LOGT 4232 Week 3 (Aug 30 - Sept 1) Class Notes
LOGT 4232 Week 3 (Aug 30 - Sept 1) Class Notes LOGT 4232
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This 10 page Class Notes was uploaded by Tavish Smith on Tuesday September 6, 2016. The Class Notes belongs to LOGT 4232 at Georgia Southern University taught by Heidi Celebi in Fall 2016. Since its upload, it has received 5 views. For similar materials see International Logistics in Logistics at Georgia Southern University.
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Date Created: 09/06/16
Week 3 – August 30, 2016 – September 1, 2016 Chapter 4 – Methods of Entry in Foreign Markets Market Factors 4 market factors: o Size o Growth o Market share o Characteristics Cultural tastes and preferences Customers 2 firm factors: o Strategy o Involved 2 product factors: o Type o Life cycle Entering a New Market Indirect exporting o Exporter does not seek export sales o Allows manufacturer to concentrate on domestic market and leave exporting to the experts o Least involved in other countries Active exporting o Exporter actively participates in finding potential markets abroad o Best option for large firms or firms with international experience Indirect Exporting Export trading companies (ETC) o A firm with offices in multiple countries that purchases goods in one country and resells them in another o For the “exporter” selling to the ETC and “importer” buying from the ETC, the transactions are domestic o Core competency = networking o Middle man Export management companies (EMC) o Normally located in the exporting company o Acts as a representative for the exporter abroad, but never takes title to the goods o Facilitator helping the exporter find buyers, and earns a commission on the sale o Requires more involvement by the exporter Ship the goods Invoice the importer Carry the risk of non-payment Manage parts of the transaction Specific to one company or product Piggy backing o The possibility of a small firm piggy-backing on another firm’s efforts to enter a foreign market o A firm uses another company’s distribution channels and experience to sell its products abroad o A firm’s customer opens a manufacturing facility abroad and request the firms sell to that new facility Active Exporting Agent o Small firm or individual located in the importing country o Acts as a representative of the exporter o He or she will not take title of the goods and will earn a commission from the exporter o Represents multiple companies manufacturing products that complement the exporter’s products Distributor o Located in the importing country o Purchases the goods from the exporter and therefore take title of them o Resells the goods for a profit o Two sets of invoices Between exporter and importer = international Between distributor and customer = domestic o Parallel imports possible from this point onward until subsidiary Marketing Subsidiary o Foreign office of a parent organization o Separate entity incorporated in the foreign country o Wholly owned by the parent company o Parent company sells products to the subsidiary in an international transaction and sell these products to customers in the foreign country Production – Manufacturing Abroad Contract manufacturing o A company enters into an agreement with a foreign company to manufacture its goods abroad o A way for a firm to get its products in a foreign country, either when there are barriers to entry or when transportation costs are high o Not REALLY a method of entry, still need a marketing subsidiary or distributor Licensing o A company (the licensor) allows another firm (the licensee) to use its intellectual property in exchange for a fee o Allows the use of a patented technology, trademark, brand name, or trade secret o Licensor retain ownership of the intellectual property and the licensee must pay the licensor a fee every time it is used All intellectual property is at risk of being copi Trade-offs Trade-off: giving up something to gain something else Features o Improve reliability o Improve in-stock levels o Cost reduction Know what features is dear/important to customers Trade-offs Trade-off: giving up something to gain something else Features o Improve reliability o Improve in-stock levels o Cost reduction Know what features is dear/important to customers o ed or “stolen” in countries where intellectual property is not well protected Franchising o Similar to licensing but involves a “bundles” of intellectual property items o A firm (franchisor) will allow an entire business model to be used by another firm (franchisee) in exchange for royalties o Works best for retail establishment requiring a uniform appearance for consumers Joint Venture o A firm created and jointly owned by two or three companies o Reasons: Investment costs Complete product line Local ways Legally required Subsidiary o Wholly owned foreign enterprise (WOFE) o Independent company established in a foreign country but owned entirely by the exporting company o Allows a foreign firm to retain complete control of its foreign investment Chapter 3 – International