Factors affecting the choice of Incoterms: The case of companies operating in Poland

Abstract

Objective: The main objective of this paper is to identify and examine the main factors which affect the choice of Incoterms® rules that are used in international sales contracts by enterprises operating in Poland. Research Design & Methods: Mixed methods research was conducted to achieve this goal. The methods applied include the critical review of existing literature on Incoterms® and their use in international sales contracts and a survey carried out among export/import managers of companies operating in Poland. Findings: Results of this study proved that there are many external and internal factors to consider in the Incoterms® selection process, which can affect cost, risks, liabilities and formalities of international transactions. The main problem faced by many companies is making incorrect or decisions on Incoterms®, as traders often underestimate their potential, misuse or apply certain terms too much, choosing them without much reflection and continuing to use the same Incoterms® even if other conditions of transactions differ significantly. The fact that most of companies don’t consider domestic and foreign competition as a factor strongly affecting their decisions on Incoterms® may suggest that the use of Incoterms® as a strategic tool for building competitive advantage is often underestimated. Also, many traders seem to be mainly focused on cost of transportation but do not see the link between Incoterms® and terms of payment or other financial aspects of transaction. The results revealed also that the selection of Incoterms® is often considered as a difficult task because of the insufficient knowledge on the topic and that entrepreneurs point out the need for further training that would increase their knowledge and skills in the proper use of Incoterms®. Implications & Recommendations: The obtained results can be used both by entrepreneurs making decisions about Incoterms®, who need guidance on their correct application. They also give indications for the education sector on how to better respond to the need for expanding knowledge and skills about Incoterms®, especially with respect to Incoterms® selection and its determinants, by shaping its educational offer appropriately. Contribution & Value Added: The research provides deeper understanding and fills the gap in knowledge regarding Incoterms® and their appropriate use in international trade. It considers different factors affecting decisions on selection of Incoterms® made by companies operating in Poland.

Keywords

• Incoterms
• delivery terms
• trade terms
• sales and purchase contract
• trade facilitation