environments of international business

Environments of International Business

•Franchising•Exporting and Importing

Prepared by: JC

Franchising

• What if Franchising?• Anglo-French means FRANC means FREEDOM or FREE

– A franchise is the agreement or license between two legally independent parties which gives:

• a person or group of people (franchisee) the right to market a product or service using the trademark or trade name of another business (franchisor)• the franchisee the right to market a product or service using the operating methods of the franchisor• the franchisee the obligation to pay the franchisor fees for these rights• the franchisor the obligation to provide rights and support to franchisees

Source: http://www.franchise.org//franchiseesecondary.aspx?id=52625

Franchising continued...

• Franchisor– Owns trademark/trade name– Provide support (advertising, initial set up,

training, personnel, inventory, logistics, and marketing)

• Franchisee– Uses the trademark or trade name – Expands the business with franchisor

support– Pays fees

Franchising continued...A little history• Middle Ages, landlords would rent their lands

for business. This businesses would follow rules and regulations.

• Isaac M. Singer 1850s, started the franchising revolution my licensing his technology to manufacturers and retailers as a way to expand his business without exerting too much effort.

• Post WWII and Baby Boom, products and services were in high demand and franchising increased the speed of product/services availability.

Franchising continued...A little history• Ray Kroc 1902-1984, 1950s this milk shake mixer

salesman discovered McDonald Brother small burger stand. He recognized the potential of the brothers fast food system with consistent results. Kroc is McDonald’s licensing agents and accepted franchisees. He became the Senior Chairman of McDonald’s after buying it in 1961. He started the modern franchising.

• International Franchise Association , founded in 1960 as a membership organization of franchisees. Established code of ethics and works closely with Federal Trade Commission and US Congress

http://www.franchoice.com/franchise-information-guide/what-is-franchise/history-of-franchising

Types of Franchises

• Product Distribution– Simply distributes products– Supplier-dealer relationship– Coca Cola, Pepsi, Ford Motor, The Big 3

• Business Format Franchise– Complete method of conducting business– Fast food, services, restaurants, retail, lodgin–maintenance

Types of Franchise Arrangements• Single Unit– One unit franchise only, may add or purchase

another unit after the first franchise is fully operational

• Multi Unit Franchise– Area Development Franchise

Can open multiple franchise in a given area on a specified time with exclusive right to develop his area.– Master Franchise

Has right to sell franchise within territory (sub franchise)

Franchise VS Licensing

Import/Export

Export and Import• Export means shipping your goods

and services to another country.• Import means buying goods and

services from another country and selling it locally.

• Customs is the governing or regulatory office responsible for managing import and exports

• The oldest form of international business environment.

A little history of Import/Export

• Ancient – 19th century record shows Assyrians have merchant

colonies– Arabs use camels and the Chinese use horses to

travel and trade in the SILK ROAD– Egyptians sail on the Red sea to sell goods to

Arabia

• Middle– China (Guangzhou Province) becoming prominent

in international trade– India is already trading spice to much of Asia and

some parts of southern Europe

A little history of Import/Export

• Modern– The Red sea becomes the new route of spice

trade replacing the Persian gulf– Portugal sent Pero Da Covilha to scout the trade– Portugal started travelling across oceans to

trade spices in different countries particularly in India.

– Japan introduced a system of foreign trade – The Dutch, Spaniards, and the British traders

started their venture as far as the Americas – Free Trade Agreement between France and

Britain

A little history of Import/Export• Post war– Bretton Woods System promotes free trade– In 1942 General Agreement on Tariffs and Trade

was formed to promote trade among nations– ISO standardized containerization– In Oct 16, 1973 OPEC was created– January 1, 1995 WTO was formed to facilitate

free trade between signatories– January 1, 2002 EU and EURO Zone was

establishedSource:

http://en.wikipedia.org/wiki/Timeline_of_international_trade

Barriers of Exporting/Importing

• Tariffs• Strategic• Subsidies

WTO Import Licensing

• Agreement requiring members to keep the procedures simple, transparent, and predictable so as not to become an obstacle for trade.

