I.E.

International
Management
Assignment 3 & 4

Adiba
1/2/2014
SWOT ANALYSIS PT HM Sampoerna Tbk

1. Strength

● Quality Raw Materials

The quality of the raw material non sampoerna been reliable, quality raw materials become
a mainstay sampoerna to compete with four other major Indonesian tobacco company
(Warehouse salt, Djarum, Bentoel Prima and Wismilak).
Mastering market share
Sampoerna cigarette products overall cigarette market share in Indonesia with a market
share of 24.2%, the runner-up in the Gudang Garam 23.6 and 20.4% Djarum third.
●Company Credibility
The company that has stood nearly a hundred years the company must have a good
credibility. Credibility Sampoerna not built overnight, but a long way and the various
achievements that have been inscribed. The credibility of the company is the basis for the
formation of trusts 'confidence' of the stakeholders who proved to be a crucial point in the
development of a business.
●Corporate Culture
Sampoerna body corporate culture has become the spirit d'corps sampoerna. In day-to-day
activities of the company culture to animate all the activities of employees so that the
performance of employees become more effective and efficient. With the corporate culture
of the company will be better able to survive and grow better.
● Large capital value
After Philip Morris became the dominant owner of the company shares. Sampoerna has a
sizable capital and guarantees the availability of capital under the auspices of the world's
giant tobacco companies. With the availability of large funds, enabling companies to
execute the marketing strategy and operations of the company.
2. Weakness
●The price is quite expensive
The price is quite expensive price is quite expensive it becomes very visible sampoerna
weakness in the eyes of competitors. The price is quite expensive promotional costs met by
large and expensive raw materials.
● Less enthuses SKM mild tobacco products at the International
The foreign smokers are familiar with and had white smoke opium with the sense given by
the white smoke, the presence of mild clove cigarettes are not biased shift the position of
clove cigarettes as cigarettes no. 1 overseas for the time being.
●defeat filtered SKM market share from competitors
Although Dji Sam Soe Filtered tobacco and cloves have the qualities that are not less than
the competitors, but the price difference makes Dji Sam Soe filter is not biased Gudang
Garam International shift the position of the first rank and the lack of distribution and
promotion makes it really solidified a Gudang Garam International as a Champion.
●capital large enough to hold a regular event
Such A Mild Live Wanted, Java Jazz, COPA Dji Sam Soe, Proliga volleyball league, IBL, Jak
Jazz and Soundrenaline. The allocation is used sampoerna widely used to create an event,
especially an event is an event that made periodically (Java Jazz, Jak jazz, IBL, Proliga,
COPA, Soundrenaline and live Amild wanted) with a period of the event held once a year,
there have been countless seven major event that must be funded each year. Given the
periodic event sampoerna should provide substantial funds
●The slow growth of non Avolution
Avolution cigarettes are supposed to be the hope to compete with the white smoke, but
that happens very slow growth of the cigarette, demand fell and profits declined, ended up
giving losses and negative impact. Cigarettes are supposed Avolution hopes of launching
seen tremendous separately Indonesian cigarette industry, but that did not happen this
product deliver as expected earnings over time.

3. Opportunity
● Entry of Philip Morris as a business partner
The entry of Philip Morris cigarette companies which are some of the world including, ease
sampoerna to expand its business to International through the help of Philip Morris
● positive market trend for cigarette Low Tar Low Nicotine (LTLN) in Indonesia
Please note again that smoking will lead to addiction and addiction is not only because of
the cigarette but also because of a sense that given by the cigarette, the addicted person
does not make a biased move to another product. Seen from the definition above, it can be
concluded that smokers have become fixed income accounted for cigarette companies. The
increasing number of young people who smoke and many manufacturers launched LTLN
strategies to attract young people to the music event causing many young people who
enjoyed cigarettes LTLN, giving the winds of change to cigarette industry in the future
because young people who smoke LTLN currently not biased moved to Other brands of
opium because he had given a sense of the cigarette. The high awareness of health and
lifestyle that considers non LTLN cooler allows changing trends in the cigarette industry.
●The number of spots found on the event to promote a new product
The number of events held sampoerna be an opportunity for sampoerna to promote a new
product free of charge advertising. With so many events, will increase brand awareness
owned serve targeted products that are known to facilitate product and customer in mind.
●Possible new products
The amount of capital owned by Sampoerna and its cooperation with Philip Morris,
allowing Sampoerna to develop new products if there is a suitable market.
● Shift of customers to competitors cigarettes Sampoerna cigarettes LTLN.
The high awareness of public health allow emigration customer GG and Djarum cigarettes
to cigarettes or LTLN Sampoerna A Mild. The magnitude of moving a very high probability
because of the high awareness of the health and taste of cigarettes Sampoerna cigarettes
has similarities with GG SKM International and Djarum Super.

