Marketing bán hàng - Chapter 17: Pricing strategies: countertrade and terms of sales/payment

Chapter 17Pricing Strategies: Countertrade and Terms of Sales/Payment Chapter OutlineCountertrade- Types of Countertrade- Problems and OpportunitiesPrice QuotationTerms of Sale- Trade Terms- Quotation GuidelinesChapter Outline Methods of Financing and Means of payment- Consignment- Open Account- Cash in Advance- Bill of Exchange (Draft)- Bankers' Acceptance- Letter of Credit Countertrade goods for goods trade (vs. monetary trade)government mandate to pay for goods and services with something else other than cashCountertrade Advantagesserving as trade financingbuyer getting rid of surplus of own productsno concern for fluctuation of exchange rates Countertrade Disadvantagescumbersome and time-consumingcostlyinferior form of exchange- requiring "double coincidence of wants" Types of Countertrade Barter- single transaction of direct exchange of products of equal valueCounterpurchase (Parallel Barter)- two transactions of cash sales agreements (of unrelated products)Compensation Trade (Buyback)- products sold and later bought by a party are relatedTypes of CountertradeOffset- for the rights to sell its product in a foreign market, the seller must manufacture the product locally (in the host country)Clearing Agreement- line or credit established in central banks of two countries- use "clearing account units" for exchange of products Trade TermsEXW (Ex Works)- price of product only; nothing else being includedFAS (Free Alongside Ship)- EXW + local transportation in seller's countryFOB (Free on Board)- FAS + loading onto the vesselCFR (Cost & Freight)- FOB + international transportation Trade Terms CIF (Cost, Insurance, and Freight)- CFR + insuranceDEQ (Delivered Ex Quay)- CIF + unloadingDDP (Delivered Duty Paid)- DEQ + local transportation in buyer's countryMethods of Financing & Means of Payment ConsignmentOpen AccountCash in AdvanceBill of Exchange (Draft)- Sight Draft- Time DraftMethods of Financing & Means of PaymentBankers' AcceptanceLetter of Credit (L/C)- Revocable vs. Irrevocable- Unconfirmed vs. Confirmed- Standby- Back-to-Back- TransferableExport Payment Terms and Risk LevelOpen account (highest risk for exporter)Sight draftTime draftIrrevocable L/CConfirmed irrevocable L/CCash in advance (least risk)Export Payment Terms and CostOpen account (least cost for importer)Sight draftTime draftIrrevocable L/CConfirmed irrevocable L/CCash in advance (highest cost)L/C: Advantages/DisadvantagesAdvantagesSecurity (for both parties)Seller receiving early payment by discounting L/CDisadvantagesLacking flexibilityComplex and potentially costly