• Example is publication of import licensing procedures and informing the WTO when new procedures are introduced.


• The agreement also covers rules for the valuation of goods at customs. It aims to make the valuation of goods fair to every participating nations and traders.

• There is also a Pre-shipment Inspection. This agreement aims to protect financial interests of developing countries (commercial fraud, capital flight, customs duty evasion, etc.).


• It also covers the Rules of Origin (Made in____). The agreement requires that a member’s rule of origin is transparent, that they do not have restricting, distorting or disruptive effects on international trade; that they are administered in a consistent, uniform, impartial and reasonable manner; and that they are based on a positive standard.


• Investment Measures: Reducing trade distortions. Under the agreement, countries must inform fellow-members through the WTO of all investment measures that do not conform with the agreement. Developed countries had to eliminate these in two years (by the end of 1996); developing countries had five years (to the end of 1999); and least-developed countries seven. In July 2001, the Goods Council agreed to extend this transition period for a number of requesting developing countries.

WTO Statistics

TOT_e - Shortcut.lnk

Import / Export in the PHL

Types of Importers and Imports

• Types of Imports– Industrial and Consumer Goods– Intermediate Goods and Services

• Types of Importers– Looking for new products to sell in the domestic

market– Looking for foreign sourcing to get their products at

the cheapest price– Using foreign sources as part of their supply chain

• Direct Importers involves a big retailer and a supplier from abroad

Source: http://en.wikipedia.org/wiki/Import

Importing Process in PHL

Importing Process in PHL• 1. What are the import documents required in all shipments to the Philippines?• Commercial Invoice• Bill of Lading or Airway Bill for air shipments• Certificate of Origin, if requested• Packing List• Applicable special certificates required due to the nature of goods being

shipped/requested by importer/bank/letter of credit clause, such as the Bureau of Food and Drugs (BFAD) license

• Commercial Invoice of Returned Philippine Goods and Supplemental Declaration on Valuation

• For Letter of Credit (L/C) Transaction, a duly accomplished Letter of Credit (L/C) including Proforma Invoice and Import Entry Declaration for Advance Customs Import Duty (ACID)

• For non-L/C Transactions, either Draft Documents against Acceptance (D/A), Documents Against Payment (D/P), Open Account (OA) or self-funded, a Proforma Invoice

Source: http://www.dti.gov.ph/dti/index.php?p=196

Importing Process in PHL• What are the legal fees to be collected from importers?

• Annual registration fee of P1,500 and processing fee of P500 for subsequent updates of the registration

• 3. Who are authorized to make an import entry?• Importer- being the holder of the Bill of Lading (B/L) or Airway Bill (AWB)• Customs Broker- acting under the authority from the holder of the B/L or AWB• A person duly empowered to act as agent or attorney-in-fact for such holder• 4. What are the requirements upon filing of import entry?• Import Entry and Internal Revenue Declaration (IEIRD-BOC Form No. 236)• Supplemental Declaration on Value (SDV)• B/L or AWB• Commercial Invoice• Packing List• Other additional documents as may be required, such as:

a. ATRIG (VAT- exempt goods) b. Certificate of Origin (CO) c. Import Permit for regulated items d. Health Certificate

Source: http://www.dti.gov.ph/dti/index.php?p=196

Top 10 Suppliers as of July 2013

Top Imported Goods as of July 2013

import export statistics - Shortcut.lnk

Ways to Export

• Direct Selling• Direct Selling Through Distributorship• Direct Selling through foreign retailers

and end users• Over the internet• Indirect sellingSource: http://en.wikipedia.org/wiki/Export

Export to the World

• Attend seminars/training courses about exporting. The Philippine Trade Training Center (PTTC) offer courses on the basics of exporting, letters of credit, negotiating with the foreign buyers, and other similar courses.

