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The Relationship between Trade and Factor Mobility:

The Relationship between Trade and Factor Mobility Capital and labor move internationally to gain more income and flee adverse political situations Although international mobility of production factors may be a substitute for trade, the mobility may stimulate trade through sales of components, equipment, and complementary products D R. M ANOHAR P ANDIT

The Relationship between Trade and Factor Mobility:

The Relationship between Trade and Factor Mobility Capital and labor move internationally to gain more income and flee adverse political situations Although international mobility of production factors may be a substitute for trade, the mobility may stimulate trade through sales of components, equipment, and complementary products D R. M ANOHAR P ANDIT

H R M:

H R M Strategies Performance-based ILM Entry of workers and their initial earnings reflect skill requirements so average initial earnings of new hires are higher with higher variance than for bureaucratic ILM Those who do not receive skill development have lower earnings growth and higher separation rates

H R M:

H R M Recruitment Recruitment for overseas projects can be on the basis of appointment of Parent Country National (PCN) Host Country National (HCN) Third Country National (TCN)

H R M:

H R M Ethnocentric Approach Important positions at headquarters (and subsidiaries?) are held by Parent Country Nationals Polycentric Approach Foreign subsidiaries will appoint Host Country Nationals, possibly head the local operations Headquarters positions at the country of origin will be held by Parent Country Nationals

H R M:

H R M Regiocentric Approach Regional headquarters positions are staffed by Host Country or Third Country Nationals, at times by Parent Country Nationals in exceptional cases Local staff will be Host Country Nationals Check local regulations Geocentric Approach Most suitable person from any part of world

H R M:

H R M Strategies Firms can structure their HRM system to develop the necessary skills in-house or they can structure their HRM to attract workers with the necessary skills on the external market Make or Buy? Technology levels and PLC

H R M:

H R M Strategies Bureaucratic ILM (Internal Labor Markets) Initial earnings of new hires are similar (low variance) since most workers enter at the same level and Have similar (and reliable) earnings growth Firm experiences a low separation rate

H R M:

H R M Strategies Performance-based ILM Entry of workers and their initial earnings reflect skill requirements so average initial earnings of new hires are higher with higher variance than for bureaucratic ILM Those who do not receive skill development have lower earnings growth and higher separation rates

H R M:

H R M Strategies Spot Market (External Labor Markets) Firms can identify workers' talents and skills, and hire and pay accordingly Firm can monitor worker performance and pay worker according to contribution Initial earnings and earnings growth reflect market rates for skill and talent, with large initial variance, and variance does not increase over tenure Separation rate is higher than in ILMs

H R M:

H R M Strategies Spot Market with Rewards Firms hire and pay workers in spot market, but identification of workers' talents and effort at hire is imperfect and monitoring of worker performance is imperfect Variance of initial earnings is lower than in spot market

H R M:

H R M Strategies Spot Market with Rewards Firm must include performance rewards and tournament or wage-efficiency type incentives; thus variance of earnings increases over tenure Earnings growth is higher than in spot market Separation rate is higher than in spot market since the bad matches (both at hire and in rewards) end

H R M:

H R M Training For Third Country and Host Country Employees Training about Company Products Technical Information Selling Skills

H R M:

H R M Training For Third Country and Host Country Employees Problems Attitudes & Behaviour Habits due to Local Culture Requirements Open minded, Delearning, Rewards, Higher Frequency of Training

H R M:

H R M Training Home Country Employees Customs (Even for family members) Special Foreign Sales Promotion Local Responsiveness Cross-culture Sensitivity Language Foreign Country Visits Advanced Training Internet as training tool for all employees

H R M:

H R M Retaining Home Country Employees Emoluments Salary, High Taxes Fringe Benefits (35 – 60% in Europe) Payment Frequency Bonus Statutory Requirements Separation Allowance Comparison with Home Country

H R M:

H R M Retaining For All Employees Customised Packages To Recruit To Perform & Develop To Motivate To Retain

H R M:

H R M National vs. Corporate Pressures Political Cultural

H R M:

H R M Impact of Culture Culture affects decision making Personal Goals Salary and Wages in US Social Aspects in Asian Countries Security and Mobility Japan, UK, France – India? Social Acceptance Co. That you work for and not what you do Status Peers

H R M:

H R M Impact of Culture Culture affects decision making Advancement Long Term Goals Power Business Position to get Political Power Political Power to do Business Quality of Life

H R M:

H R M Impact of Religion Religion affects decision making Type of Job Industry / Organisation Appointments on the basis of Gender Social, Religious considerations

GLOBAL LOGISTICS:

GLOBAL LOGISTICS Distribution Logistics Single Country Single Market Dependable Mode of Transport Safe Arrival of Goods Reasonable Time Reasonable Cost Such Solution Not Viable For Global Markets 23

Slide 24:

