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Negotiation Techniques for International Trade

Negotiation is a fundamental part of international trading.  You will have to negotiate every part of the deal with suppliers, wholesalers, retailers, pricing and terms of delivery.  Understanding how to negotiate is one of the cornerstones to making your business successful.

Below is our 5 Key Steps To A Successful Negotiation:

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Important!: Many deals are negotiated based on matching personalities, not cost alone. If you can find something in common and personalities work well, this can seal the deal.

Step 1:  Defining Objectives And Targets: Start with preparing your “L-I-M”.

1. Recognizing the objectives you would LIKE (L) to achieve. What does the perfect deal look like to you?

2. Identify what objectives you INTEND (I) to achieve.

3. Finally, recognize the MINIMUM (M) you’ll accept.

Step 2:  Setting The Negotiation Strategy.

Are you working towards a Win-Win or a Win-Lose strategy? A win-win leads to collaboration, mutual interest, flexibility, joint problem solving and harmony between the parties, a good strategy for a long term relationships.

A win-lose strategy can lead to conflict, inflexibility, competition, one side beating the other and adversarialism. This strategy can be used in one-off deals.

Step 3:  Active Listening: Concentrate on what is being discussed. Don’t answer back or interrupt. Try to understand the other persons point of view and don’t jump to conclusions.

Step 4:  Methods Of Persuasion: One or several of the following methods of persuasion can be used. Logic, bargaining, emotion, even threats and of course, compromise. It is up to you to select the correct one(s) for a particular situation.

Step 5:  Your Style Of Negotiating: Find your own style. Warm, tough, logical, personality driven perhaps. Recognize these traits in the other party and respond accordingly.

Exporting From The UK: The 9 Most Costly Mistakes

Exporting can be complicated and take time to understand.  It’s worth researching or even signing up to a course that will teach you in depth knowledge to trade internationally. There are many pitfalls and costly mistakes that you should be aware of.  Below and the 9 most common and costly:

 1. Not understanding effective sourcing techniques.
Result: You’re limiting potential suppliers and perhaps not getting the best products at the most competitive price.

2.Not identifying  ALL costs from seller to buyer.
Result: Not realising expected profit margins but increased costs.

3.Not understanding  import custom regimes and correct tariff  number.
Result:  Not minimising your  import custom duty leading to higher, unnecessary costs.

4. Not understanding Sea/ Air freight rate structures.
Result: Being overcharged by your Freight forwarder.

5. Not understanding method of payments available.
Result: Negative cash flow, not using method of payment as a negotiating tool.

6. Not undertaking  how to conduct in depth and comprehensive market research.
Result: Dead stock or limiting your customer base.

7. Not identifying most advantageous channel to sell your goods through wholesalers, retailers, direct to public via own retail outlet or websites.
Results: Lost sales.

8. Not understanding your responsibilities  and costs under the Term of Delivery used in the sales contract.
Result: Charged for costs you are not responsible for, reducing your profit margins.

9. Lacking negotiating skills.
Result: Loosing out on negotiations and not receiving the best deal that you could have.

How To Export For the First Time

Exporting for the first time can be confusing and overwhelming. We’ve put together a simple video explaining the first steps in exporting.


Global Selling Online – Webinar

Below is a recording of our webinar discussing how to setup your ecommerce website and market online to a global audience.

 

What is a Transferable Letter of Credit?

From time to  time I am invited by publishers to review recently published books on the subject of International Trade. I enjoy the experience as most times I learn something new.

One particular book which caught my attention was titled “How to make money without having any money”.  I thought this is  a winner and got stuck in. To my surprise, the book addressed the usual areas of International Trade but I could not find the section on how to make money without having any money.

When I arrived at chapter six, the chapter heading read  how to make money without having any money and the author simply said if you want to trade and don’t have funds available use a “Transferable Letter of Credit” and described for a whole paragraph telling his reader that they just ask the buyer for a Transferable Credit and use the credit to buy the goods from a third party to fulfill their contract with the buyer. That was it! Nothing more.

I was very disappointed as I thought after reading this book I could retire immediately and become a very rich man!

A transferable Letter of Credit can enable the seller to buy products of the sales contract from a third person without using their own funds. It is often used by middlemen.