Logistics Infrastructure Three flows is a supply chain: 1. Physical 2. Information 3. Money Infrastructure All of the elements in place to facilitate transportation, communication, and business exchanges Anything that is already in place that helps business flow It does NOT have to be tangible Infrastructure affects the 3 flows in a supply chain Infrastructure Types Communication: allows businesses to communicate clearly and quickly o Mail Speed: differs between countries Reliability: differs between countries Delays: differs between countries Competition: firms such as FedEx, UPS, and DHL are very reliable, but they are generally much more expensive than the public postal services o Telephone Landlines Cellular phones Internet o Internet Legal o Standard infrastructure: allows businesses to determine the requirements that their products and operations must meet Includes safety, design, & performance standards o Court: allows businesses to settle disputes quickly and fairly Efficient court systems Network of mediators and arbitrators o Intellectual Property infrastructure Protection & International agreements Services o Banking infrastructure: allows businesses to move funds and documents quickly and reliably, both within a country and between countries Requires a network of bank branches and well- trained back employees Foreign currency payments, methods of payment, & document exchanges o Logistics (service) infrastructure: allows businesses to find additional competent logistics help quickly Freight forwarders, customs brokers, packing services, etc. Utilities: allows business to sustain their daily operations o Electric o Water: access to clean water (and sewer) is fundamentally important for many manufacturing processes o Pipelines The MOST political Reliable pipelines have to be available to deliver natural gas or oil products to the locations where they can be used (energy) o Theft Transportation infrastructure: allows goods to move efficiently within a country and between countries o Ports Water draft: the depth of water determines the size of ships that can call Air draft: bridge clearances also determine which ships can call Cranes: post-panamax ships need wider/taller cranes than Panamax ships Port operation: many ports have strong unions which limit operations Space limitations: the location of most ports limit their ability to expand Warehouse space: availability of reliable storage space for goods in transit Connection to land-based transportation: ports need to have reliable access to roads and/or rail lines to keep cargo moving o Railroad infrastructure Gauge: When railroads were first built, countries installed unique railroad track gauges to prevent rival armies from using them. Today, these gauge differences prevent trains from traveling quickly between multiple countries Multi-modal: multi-modal cars, carrying either containers or truck trailers Land bridges: containers are shipped from Asia to Europe through the U.S. railroad network; they arrive in a port on the west coast, and are transported to an east-coast port by rail o Airport infrastructure Runways: length determines size of plane, # of runways determines capacity Space: most airports are landlocked and cannot expand Hours of operation: airports need to be located away from major cities if they are going to operate at night, many airports do not meet this requirement Warehouse space: storage facilities protect cargo from the elements o Road infrastructure Quality: quality roadways = the continuous flow of goods Congestion: in many countries traffic congestion is stifling and prevents goods from moving quickly Civil engineering structures: ex = bridges o Canals and waterways Maritime transportation is dependent on reliable canals Important canals = Suez Canal is North Africa & the Panama Canal is Central America Key waterways = Bosporus strait in Turkey & the Saint Lawrence Seaway in North America o Warehouse Packaging functions Protection o Transit o Handling Image (seller’s) o Want the buyer to have a positive image Chapter 14: Packaging for Export Packaging Functions Three functions o It protects the goods during transport o It allows the handling of goods without damage o It is part of the customer service strategy of the firm: good packaging reflects positively on the exporter’s firm Insurers will deny damage claims if they observe improper packaging Packaging is always the responsibility of the exporter, regardless of the Incoterms rule used in the transaction Packaging Terminology Primary packaging: what the final customer sees Secondary packaging: what the retailer/wholesaler handles Tertiary packaging: what is used for transportation Packaging Objectives Three objectives o Protect the goods in transit from mechanical damage: breakage, crushed, nicks, and dents (43% of claims) o Protect the goods from water damage (15% of claims) o Protect the goods from theft pilferage (21% of claims) Ocean Cargo Packaging Shipments that are small in size and weight can either be full- container-load (FCL) or less-than-container-load (LCE) o An FCL