Global Markets Multi Modal Transport Trans-shipments Regulatory Authorities Pilferage Damages Quality Issues, Storage at Different Climatic Conditions Control GLOBAL LOGISTICS 24

GLOBAL LOGISTICS:

Sea Air Transport Costs $31,790 $127,160 Transit Time 21 Days 3 Days In-Transit Inventory $44,289 $6,328 Finance Cost Total Trans. Cost $76.079 $133,487 WareHsg. Inventory $126,540 WareHsg. Rent $6,500 Real Physical D.C. $209,119 $133,487 *44,000 Units, Value $7.7 m, SGP to LA, Finance Cost 10% i.e.$2,109 per day, Inventory of 30 days at SGP and LA GLOBAL LOGISTICS 25

GLOBAL LOGISTICS:

Globalization of Operations The forces of globalization have led to expansion of operations on a global scale which include Global sourcing of inputs Global production of goods and services Global transportation of products Global management of entire supply chain GLOBAL LOGISTICS 26

GLOBAL LOGISTICS:

Global Supply Chain Managing a global supply chain is far more complex Physical distance Differences in logistics systems Different legal systems Large number of intermediaries involved GLOBAL LOGISTICS 27

GLOBAL LOGISTICS:

Transportation Transportation is an important part of international logistics Various modes of transport used include: Air Road Rail Ocean transportation GLOBAL LOGISTICS 28

GLOBAL LOGISTICS:

Third Party Logistics (3PL) Outsourcing of more sophisticated logistics and supply chain services, especially on a global scale GLOBAL LOGISTICS 29

GLOBAL LOGISTICS:

Maritime Transportation Ocean transport is responsible for carriage of 90 per cent of world trade, making it the largest means of transport in international trade Since ocean transportation is the oldest mode of international business, a large number of shipping practices are derived by the customs of trade It is the low-cost availability and efficiency of maritime transport that has made it possible to shift industrial production to low-cost countries GLOBAL LOGISTICS 30

GLOBAL LOGISTICS:

Types of Ocean Cargo Bulk Cargo that is loaded and carried in bulk, without mark or count, in a loose unpackaged form, having homogenous characteristics e.g. coal, iron ore, fertilizers, grains, oil, etc. Break-bulk Packaged cargo that is loaded and unloaded on a piece-by-piece basis, i.e., by number or count. This can be containerized or prepared in groups of packages e.g. coffee, rubber, steel, etc. GLOBAL LOGISTICS 31

GLOBAL LOGISTICS:

Neo-bulk Certain types of cargo that are often moved by specialized vessels, e.g., auto, and logs are termed as neo-bulk Containerized Cargo loaded at a facility away from the pier or at a warehouse into a metal container usually 20 to 40 feet long, 8 feet high, and 8 feet wide GLOBAL LOGISTICS 32

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Types of Commercial Vessels On the Basis of Registry Groupings Oil tankers (ULCC – 300,000 dwt) Bulk carriers General cargo vessels Container ships Other vessels GLOBAL LOGISTICS 33

GLOBAL LOGISTICS:

On the Basis of Type of Cargo Container ships Tankers Bulk carriers Neo-bulk carriers Combination carriers Other vessels General cargo vessels Roll-on and roll off (Ro/Ro) vessels LASH (Lighter aboard ships) vessels GLOBAL LOGISTICS 34

GLOBAL LOGISTICS:

On the Basis of Decks Single deck vessel The tween deck vessel Shelter deck vessel Specialized cargo vessel Container vessel GLOBAL LOGISTICS 35

GLOBAL LOGISTICS:

Alternates for Ocean Shipment Charter Shipping Often used for shipment of bulk cargo, the charter vessel does not have any fixed sailing schedule and can be hired to ship the firm’s cargo on charter basis as per the terms and conditions of the charter party GLOBAL LOGISTICS 36

GLOBAL LOGISTICS:

Alternates for Ocean Shipment Charter party The contract made between the charterer and ship-owner that contains details of the ship, routes, methods of cargo handling, port of call, etc. GLOBAL LOGISTICS 37

GLOBAL LOGISTICS:

Forms of Chartering Voyage charter Contract of carriage in which a vessel is hired for transport of a specified cargo from one port to another port GLOBAL LOGISTICS 38

GLOBAL LOGISTICS:

Forms of Chartering Time charter Hiring of a ship for a time period whereby the ship-owner places the ship with crew and equipment at the disposal of the charterer GLOBAL LOGISTICS 39

GLOBAL LOGISTICS:

Bare boat (demise) charter Hiring of a ship for a specified period of time during which ship-owner provides only the ship whereas the charterer has to provide the crew together with all stores and bunkers and pays for all operating costs GLOBAL LOGISTICS 40

GLOBAL LOGISTICS:

Back-to-back charter Contract between a charterer and a sub-charterer, whose terms and conditions are identical to contract (charter) between the charterer and the ship-owner GLOBAL LOGISTICS 41