4. Threats
●Regulation and regulations regarding anti-smoking
This regulation allows a reduction in the number of smokers and the demand for cigarettes
that occur in an area that has an anti-smoking regulations.
●Competitors of cigarettes Mild
Judging from the positive trend mild cigarettes, a lot of cigarette manufacturers began to
gain market share mild cigarette. For current cigarette manufacturers are already
producing mild cigarettes, there Surya Gudang Garam Signature, born of the Djarum LA
Light, which is quite threatening Sampoerna this time, from the camp there Starmild
Bentoel Prima which was third mild cigarette market share, even cigarette manufacturers
small as Nojorono Tobacco Indonesia enliven Indonesian cigarette industry with products
carrying the Mild class that was ranked runner-up. Increased cigarette competitor adds
intense competition in Indonesia, there ends up being knocked out of the competition.
●Increased competitors mild cigarettes
Mild cigarette market share in the promising future allow the emergence of new entrants in
the competition mild cigarette industry.
●Higher cigarette tax
Higher cigarette tax makes the low purchasing power of cigarettes resulting in decreased
demand for cigarettes.
●Reduced events sponsored by tobacco companies
Reduced non-sponsored event is the impact of the public mindset that supports anti-
smoking cigarettes and want to reduce the promotion of events contained in the event,
especially young children. With the reduction of events sponsored by tobacco companies
make it difficult for tobacco companies to promote their products and over time will
decrease the level of awareness.

RESULTS ANALYSIS
SWOT analysis of PT HM Sampoerna Tbk. mentioned above, can be some of the core specify
the following:
Strength
1. Quality Raw Materials
2. Market share
3. The credibility of the company
4. Corporate Culture
5. Large capital value
Weakness
1. The price is quite expensive
2. Less enthuses mild clove cigarettes products at the International
3. SKM filtered defeat of the market share from competitors
4. Modalyang big enough to hold a regular event.
5. The slow growth of non Avolution

Opportunity
1. The entry of Philip Morris as a business partner
2. Positive market trend for cigarette Low Tar Low Nicotine (LTLN) in Indonesia
3. The number of spots found on the event to promote a new product
4. The possibility of a new product
5. The shift of customer competitor to cigarettes (LTLN) Sampoerna

Threath
1. Regulation and regulations regarding anti-smoking
2. Competitors of cigarettes Mild
3. Increased competitors mild cigarettes
4. Higher cigarette tax
5. Reduced event sponsored by the cigarette industry

Strategies that can be used

√SO Strategy
(S1, O4) The latest innovation products for foreign targets
(S4, O1) Trying to find investors, under the auspices of Philip Morris facilitate sampoerna
to seek capital.
(S5, 03) Large-scale promotion to boost brand awareness and business expansion.
(S3, 05) did seize customer strategy
(S2, O2) Fixed maintain market share Mild current trends
√OW Strategy
(W5, O1) Set the strategy to promote Avolution overseas through the help of Philip Morris
(W3, O2) More focused strategies to maintain the current trend of mild
(W2, O4) Create the latest innovations to make white smoke.
(W1, O5) Emphasize Finest Quality to the customer and make the finest Quality persepsei
through a media campaign.
(W4, O3) In a large-scale event held massive campaign to

increase customer awareness.

