International Logistics, Trade, and Marketing Strategies

International Logistics

International logistics is the process of planning, implementing, and controlling the movement of goods from supplier to customer from one country to another. It describes the activities necessary to get materials to a manufacturing facility, through the manufacturing process, and out through a distribution system to the end user. The goal is to manage a global supply chain at a low cost while providing superior customer service. Firms now typically use electronic data interchange (EDI) via the Internet to coordinate the flow of materials into manufacturing, through manufacturing, and out to customers. This eliminates delays among suppliers, shippers, and the purchasing firm, and reduces paperwork. EDI can also help a firm decentralize materials management decisions by giving corporate-level managers the information they need for coordinating and controlling decentralized materials management groups. Just-in-time systems economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process. This reduces warehouse and inventory holding costs but leaves the company with no stock to face unexpected demand or supply changes. Reverse logistics involves sending goods back for repair, due to defects, or because they are no longer in use.

Lex Mercatoria in International Trade

Lex mercatoria refers to all international agreements, international conventions, and other international trade customs that complement the domestic laws of a given country, and to which all international trade transactions are subject. It includes principles like:

• Good faith: The assumption that both parties want to enter an agreement without ulterior motives.
• Force majeure: Prevents one of the parties from fulfilling its commitment due to unforeseen circumstances.
• Exclusive representative: An agent or distributor granted the right of being the representative of the exporter in a given country.

Exporting: Opportunities and Challenges

Exporting is a way to increase market size and profits, especially with reduced trade barriers thanks to the WTO and regional economic agreements like NAFTA. Exporting firms need to:

• Identify market opportunities
• Deal with foreign exchange risk
• Navigate import and export financing
• Understand the challenges of doing business in a foreign market
• Deal with customs and paperwork

Improving Export Performance

Organizations like ICEX, IGAPE, and CEOE provide export assistance for firms and facilitate international expansion. Export management companies (EMCs) are export specialists that act as the international department for client firms.

Reducing Export Risk

Companies can reduce export risk by:

• Hiring an EMC
• Focusing on one market initially
• Entering a market on a small scale
• Hiring locals
• Being proactive

Countertrade

Countertrade is the exchange of goods or services when they cannot be traded for money. There are five main types of countertrade:

1. Barter: A direct exchange of goods and/or services between two parties without a cash transaction.
2. Counterpurchase: A reciprocal buying agreement.
3. Offset: Similar to counterpurchase, one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale.
4. Buyback: Occurs when a firm builds a plant in a country or supplies technology, equipment, training, or other services to the country.
5. Switch trading: The use of a specialized third-party trading house in a countertrade arrangement.

Production and Logistics

Production is the process of creating a product. Logistics is the activity that controls the transmission of physical materials through the value chain, from procurement to production and into distribution.

The Marketing Mix

The marketing mix (the choices the firm offers to its targeted market) is comprised of:

1. Product attributes
2. Distribution strategy (the means to deliver; firms that manufacture the product locally can sell directly to the consumer, to the retailer, or to the wholesaler)
3. Communication strategy
4. Pricing strategy