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INTERNATIONAL MARKETING
SECTION 1A
INTRODUCTION AND OBJECTIVES
ALAN L. WHITEBREAD
WHY DO DOES THE GOVERNMENT HELP AMERICAN BUSINESS?
• To help the American economy, investors, and workers by assisting American business through counseling and advocacy around the world.
• To help business in another country• increase the variety of products and services for your
B2B and consumer markets; • create jobs at many levels of your economy;• improve industries in your host country and make them
more competitive world-wide; and• potentially increase your country’s exports!
WHY DO WE SEE THE TREMENDOUS INCREASE IN WORLD TRADE?
• Governments are recognizing that– Trade and investment help bring prosperity
by• Increasing standards of living;• Providing access to products, services, and
more choice for businesses and consumers; and
• International firms tend to 1-pay higher wages and 2-be more employee friendly and socially responsible.
WHY DO WE SEE THE TREMENDOUS INCREASE IN WORLD TRADE?
• Governments are also recognizing that– Trade helps bring peace [just look at Europe
since WW II]• Role of the WTO – Improving intellectual property
[IP] protection and reducing and/or eliminating trade barriers
• World Bank and Regional Banks – assisting countries in need
• IMF – assisting with currency stabilization
– Product standards [like ISO] are spreading around the globe.
WHY DO WE SEE THE TREMENDOUS INCREASE IN WORLD TRADE?
• Governments are responding to this thinking by
– Encouraging more trade and slowly reducing or eliminating market barriers;
– Increasing participation in bilateral and multilateral trade agreements;
– Opening markets to foreign investment; and,– Allowing greater competition in domestic markets
while encouraging local firms to export.
TRENDS AFFECTING WORLD TRADE
• The growth of regional economic agreements [EU, NAFTA, ASEAN, and many more] have boosted trade.
• The world is shrinking rapidly with the improvement of communications.
• Strategic alliances are the new wave of international business growth.
TRENDS AFFECTING WORLD TRADE
• There has been a major change in multinational thought recognizing that we can not be efficient at everything so we need to concentrate on core competencies and build strategic alliances.• Foreign Direct Investment [FDI] continues at or near all-time
highs.– FDI increases jobs and cash flows in that firm and its domestic
suppliers.– Joint ventures increase jobs and cash flows in that firm and its
domestic suppliers.– Acquisitions provide capital for expansion, jobs, and improve cash
flow.– Affiliate investment provides capital for expansion, jobs, and
improve cash flow.– Strategic alliances provide the opportunity to gain access to other
opportunities.
BARRIERS TO FREE TRADE
• National controls to protect industries for many reasons [there will be much more later in the course].
• Local business interests that believe they need help, or assistance, or protection because they are not a significant player in that item.
• Capital markets are becoming more internationally interconnected making it easier to legally raise and move money. Nations that do not actively participate are at an extreme disadvantage.
BARRIERS TO FREE TRADE
• Fear of
EXPORTING IMPORTS
It is too risky for the firm. More competition means more risk.
The firm is unprepared. Firm is not ready for foreign competition.
The firm believes it is too small to succeed.
Large companies are more efficient.
Happy at home – lack the desire to be a global firm.
Happy at home – do not mess things up with more competition.
BUILD RELATIONSHIPS BY
• Improving the strategic position of the firm.
• Expand and/or find markets to decrease dependence on a few concentrated markets
• Reduce costs of – 1-manufacturing, 2-product development, 3-customer service
• Gain access to resources – 1-natural, 2-human, 3-technological, 4-financial
• Become more competitive in a national or regional market• Reduce and manage overall risk
• Growing corporate interdependence – multinationals are pulling their suppliers along
INTERNATIONAL MARKETING
SECTION 1B
BUSINESS TOOLS AND THE WORLD MARKETPLACE
ALAN L. WHITEBREAD
WELCOME
• All information in the lectures is presented with what we refer to as the stoplight approach. This will help you understand the amount of risk that may be associated with a concept or approach that you should point out to your clients.
– If the box is in bright green, it is a common thing to do with the necessary due diligence. [Low risk]
– If the box is in bright yellow, you should take some extra care/analysis before pursuing. [Moderate risk]
– When appropriate, if the box or text is in bright red or has “[WARNING]”, it indicates a high risk item and you need to either take great precaution before proceeding or doing anything different.
– Examples of concepts, ideas, or theories are in light tan italics OR start with EX-.
– Things for you to do or questions you may want to ask about a business are in light blue.
OPTIONAL RESOURCE
The U.S. Department of Commerce’s
A Basic Guide to Exporting,
10TH Edition, 2008, ISBN 9780160792045 fromhttp://bookstore.gpo.gov/actions/GetPublication.do?stocknumber=003-009-00733-0 .
GENERAL RESOURCES
IMF Datahttp://www.imf.org/external/data.htm#data
CIA World Factbookhttps://www.cia.gov/cia/publications/factbook/
Numerous other sources for specific topics will be found in the slides.
GETTING STARTED -PART 1 OVERVIEW
• THE WORLD MARKETPLACE– Examine its history, frames of reference, and some
economic items
• THE IMPACT OF CULTURE ON INTERNATIONAL BUSINESS – What is it? – How does it affect us?
• FIRST STEPS OF INTERNATIONAL BUSINESS – Your readiness, keys to success, dangers
PART 1 OVERVIEW - continued
• ECONOMIC GEOGRAPHY– How do you evaluate different countries?
• STRATEGY, PLANNING, AND PROGRAM BASICS– Basics, initial exporting items
• INTERNATIONAL MARKET RESEARCH– Overview– Politics, controls, and legal problems [danger]
LETS GET STARTED.