I have often successfully traded under Transferable Letters of Credit to purchase high value goods without dipping into my own working funds but I must warn you they are not as simple to obtain and utilise as this author would like his reader to believe.

Lets first look at the definition of a Transferable Letter of Credit in my own words.

A Transferable Letter of Credit allows you to use the funds of the credit to open a fresh Letter of Credit on a third party. In other words, a Transferable Letter of Credit can be transferred to as many parties as you wish as long as the total you transfer does not exceed the amount of the original.

Let me give you a real world example of how we used a Transferable Letter of Credit to great success.

Some time ago, as a procurement house we received a request for a quote to supply and erect a leisure centre in Bengazi, Libya. We submitted our quotation and requested a Transferable Letter of Credit as we did not have the funds to support such a large Project.  As it was in Libya we also asked for the credit to be confirmed. The value of the contract was £1.5 million.

Over a period of approximately four months we purchased a pre-fabricated building, all the accessories required and shipped everything to Benghazi. This was followed up by sending out steel erectors  to erect the building and personnel to furnish it.

The project was a great success for all concerned but it was the busiest four months of my working life. Why? Because I had to visit about twenty suppliers and convince them to sell me their products on a Letter of Credit and ship them to Libya BEFORE they got paid. Not an easy task.  I had to transfer the original Letter of Credit into individual ones,  payable to each supplier.  This took much negotiation as you can imagine.

Here are some of the pitfalls associated with Transferable credits:

  • The buyer may not want to give you a transferable credit as they can be very expensive to establish.
  • If you are not familiar with letters of credit and do not have a good track record of trading under a letter of credit, you can make costly mistakes with a transferable credit.
  • Some suppliers take a lot of persuading to release their goods against a Transferable Letter of Credit especially when they have no previous experience of trading under such a credit.
  • You may have to do a lot of “hand holding” with your supplier, have to instil confidence in them as to your ability to successfully negotiate the original credit and their spin off credit.
  • You must be confident in your own ability to utilise a Transferable credit this comes about from hands on experience and training.

Our online International trade  course is a no nonsense training course which includes  in   details of how to trade under a Transferable credit.  For more information please contact us.

See below for a handy guide that we have developed on Letters of Credit:

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Letters of Credit Infographic

Top 10 Tips for Importing and Exporting

Our easy to understand quick guide to importing and exporting.  We off you 10 top tips for starting your own import export business.

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All About Freight Forwarders

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There are three main questions to be answered about freight forwarders:

What is the role of a freight forwarder?
How do I select a freight forwarder?
How do I find a freight forwarder?

I ran my own freight forwarding company for many years so I am well qualified to answer all three of these questions.

What is the role of a Freight Forwarder?

When you’re exporting, you must acquire the knowledge of how to obtain such things as a competitive freight rate, book freight for shipping, complete export documentation such as an export entry, Certificates of Origin, Bills of Lading and the list goes on and on.

Some companies and individual traders have this depth of knowledge and go it alone, most however, opt for the services of a freight forwarder. A freight forwarder will undertake the above tasks and also offer other services such as export packing, warehousing and local transport. They become your unpaid adviser.

For example, you can call them and ask them:

When is the next vessel sailing for your destination.
How much is it to ship a FCL to Shanghai.
What is the air freight rate for 40 kilos to Hong Kong and so on.

The advantage of using a freight forwarder is they are a one stop shop.

One phone call or email to your freight forwarder answers all your questions.
You get a lot of free advice as you only pay them when they undertake an export consignment for you.

The big disadvantage of completely relying on a freight forwarder is that SOME freight forwarders can take advantage of the fact that you have little or no knowledge of exporting and charge you accordingly.

I stress only SOME as the vast majority of forwarders are very professional and eager to help you. It goes without saying that a forwarder has to make an honest profit, which is very different to ripping you off.

My advise to you is by all means use the services of a freight forwarder BUT understand export procedures, have a working knowledge of freight rate structures and the real cost of producing export documentation. Once you know these facts you can work successfully with your freight forwarder.
Here’s a real life example of a exporter that joined our training course, who handed over all their exports to a freight forwarder.

The exporter had little or no knowledge of freight rates and left it up to the forwarder to arrange their air freight for them. This particular forwarder was aware of the exporters lack of knowledge and as a result charged £7.06 per Kilo while a commercial rate was £2.60 per kilo!