GLOBAL LOGISTICS:

Trip time charter A charterer hires the vessel for single voyage or a round trip on terms and conditions similar to time-charter Contract of affreightment A long-time agreement to carry a certain amount of cargo between two ports GLOBAL LOGISTICS 42

GLOBAL LOGISTICS:

Liner Shipping Regular scheduled vessel services between two ports ‘Liner’ or ‘Shipping’ Conferences Collaboration between two or more shipping companies to operate vessel in the same trade lanes that legally agree not to compete on price, and charge the same freight for the same type of cargo and the same voyage GLOBAL LOGISTICS 43

GLOBAL LOGISTICS:

‘Multi-Modal’ or ‘Inter-Modal’ Transportation Transport of goods by at least two different modes of transport, such as rail, road, sea, or air on the basis of a multi-modal transport contract GLOBAL LOGISTICS 44

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Types of Containers ISO containers : Standard size containers Width: 8 feet Heights: 8 feet 6 inches and 9 feet 6 inches; Lengths: 20 feet and 40 feet GLOBAL LOGISTICS 45

GLOBAL LOGISTICS:

Principle Configurations of ISO Containers Dry containers ‘Insulated’ or ‘thermal’ containers ‘Refrigerated’ or ‘reefer’ containers Open top containers Liquid bulk container Dry bulk container Flat racks and platforms GLOBAL LOGISTICS 46

GLOBAL LOGISTICS:

Swap bodies These have many characteristics of inter-modal containers but are not standard ISO containers. Strong bottom and a minimal upper body constitute their major characteristics. FCL vs. LCL containers Use of an entire container in FCL whereas partial space in a container is used in LCL GLOBAL LOGISTICS 47

GLOBAL LOGISTICS:

International Organizations Associated with International Maritime Transportation International Maritime Organization (IMO) A specialized agency of the United Nations responsible to develop and maintain a comprehensive regulatory framework for shipping which includes maritime security and safety, environmental concerns, legal matters, technical cooperation, and the efficiency of shipping GLOBAL LOGISTICS 48

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International Labour Organization (ILO) Standards of employment and working conditions for seafarers are established by ILO were adopted by the Maritime Labour Convention (MLC) to provide a level playing field on a global basis with regard to seafarers’ employment standards GLOBAL LOGISTICS 49

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World Customs Organizations (WCO) In June 2005, the WCO unanimously adopted the Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework) which provides broad outlines and overarching principles concerning security and facilitating global supply chain, based on two main ‘pillars’: customs-to-customs cooperation and customs-to-business partnership GLOBAL LOGISTICS 50

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United Nations Conference on Trade and Development (UNCTAD) Monitors development in the field of transport security and disseminates information’s in form of various reports and its annual ‘Review of Maritime Transport’ GLOBAL LOGISTICS 51

GLOBAL LOGISTICS:

International Organization for Standardization (ISO) In order to enhance supply chain security, consistent with ISPS code, and the WCO Framework of Standards, ISO has developed certain procedures and standards ISO standards are voluntary, they are developed in response to market demand based on consensus of interested parties GLOBAL LOGISTICS 52

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Institutional Framework for Maritime Transport in India Ministry of Shipping is responsible for monitoring and development of maritime transport infrastructure and formulating policies and programmes for development of shipbuilding, ship-repair, major ports, and inland water transport GLOBAL LOGISTICS 53

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National Shipping Board Established in 1959 advises the Government on matters related to shipping and its development GLOBAL LOGISTICS 54

GLOBAL LOGISTICS:

Directorate General of Shipping Established in 1949, is responsible for administration of the Indian Merchant Shipping Act, 1958 on all matters related to Shipping policy and legislation Implementation of various international conventions Promotion of maritime education and training Examination and certification Supervision of subordinate offices, etc. GLOBAL LOGISTICS 55

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The Shipping Corporation of India Ltd. (SCI) Formed on 2 October, 1961 by the amalgamation of Eastern Shipping Corporation Ltd. (ESC) and Western Shipping Corporation of India Ltd. (WSC), the SCI has diversified fleet GLOBAL LOGISTICS 56

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GLOBAL LOGISTICS Container Corporation of India (CONCOR) Set up in 1988 aims to develop multi-modal logistics support for India’s international and domestic containerized cargo and trade Though rail is the mainstay of CONCOR’s transportation plan, road services are also provided according to market demand and operational exigencies 57

IMF:

IMF Bretton Woods Conference, 1945 – IMF Unstable currencies & inadequate monetory reserves could not develop & function world markets 01.03.1947 – IMF Functioning 29 Signatories to startwith, 187 at present Major Objectives To Promote International Monetary Cooperation To Facilitate Expansion and Balanced Growth of International Trade To Promote Exchange Rate Stability To Establish Multilateral System of payment To Make Its Resources Available to Its Members Who Are Experiencing Balance of Payment Difficulties