INTERNATIONAL TRADE AND THE FIRM
Legal
Human resources
Environment
Stakeholders
Technologies
Capital
Competition
Government
Management
Marketing
Supply ChainManagement
TradeFinance
INTERNATIONALTRADE
ETHICS & CORE VALUES
• Morals and ethics may be different between cultures.
– MORALS• The differences between right and wrong.
– ETHICS• The values of human conduct. Whether an action
is right or wrong, and the good or bad of motives, means, and ends.
ETHICS & CORE VALUES
• ETHICS– Personal ethics should exceed legal
requirements.– If you have to ask about its legality, you are
likely in ethical trouble.– What is the intent of an action?
• In U.S. criminal and U.S. business law, there are more severe punishments for the “intent to harm”.
– What are the U.S. government’s ethics?
ETHICS & CORE VALUES
• CORE VALUES– Values and beliefs: you can not live a dual
life.
– Peter Drucker, one of the great management philosophers of our time, said “It is extremely important to do the right thing”. It is equally important to also do all the right things when advising U.S. business in your host country.
DESIGNING THE BUSINESS PORTFOLIO
• THE VISION STATEMENT
– broadly defines what the entity should be like in 10-20 years.
– This statement needs to become part of the entity’s culture to be most effective.
DESIGNING THE BUSINESS PORTFOLIO
• THE MISSION STATEMENT– provides a path to achieve the vision through
clear objectives. It will contain many of the nine following elements.
• Customers; products/services; markets; technologies; concern for survival/growth; philosophy; self-concept; public image; employees
– U.S. Department of State Mission Statement• Create a more secure, democratic, and prosperous
world for the benefit of the American people and the international community.
DOMESTIC VS. INTERNATIONAL DIFFERENCES: PLANNING
DOMESTIC INTERNATIONALSingle language [most nations] Multilingual, multinational, multicultural
Homogeneous market [segments] Very diverse markets [segments]
Market research is fairly straight-forward Data collection and analysis present many difficulties
Well understood legal and regulatory environments
Multiple environments with different degrees of stability
Well-understood business environment Multiple environments with different degrees of stability
Well-understood financial environment Wide-ranging from stable to slow to inflationary
Can you think of another one? Can you think of another one?
U.S. BUSINESS STRATEGIC PLANNING
• Set goals / objectives / examine alternatives
• Develop plans
• Implement plans as soon as there is enough substance to have a fairly high probability of success.
• Always have contingency plans in place.
U.S. BUSINESS STRATEGIC PLANNING
• What are we now?• What capabilities do we want to develop?• What businesses should we be in?• How do we get there?
– Thought processes• The American educational approach
• Thinking in different ways
• Assess different strategy options.• What are the rewards of success?• The myopia problem
TYPICAL U.S. BUSINESS PLANNING TOOLS
• Marketing myopia• Core competencies• Key success factors• SBUs and SWOT analysis• BCG and GE models• Scenario planning• Development projects• Ansoff’s Product / Market Expansion Grid• Competitive advantage of the firm• Marketing mix• Gap analysis
“MARKETING MYOPIA”THEODORE LEVITT ARTICLE
Harvard Business Review reprint, July-August, 2004
• Myopia: defining your business too narrowly– Railroads– Corner grocery [1930] vs. supermarket– Color TV [Motorola, GTE, GE]– Lead with price conundrum
• You can always get sales!• Great marketing organizations rarely have
financial problems!
BUSINESS DEFINITIONS & EXTENSIONSFill in different types of businesses that fit the market
oriented definition. Then do the same for your business[es].
COMPANY
PRODUCT
ORIENTED
MARKET
ORIENTED
BUSINESS
EXTENSIONS
DISNEY Theme parks Fantasies & entertainment
Name the businesses they are in and could get into with this definition.
WAL-MART Discount stores Value to middle class
What is your answer?
HOME DEPOT Tools & home improvement
Advice & solutions
What is your answer?
STRATEGIC DIRECTION OF THE FIRM(“THE CORE COMPETENCE OF THE CORPORATION” ARTICLE)
• CORE COMPETENCY – The foundations [usually technologies] upon which you build
your business over a very long time. You need to compare your core competencies with those of your competitors.
• THREE CORE COMPETENCY TESTS
• SUSTAINABLE – Very long term [5+ years]AND
• COMPETITIVE – Obvious customer benefits
AND• ADVANTAGE – Access to additional markets or
market segments
KEY SUCCESS FACTORS
• NOT CORE COMPETENCIES• YOU MUST DO BETTER ALL THE TIME TO
KEEP UP WITH YOUR COMPETITORS.• Take a few moments now and apply the core
competency tests to the following and see why they fail one or more of the tests.
• Customer services
• Design
THE STRATEGIC BUSINESS UNIT (SBU)
• A UNIT OF THE FIRM THAT HAS DIFFERENT OBJECTIVES AND CAN BE PLANNED SEPARATELY FROM OTHERS.
• For instance, some of General Electric’s business units include– GE Commercial Finance -- GE Industrial– GE Consumer Finance -- GE Infrastructure– GE Healthcare -- NBC Universal
THE STRATEGIC BUSINESS UNIT (SBU)
• SBU ISSUES– RESOURCE COMPETITION
1. PEOPLE2. MONEY3. DEVELOPMENT RESOURCES
– FAIR PERFORMANCE MEASURES• How do you reward very different SBUs?
– WHAT IS THE ACCEPTABLE DEGREE OF AUTONOMY FOR EACH SBU?