I give this example to emphasise the point that you should have a working knowledge of exporting and not to insinuate that all freight forwarders will overcharge the innocent. As I mentioned above I was a successful freight forwarder for many years without overcharging my clients. All my colleagues in the freight forwarding business gave a good service for a fair price.

How do I select a Freight Forwarder?

I have a very simple rule. Make sure that the freight forwarder can give you the service YOU require not what they WANT to give you.

Again, here is an example of what I mean.

On questioning a freight forwarder on their services, they tell you how strong they are in sea and airfreight to South America and Australia and that they can offer you very competitive rates to these destinations. However if your market is the Middle East, this is not a well fitting partnership.

Before discussing business with a freight forwarder, you should make out what a WISH LIST. A wish list is a list showing the level of service YOU require from a freight forwarder. Here is an example:

Can you offer UK collection from my local suppliers (here name your suppliers address)? If so please quote.

Can you offer competitive air freight rates f rom UK to (your destination)? If so please quote up to 1000kgs.

Can you offer competitive rates FCL/LCL rates to (your destination)? If so please quote.

Please quote to prepare the following documentation: Bills of Lading, Certificates of Origin etc.

Can you offer local warehousing and export packing? Please quote.

Please name the contact person responsible for servicing my account.

What are your terms of payment?

I require a copy of your trading terms and conditions.

The above is just indicative of questions you should ask in order to get the service YOU require for your particular exports.

How do I find a Freight Forwarder?

This is an easy answer thanks to all those lovely search engines available.
Just type in “freight forwarding in (here mention you town or city)” and you will be swamped with local contacts.

You can also check the BIFA website (www.bifa.org) and they will supply you with a list of all Freight Forwarders who are members of BIFA .

If you want to go it alone or use the services of a freight forwarder, either way you need to understand the business

Our on line International Trade course will explain to you in detail and all you have to know about importing and exporting to trade successfully internationally.

Free Webinar: Introduction to Importing and Exporting – 3rd August 2015

webinarJoin us on 3rd August 2015 for a free webinar where we will introduce you to the world of importing and exporting. We’ll cover many topics including:

Methods of Payment
Negotiation Techniques
Sea / Air freight rates
Marine Insurance

We will end with a question and answer session and hope this will give you some hints and tips and share some of the pitfalls many importers and exporters face.

The webinar is due to start at 11am London time and will last for approximately 1 hour 15 minutes.

sign-up-webinar

Emeralds Could Be A Girls Best Friend

I always dreamed of being my own boss . I wanted to source goods overseas and sell them to wholesalers and retailers in the UK.  I saw many opportunities on my travels to bring unique goods into the UK and sell them, in particular precious stones.

I couldn’t afford to leave my full time employment and devote myself  to my own business as like us all, I had financial commitments.  I did not have any knowledge of International trade so my first move was to get proper training.

I contacted many training companies who offered international trade courses but in the end I decided to go with ABTS Training services because they offered an Online course suited for beginners, so I was able to study in my own time.

I spoke to Alan Bracken of ABTS about my ambitions and current situation.

His advice was invaluable and gave me confidence to pursue my dream.  I remained in full time employment and enrolled in the Online  International Trade course. I studied at my own pace and in my own time.

Once I was confident that I understood what was involved in International Trade and after many phone calls to Alan, I took the plunge and set up a limited company.

As my funds were limited  I relied heavily on the knowledge I gained from the ABTS International Trade course and decided not to import direct from suppliers but to test the market and trade as a commission agent.

After analysing several offers for an agency, I decided to accept an agency for uncut emeralds from a company  and to represent them in the UK as their commission agent.

I made contact with many precious stone wholesalers in the UK. As the ABTS International Trade course advised me, I used the comments I received from wholesalers to refine my presentation and I am now very confident when I meet perspective customers.

I am now working with several wholesalers in the UK and high value orders are in the pipeline. It’s hard work as I am still working full time but it is well worth the effort.  I am looking forward to the day I can become my own boss full time, which is now, not too far away.

The online course gave me the knowledge and confidence I need to take the plunge and start up my own business. Thank you Alan and ABTS Training Services.

Miss. Lina Cardona