IMF:

IMF Bretton Woods Agreement Established Fixed Exchange Rates for Each Member Country USD 35 = Gold 1 Oz. par Value was same whether Gold or USD was used Variation of 1% allowed, raised to 2.25% In 1971 US had 70% of World’s Gold Reserve in 1947 Redemption of Dollar in Gold Member Countries Contribute to IMF - Quota Quota Depends Upon National Income, Monetory Reserves, Trade Balance and Other Economic Indicators Quota is Pool of Money IMF can Lend to Member Countries, Basis of How Much Country Can Borrow as Allocation of SDR Quota determines Voting Rights

IMF:

IMF Total SDR = 213 million Largest Quota USA 17.5%, Japan 6.6%,Germany 6.11%, France and UK 5.05% each Board of Governers is Final Authority Day to Day Business with 24 Executive Directors SDR Created in 1969 SDR 213 = $ 280 billion SDR is weighted average of USD (45%), Euro (29%), JPY (15%), GBP (11%) by end 2002 SDR designed to take over Gold Several Countries Have SDR Base for Value for Their Currencies

WORLD BANK:

WORLD BANK Lending Money to the governments of developing countries to finance development projects in education, health and infrastructure Providing assistance to governments for developmental projects to the poorest developing countries Lending directly to private sector to help strengthen the private sector in developing countries with long-term loans equity investmentsand other financial assistance

WORLD BANK:

WORLD BANK Providing investors with investment guarantees against non-commercial risks, to create an environment in developing countries to attract foreign investments Promoting increased flow of international investments by providing facilities for conciliation and arbitration between governments and foreign investors Advise, Research, Publication Contributed for trade since WW2

Slide 63:

I M

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Export Import Finance In India Institutional Finance for Export Need for Finance – Short, Medium and Long Term Pre-Shipment Credit Also known as Packing Credit To meet Working Capital needs, short term and is also advanced against the export incentives Advanced by Commercial Banks, governed by the Packing Credit Scheme of the RBI Advanced only on receipt of the Export Order, LC or other evidence of Export Order is required

Slide 65:

Export Import Finance In India Institutional Finance for Export Need for Finance – Short, Medium and Long Term Pre-Shipment Credit Details of buyer, commodity, quantity, rate, date of shipment, payment mode are must Advances to be repaid from the proceeds received against the supplies INTERNATIONAL MARKETING

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Export Import Finance In India Institutional Finance for Export Pre-Shipment Credit Packing Credits are eligible for interest subsidy, for a period not exceeding 90 days, credits can extend to 180 days, with RBI permission. Interest rates specified by RBI. Service charges as stipulated by FEDAI Packing Credit can be extended to sub-suppliers.

INTERNATIONAL MARKETING:

Export Import Finance In India Post –shipment Credit Supplier’s Credit Indian or Foreign Currency Rates For Rs. BPLR minus 2.5%age points Rates For FC LIBOR plus 0.75%age points Maximum for 180 Days. Extension Subject To RBI Permission Rates 2%age points above the Rates Mentioned Above INTERNATIONAL MARKETING

INTERNATIONAL MARKETING:

Export Import Finance In India Post –shipment Credit Line of Credit Credit Extended To Overseas Bank or Institution or Government To Buy Listed Goods From India No. of Importers May Use Same Line of Credit RBI Provides Guidelines INTERNATIONAL MARKETING

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Export Import Finance In India Post –shipment Credit Buyer’s Credit Short Term Finance Medium & Long Term Finance Help the Buyer To By Indian Equipment For The Project

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Export Import Finance In India EXIM Bank EXIM Bank – Promotion of Foreign Trade Coordination of Institutions Engaged in Financing Exports & Imports Funded & Non –funded Assistance Project Finance, Trade Finance, Overseas Investment Finance

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Export Import Finance In India FOREX Regulations Inward Remittances Outward Remittances Role of RBI

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions Understanding of Payment Terms Cash in Advance Open Account Consignment Sale Documentary Bills Documents Against Payment Documents on Acceptance Documentary Credit Letter of Credit

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions Cash in Advance Advance Payment by Draft or TT Payment Made On Receipt Of Sample And Its Approval Clean Remittance After Acceptance and Before the Shipment Simplest and Least Risky for the Exporter No Bank Charges or Commissions Involved Method Adapted Usually By Overseas Affiliates of Exporting Firm

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions Open Account Sale Terms Without Documents Calling for Payments Settlement of Accounts Through Periodic Remittances No Advance Payments, Importer Saves on Bank Finance Most Hassle Free and Simple Mode of Payment No Safe-guard for Importer for Non-payment Method Adapted By Longstanding Relationship and Inter Company Transfers Central Bank Restrictions Can Affect Payments