SBU
MARKETS /
SEGMENTS
TECHNOLOGIES [fuel cells] / PRODUCTS/ SERVICES
APPLICATIONS
North America Europe Asia Export
Business Consumer Government
Trucks
Cars
Tanks
Delivery
Transportation
War
SWOT ANALYSISComplete the analyses for your firm and your major competitors.
STRENGTHS LEVERAGE OPPORTUNITIES
WEAKNESSES[constraints]
PROBLEMS THREATS[vulnerabilities]
BOSTON CONSULTING GROUP:GROWTH – SHARE MATRIX
HIGHRelative Market Share
LOWRelative Market Share
HIGHMarket Growth Rate
STARS
Invest heavily
QUESTION MARKS
Decide quickly
LOWMarket Growth Rate
CASH COWS
Milk for cash
DOGS
Divest or discontinue
GE STRATEGIC BUSINESS PLANNING MATRIX
• Market Attractiveness– Market size, growth rate,
potential– Competition– Profitability– Government regulation– What else?
• Business Strength– Market share– Customer & market
knowledge– Cost efficiency– Technology– What else?
GE STRATEGIC BUSINESS-PLANNING MATRIX*BUSINESS STRENGTH
Market share, Customer & market knowledge, Cost efficiency, Technology, …STRONG MEDIUM WEAK
MA
RK
ET
AT
TR
AC
TIV
EN
ES
SM
arke
t siz
e, g
row
th ra
te, p
oten
tial,
…LO
W
M
EDIU
M
HIG
H
SBU A is going in the right direction.
SBU B is losing ground.
SBU C is improving.SBU D is bad and
getting worse.
Invest and Grow Selective Growth Divest or Discontinue
SCENARIO PLANNING
• Thoroughly understand the key strategic forces that impact each scenario.
• Take an issue that is of concern to you and describe alternative futures by– Creating alternative paths from the future scenario
back to today.– Creating alternative paths from today to the future
scenario.– Analyzing all the paths and select the best approach
—possibly using parts of many paths.
FIVE TYPES OF DEVELOPMENT PROJECTS
R&D ADVANCED DEVELOPMENT
PROJECTS: GENETIC
ENGINEERING
NEW CORE PRODUCT
NEXT GENERATION PRODUCT
ADDITION TO PRODUCT FAMILY
DERIVATIVES AND EXTENSIONS
ALLIANCES PARTNERSHIPS
PROJECTS
NEW CORE PROCESS
BREAKTHROUGHPROJECT:
NEW FAMILY OF DRUGS
R&D JOINT VENTURE
NEXT GENERATION PROCESS
SINGLE
DEPARTMENT UPGRADE
PLATFORM PROJECT:
APPLE iMAC: TRANSLUCENT
PLASTIC COLORATION TECHNOLOGY
INCREMENTAL
CHANGE
DERIVATIVE PROJECT:
SIMPLE SIZE CHANGE
MORE PRODUCT CHANGE LESSP
R
O
C
E
S
S
C
H
A
N
G
E
For more information see Creating Project Plans to Focus Product Development, Harvard Business Review, Vol. 70, No. 2, p.74.
EASIEST
HARDEST
SMALL
LARGE
ANSOFF’S PRODUCT / MARKETEXPANSION GRID
EXISTING PRODUCTS
NEW PRODUCTS
EXISTING MARKETS
1. Market penetration and / or saturation
2. Product development [internal
or external]
NEW MARKETS
3. Market development [channels of distribution]
4. Diversification
[usually by acquisition]
These show ways to grow your business generally go from easiest [#1] to hardest [#4].
COMPETITIVE ADVANTAGE OF THE FIRM:PORTER’S THREE GENERIC STRATEGIES
Customer Perceived Uniqueness
Low Cost Position
INDUSTRY
WIDE
DIFFERENTIATION
STRATEGYFocus on perceived
value.
OVERALL COST
LEADERSHIP
STRATEGYHard to maintain
long term.
MARKET
SEGMENT ONLY
NICHE STRATEGYUnderstanding and focus.
No direct battles with major competitors.
COMPETITIVE ADVANTAGE
COMPETIVE
SCOPE
MARKETING MIX [The 4 P’s]
PRODUCT-Variety
-Design
-Features
-Branding
-Packaging
PLACE-Channels
-Coverage
-Transportation
-Logistics
PROMOTION-Advertising
-Public Relations
-Sales promotion
-Trade Shows
PRICE » VALUE-List price
-Discounts
-Allowances
-Terms and conditions of sale
FIRST MOVER:ADVANTAGES AND DISADVANTAGES
POTENTIAL ADVANTAGE
POTENTIAL DISADVANTAGE
Increased brand recognition Channel members need training
Leadership image Customers need to be educated
Increase distribution Market segmentation must be very good
Longer market experience Cannot maintain first mover advantage
ATTACKING COMPETITORS:GAPS—THE THREE DIMENSIONS
MARKETS / SEGMENTS
[Gap 2 – major gap in all three dimensions with two market segments]
CHANNELS OF DISTRIBUTION [Gap 1 – small gap in one
dimension]
TECHNOLOGIES
PRODUCTS
SERVICES
APPLICATIONS
[Gap 3 – small gap in all three
dimensions]
Gap 1
Gap 3
Gap 2
Gap 2
PRODUCT PLACE PROMO-TION
PRICE COMPETI-TION
Features Expand channels
Stimulate light users
How to compete
Brands Intensify coverage
Attract non-users
Penetrate / Substitute
Market segments
Use more each time
Model number
Services added
To maximize your return,You always pursue price
gaps last.
