In light of Ferros experience, which of the following earnings strategies would you choose as an exporter in order to ensure requital and reduce monetary risk? Why?
a) Full advance payment. b) Letter of credit. c) character reference (delayed payment)
Answer:
In order to reduce financial risk and ensure payment from Yusuf the the in good order way choice for the Ferro Industries would be earn of credit. In other words earn of credit is a flexible banking instrument, issued on behalf of banks customer in order to apprehend a payment to seller. By using a letter of credit Ferro Industries was going to recieve payment from Yusuf within a fewer days. Moreover, letter of credit is a secure instrument so it can be used as collateral in this case very helpful for Ferro Industries in order to arrest a loan to finance manufacturing or other be associated with internationalist expansion. The other option which is full advance payment will be too risky for the buyer (Yusuf), because of minutes risks in contracts such as: shipping risks or seller non compliance risk. Therefore, it was a right desicion made by Ferro Industries do not ask for a full advance payment upfront.The third option which is delayed payment is not the right choice for the Ferro Industries.
However, despite all the risks with this type of payment when it comes to extradite an international business in the world wide contest it is could be acceptable.
3. Evaluate the role of trust vs. contracts in international customer relationships. Would you have released the product to Yusuf?
Despite all market issues, achieverful exporting requires a plan. In order to success in international market Ferro Industries made a right step in making a long-term cargo to its foreign customer (Yusuf), identifying foreign customers cultural and religious factors, identifying practical financing arrangements to assist its foreign customer.
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