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions Consignment Sale Title of Goods With Exporter Till Goods Are Finally Sold Blocked Funds and Uncertain Payment Periods High Cost Due to Warehousing, Interest, Commissions Trusted Business Partners Needed for Such a Business Expected Value To Be Declared for GR Forms Goods May Fetch Higher Price Depending Upon Customer Satisfaction Precious, Semi Precious Stones, Cut Flowers Are Sold on This Basis

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions Documentary Credit Banks Play a Vital Role Documentary Credit Without Letter of Credit Documents Against Payment (Sight Draft) Exporter Retains Ownership Till Payment is Made Documents on Acceptance (Usance or Time Draft) Bank Presents Bill of Exchange To Importer For His Acceptance of Liability for Payment In Agreed Time Risky As Recovery of Nonpayment Is Difficult and Cumbersome Process

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions Documentary Credit Documentary Credit With Letter of Credit Banks Commitment to Pay The Exporter on Agreed Time Subject to Terms & Conditions Operation of LC - Governed By Uniform Customs and Practices for Documentary Credit (UCPDC) of International Chamber of Commerce (ICC) Present Version is ICC 500 wef Jan 1 st 1994

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions Kinds of Letter of Credit Irrevocable Letter of Credit Revocable Letter of Credit Confirmed Letter of Credit Unconfirmed Letter of Credit Assignable Letter of Credit Non-assignable Letter of Credit

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions Types of Credit According To Methods of Payments Sight Term Credits Acceptance Credit Deferred Payment Credit Back-to-back Credit Revolving Letter of Credit

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions Letter of Credit The Opener The Issuer The Beneficiary The Confirming Bank The Notifying Bank The Paying Bank The Negotiating Bank

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions ECGC GOI Company, under Ministry of Commerce, set up to strengthen and support export promotion drive Credit risk insurance against loss in export of goods and services Guarantees to Banks & FIs to help them offer better services

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions ECGC Objectives To provide insurance cover to exporters against Political and commercial risks Exchange rate fluctuations in case of deferred payments To provide insurance cover to Banks & FI for export credit and guarantees To provide insurance cover to Indian investors Against political risks

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions ECGC Types of Policies Standard Policies Shipment (Comprehensive Risk) Policy – CPR from DoS Shipment (Political Risks) Policy – PR from DoS Contracts (Comprehensive Risk) Policy – CPR from DoC Contracts (Political Risks) Policy – PR from DoC

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions ECGC Risks Covered Commercial Risks 1. Insolvency of the buyer 2. Buyers protracted default to pay for the goods accepted by him 3. Buyers failure to accept goods, subject to certain conditions

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions ECGC Risks Covered Political Risks 1. Govt action that may block or delay the payment to the exporter 2. War, Revolution, Civil Disturbances 3. New govt policies for imports after the DoS or DoC 4. New govt policies for exports after the DoS or DoC 5. Payment of additional freight, insurance not recoverable from buyer 6. Losses not generally covered by GIC and beyond control of the buyer or exporter

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions ECGC Risks Not Covered Disputes of Commercial nature viz. quality, packing etc, unless a decree is obtained by the exporter from competent court in the buyer’s country. Causes inherent to the nature of the goods Buyer's failure to obtain necessary import or remittance authorization fro his Govt. Insolvency or default by the agents of the exporter or the collecting bank Loss or damages covered by GIC Exchange rate fluctuations Failure of exporter to fulfill the terms of contract or negligence

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions ECGC Extent of Coverage - 90% of the losses on account of CPR Whole Turnover Principle Consignment Exports Specific Policies Specific Shipments (Comprehensive Risks) Policy - PCR from DoS Specific Shipments (Political Risks) Policy – PR from DoS, where payment I guaranteed by Govt. or buyer is Govt. Specific Contracts (Comprehensive Risks) Policy - PCR from DoC Specific Contracts (Political Risks) Policy – PR from DoC

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Financial Transactions ECGC Insurance Cover for the Buyer’s Credit or Line of Credit Services Policy Construction Works Policy Financial Guarantees P acking Credit E xport Promotion Finance P ost Shipment E xport Finance E xport Performance E xport Finance (Overseas Lending) Special Schemes Transfer Guarantee Overseas Investment Insurance Exchange Fluctuation Risk Cover Scheme

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Currency Fluctuations Customers must perceive the value - Market must absorb the price Weak Domestic Currency Strong Domestic Currency Stress price benefits Engage in non-price competition by improving quality, delivery and after sales service Expand product line and add Improve productivity and more costly features engage in vigorous cost reduction Shift sourcing & manufacturing Shift sourcing & manufacturing to domestic market overseas

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Currency Fluctuations Weak Domestic Currency Strong Domestic Currency Exploit export opportunities in Give priority to exports to all markets strong currency countries Conduct conventional cash for Deal in counter trade with goods trade weak currency countries Useful full costing approach, Trim profit margins and but use marginal cost to use marginal cost pricing pricing penetrate new / competitive markets Speed repatriation of foreign Keep the foreign earned earned income and collections income in host country