PRODUCT LINE PLANNING*APPLICATION SUMMARY OF GAP ANALYSIS
SECTION 1A & B: REVIEW
• You should now have knowledge of– International trade and the firm– Strategic planning tools
• Core competency, key success factor, SBU• Business portfolio, mission, and vision• SWOT, BCG, GE planning tools• Exploring scenarios • Types of development projects• Product / market expansion or approach• The Marketing Mix and gap analysis
INTERNATIONAL MARKETING
SECTION 2
THE IMPACT OF CULTURE ON INTERNATIONAL BUSINESS
ALAN L. WHITEBREAD
U.S. CULTURE: GENERAL
• THINGS THAT ARE LIKELY DIFFERENT ABOUT AMERICANS.
– Americans admire individualism and self-reliance.
– Americans are tolerant of different viewpoints and openly discuss them. “Live and let live” is a good motto.
– Americans take pride in work achievements; e.g. my son the doctor, or my daughter the lawyer.
– Change is embraced and is a key part of their success.
– They are competitive [aggressive] – winning [being first] is very important.
U.S. CULTURE: FAMILY
• THINGS THAT ARE LIKELY DIFFERENT ABOUT AMERICANS.
– Meals and specific foods rarely have the significance they do in other cultures.
– Meals are mostly informal social events.
– Social contacts and relationships tend to be more work related, as opposed to neighborhood, community, or religious.
– The family is important but not to the extent you see it in other cultures.
U.S. CULTURE: MOBILITY
• THINGS THAT ARE LIKELY DIFFERENT ABOUT AMERICANS.
– Getting ahead is usually done via changing jobs.
– Americans frequently change jobs and move whatever distance is necessary – even across the country.
– Social mobility is most often tied to professional or business accomplishments [money] and only rarely to family social standing.
U.S. CULTURE: OTHER
• THINGS THAT ARE LIKELY DIFFERENT ABOUT AMERICANS.
– Most Americans pay their taxes – an example of following the “rule of law”.
– Americans are very litigious – they have uncommon confidence in their judicial system to render impartial decisions in civil and business disputes. They tend to expect the same outside the U.S.
– Americans love to shop – tangible objects serve as mementos of travel and unique experiences.
U.S. BUSINESS CULTURE
– Smiles are common even between strangers anytime there is direct eye contact and frequently include a “Hi”.
– Greeting – business or strangers: use a firm handshake [3 or 4 seconds] and maintain good eye contact during the greeting. The eye contact shows character, confidence, interest, and sincerity.
– Introductions include your title only if appropriate for the situation.
– Friends may briefly embrace – much more common in smaller cities.
U.S. BUSINESS CULTURE
– Business cards are usually exchanged informally and without any special presentation style 1. during introductions, or 2. early in a meeting, or 3. at a significant point in a meeting, or 4. rarely when leaving.
– Business meetings are usually informal.• Americans start discussing business very early in the
meeting.• Differences of opinion are common even during a meeting. • Rank in a meeting is generally unimportant – expect
anyone to speak at any time.
U.S. BUSINESS LAWS
• ILLEGAL BUSINESS PRACTICES – COMPETITION
– Horizontal agreements among competitors can raise antitrust suspicions of potentially restricting competition.
– Any agreement to restrict output is illegal.
– Boycott agreements 1. among competitors not to deal with another person or business
violates the law if it is used to force another party to pay higher prices, and
2. to prevent a firm from entering a market or to disadvantage a competitor also are illegal.
– Agreements among competitors to divide sales territories or allocate customers are probably illegal. Cartels are illegal.
U.S. BUSINESS LAWS
• ILLEGAL BUSINESS PRACTICES – COMPETITION
– A professional code of ethics may be unlawful if it unreasonably restricts the ways professionals may compete. [advertising by some professions]
– Certain kinds of agreements between buyers and sellers, such as a retailer who buys from a manufacturer, may be illegal if they restrict competition or show favoritism in any way.
– Manufacturer-imposed limitations on how or where a dealer may sell a product, e.g., service obligations or territorial limitations, are generally legal.
– Tie-in sales where the sale of one product is based solely on the condition that a customer purchase a second product, which the customer may not want or can not buy elsewhere at a lower price, are illegal if they harm competition.
• Americans have very high regard for “the rule of law”. They will not respond well to suggestions that they break or evade it, even if “everyone else” does.
U.S. BUSINESS PRACTICES
• CONTRACTS
– Americans expect business partners to respect the spirit of the contract, even more so than the letter. [It defines the relationship – it is not treated as a starting point.]
– Some business is done informally with just a verbal agreement.
– Most business is done with purchase orders which are an intent to purchase with usually a lot of legal paragraphs attached but are usually non-binding.
– Contracts are frequently used, and are always used for large deals.
– Contracts tend to be quite lengthy and are heavily in legal jargon although there is a trend to simplified verbiage.
SENSITIZING AMERICANS TO ANOTHER CULTURE
• Americans are generally quite friendly but forceful in business relationships.
• They generally have less knowledge of foreign cultures than foreigners expect of them as citizens of such a prominent country. Do not expect them to have much more than a basic knowledge of another culture or history. If they misstep in another culture it is from ignorance. Deliberate insults by Americans are rare and obvious.
• Americans are not generally fluent in other languages, although this is changing among the young.
• There is no commonly accepted “proper” use of eating utensils.
• Americans’ posture tends to be relaxed. It does not generally mean they are disinterested, however.
• They generally say exactly what they mean – do not look for hidden meanings or saving face. Interrupting another person is common.
SECTION 2: REVIEW
• You should now have knowledge of– American culture in general with some
insights into family, mobility, and other aspects;
– American business culture, business laws, and common business practices; and,
– Sensitizing Americans to your culture.
INTERNATIONAL MARKETING
SECTION 3A
FIRST STEPS IN INTERNATIONAL BUSINESS - 1
ALAN L. WHITEBREAD
UNDERSTANDING GLOBAL BUSINESS
• It is more different than you can imagine.
