies and implement identified improvements 22 Portfolio Activities Semester 2, 2013 24 Introduction Continued pressure to reduce costs and improve spending has fueled a procurement revolution. Pressures to source from emerging markets such as China, India and Eastern Europe demand improved sourcing and supply management skills. Purchasing internationally involves having to expand your knowledge of many aspects of procurement that you don't have to worry about when buying domestically. Differences in cultures, laws, communications, currencies and more. Coordinating logistics, dealing with customs, arranging payment, identifying...
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...section describing the elements of a trade transaction and the various documents that are used to facilitate the trade’s completion and financing. The next section identifies international trade risks; namely, currency risk and noncompletion risk. The following sections describe the key trade documents, including letters of credit, drafts, and bills of lading. The next section summarizes the documentation of a typical trade transaction. This section is followed by a description of government programs to help finance exports, including export credit insurance and specialized banks such as the Export-Import Bank of the United States. Next, we compare the various types of short-term receivables financing and then the use of forfaiting and countertrade for longer term transactions. The mini-case at the end of the chapter, “Crosswell International’s Precious Ultra-Thin Diapers,” illustrates how an export requires the integration of management, marketing, and finance. 21 CHAPTER Eiteman-2 US CHAPTERS 31/7/07 4:01 PM Page 40 ❙ International trade finance / 21 The trade relationship Trade financing shares a number of common characteristics with the traditional value...
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...\ eighth edition Global Business Today CharlesW. L Hill University of Washington McGraw-Hill Irwin contents PREFACE xiii PART ONE Chapter One Introduction 4 What Is Globalization? 6 The Globalization of Markets 6 The Globalization of Production 7 The Emergence of Global Institutions 9 Drivers of Globalization 11 Declining Trade and Investmen t Barriers 11 The Role of Technological Change 14 The Changing Demographics of the Global Economy 16 The Changing World Output and World Trade Picture 16 The Changing Foreign Direct Investment Picture 18 The Changing Nature of the Multinational Enterprise 19 The Changing World Order 22 The Global Economy of the Twenty-First Century 23 The Globalization Debate 24 Antiglobalization Protests 24 Globalization, Jobs, and Income 26 Globalization, Labor Policies, and the Environment 28 Globalization and,National Sovereignty 29 Globalization and the World's Poor 30 Managing in the Global Marketplace 31 Key Terms 33 Chapter Summary 33 Critical Thinking and Discussion Questions 34 Research Task 34 Closing Case: Legal Outsourcing 35 Introduction and Overview 2 Globalization 3 PART TWO Chapter Two Country Differences 36 National Differences in Political Economy 37 Opening Case: Ghana: An African Dynamo 37 Introduction 38 Political Systems 39 Collectivism and Individualism 39 Democracy and Totalitarianism 42 Economic Systems 44 Market Economy 44 Command Economy 45 Mixed Economy 45 Legal Systems 46 Different Legal Systems 46 Differences...
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...STRATEGIES AVAILABLE TO FIRMS INTERNATIONALISING This report gives an insight into exporting, its definitions and other international business transactions, it goes on discussing the different strategies available to a firm internationalizing for the first time, and these include both direct and indirect strategies available, and provides examples of firms that use export strategies. It also gives the advantages and disadvantages of such strategies. At the end of the report it provides a conclusion and recommendations to what strategies a firm can adopt depending on the situation. 2.0 INTRODUCTION AND BACKGROUND The most conventional forms of international business transactions are international trade and investment. International trade refers to an exchange of products and services across borders. Exchange can be through exporting, importing or countertrade. Exporting is an entry strategy involving the sale of products and services to customers located abroad from the home base or third country. Importing is the buying of products abroad and bringing them to the home market. Countertrade is a business transaction where all or partial payments are made in kind rather than cash. Both finished and intermediate goods, such as raw materials and components are subject to trade. While on the other hand international investment refers to the transfer of assets to another country, or acquisition of assets in that country through foreign direct investment and contractual agreements, Cavusgil...