INTERNATIONAL MARKETING:

INTERNATIONAL MARKETING Currency Fluctuations Weak Domestic Currency Strong Domestic Currency Minimise expenditure in local Maximise expenditures in local host country currency host country currency Buy needed services (Advt., Buy needed services abroad Insurance, Transportation etc.) and pay for them in local in domestic market. currency Minimise local borrowings Borrow money needed for expansion in local market Bill foreign customers in Bill foreign customers in their domestic currency own currency

INTERNATIONAL PRICING:

INTERNATIONAL PRICING PRICING Diaper War in Brazil - USD 1 in 1990 to USD 0.20 in 1998 to USD 0.13 in 2000 Benz in Hong Kong – 30% Cheaper from SE Asian Countries following Asian Currency Crisis Levi’s in International Market Bulk Purchase in US and Exports in Europe Coke- Canada to Hong Kong, Legal Export 50,000 cases a week, USD 4.25 + USD 1.00 Shipping Sale Price in Hong Kong USD 6.00 per case, Back Japan Panasonic Cordless USD 59.95, in Japan USD 120 Computer Parts, CDs in India Parts 35% Cheaper in Grey Market, CDs are ??????

INTERNATIONAL PRICING:

INTERNATIONAL PRICING OBJECTIVES Active Instrument of Achieving Marketing Objectives Targetted Return on Profit Targetted Return on Market Share Any Other Specific Objective Static Element in Business Decisions Exports of Excess Inventory Low Priority on Foreign Business Export as Passive Contribution to Sales Volume

INTERNATIONAL PRICING:

INTERNATIONAL PRICING More the Company Control on Final Price, Better the Chances for Achieving Marketing Objectives Not Always Possible to Control End Prices Broader Product Line and Larger Number of Countries Add to the Complexity Price Competition Country By Country and Product By Product Economic Conditions and Local Competition Affects Pricing

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Pricing The only element from 4 Ps that generates revenue Right Price Market Demand Marketing Mix Competition Minimum Price ~ Cost and supply determines Maximum Price ~ Competition and demand determines

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Pricing Additional Costs Benefits Quality Specifications Incentives Packaging Duty Drawbacks Transportation Duty free Imports Warehousing SEZ / EOU Insurance Low Interest Rates

INTERNATIONAL PRICING:

INTERNATIONAL PRICING

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Pricing Objectives Market Penetration Market Share Market Skimming Competitor Driven New Entrant Prevention Early Pay Back Early Cash Recovery Export Obligation Export Surplus Capacity Utilisation Target ROI Profit Maximisation

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Factors Affecting Pricing Policy Decision Pricing Objectives Costs Competition Product Differentiation FOREX Rate Market Characteristics Image Cartels

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Factors Affecting Pricing Policy Decision Government Factors Margins Ceiling & Floor Prices Subsidies Tax Concessions and Exemptions Incentives, Assistance in Marketing Cheap Credit Government Competition Taxes Trade Agreements

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Pricing Methods Cost based Pricing also known as Cost plus pricing Price = FC + VC+ OH + Mktg. Cost + Profit (Specified %age of total cost) Market Oriented Pricing Flexible Policy, Price dependent on the Market Conditions Following Competitor Pricing Same or Higher or Lower than the Competitor Negotiated Pricing B.E. Pricing Marginal Cost Pricing Transfer Pricing

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Pricing Methods Define Pricing Objectives Analyse Market Characteristics Calculate Cost Calculate Incentives Marketing and Distribution Cost Determine Export Price

INTERNATIONAL PRICING:

INTERNATIONAL PRICING DIFFERENT DEGREE OF GOVERNMENT INTERVENTION Set minimum or Maximum Prices Prohibit Certain Competitive Practices Affecting Pricing Quotas and Restrictions WTO Permits Restrictions MARKET FACTORS Parallel Imports Low Pricing to Test the Markets Different Prices for Different Countries

INTERNATIONAL PRICING:

INTERNATIONAL PRICING GENERALISATION Country to Country Variations Competition / Monopoly PLC Country Perception Skimming Penetration Cost Plus

INTERNATIONAL PRICING:

INTERNATIONAL PRICING PRICE ESCALATION IN EXPORTING Distribution Channel Length of Channel Expenses in the Chain Mark Up Distances Tariffs Identify Methods to Maximise Profits

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Currency Value and Price Changes Stable Currency Volatile Currency – PPP Inventory Replenishment Frequent Changes in Other Cost Inflation Tariff Changes

INTERNATIONAL PRICING:

INTERNATIONAL PRICING FIXED Vs. VARIABLE PRICING Quantity Discounts Credit and Payment Terms Service Promotional Material and Cost Training of Representatives and Customers Schedules of Delivery

INTERNATIONAL PRICING:

INTERNATIONAL PRICING C2C PRICING Chain Stores Dominance, Consolidation Domination in Home Markets by Chain Competition amongst the Giants Globalisation Enhanced Competition – Internet Art of Negotiation Right Price is Key to Success In International Market

INTERNATIONAL PRICING:

INTERNATIONAL PRICING ADVERTISING & SALES PROMOTION Dunkin Donuts – Thialand Super Moms,Largest Shop in the World, SP of $14,000 gave Sales of $400,000, 4% MS gain over Mr. Donut Ariel Road Show – Egypt Retailers Stocked Premium Ariel Brand Coke – Latin America – Free Shows Entry Unopened Bottle, Exchange Unopened with Chilled Gerber in France – Rest Stops 64 Hostess, 1.20 million Babies, 600K Samples, Free Diapers

INTERNATIONAL PRICING:

INTERNATIONAL PRICING ADVERTISING & SALES PROMOTION Problems Inadequacy of Information Customer Unawareness Resource Constraints Cultural Environment Distribution System Buying Process Promotion Methods Study total marketing system to design marketing strategy in target market

INTERNATIONAL PRICING:

INTERNATIONAL PRICING ADVERTISING & SALES PROMOTION Promotional strategy is one of the important elements Motivation for Overseas Buyers Pride, Ego Satisfaction Product Differentiation - Not just the copy of domestic product Better quality at bargain price - Value for money Organisational objectives for the International advertising Brand Creation / Awareness Co. Awareness

INTERNATIONAL PRICING:

INTERNATIONAL PRICING International Advertising Cross cultural communication Social customs, attitudes, beliefs, values Language Interpretations, slang, dialect Media availability TV, Radio, Print - controls and ownership

INTERNATIONAL PRICING:

INTERNATIONAL PRICING International Advertising Laws and regulations Models, comparison, banned items Unified Without consideration to Geographical Boundaries Diversified With consideration to language, religion, traditions, geographical and climatic conditions

INTERNATIONAL PRICING:

INTERNATIONAL PRICING International Advertising Criteria for deciding unified or diversified advertising also depends on Type of product sold on basis of objective physical characteristics, same appeal effective in all markets Homogeneity of Heterogeneity of the market, consideration to needs, attitudes, customs, if these are alike and consideration to income, education, occupation Home market advertising can have transferability if factors like marketing, economic, cultural / psychological and media are identical

INTERNATIONAL PRICING:

INTERNATIONAL PRICING International Advertising Elements that make advertising successful Information and analysis of market data, travel, network and long lead times Campaign Designs Depends upon basic objectives of the exporting company What to communicate? How to communicate? Whom to communicate?

INTERNATIONAL PRICING:

INTERNATIONAL PRICING International Advertising Media selection Coverage of Media Selectivity of Media Regional Flexibility Frequency of Promotion Creativity Scope Cost Involved

INTERNATIONAL PRICING:

INTERNATIONAL PRICING INTERNATIONALADVERTISING CAMPAIGNS Perform Market Research Specify the Goals of Communication Develop the Most Effective Message Select Effective Media Compose & Secure a Budget Execute the Campaign Evaluate the Campaign Relative to Specified Goals Understand Government Controls to Advertising and Sales Promotion

INTERNATIONAL PRICING:

INTERNATIONAL PRICING International Marketing Intelligence Adequate, reliable information is must for decision making Decisions pertaining to Market Selection Prospects Competition Entry and Operating Strategies 4 Ps of Marketing Mix

INTERNATIONAL PRICING:

INTERNATIONAL PRICING International Marketing Intelligence Information related to Government Policies Competition 4 Ps of Marketing Mix

INTERNATIONAL PRICING:

INTERNATIONAL PRICING International Marketing Intelligence Source of Information India ITPO STC CC FICCI Boards Banks -EXIM, Commercial ECGC IIFT Competitors

INTERNATIONAL PRICING:

INTERNATIONAL PRICING International Marketing Intelligence Source of Information Overseas International Trade center, Geneva Indian Embassies WTC Publications

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Marketing Research 4 Ps Existing & Emerging Marketing Opportunities Relative SWOT Analysis Expensive Reliability? Paucity of data in Developing Countries

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Scope of Research Product Pricing Distribution Promotion Consumer Trend

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Exploratory Research Study of Secondary Data Personal Interviews Analysis of Selected Cases Conclusive Research Descriptive Research Case Study Statistical Study Experimental Research

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Methods of Data Collection Observational Research Survey Research Personal Interviews Telephone Interviewing Mail Questionnaire

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Research Agencies Benefit from professional expertise Unbiased Knowledge and Familiarity Cost Effective Problems Cultural Differences Expensive Suitability of Research Methodology

INTERNATIONAL PRICING:

INTERNATIONAL PRICING Research Agencies Benefit from professional expertise Unbiased Knowledge and Familiarity Cost Effective Problems Cultural Differences Expensive Suitability of Research Methodology

