Discuss the below:
1 MD International is a medical supply company that has exported medical equipment, initially to Latin America. They acted as an intermediary for other businesses in doing so. This made it more cost efficient for other businesses due to the broad spectrum of products MD was involved with. The company owner chose Latin America since he was already familiar with business in the area. At the time trade barriers were coming down, which made the area ripe for new entry. The local governments were also expanding in the area of health care (Hill, 2012).
The company made South Florida home base. The company worked with specialists in Latin America in the fields of medical supplies they were trying to sell. Along with selling the products, they were able to offer training and support for the products they sold (Hill, 2012).
They relied on export assistance programs established by the United States. One of the biggest things they counted on was the Export Import Bank, also known as Ex-Im Bank. This bank provided financial assistance and insurance to help facilitate exports, imports and exchanges between the United States and foreign countries (Hill, 2012).
MD International started out as a small company. With that understanding, although they became successful, they could not have done so without the help of these programs. They could not afford to finance business deals with other companies and foreign countries on their own. They also could not afford to float loans and continue to produce. In essence, without the assistance of U.S. government assistance, MD International would not have been able to accomplish their goals of going into the global market.
According to James Merritt, owner of MD International, " Without Ex-Im's assistance, our company would have lost important sales, and individuals throughout Latin America would have gone without access to modern medical technology" (Merritt, 2006, p.1).
This to me is definitely good use of taxpayers money. Businesses that are able to export goods and services are in essence bringing money back into the United States through their sales. Even small business can grow into large corporations given the right circumstances. Unfortunately this is not always easy to accomplish without the capital to do it.
Getting this capital is not easy due to the risks involved in dealing with other countries. If a foreign country defaults on a loan, the money is difficult to recover. The laws governing them are different and the currency is not always the same or equal. Most conventional banks refuse to become involved in these deals (Merritt, 2006).
For those companies that have a product that could bring money back to the United States, the Ex-Im Bank is a lifesaver. "American companies of all sizes would lose countless billions of dollars in export sales-and the high-paying export-related jobs that go with them - without EX-Im, the official export credit agency of the United States" (Merritt, 2006, p. 2-3).
The other consideration in the case of MD International is that the products it sells improve the quality of healthcare, hence the quality of life for the countries it exports to. This is a good public relations tool for the future.
China is a country that can act as an example for any individual wanting to become a small business owner. The country is the largest country in the world with a booming economy. In the early 1990, the Chinese government strongly urged their citizens to open businesses locally. Currently 1 in 4 Chinese Citizens own their own businesses and the country has over 400,000 citizens that are millionaires. There are a number of opportunities for local citizens as well as those from other countries ("CNBC originals- made," CNBC originals- made in China: The people's republic of profit).
Chinese citizens are also taking the opportunity to use ideas that have been in the United States and use Chinese customs to make changes. A prime example is taking the Pizza Hut/KFC name and adding Chinese fast food ("CNBC originals- made," CNBC originals- made in China: The people's republic of profit).
Without encouragement from the Chinese government and support, this would never have occurred. The government was smart enough to realize this would power the entire country's growth. By encouraging their own citizens to get involved in private business, they are able to beat out some of the largest competition in the world. They know the Chinese customs and preferences. Google is a prime example, having been one of the biggest search engines in the world. They have been unable to penetrate China, over a local company. ("CNBC originals- made," CNBC originals- made in China: The people's republic of profit).CNBC originals- made in China: The people's republic of profit [Web Video].
Hill, C. (2012). International business. (9th ed.). New York, NY: McGraw-Hill/Irwin
Merritt, J. A. (2006, March). Regarding reauthorization of the export-import bank of the united states. Subcommittee on international trade and finance; committee on banking; united states senate, Washington, DC.(Merritt, 2006) Geraldine
2 MD International has leaned heavily upon export assistance programs established by the U.S. Government. The U.S. Export Assistance Center has arranged for U.S. Embassies to draft letters to customs officials in Latin American and the Caribbean to release shipments that have been held up in order to determine the intention of particular products. Government Agencies are also a valuable resource for information and assistance in navigating the difficulties of international trade. The most comprehensive source of information is the United States Department of Commerce and its district offices all over the country. Within that department are two organizations dedicated to providing businesses with intelligence and assistance for attacking foreign markets: The International Trade Administration and the U.S. Commercial Service. The Small Business Administration also provides services that assist in exporting and importing goods (Hill, 2013)
I think that this is a great use of taxpayer money because it ultimately benefits the United States in the end. The great promise of exporting is that large revenue and profit opportunities are to be found in foreign markets for most firms and industries. The International market is normally so much larger than the firm's domestic market that exporting is nearly always way to increase the revenue and profit base of a company. By expanding the size of the market, exporting can enable a form to achieve economies of scale, thereby lowering its unit costs. The United States can also create more jobs by encouraging importing and exporting because the economic improvement of the population of a foreign country can create demand for products in the U.S. which creates more jobs because they have more money to spend.
The reason for United States Government Organizations and companies such as MD International is to assist in exporting is because of the difficulties involved. MD International becomes the middle man and handles all marketing and international Customs barriers that can be costly to smaller firms. Common pitfalls to exporting include poor market analysis, a poor understanding of competitive conditions in the foreign market, a failure to customize the product offering to the needs of foreign customers, lack of an effective distribution program, a poorly executed promotional campaign, and problems securing financing. The U.S. Department of Commerce can match American and Foreign firms with each other and even provide a representative to travel with company executives to visit potential business partners (Hill, 2013).
Trust is a major barrier in the import and export business because you have to trust someone you have never seen, who lives in a different country, speaks a different language, abides by or does not abide by different laws and can be difficult to track down the default on their obligation. This problem is usually solved by using a third party, usually a reputable bank, to act as an intermediary. Banks such as the Export Import Bank, an independent agency of the U.S. Government, provides financing aid that will facilitate exports, imports, and exchange of commodities between the U.S. and other countries. Banks also provide export credit insurance and arrange bills of lading, Drafts and Letters of credit to guarantee payment for both parties involved in foreign trade. Some countries engage in countertrade which is a principle to trade goods and services for other goods and services. Type of countertrade include barter, counter purchase, offset, and switch trading (Hill,2013).
Resources:
Hill, C. (2013). International business: Competing in the global marketplace. (9th ed.). New York, NY: Irwin/McGraw-Hill. Donald Banks