ORGANIZATIONAL GOALS
• The key is to find a structure which allows the organization to profitably respond to market differences and market dynamics.– A market difference is something that is not the same
as in another market [e.g. color preference]. – A market dynamic is something that drives the market
[e.g. interest rates].
• Make a list of examples of market differences and market dynamics.
ORGANIZATIONAL GOALS
• TRADE-OFF– the value of centralization comes from
• knowledge• planning• co-ordination, implementation, and control
– the value of decentralization comes from• maximizing response flexibility for a local situation• minimizing reaction time• customizing the approach as required
ORGANIZATIONAL STRUCTURE
• Organizational structure is a function of the situation.
• Multinationals generally use a simple, flat organization structure with few levels of management.– Empowerment– Speed of decision-making
GLOBAL ORGANIZATION STRUCTURES
• INTERNATIONAL
• GEOGRAPHIC / AREA
• PRODUCT
• FUNCTIONAL
• MARKET / CUSTOMER
• COMPLEX [large firms]
INTERNATIONAL STRUCTURE
CEO orVP Marketing
NorthAmerica
Central andSouth America
Europe, Africa,and the
Middle East
Asia and thePacific
Export
List three advantages to this structure below.
1. 2. 3.
List three disadvantages to this structure below.
1. 2. 3.
GEOGRAPHIC STRUCTURE
VP Marketing
Product Manager Group A
Product Manager Group B
Eastern Region Sales Manager
Western Region Sales Manager
Marketing Communications
Manager
Advantages of this structure include
1. simple
2. low cost of sales and administration
3. direct customer interaction
Disadvantages to this structure include
1. no specialization
2. controlling how the sales force spends its time
3. selling all the products
PRODUCT STRUCTURE
VP Marketing
Product Manager Group A
Product Manager Group B
Sales ManagerProduct Group A
Sales Manager Product Group B
Marketing Communications
Manager
Advantages of this structure include
1. driven by product purchases
2. specialized sales force knowledge for specialized products
3. helps forecasting and production scheduling
Disadvantages to this structure include
1. duplication of sales effort selling two very different product groups
2. higher administrative costs
3. problem with accounts wanting to buy both product groups
FUNCTIONAL STRUCTURE
CEO
Marketing and Sales
OperationsFinance and Accounting
Information Technology
Human Resources
List three advantages to this structure below.
1. 2. 3.
List three advantages to this structure below.
1. 2. 3.
MARKET / CUSTOMER STRUCTURE
VP Marketing
Product Manager Group A
Product Manager Group B
National Sales Manager
Major Accounts Manager
Marketing Communications
Manager
National Accounts OEM AccountsFederal
Government
Advantages of this structure include
1. driven by type of customer and is close to the customer
2. sales management controls field sales and how they spend their time
3. improved feedback throughout the organization
Disadvantages to this structure include
1. higher selling and administrative costs
2. multiple sales forces compete for product management’s time
3. account assignment to the appropriate sales organization is critical to the success of this approach
COMPLEX STRUCTURE
VP Marketing
Product Management
Group
National Sales Manager
Direct Marketing Manager
Major Accounts Manager
Marketing Communications
Manager
National Accounts
OEM AccountsFederal
GovernmentTelesales Manager
Direct Sales Managers
Reseller Sales Managers
Internet Sales Manager
Advantages of this structure include
1. driven by type of customer and is close to the customer
2. multiple levels of sales skills based on the customer type
3. very difficult for competitive analysis
Issues of this structure include
1. classification and reclassification of accounts
2. price strategies
3. consistent program implementation
Disadvantages of this structure include
1. requires a lot of coordination
2. Information is widely spread over the organization and hard to consolidate
3. very heavy work load on marketing communications
INTERNATIONAL STRUCTURE
VP Marketing
Product Management
Group
National Sales Manager
Direct Marketing Manager
Major Accounts Manager
Marketing Communications
Manager
Customer Services
Technical Sales Support
This is a typical U.S. marketing structure for a large organization. At this size it could look like an international structure at the higher level. This provides you detail of some of the organizational issues larger firms face every day.
For instance, where should customer services report – marketing or sales?
Only $1.28 trillion [8.8%] of the U.S. GDP [$14.6 trillion] was exported in 2010
U.S. is 2nd largest exporter - $16 million ahead of Germany. China is the largest at $1.58 trillion.
~ 10% of U.S. companies export
Approximately 2,000 firms account for 70% of U.S. exports
Exports account for a significant amount of profits
WHO EXPORTS?
THE VALUE OF EXPORTING
• Higher revenues, average unit price [AUP], and profits
• Increased volume
• Potentially lower average unit cost [AUC]
• Potential tax advantages for Americans
• May extend product life cycles
WHY DON’T MORE FIRMS EXPORT?
• They are preoccupied with domestic issues / content with domestic business.
• International misconceptions– Fear of the unknown– Horror stories because of lack of knowledge.
• I lost money.• I did not get quick results.• It costs too much.• …
INTERNATIONAL ORGANIZATION:REQUIRED COMPETENCIES
• Knowledge of economic geography, markets, segments, and customers
• Knowledge of industry and competitive forces
• Knowledge of your country and region
• This is a key value that you provide your American clients
INTERNATIONAL CORPORATE CULTURE
• An multi-national corporation [MNC] knows changing its culture is an important part of improving its global competitiveness.
• MNC Managers accept and embrace the mission, thus forming a corporate culture.
• Changing the culture of an organization can be a long and difficult process.
EXPORTER’S CHECKLIST:THE FIRM
• Why does the firm want to pursue exports?