• Register your business with DTI, SEC, and other concerned government agencies

• To be successful your Organization and Products must be READY.

Export to the World• Export Procedures

• Upon receipt of a purchase order from a foreign buyer, immediately send him a proforma invoice for confirmation. An order is confirmed when the proforma invoice is signed and returned to you by the buyer.

• Payment for exports is normally made through the banks. The foreign buyer’s interest in the Philippines is represented by a local authorized agent bank, which is designated by the foreign buyer’s bank. The local Authorized Agent Bank (AAB) will assist you in negotiating the collection of the payment for your exports.

• The AAB will explain to you all the instructions concerning your shipment to ensure its acceptability for payment. Make sure that you understand all the instructions provided by the bank. If the instructions are written in a non-English language, ask the bank to give you an official translation in English or to officially recognize a translation of the instructions, if the translation was made by someone other than the bank.

• Exporters may be paid through banks by means letters of credit (L/C), documents against payment (D/P), documents against acceptance (D/A), open account (O/A), cash against documents (CAD), prepayment/export advance, inter-company open account, offset arrangement, consignment, or telegraphic transfer.

• You may or may not need outside financing to produce export products ordered by the buyer. Should you, however, find the need for outside financing. You can either tap the assistance of government or non-government financial institutions.

• Verbatim: http://www.dti.gov.ph/dti/index.php?p=223

Export to the World• Export Documentation

• When you are ready to ship, fill up an Export Declaration (ED) form. Sample ED forms are available at BETP, DTI Provincial offices, BOC Processing Units, OSEDCs and PHILEXPORT offices.

• Secure an export commodity clearance/export permit from the proper government commodity office, if your product is included in the list of regulated products for exportation or if the buyer requires.

• With the required supporting documents, submit the accomplished ED form to the BOC Processing Unit for the approval of the Authority to Load (AL).

• Verbatim: http://www.dti.gov.ph/dti/index.php?p=223

Export to the WorldLoading in Manila

Cargo to be transported by air are inspected by the Bureau of Cusotms (BoC) at the Ninoy Aquino International Airport (NAIA). Conventional cargo, whether containerized or non-containerized, to be transported by ship are inspected by the Customs Container Control Division and the Piers and Inspection division, respectively, after payment of the wharfage fee and arrastre charges. Wharfage fee and arrastre services may be paid at South Harbor or MICP.

However, for Board of Investments (BOI) and Philippine Economic Zone Authority (PEZA)-registered companies, stamping or exemption from payment of wharfage fee may be done at the PPA Unit of OSEDC-Manila at Roxas Boulevard. Loading can either be at the North or South Harbor.

Export to the WorldLoading in Manila

Cargo to be transported by air are inspected by the Bureau of Cusotms (BoC) at the Ninoy Aquino International Airport (NAIA). Conventional cargo, whether containerized or non-containerized, to be transported by ship are inspected by the Customs Container Control Division and the Piers and Inspection division, respectively, after payment of the wharfage fee and arrastre charges. Wharfage fee and arrastre services may be paid at South Harbor or MICP.

However, for Board of Investments (BOI) and Philippine Economic Zone Authority (PEZA)-registered companies, stamping or exemption from payment of wharfage fee may be done at the PPA Unit of OSEDC-Manila at Roxas Boulevard. Loading can either be at the North or South Harbor.

Verbatim: http://www.dti.gov.ph/dti/index.php?p=223

Export to the World• Loading at Provincial Ports

Documentation (steps 1-3) may be done in Manila. After approval of the Authority to Load, the BoC sends message to BoC staff at the Port of Loading.

You can also process documents and secure Authority to Load from the local OSEDC (now in Clark, Davao, Baguio, General Santos, Iloilo, Cebu, Cagayan de Oro, and Subic Bay Special Economic Freeport Zone).