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Export Order Processing Consult Foreign Trade (Development and Regulation act) 1992 Customs Act 1962 Carriage of Goods by Sea Act 1924 Foreign Exchange Regulation Act 1973 / FEMA Schedule of Charges of Goods in respect of the Port of Shipment Handbook of Export Promotion Trade Policy and Handbook of Procedures

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Main Parties Involved The Exporter Foreign Buyer Banks / Negotiating Bank Shipping Co. Insurance Co RBI DGFT Collector of Customs CFA

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Registration with Export Promotional Council IEC Code No. Proper Documentation Essential to Meet the Requirements of the Importer – Delivery Schedules Specifications Scrutiny of the order wrt Terms and Conditions of the Contract L/C terms, specifications and all other details Instructions for Manufacturing / Procurement Excise Duty clearance either by paying the duty or by filing in the form for exemption (6 copies) ARE1, ARE 2 Export Inspection Agency for QC and Pre-shipment Inspection Despatch of Goods to the Port Marine Insurance, Documents to CFA

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Shipping Bill Consignee name and Address, Vessel’s name, Rotation No. allotted by Customs to the vessel, Agent’s Name, Port of Discharge, Final Destination, Exporter’s Name and Address, No. of Packages, Marks and Nos., Gross, Net and Tare Weight, Description, fob Value, Country of Origin, Code No. of the Goods, RBI Documents, ARE Forms, Export Licence No. if required Shipping Bill for Free Goods Dutiable Shipping Goods Drawback Shipping Bills All these are to be deposited in the Custom House

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Clearance from Customs, Copy to Shed Suptd. of PT, Goods in Transit Shed for Physical Inspection, Passing of Dock Challan, Custom Officials and Port Commissioner clear the Documents Mate’s Receipt CFA forwards the Documents to the Exporter Apply for Drawbacks, Incentives, send Non-negotiable Copy of BL to Importer, alongwith Custom Invoice, Commercial Invoice and Packing List Submission of Documents to the Negotiating Bank Obtain Bank Certificate, forward Duplicate Copy to DGFT

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Documentation Facilitates Smooth Operation Of The Transaction Commercial Documents Regulatory Documents Export Assistance Documents Documents required by the Importing Country Regulatory Requirements Exporting Country Importing Country Operational Requirements – Customs, no shipping bill without custom clearance

INTERNATIONAL TRADE:

INTERNATIONAL TRADE List of documents Customs Shipping Bill Commercial Invoice GR Form Shippers Declaration Form Copy of LC / Export Contract / Export Order Inspection Certificate ARE Forms Export Licence, if required Weighment Certificate, wherever required

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Port Authorities Port Trust Copy of Shipping Bill Cart Ticket / Chits Shipping Order

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Bank Authorities LC (if required) Commercial Invoice BL / AWB Insurance Policy Bill of Exchange GR Form Bank Certificate Export Inspection Certificate Certificate of Origin Shipment Advice

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Licensing Authorities IEC No. Application For AL Application in prescribed Form Copy of Export Order / LC Statement of Export Bank Receipts or DD for application fee Legal Undertaking towards export obligation Chartered Engineer’s Certificate, if necessary For Special Import Licence, as specified

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Export Promotion Council Application for Registration cum Membership Certificate Bank Certificate for Financial Soundness Maritime Collector of Central Excise Application Form ‘C’ Duplicate Copy of ARE Non-negotiable Copy of the Shipping Bill Custom Certificate Copy of the Shipping Bill

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Export Inspection Council Application in prescribed form Copy of L/C Copy of Export Contract Commercial Invoice Payment of Fees RBI Application Form Copy of the Invoice Sales Contract BL Inspection / Analysis report

INTERNATIONAL TRADE:

INTERNATIONAL TRADE Exim Bank Export Contract L/C or Guarantee from Importer Balance Sheet of the Exporter Statement of profit and loss in the transaction covered by the export contract Statement regarding projection of credit requirements Bank for Packing Credit Proforma Invoice Copy of the L/C Application Form Despatch Advice ( for post shipment credit)

INTERNATIONAL TRADE:

INTERNATIONAL TRADE ECGC Proposal Form Bank Certificate about the financial position Application form for fixing the credit limit Importing Country Consular Invoice Certificate of Value Certificate of Origin Customs Invoice Health Certificate Phyto Sanitory Certificate GSP Certificate of Origin

INTERNATIONAL TRADE:

INTERNATIONAL TRADE

INTERNATIONAL TRADE:

INTERNATIONAL TRADE

Slide 144:

PROCESS

INTERNATIONAL TRADE:

INTERNATIONAL TRADE PRESHIPMENT ACTIVITIES

Slide 146:

C & F Responsi bilities

INTERNATIONAL TRADE:

INTERNATIONAL TRADE

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