• Is senior management committed to a multi-year effort to succeed in international business? – Including travel, trade shows, samples, different
collateral, IP protection, …, ?
• What are management’s expectations for the export effort?– Are they reasonable [size and time]?
EXPORTER’S CHECKLIST
• WHY DOES THE FIRM WANT TO PURSUE EXPORT MARKETS?
– COMMON ANSWERS• We are getting a lot of inquiries.
– BAD ANSWERS • We need more volume to offset domestic sales.• The big-game hunting owner thinks there is opportunity in
Africa.
– GOOD ANSWERS• Your ideas would include …
EXPORTER’S CHECKLIST:INTERNATIONAL EXPERIENCE
• In which countries are you conducting business?
• How many inquiries have been received from each country in the last n months?
• Which product [lines] are requested most often?
• How many domestic customers are buying the product for sale or shipment overseas?
EXPORTER’S CHECKLIST:INTERNATIONAL EXPERIENCE
• Do you understand competition in the countries you are selling to or from where you are receiving inquiries?
• Do you know how to compete in those countries?– Use the marketing mix as a quick guide
• Product• Place• Promotion• Price
EXPORTER’S CHECKLIST:MANAGEMENT AND PERSONNEL• What international expertise is needed to
service current and projected customers?
• What in-house international expertise exists? – Make a list of your international expertise.
EXPORTER’S CHECKLIST:PRODUCTS AND SERVICES
• Is the product adaptable?
• Does the product ship complete or as components?
• Can it ship as components?
• Does the product require any technical support, training, sales training, or after-sale service?
EXPORTER’S CHECKLIST:PRODUCTS AND SERVICES
• Can your products / services be strongly differentiated?
• Do you require a special U.S. license to export? • Do you or your client require any special import
licenses, permits, registrations, or documentation?
• Will your product comply with the required country and international standards, packaging, and labeling?– Where can an American company get this information
for a specific country?
SECTION 3A: REVIEW
• You should now have knowledge of– Global business
• Organizational goals and structures– International, geographic, product, functional,
market/customer, complex
– The value of exporting– International business
• Competencies• Culture
– The Exporter’s Checklist
INTERNATIONAL MARKETING
SECTION 3B
FIRST STEPS IN INTERNATIONAL BUSINESS - 2
ALAN L. WHITEBREAD
KEYS TO SUCCESS:KNOWLEDGE
• Language, customs, lifestyles, culture, …
• Control with limited flexibility
• Meeting standards and regulations
• Competence in international trade
KEYS TO SUCCESS:COMMITMENTS AND GOALS
• The long-term commitment of senior management
• A realistic set of goals
• A logical and defendable marketing plan
• Always protect all your intellectual property
KEYS TO SUCCESS:BUSINESS RELATIONSHIPS
• Be patient—it takes time to establish yourself, develop trust, and build relationships.
• Be very careful selecting international resellers and / or representatives.
KEYS TO SUCCESS:MARKETING AND SALES
• FOCUS - do not chase every opportunity.• Build programs that provide resellers with the
support tools to do a great job.• Communicate with your customers in the
language of their preference – frequently!• Seek expert advise and assistance—especially
in the specialized fields of – contract law, IP, packaging and labeling,
documentation, and language.
Western Europe
Eastern Europe
Secular-rational values
[modern, rational, non-religious]
Traditional values [religion, prior behavior]
U.S.AustraliaCanada
Self-expression valuesSurvival values
AfricaMiddle East
South America
The longer the arrow, the greater the difference in
values.
KEYS TO SUCCESS:INTERNATIONAL NEGOTIATIONS
KEYS TO SUCCESS:PRINCIPLES OF NEGOTIATIONS• Conflicts of interests are likely.
– Why is this true?
• All parties are seeking resolution.– Why is this likely to be true?
• Seek an acceptable solution for all.– Do not seek the best solution for one.– Why may this be the best approach?
KEYS TO SUCCESS:NEGOTIATION PERSPECTIVES
1. Detail the situation by likely scenarios.
2. Develop and rank alternative outcomes.
3. Determine the rules of the game.
4. What process[es] do we want to use?
5. What type[s] of interaction do we want?
6. What tactic[s] will be employed?
7. How will power be used?
KEYS TO SUCCESS:NEGOTIATION TYPES
• Heavy-handed - threatening
• Collaborative – working together
• Sharing – pro-rated to synergistic like JVs
• Accommodating - appeasement
• Competitive – zero sum game
COMPETITIVE NEGOTIATION
• Competitive negotiation is composed of three major areas.– Characteristics involve how the negotiation is to proceed.– Tactics are the tools you use to accomplish you goals.– Expressions are ways of forcefully stating your desires.
CHARACTERISTICS[Control is key; what type of behavior is to be used; how to force
concessions, …]
TACTICS[Bluffs; promises; rewards; threats, …]
EXPRESSIONS[Using words to deliver strong messages, …]
COMPETITIVE NEGOTIATION
1. That is not the response we need. You will have to do better if we are to continue doing business with you.
2. There does not appear to be a quick solution to this issue, so accept our offer this time and we will accept yours the next time.
3. This is a large amount of business that will help drive your costs down. We should see more of that reflected in our price.
• How do you effectively respond to each of these?
GOAL CONTRACT OR RELATIONSHIP
Attitudes Win / Lose Win / Win
Personal Style Informal Formal
Communications Direct Indirect
Time sensitivity High Low
Emotionalism High Low
Agreement form Specific General
Agreement Building Bottom Up Top down
Team Organization One Leader Group consensus
Risk taking High Low
IMPACT OF CULTURE ON NEGOTIATION
WHY ARE THESE STATEMENTS NOT TRUE FOR AN AMERICAN BUSINESS?