√SO Strategy
(S5, T1) Participate in an anti-smoking campaign to raise awareness
(S2, T3) control of the market share by lowering the price of mild.
(S3, T5) Trying to get sponsorship through certain requirements
(S5, T4) held research to find cheaper raw materials.
(S1, T2) Maintain customer and wake up in the customer perception that sampoerna The
Finest Quality
√OW Strategy
(W2, T4) offers mild to Reduce abroad because customs that expensive,
increase supply in the country.
(W3, T2) Conduct market penetration for products SKM filters
(W1, T1) Making CSR strategy for dealing with smoking regulations.
(T4, W5) Create a more exclusive image Avolution then export abroad.
(W4, T5) sampoerna advantage of periodic events for product promotion.
The strategy used by PT. Sampoerna

1. Market Driven Strategy

PT Sampoerna to start making Market For Orientation To Make Strategy must believe that
the customer is the king of kings is fitting his needs and desires to be fulfilled. There needs
to be an effort that maintaining a relationship with its customers to maintain their loyalty,
to be able to maintain the loyalty of existing customers should be observed on the market,
knowing what the market wants, create an innovative new product that fits the needs and
desires of the market.
Market Driven Strategy outlines a strategy that is applied in a way to understand the
market, customers and competitors. Understanding the market may imply that the
products we provide must match what the market wants through. Understanding the
customer can be defined in addition to making the desired product market, as a
businessman we should also be able to provide value-added (value) to customers, value
given must be more than the sacrifices that have been made. Once we understand the
market, understand the customer we also have to understand competitors, we must
understand the conditions competitors, what value is given to the competitor's customers,
competitors wear what technology etc..
PT Sampoerna already oriented based Market Driven Strategy since the emergence of
product A mild. A mild product is one implementation of market driven strategy because a
product has a unique mild with nicotine and tar contents are low. A mild products have the
unique views of the first communication theme 'Taste of the Future' who wants to
characterize a product has a mild flavor differences are not a lifestyle but also the future.

2. Blue Ocean Strategy.

Blue Ocean Strategy is used by PT. HM Sampoerna in business can be seen with the launch
of the product A Mild. The launch is quite surprising many, especially when the cigarette
industry. This is because product A-Mild is a unique product, which does not belong in any
category, of the three major categories of cigarettes in those days, namely cigarettes bridge
hand (SKT), bridge cigarette machine (SKM) regular, and white cigarettes (SPM). A
through-Sampoerna Tbk PT Mild take bold steps to create a new category, namely mild
SKM. Since the beginning of A-Mild had been designed to be unbeatable product in the
domestic market at that time. A-Mild is a low-nicotine cigarettes (Low Tar Low Nicotine) in
Indonesia with the composition of the tar / nicotine 14 mg/1.0 mg. Not only the
composition, Sampoerna also make changes to the A-Mild packaging by reducing the
content of 20 to 16 stem rod. Mild to product innovation takes 2 years to prepare. This is
because at that time there was no benchmark that can be used as a reference product,
including in the international market. There was only a variety of surveys and research
involving consumers, including a blind test that is not only done once, but several times in
several cities.
1994 A-Mild replace campaign motto Taste of the future and replace it with How low can
you go. With this motto Sampoerna as if challenging consumers to rethink the type of
cigarettes they consume. This method is effective because the sale of A-Mild tripled, from
only 18 million sticks per month to 54 million sticks per month. And over time, the sale of
A-Mild continues to rise. 1996, A-Mild already penetrated sales of 9.8 billion cigarettes, or
4.59% of total cigarette sales nationwide. In 2005, SKM mild cigarettes already accounted
for 16.97% of the total national cigarette. Until now, A-Mild has become one of the flagship
products of Sampoerna with a market share of about 50%.