After loading, the BoC issues the following documents upon request:• Certificate of Origin, Form A for export products covered by the Generalized System of Preferences

(GSP); you can inquire about the GSP from DTI-Bureau of International Trade Relations (BITR) or BoC.• General Certificate of Origin for export products not availing of preferences under GSP• Certificate of Origin, Form D for export products covered by the Association of Southeast Asian

Nations (ASEAN) Common Effective Preferential Tariff Scheme• Certificate of Shipment• Furnish the AAB, for record purposes, a copy of the duly accomplished ED form together with other

shipping documents, if export negotiation or payment is coursed through them.

For prepaid shipments, send the original commercial and shipping documents to the buyer.

Verbatim: http://www.dti.gov.ph/dti/index.php?p=223

Top 10 Markets 2013

Top Imported Goods as of July 2013

import export statistics - Shortcut.lnk

Philippine International Trade Groups

• Bureau of Export Trade Promotion– Promotion arm of DTI– Frontline assistance, consultancy and information

for the public and exporters

It is composed of three functional groups:

1. Trade Information and Assistance Group (TIAG) 2. Market Strategy and Consultancy Group (MSCG) 3. Product Research and Strategy Group (PRSG)


• Center for International Trade Expositions and Missions (CITEM)– Promotes the Philippines as a source of

reliable products through trade fairs, in-store promotions, exhibits, trade missions, and other promotional activities here and abroad.


• Design Center of the Philippines (DCP)–Mandated to promote industrial design

as a tool for quality improvement and competitiveness of Philippines products.

– Services the design needs of SMEs– Services offered: Product design,

package design, product technology demonstration, design and technical information, library


• Philippine Trade Training Center (PTTC)– Develop training modules on export and import

techniques and procedures. Raise the level of awareness of Philippine businessmen on export opportunities and the availability of alternative sources of import products or diversified markets for export. Offer specialized courses for specific industry groups directed at overcoming barriers to overseas market penetration. Conduct training programs in international trade practices, inspection techniques, and exhibition mounting.


• Philippine International Trading Corporation (PITC)– Aimed to trade with centrally planned

economies–Was designated as key implementing agency

by FPGMA for her 10 Point legacy programs which is aimed at reducing the cost of medicines by 50%

– PITC Pharma,, Inc. was formed to focus on delivering the legacy through distribution channels like Botika ng Bayan


• Foreign Trade Service Corps (FTSC)– Head the operations of Philippine Trade and

Investment Centers abroad– Promote the Philippines as an investment

destination– Introduce Philippine products and services to

foreign markets– Gather economic/commercial intelligence and

share to concerned agencies– Assist in Philippine multilateral, regional, and

bilateral trade negotiations

E-Commerce

• The buy and sell of goods or use of services over or with the use of the internet or electronic device – Ebay, Zalora, KimStore, Amazon.com, BPIExpressonline

• Boom of ecommerce started in the mid 90s and the increase in popularity has risen so much in the early 2000s. Today it is very common thing to do- Online Shopping.

• Available 24 hours and usually with next day delivery option for shipping. It has also 24/7 customer service and follows almost the trade regulations, laws, and policies like the Return-Exchange policy.

E-Commerce continued...• Not as heavily regulated compared to

the usual import/export method of doing business

• Offers variety of products and services with really competitive pricing. Operation is not that expensive

• Logistics is playing a big role• Online security is a very big concern

and still no laws in most countries like PHL that will curve online crimes

E-Commerce continued...• To improve payment process and security

Payment Card Industry Security Standards Council (PCI) was formed. Its PHL counterpart is the E-Commerce Law RA 8792.

• The latest trend in E-commerce are social media marketing and selling and the fast rising mobile e-commerce.

• There are so many online e-commerce organizations that you can join. However government agencies are lagging behind (especially in the developing nations)

• Sales went up from $27 billion to $143 billion and is expected to go up to $600 billion by 2014.

E-Commerce continued...

• Source:http://www.mivamerchant.com/blog/the-history-of-ecommerce-how-did-it-all-begin

Thank you

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