• We can sell our products to anyone we want, anywhere in the world.
• We know our customers and how to contact them. That is all that the law requires.
• We only sell our products domestically so export laws do not apply.
• We sell to many countries around the world so we are exempt from U.S. export control laws.
• Once our buyer pays us we do not have to be concerned about what they do with the product.
WHY ARE THESE STATEMENTS NOT TRUE FOR AN AMERICAN BUSINESS?
• 3PL’s do our international shipping so they [not us] are responsible for any violations.
• We do not make anything dangerous so the Export Administration Regulations [EAR] do not apply.
WHY ARE THESE STATEMENTS NOT TRUE FOR AN AMERICAN BUSINESS?
• We keep the necessary important records for our business. The government does not care about minor details.
• We do not pay bribes to foreign officials so FCPA does not apply; but we provide almost any entertainment they want when they are here.
WHY ARE THESE STATEMENTS NOT TRUE FOR AN AMERICAN BUSINESS?
SPECIAL NOTICE!
• As an American business or citizen, you have a legally required obligation under federal law to know your customer, and in some cases who your customer sells it to, plus how the product will be used!
EXPORT ASSISTANCE
• US DEPARTMENT OF COMMERCE
– US Foreign and Commercial Service• Product / Service / Industry Specialists• Country Desk Officers
– Collect data regarding regulations, tariffs, business practices, economic and political developments, market size and growth and trade data
• Country Service Posts / Commercial Service Offices– These are locations of U.S. DOC offices around the world that
can provide business assistance.
EXPORT ASSISTANCE
• US DEPARTMENT OF COMMERCE
– US Foreign and Commercial Service• Bureau of Industry and Security
– Formerly called the Bureau of Export Administration [BXA]– Mission: Advance U.S. national security, foreign policy, and
economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership.
– See http://www.bis.doc.gov
• National Institute of Standards and Technology [NIST]– Manufacturing Extension Program– See http://www.mep.nist.gov/about-mep/overview.html
• National Oceanographic and Atmospheric Administration [NOAA]
EXPORT ASSISTANCE
• US DEPARTMENT OF COMMERCE
– International Trade Administration• Mission: to create prosperity by strengthening the
competitiveness of U.S. industry, promoting trade and investment, and ensuring fair trade and compliance with trade laws and agreements.
• See http://www.trade.gov/index.asp • SBA’s SBDC International Trade Centers [ITC] and U.S.
Export Assistance Centers [USEAC]– A resource listing may be found at
http://www.sba.gov/gopher/Business-Development/International-Trade/Guide-To-Exporting/trad14.txt
– http://www.sba.gov/oit/export/useac.html
EXPORT ASSISTANCE
• World Trade Centers [WTC]– bring businesses and government agencies together
to increase foreign trade. – It is an information hub for
• market research, WTCA OnLine matchmaker, trade shows & exhibit space, business services, trade education, group trade missions, and WTC clubs.
– See http://world.wtca.org/portal/site/wtcaonline
• State government agencies• Local trade associations
EXPORT ASSISTANCE
• US DEPARTMENT OF AGRICULTURE
– Agriculture commodity & marketing programs• Dairy• Grain & Feed• Tobacco, Cotton, & Seed• Forest Products• http://www.fas.usda.gov/outreach/Matrix.pdf
EXPORT ASSISTANCE [7 of 17]
• US DEPARTMENT OF COMMERCE
• US DEPARTMENT OF AGRICULTURE
• US DEPARTMENT OF STATE
• US DEPARTMENT OF THE TREASURY
• US AID
• OVERSEAS PRIVATE INVESTMENT CORPORATION [OPIC]
• EXIMBANK
EXPORT ADMINISTRATION REGULATIONS [EAR]
• The EAR is the complete set of rules and regulations that control what can be exported, to whom, and what documents are required for compliance.
• For more information see http://www.access.gpo.gov/bis/ear/ear_data.html
EXPORT ADMINISTRATION REGULATIONS [EAR]
U.S DEPARTMENT OF COMMERCE
-Bureau of Industry and Security [BIS] controls EAR including “dual-use” items.
-The Census Bureau controls the balance of the export process, i.e. SED’s, etc.
-U.S. Patent and Trademark Office
U.S. TREASURY DEPARTMENT
-Office of Foreign Assets Control [OFAC] oversees embargo and sanction lists – OFAC regulations.
EXPORT ADMINISTRATION REGULATIONS [EAR]
U.S. STATE DEPARTMENT
-Directorate of Defense Trade Controls [DDTC] controls defense articles, defense services, and related technical data including most space related agencies [ITAR]
OTHER U.S. GOVERNMENT AUTHORITIES
-U.S. DEPARTMENT OF HOMELAND SECURITY.
-Customs and Border Protection [CBP]
-U.S. DEPARTMENT OF ENERGY
-NUCLEAR REGULATORY COMMISSION
BUREAU OF INDUSTRY AND SECURITY Export Administration Regulations [EAR] – Part 734
• Items subject to the EAR include all– Items moving into or through the U.S., and– U.S. origin items, parts, and components, and– In quantities exceeding de minimis levels, and– Certain items produced outside the U.S. using U.S. origin
technology.
• Items excluded from the EAR are exclusively controlled by other U.S. departments or agencies.
• The complete export regulations administration database may be found at– http://www.access.gpo.gov/bis/ear/ear_data.html
BUREAU OF INDUSTRY AND SECURITY Dual-Use Product
• A dual-use product is any item that may have both commercial and military or commercial and proliferation applications.
