Comprehension and Discussion Questions. 1. How does the company chose the countries it should export to?
1. How does the company chose the countries it should export to?
2. What is the first step to be taken to start exporting?
- Why should you build up a profile of your potential overseas market?
- Is it important to know the prevailing trends for the successful promotion of export product?
- When will your business thrive successfully?
- What consideration should you know to start your business exporting for the first time?
- What geographical factors should be taken into consideration when planning export strategy?
Practical Task:
Make up a short summary of text II using topical sentences of the paragraphs for the purpose.
Text III. Payment FOR EXPORT SERVICES
Although payments difficulties cannot always be anticipated you should establish, as far as is possible the likelihood of this occurring and be aware of those countries with foreign currency restrictions. To some extent risks can be alleviated by talking out credit insurance through ECGD or private sector companies. For smaller businesses, the banks and other export finance companies offer ECGG-backed cover through their schemes. As a general rule, exporting to a high-risk country should be avoided by the new exporter. In some cases, as in Brazil, exporting certain products is out of the question due to the restrictions imposed. The only alternative open to the exporter is to set up a local manufacturing base through a joint venture with a local domestic company.
One of the major areas to watch out for when invoicing for products services supplied is that of invoicing in foreign currencies. Foreign exchanges have in the past been noted as ‘the wilder beasts in the export jungle’, and for the first-time exporter in particular this is an area which should be avoided. Try if possible to invoice in pounds sterling. However, this can and often does lead to the displeasure from your overseas buyer. If you do decide to risk the currency market and invoice in the currency of the country to which you are exporting (the degree of risk is termed “foreign exchange exposure”), then this means that while you know the rate of exchange on the day the contracts are signed you will not know the rate applying at the time the contracts are exchanged. In order to minimize the risk you have three options: a foreign currency account, a forward exchange contract or a foreign currency borrowing facility.
Foreign currency accounts mean that you will have to open a bank account in that foreign currency through which income and expenditure can go. Basically, it eliminates the risk by matching your currency receivable against your expenditure. However, this is very tricky and rarely will you be able to do it. Another method of risk-reduction should be considered to operate in tandem with this system.
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A forward exchange contract is the more usual method and is available through all the clearing banks. It operates as follows. You arrange a contract to sell the currency you receive to the bank at a future stipulated date (a fixed contract) or more usually between two fixed dates (option contract). The option extends only to delivery of the currency, and there are penalties if the contract has not been used by the time it matures. Early contract with your bank is essential if you wish to crystallize your exchange risk by using this method.
However, before entering into any currency commitments do ensure that a market exists for the currency, the amount specified and the time period stated.
Vocabulary notes
to be aware –сознавать, представлять
to anticipate –предусмотреть наперёд
likelihood –вероятность
to occur –происходит, случаться
to alleviate –облегчать
insurance –страховка
to avoid –избегать, уклоняться
wilder beasts –более дикие звери
to term –называть, квалифицировать
option –выбор
a forward exchange contract –предварительный контракт по обмену валют
currency borrowing facility –возможность обмена валюты
expenditure –трата, расход
to match – соотносить, сравнивать
receivable –получаемый
risk-reduction –уменьшение риска
available –доступный
to specify –конкретно определять
to ensure –убедиться
commitment –обязательство, договорённость
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