3. Giving "Customer Value" In products

In sampoerna company, Customer value is implemented by way of a limited edition

sampoerna on some products, namely A-mild. Sampoerna produces limited edition product
packaging mild A-12 rod, With A mild limited edition, Sampoerna add value by providing a
different look than regular cigarettes and packs listed joke on the limited edition cigarette
packs like 'If love is blind, why apa ada bikini', joke tersebut sangat memberikan nilai
tambah kepada para customer muda. The limited edition (limited edition) is meant to
attract young consumers and also limit ededition A-Mild intended to increase sales
packaging A 12-mild rod low enough compared to a mild 16 stem packing.

4. Diversified Products

Diversification is a strategic placement of our investment funds into different instruments-

beda.Alasan why PT. HM Sampoerna Tbk. diversify. Diversification of products is an
attempt by the company to market some products similar to the products that have been
marketed before. The company diversified its product aimed at:
• to make longer-lasting products,
• leads to a product ready for consumption / use,
• satisfy the tastes, needs and expectations of consumers,
• expand markets, facilitate transportation, employment, the member value added, income
and other so on.
So basically PT. HM Sampoerna Tbk. diversification of products to increase market
penetration or differentiate products from one another. Some products of PT. HM
Sampoerna Tbk. among others:
I. PT Sampoerna - cigarette
a. Dji Sam Soe
b. A Mild
c. U Mild
d. Sampoerna Hijau
e. Avolution
f. Dalem Kraton
g. Panamas
h. Comet
i. Sampoerna Pas
j. A Flava

PT Sampoerna Printpack - packaging printing

Packaging Printing Company and the Group
Company Sampoerna (PPP), location in Jakarta. Address Jl. Raya Bekasi km 24 Cakung, East
Jakarta
Besides PT. HM Sampoerna is one of the companies included in the single category of
business. In a single business so that there are three levels of strategy, namely:

1.Functional - Strategies area

Sampoerna Innovation committed not only limited innovation in the product. What is
important and it is very broad impact is innovation in technology, processes, systems,
strategies, and even business models.
● Innovation Aga Sampoerna build delegating management encourages employees in 1960
● Innovation Liem seeng Tee in building agency in the distribution of Dji Sam Soe year
1920
● Innovation Putera Sampoerna develop direct distribution system, establish a corporate
brand "HM Sampoerna," and in the process of revamping the production facilities Sukorejo.
And that should never be forgotten of course is innovation "giant" in the form of changes in
the business models of Sampoerna "manufacturing-driven company" to "market-driven
company," in the early 1990s whose influence is very wide to all aspects of company
operations.

2.Business Strategy
To strengthen its market position, PT.HM Sampoerna presented several kinds of
innovations, among others:
● Launch A Flava Click Mint cigarettes are mild cigarettes first product in Indonesia with
innovative click mint, which offers two different smoking experiences to adult smokers,
cigarettes with a mild flavor and mint.
● Launch A Mild cigarettes, A-Mild is a low-nicotine cigarettes (Low Tar Low Nicotine /
LTLN) in Indonesia with the composition of the tar / nicotine 14 mg/1.0 mg.

3.Operating Strategies
Company-the world's most admired companies in the planning and control of many
applying Six Sigma operations, one of which is PT HM Sampoerna Tbk.Six Sigma is a goal
that is almost perfect in meeting customer requirements. Six Sigma refers to the target
operating performance as measured statistically by only 3.4 errors per million activities.
Six Sigma is also a culture change effort so that no firm position on customer satisfaction,
profitability and greater competitiveness. Six Sigma is a comprehensive and flexible system
for achieving, sustaining and maximizing business success, which is uniquely controlled by
a strong understanding of customer needs, disciplined use of the data, facts and statistical
analysis as well as careful attention to managing, repairing and re-embed business
processes .
Conclusion:

