International Business: Competing in the Global Marketplace, Ninth Edition 329 Exporting, Importing, and Countertrade Chapter 16 549 MD International can not only survive such downturns, but also come out stronger as weaker competitors fall by the wayside. 33 Case Discussion Questions held up by the Venezuelan customs seeking proof that the medical devices were not intended for military use. Within two days, staff at the U.S. Export Assistance Center in Miami arranged for the U.S. embassy in Venezuela to have a letter written and delivered to the customs officials, assuring them that the products had no military applications, and the shipment was released. Merritt has also worked extensively with the Export- Import Bank to gain financing for its exports (the com- pany needs to finance the inventory that it exports). Despite these advantages, it has not all been easy going for MD International. Latin American economies have often been highly cyclical, and MD International has ridden those cycles with them. In 2001, for example, after several years of solid growth, an economic crisis in both Argentina and Brazil, coupled with a slowdown in Mexico, resulted in losses for the year and forced Merritt to lay off one-third of his staff and cut the pay of others, which included a 50 percent pay cut for himself. Things started to improve in 2002, and the weak dollar in the mid-2000s also helped to boost export sales. However, the global financial crisis of 2008 ushered in another tough period; although prior experience suggests that 1. How does an intermediary such as MD Interna- tional create value for the manufacturers that use it to sell medical equipment in foreign mar- kets? Why do they want to use MD Interna- tional rather than export directly themselves? 2. Why did MD International focus on Latin America? What are the benefits of this regional approach? What are the potential drawbacks? 3. What would it take for MD International to start exporting to other regions such as Asia or Europe? Given this, would you advise Al Merritt to continue his regional focus going forward or to add other regions? 4. How important has government assistance been to MD International? Do you think helping firms such as MD International represents good use of taxpayer money? Notes 1. U.S. Department of Commerce website, "Vellus Products Inc.," www.export.gov; C. K. Cultice, "Best in Show: Vellus Products," World Trade, January 2007, pp. 70-73; and C. K. Cultice, "Lathering up World Markets," Busi- ness America," July 1997, p. 33. 2. R. A. Pope, "Why Small Firms Export: Another Look," Journal of Small Business Management 40 (2002), pp. 17-26. 8. Small Business Administration, "The State of Smal Business 1999–2000: Report to the President," 2001 www.sba.gov/advo/stats/stateofsb99_00.pdf; and D. Ranson "Obama's Math: More Exports Equals More Jobs," TH- Wall Street Journal, February 6, 2010. 9. A. O. Ogbuehi and T. A. Longfellow, “Perceptions of U. Manufacturing Companies Concerning Exporting Journal of Small Business Management October 190 1 YT > SL 328 International Management 548 Part 6 Business Operations use decline? ther by 2015? Under what scenarios might its 5. How might a company make strategic use of generate export revenues? What are the risks as sociated with pursuing such a strategy? disadvantages of using export credit insurance rather than a letter of credit for exporting (a) a luxury yacht from California to Canada, and (b) machine tools from New York to Ukraine? 4. How do you explain the use of countertrade? Under what scenarios might its use increase fur- countertrade schemes as a marketing weapon to Research Task globalEDGE globaledge.msu.edu Exporting, Importing, and Countertrade Use the globalEDGE" site to complete the following Exercise 2 exercises: Understanding the specific terminology used in the import/export process is necessary prior to your compa- Exercise 1 ny's first international venture. Utilize the globalEDGE Exporting is an important way for small and large compa- Glossary of International Business Terms to identify the nies to introduce products and develop new markets. In definitions of the following terms related to exporting fact, the Internet is rich with resources that offer and importing: ad valorem tariff, consignment, embargo, guidance to companies wishing to expand their markets global quota, invisible barriers to trade, letter of credit, through exporting. The trade tutorials at the globalEDGE mercantilism, and section 201. website provide links to these resources. Identify five sources and provide a description of the services avail- able for new exporters through each source. CLOSING CASE MD International Al Merritt founded MD International in 1987. A former salesman for a medical equipment company, Merritt saw an opportunity to act as an export intermediary for med- ical equipment manufacturers in the United States. He chose to focus on Latin America and the Caribbean, a region that he already had experience in. Also, trade barriers were starting to fall throughout the region as Latin governments embraced a more liberal economic ideology, creating an opening for entrepreneurs such as Merritt. Local governments were also expanding their spending on health care, creating an opportunity that Merritt was poised to exploit. Merritt located his company in south Florida to be close to his market. Since then, the company has grown to become the largest intermediary exporting medical devices to the region. Today the company sells the prod- ucts of more than 30 medical manufacturers to some 600 regional distributors. While many medical equip- ment manufacturers don't sell directly to the region because of the sizable marketing costs, MD can afford to because it goes into those markets with a broad portfolio of products. The company's success is in part due to its deep- rooted knowledge and understanding of the Latin American market. MD works very closely with teams of doctors, biomedical engineers, microbiologists, and mar- keting managers across Latin America to understand their needs and what the company can do for them. The sale of products to customers is typically only the begin ning of a relationship. MD International also provides training to medical personnel in the use of devices and extensive after-sale service and support. Along the way to becoming a successful exporter, MD International has leaned heavily upon export assistance programs established by the U.S. government. For ex- ample, in the early 2000s a shipment to Venezuela was
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