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...CounterTrade University of Phoenix MGT 448 April 17, 2011 Since the beginning of civilization, trade has existed. For thousands of years, nations have traded silk, spices, precious metals as well as animals. As centuries pass, trade between nations has advanced in terms of products. Today, nations deal in trading countless types of products including electronics, liquor, and military equipment. One type of trading among nations is known as countertrade. Countertrade is an association between two parties in which goods and/or services are traded for goods and/or services as an alternative to money. These parties can be between companies as well as countries. For example, a large company in Europe can trade a local product as a form of payment to another company in the United States for a particular American product. If a nation’s currency is not exchangeable or no good overseas, they may offer a commodity or other product in place of cash (Gonzales, 2011). One of the most familiar events involving countertrade was between global soft drink giant, Pepsi and the former U.S.S.R. who had limited access to foreign currency due to its communist ideology. In 1972, Stolichnaya Vodka was used as payment to Pepsi by the Soviet nation for shipping syrup to the U.S.S.R. Pepsi became the first foreign product sold in the U.S.S.R. Because of this incident, Pepsi now has the marketing rights of all Stolichnaya Vodka in the United States (West, 1996). There are...
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...Module 8 – Managing multinational operations Module 98 MANAGING MULTINATIONAL OPERATIONS8 MODULE 8 OVERVIEW Managing multinational operations Objectives At the completion of this module, you should be able to: • Ooutline the objectives of maintaining documentation for foreign trade transactions • Eexplain the key documents for a foreign trade transaction • Ddiscuss the various payment methods for international trade • Ddiscuss the characteristics of export finance and risk insurance • Ddiscuss the objectives and major tasks of current asset management • Eexplain the features of international cash management, accounts receivable management and inventory management • Ddiscuss the important differences between domestic taxation and multinational taxation. Learning resources Textbook Eiteman, Stonehill & Moffett 2013, edition 13th01, chapters 175, 17 19 and 20 and 18. Introduction This final module of the course encompasses a number of areas that are essential to any multinational finance course but have yet to be covered in this course. In particular, the module focuses on specific areas regarding the management of multinational operations. The module is essentially broken into three sections, all of which have a relevance to each other and to the other topics covered in this course. The first section focuses on the importance of foreign trade, in particular with regards to the growth potential it offers firms. More importantly, this section centres...
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...BNAD 303 – Exam 1 Review Sheet I. Introduction to Marketing (Chapter 1) ▪ Understand what marketing is and the overall marketing process. ▪ Know all the necessary and sufficient condition for an exchange ▪ Study all types of marketing management orientations and know the differences between them (Production, Sales, Market and Societal). II. Strategic Planning for Competitive Advantage (Chapter 2) ▪ Understand how business strategy relates to marketing and what is SBU. ▪ Review the different types of marketing strategies (e.g. Ansoff’s strategic Opportunity matrix and BCG matrix) and their components. ▪ Know the elements of a Marketing Plan ▪ Identify what a SWOT analysis is and the components that comprise this overall evaluation process. ▪ Study different ways in which a company can gain competitive advantage. ▪ Understand marketing mix (4P’s) and all it’s components in detail. III. The Marketing Environment (Chapter 4) ▪ Understand how the environment affects marketing related decisions and apply this to firm decision making. How does the environment affect marketing decisions? Understand factors such as social factors, demographic factors, economic factors, technological factors, and political and legal factors. ▪ Review: 1) component lifestyles, 2) demography, 3) age categories/ cohorts (e.g. Tweens, Baby boomers, and Generation Y. ▪ How do purchasing power, inflation, and recessionary pressures affect...
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... chapter1 When Egypt fell under the rule of a Greek dynasty, the Ptolemies (332‐30 BC), the numerous scattered government granaries were transformed into a network of grain banks Greek and Roman link The Greeks coined money and developed a system of credit. The Roman Empire had a highly developed banking system, and its bankers accepted deposits of money, made loans, and purchased mortgages History of International Banking Collapsing Roman Empire in AD 476 was a major set back and banking declined in Europe. Italians are the first to have organised international banking due to the increase of trade in the 13th‐ century. The moneychangers of the Italian states developed facilities for exchanging local and foreign currency. As trade is growing, merchants demanded other services, such as lending money, and gradually bank services were expanded. Banking in the modern sense of the word can be traced to medieval and early Renaissance Italy, to the rich cities in the north such as Florence, Venice and Genoa. First reported international banks were established in Genoa, Milan, Venice and Florence in 12th Century According to the Encarta encyclopaedia the first bank to offer most of the basic banking functions known today was the Bank of Barcelona in Spain. This was founded by merchants in 1401. This bank held deposits, exchanged currency, and carried out lending operations. It also is believed to have introduced the bank check. Three other early banks, each managed by...
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