Discuss the steps companies should take to avoid export and import blunders. How can an advance payment method help exporters reduce financial risk?

What will be an ideal response?

There are several errors common to companies new to exporting. First, many businesses fail to conduct adequate market research before exporting. In fact, many companies begin exporting by responding to unsolicited requests for their products. If a company enters a market in this manner, it should quickly devise an export strategy to manage its export activities effectively and not strain its resources.
Second, many companies fail to obtain adequate export advice. National and regional governments are often willing and able to help managers and small-business owners understand and cope with the vast amounts of paperwork required by each country's export and import laws. Naturally, more experienced exporters can be extremely helpful as well. They can help novice exporters avoid embarrassing mistakes by guiding them through unfamiliar cultural, political, and economic environments.
To better ensure that it will not make embarrassing blunders, an inexperienced exporter might also want to engage the services of a freight forwarder–a specialist in export-related activities such as customs clearing, tariff schedules, and shipping and insurance fees. Freight forwarders also can pack shipments for export and take responsibility for getting a shipment from the port of export to the port of import.
The advance payment method can help exporters reduce financial risk. Advance payment refers to export/import financing in which an importer pays an exporter for merchandise before it is shipped. This method of payment is common when two parties are unfamiliar with each other, the transaction is relatively small, or the buyer is unable to obtain credit because of a poor credit rating at banks. Payment normally takes the form of a wire transfer of money from the bank account of the importer directly to that of the exporter. Although prior payment eliminates the risk of nonpayment for exporters, it creates the complementary risk of nonshipment for importers–importers might pay for goods but never receive them. Thus advance payment is the most favorable method for exporters but the least favorable for importers.