shipment utilizes the entire capacity of a container, whether it is by weight or by volume o An LCL shipment utilizes less than entire capacity, and its mixed with other goods, so that an entire container can be utilized Shipments of packaged goods that are not placed in a container are called “break-bulk” shipments FCL Ocean Cargo FLC cargo should be loaded according to the following rules: o The center of gravity should be at the center of the container, front-to-back, and side-to-side o The heavier items should be at the bottom o The goods should be braced with blocking or dunnage o The goods should be placed on pallets or dunnage to raise them above the floor of the container (to protect them from water damage) o A desiccant should be used to protect from ambient humidity LCL Ocean Cargo Should be even better protected than FLC, goods are likely to be handled more frequently & be placed near goods that may not have be well packaged Should be boxed or crated with strong corners (in case something is placed on top), protected from humidity w/ shrink/stretch wrap, & well marked with handling instructions Break-bulk Ocean Cargo Break-bulk cargo (general cargo): placed directly into the hold of a ship, not containers (b/c it is too large or too heavy) Must be packaged so that it can be handled at all steps (crates or boxes) Sometimes placed on flat-top containers if it is small enough Packaging alternative include utilized packages that can be handled by human labor (bags, bales, or drums) & those that can be only handled with mechanized equipment Some is not packaged at all & the goods are placed directly in the ship’s hold Break-bulk Cargo Markings The International Plant Protection Convention (IPPC): mandates that wood used for packaging or dunnage be treated with chemicals to prevent insect infestations Marking international shipments with international handling pictorials help protect them from poor handling (not language specifics), as well as from theft & pilferage Bulk Cargo Bulk cargo (dry or wet): cargo that is placed directly in the holds of the ship, without packaging of any kind Containerized cargoes and break-bulk cargoes are loaded & unloaded using cranes, one unit at a time Bulk cargo is loaded & unloaded w/ cont. methods (conveyor belts, etc.) Air Transport Less hazardous than ocean but should be well protected for air transport Secondary packaging is not appropriate for air shipment because it does not sufficiently protect goods Air cargo containers are designed to facilitate the loading & unloading of aircraft, & not to act as intermodal Road and Rail Transport Goods will generally travel by road for a portion of their voyage, but the main international carriage can be by ocean, air, or rail. Packaging needs are directed by the main mode of transportation Rail transportation requires the same level of packaging as ocean transportation Rail companies provide packaging guidelines for shippers Security Packaging security issues center around pilferage and theft Good packaging security practices include: o Tamper-proof seals on all FCL shipments o Measures designed to hide the nature of the goods being shipped (making secondary packaging “anonymous”) o Measures designed to keep shipment information confidential Dangerous Goods Hazardous cargo can be shipped by ocean and by air, but most dangerous goods (flammable, explosive, or toxic goods) are shipped by ocean If containerized, they are shipped “above deck” rather than “under deck” Shipment by sea regulated by the International Maritime Organization Shipment by air is regulated by the International Air Transport Association (IATA) Refrigerated Goods Usually require very specific handling, & therefore, most refrigerated goods travel “alone,” & are not mixed with other refrigerated goods Placed in refrigerated containers that are self-powered, or powered through the ship’s electrical system Can also be placed in refrigerated holds in the ship Retail Packaging Issues Consumer packages (primary packaging): may need to be different from country to country to accommodate consumer preferences o Packaging size: consumer preferences dictate packaging sizes o Packaging design: the customary design for the package for a type of product may be different o Legal requirements: influence the sizes of packages o Storage and transportation environment: influence the design and materials used in primary packaging (heat, humidity, etc.) Secondary packaging: may need to be different from country to country to accommodate trade requirements o Legal requirements: laws may restrict the size of secondary packaging o Storage and transportation requirements: there may be a standard pallet size that dictates how large secondary packaging must be Packaging as a Marketing Tool Good packaging o Generates goodwill with the importer o Marketing benefits that can be derived from it o Enhances the relationship b/w exporter & importer & builds trust o Importers don’t want to challenge invoices or ask for the replacement for damaged goods
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