Company sampoerna a cigarette company in Indonesia, by diversifying the variety of

brands and products, a step that is run by PT. Sampoerna Company to achieve a stable
income due to the stability of the Product Life Cycle. PT Sampoerna was founded by Liem
Seeng Tee Siem Tjiang Nio and his wife, to his children was revealed that the Aga
Sampoerna, Putera Sampoerna and son sampoerna. In 2005 the company was acquired by
Philip Morris, some 40% of the shares purchased by Philip Morris Sampoerna. Cigarette
manufacturer Philip Morris is from the United States with expertise in white cigarette
products such as Marlboro, Virginia Slims, Benson & Hedges and.
PT HM Sampoerna Tbk. Have a high social responsibility on about. This show with the
activities undertaken by the company such as disaster management by forming a team of
Sampoerna Rescue (SAR), and then in the field of education these companies establish a
business school that is Sampoerna School of Business and the Academy of Putera
Sampoerna Foundation that aims to improve education in the national Indonesia. In
addition sampoerna also do with establishing Economic Empowerment Entrepreneurship
Training Center Sampoerna (PPKSampoerna) and in the field of environment sampoerna
provide support for Mangrove Conservation Program in Surabaya and Pasuruan
reforestation and Lombok to achieve a sustainable environment
PT Sampoerna making Market For Orientation To Make Strategy must believe that the
customer is the king of kings is fitting his needs and desires to be fulfilled. In addition the
company has product differentiation against other products with the launch of the product
A-Mild. The launch is quite surprising many, especially when the cigarette industry. A-Mild
is a low - nicotine cigarettes (Low Tar Low Nicotine) in Indonesia with the composition of
the tar / nicotine 14 mg/1.0 mg. and also various kinds of brands issued by this company.
The company Sampoerna Tbk, should always reflect the current condition of the company
challenged through SWOT analysis, SWOT because we can create a strategy for the
company's progress with increasing the strength and opportunity and then minimize
weakness and Threat.
Assignment 3-B

1. The main factors who have contributed to the development HR function over the last
century is when BTM realized over 95% of the blue-collar employees out of total 1.100
are member of union. Over the last 30 years, the plant has experienced many disruptions
from the union. Until 1982 the accounting department of BTM was responsible for its
personnel function.

2. Witch HRM models are applicable to the case? Point out the key?

 The states forcing organization to employ people from backward and reserved
categories.
 Use the antagonistic rules of trade the union
 Create the personnel department witch responsible for recruitment, industrial
relations, employee safety and welfare and legal recruitment.
 And make TOP of HRD manager is involved in strategic planning of the firm.

3. Highlight the main factors which any foreign firm thinking of starting an operational in
India

 In 1970s the thrust of the personnel function shifted towards the need for greater
organizational efficiency
 By 1980s personnel professional began to talk about new concepts such HRM and
human recourses development.

4. As the HRD director of BTM, challenges?

Culture and habits is the most challenges cause.Because it’s hard to change the mind set
of people around. With history that we know, we should make a better communication
with all kind of employee

5. What do you purpose?

 As HRM Manager, I will do the aggressive approach to all employee, make a better way
to contact with them and make an easy way to them to communicate with me. And then I
will decide what they need and make resume of what they want. Than find a solution for
that, also give all employee rules to work in company

4. Forfaiting

In trade finance, forfaiting is a financial transaction involving the purchase of receivables

from exporters by a forfaiter. The forfaiter takes on all the risks associated with the
receivables but earns a margin. The forfaiter may also be immunized from certain risks if
the transaction involves payment by negotiable instrument. The forfaiting is a transaction
involving the sale of one of the firm's transactions. Factoring is also a financial transaction
involving the purchase of financial assets, but Factoring involves the sale of any portion of a
firm's receivables.

Forfaiting is a method of trade finance that allows exporters to obtain cash by selling their
medium and long-term foreign accounts receivable at a discount on a “without recourse”
basis. A forfaiter is a specialized finance firm or a department in a bank that performs non-
recourse export financing through the purchase of medium and long-term trade
receivables. “Without recourse” or “non-recourse” means that the forfaiter assumes and
accepts the risk of non-payment. Similar to factoring, forfaiting virtually eliminates the risk
of non-payment, once the goods have been delivered to the foreign buyer in accordance
with the terms of sale. However, unlike factors, forfaiters typically work with exporters
who sell capital goods and commodities, or engage in large projects and therefore need to
offer extended credit periods from 180 days to seven years or more. In forfaiting,
receivables are normally guaranteed by the importer’s bank, which allows the exporter to
take the transaction off the balance sheet to enhance key financial ratios. The current
minimum transaction size for forfaiting is $100,000. In the United States, most users of
forfaiting are large established corporations, but small and medium-size companies are
slowly embracing forfaiting as they become more aggressive in seeking financing solutions
for exports to countries considered high risk.
Characteristics of Forfaiting
Applicability Suited for exports of capital goods, commodities, and large projects
on medium and long-term credit (180 days to seven years or more)
Risks Risk of non-payment inherent in an export sale is virtually elminiated
Pros  Eliminates the risk of non-payment by foreign buyers

 Offers strong capabilities in emerging and developing markets

Cons  Cost is often higher than commercial lender financing

 Limited to medium and long-term transactions and those

exceeding $100,000

Key Points
 Forfaiting eliminates virtually all risk to the exporter, with 100 percent financing of
contract value.

 Exporters can offer medium and long-term financing in markets where the credit
risk would otherwise be too high.

 Forfaiting generally works with bills of exchange, promissory notes, or a letter of

credit.

 In most cases, the foreign buyers must provide a bank guarantee in the form of an
aval, letter of guarantee or letter of credit.

 Financing can be arranged on a one-shot basis in any of the major currencies,

usually at a fixed interest rate, but a floating rate option is also available.

 Forfaiting can be used in conjunction with officially supported credits backed by

export credit agencies such as the U.S. Export-Import Bank.

How Forfaiting Works

The exporter approaches a forfaiter before finalizing the transaction’s structure. Once the
forfaiter commits to the deal and sets the discount rate, the exporter can incorporate the
discount into the selling price. The exporter then accepts a commitment issued by the
forfaiter, signs the contract with the importer, and obtains, if required, a guarantee from
the importer’s bank that provides the documents required to complete the forfaiting. The
exporter delivers the goods to the importer and delivers the documents to the forfaiter
who verifies them and pays for them as agreed in the commitment. Since this payment is
without recourse, the exporter has no further interest in the financial aspects of the
transaction and it is the forfaiter who must collect the future payments due from the
importer.

When to Contact a Forfaiter

Forfaiting is widely used by exporters and financial institutions throughout Europe

because their sales and financing professionals work very closely together to develop a
contract price proposal that makes the cost of financing competitive and attractive to
foreign buyers, an approach not widely embraced and practiced in the United States. Thus,
exporters should contact a forfaiter at the earliest possible point in formulating their sales
and financing proposals so that they might better understand the subtleties and
complexities of dealing in certain markets, including how to create a medium-term
financing proposal at interest rates that are competitive, without reducing the margin on
the sale.

Cost of Forfaiting

The cost of forfaiting to the exporter is determined by the rate of discount based on the
aggregate of the LIBOR (London inter bank offered rate) rates for the tenor of the
receivables and a margin reflecting the risk being sold. In addition, there are certain costs
that are borne by the importer that the exporter should also take into consideration. The
degree of risk varies based on the importing country, the length of the loan, the currency of
the transaction, and the repayment structure–the higher the risk, the higher the margin
and therefore the discount rate. However, forfaiting can be more cost-effective than
traditional trade finance tools because of the many attractive benefits it offers to the
exporter.

Three Additional Major Advantages of Forfaiting

Volume: Forfaiting can work on a one-off transaction basis, without requiring an ongoing
volume of business.

Speed: Commitments can be issued within hours or days depending on details and country.

Simplicity: Documentation is usually simple, concise, and straightforward.

Forfaiting Industry Profile

Forfaiting was developed in Switzerland in the 1950s to fill the gap between the exporter of
capital goods, who would not or could not deal on open account, and the importer, who
desired to defer payment until the capital equipment could begin to pay for itself. Although
the number of forfaiting transactions is growing worldwide, there are currently no official
statistics available on the size of the global forfaiting market. However, industry sources
estimate that the total annual volume of new forfaiting transactions is around $30 billion
and that forfaiting transactions worth $60 to $75 billion are outstanding at any given time.
Industry sources also estimate that only 2 percent of world trade is financed through
forfaiting. U.S. forfaiting transactions account for only 3 percent of that volume. Forfaiting
firms have opened around the world, but the Europeans maintain a hold on the market,
including in North America. Although these firms remain few in number in the United
States, the innovative financing they provide should not be overlooked as a viable means of
export finance for U.S. exporters.

Where to Find a Forfaiter

The Association of Trade & Forfaiting in the Americas, Inc. (ATFA) and the International
Forfaiting Association (IFA) are useful sources for locating forfaiters willing to finance
exports. ATFA and IFA are associations of financial institutions dedicated to promoting
international trade finance through forfaiting. ATFA is located in New York, and its Web
site is www.tradeandforfaiting.com. IFA is located in Switzerland and its Web site is
www.forfaiters.org.

Pricing

Three elements relate to the pricing of a forfaiting transaction:

 Discount rate, the interest element, usually quoted as a margin over LIBOR.
 Days of grace, added to the actual number of days until maturity for the purpose of
covering the number of days normally experienced in the transfer of payment,
applicable to the country of risk.
 Commitment fee, applied from the date the forfaiter is committed to undertake the
financing, until the date of discounting.
The benefits to the exporter from forfaiting include eliminating political, transfer, and
commercial risks and improving cash flows. The benefit to the forfaiter is the extra margin
on the loan to the exporter.

Professional association

The International Forfaiting Association was founded in 1999 as the worldwide trade
association for the forfaiting industry with cash contribution of the VEFI (VEFI, founded in
1978 and chaired since 2003 by Mr Sal Chiappinelli is the oldest forfaiting association of
the world). Its purpose is to develop business relationships and assist other forfaiting-
related organizations.

Forfaiting Example

In order to illustrate how forfaiting takes place in practice, the following is a typical
forfaiting transaction where the buyer and the seller of goods are located in different
countries.

1. During the course of negotiations between an exporter and an importer for the
supply of goods, the importer asks for credit terms.
2. The exporter approaches a forfaiter and asks for an indication of whether the
forfaiter is willing to provide this credit and how much it is likely to cost. At this
stage the forfaiter will need to know:
o The country of the importer
 o The importer’s name
o The type of goods
o The value of the goods
o The expected shipment date
o The repayment terms sought by the importer
o Whether the importer’s obligations will be guaranteed by a bank, and if so,
who?
3. The forfaiter provides the exporter with an indication of the costs involved. At this
stage neither party is committed in any way.
4. When the details of the commercial contract have been agreed, but usually before it
has been signed, the exporter asks the forfaiter for a commitment to purchase the
debt obligations (bills of exchange, promissory notes etc) created under the export
transaction.
5. The information required for this is the same as for an indication.
6. The forfaiter issues a commitment which is accepted by the exporter and which is
binding on both parties (1). This commitment will contain the following points:
o The details of the underlying commercial transaction.
o The nature of the debt instruments to be purchased by the forfaiter.
o The discount (interest) rate to be applied, together with any other charges
o The documents that the forfaiter will require in order to be satisfied that the
debt being purchased is valid and enforceable
o The latest date that the exporter can deliver these documents to the forfaiter
7. The exporter signs the commercial contract with the importer and delivers the
goods (2+3).
8. In return, if required, the importer obtains a guarantee from his bank (4) provides
the documents that the exporter requires in order to complete the forfaiting (5).
This exchange of documents is usually handled by a bank, often using a Letter of
Credit, in order to minimise the risk to the exporter.
9. The exporter delivers the documents to the forfaiter who checks them and pays for
them as agreed in the commitment (6+7).
10. Since this payment is without recourse, the exporter has no further interest in the
transaction. It is the forfaiter who collects the future payments due from the
importer (8) and it is the forfaiter who runs all the risks of non-payment.