• Purely commercial items without an obvious military use are also subject to the EAR due to potential alternative uses.– F– Ammonium nitrate fertilizer
BUREAU OF INDUSTRY AND SECURITY Export Administration Regulations [EAR]
• KNOWING VIOLATIONS
– Corporation - A fine of up to the greater of $50,000 or five times the value of the exports for each violation.
– Individual - A fine of up to the greater of $50,000 or five times the value of the exports or imprisonment for up to five years, or both, for each violation.
BUREAU OF INDUSTRY AND SECURITY Export Administration Regulations [EAR]
• WILLFUL VIOLATIONS
– Corporation - A fine of up to the greater of $1,000,000 or five times the value of the exports for each violation.
– Individual - A fine of up to $250,000 or imprisonment for up to ten years, or both, for each violation.
BUREAU OF INDUSTRY AND SECURITY Export Administration Regulations [EAR]
• ADMINISTRATIVE SANCTIONS• Denial of export privileges [Denied Persons List]
– See http://www.bis.doc.gov/DPL/Default.shtm for more details
– The exclusion from practice; and / or
– The imposition of a fine of up to $12,000 for each violation, except that the fine for violations involving items controlled for national security reasons is up to $120,000 for each violation.
EXPORT COMMODITY CONTROL LIST
• Approximately 15 pages of items– Defense articles & services / national security– Dangerous drugs and narcotics– Endangered plants and wildlife– Chemicals– Radioactive materials– Explosives
• Access the list at– http://www.access.gpo.gov/bis/ear/ear_data.html
BUREAU OF INDUSTRY AND SECURITY Office of Antiboycott Compliance• U.S. companies receive requests to engage in
activities that further or support the boycott of Israel or blacklisted companies.
• Compliance with such requests may be prohibited by the Export Administration Regulations [EAR] and may be reportable to the Department of Commerce.
• See http://www.bis.doc.gov/AntiboycottCompliance/Default.htm for more details
BUREAU OF INDUSTRY AND SECURITYRed Flag Indicators - 1
• The customer or its address is similar to one of the parties found on the US DOC’s Denied Person’s List [DPL].
• The product's capabilities do not fit the buyer's line of business.
• Routine installation, training, or maintenance services are declined by the customer.
• Level of product sophistication far greater than usual in the intended country.
BUREAU OF INDUSTRY AND SECURITYRed Flag Indicators - 2
• A freight forwarding firm is listed as the product's final destination.
• When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export, or for re-export.
• Cash only transactions.
• See http://www.bis.doc.gov/Enforcement/redflags.htm for examples.
BUREAU OF INDUSTRY AND SECURITY Entities List
• The Export Administration Regulations [EAR] provide that the Bureau of Industry and Security may inform exporters, individually or through amendment to the EAR, that a license is required for exports or reexports to certain entities. This is known as the Entities List.
• These end users have been determined to present an unacceptable risk of diversion to developing weapons of mass destruction or the missiles used to deliver those weapons.
• http://www.bis.doc.gov/Entities/Default.htm
BUREAU OF INDUSTRY AND SECURITY Unverified List
• The Unverified List includes names and countries of foreign persons who in the past were parties to a transaction with respect to which BIS could not conduct a pre-license check (“PLC”) or a post-shipment verification (“PSV”) for reasons outside of the U.S. Government’s control. Any transaction to which a listed person is a party will be deemed by BIS to raise a “red flag” with respect to such transaction within the meaning of the guidance set forth in Supplement No. 3 to 15 C.F.R. Part 732. The “red flag” applies to the person on the Unverified List regardless of where the person is located in the country included on the list.
• http://www.bis.doc.gov/Enforcement/UnverifiedList/unverified_parties.html
OFFICE OF FOREIGN ASSETS CONTROL [OFAC]Specifically Designated Nationals and Blocked Persons
7TH APRIL CARD BOARD FACTORY, Tajoura, Libya [LIBYA]
‘ABD AL-RAHMAN, Humam ‘abd al-Khaliq (a.k.a. ABD-AL-GHAFUR, Humam abd-al-Khaliq; a.k.a. ABD AL-GHAFUR, Humam Abd al-Khaliq; a.k.a. GHAFUR, Humam Abdel Khaleq Abdel; a.k.a. RASHID, Humam ‘abd al-Khaliq); DOB 1945; POB ar-Ramadi, Iraq; Minister of Higher Education and Research; Passport No. M0018061/104 (Iraq) issued 12 Sep 1993; nationality Iraqi (individual) [IRAQ][IRAQ2]
From list on January 29, 2004
http://www.treas.gov/offices/eotffc/ofac/sdn/t11sdn.pdf
OFFICE OF FOREIGN ASSETS CONTROL [OFAC]Sanctions Program and Country Summaries
Sanctions Program and Country SummariesTo view or print the PDF content on this page, download the free Adobe® Acrobat® Reader®.BalkansOverview of Sanctions Guidelines and InformationBurma (Myanmar)Overview of Sanctions Guidelines and InformationCubaOverview of Sanctions
http://www.treasury.gov/offices/enforcement/ofac/programs/
U. S. DEPARTMENT OF STATEList of Debarred Parties
• Persons or entities with which no American person or entity can conduct business.
• http://www.pmddtc.state.gov/debar059intro.htm
• http://www.state.gov/index.htm
U.S. GOVERNMENT ENFORCEMENT LISTS
• Be sure to review the “Enforcement Lists” in detail in the READINGS section.
• You may want to keep some of these available to give to your American clients as you deem appropriate.
PROSPECT
APPROACH & QUALIFY
PRESENT
DEMONSTRATE
HANDLE OBJECTIONS
CLOSE
FOLLOW-UP
CUSTOMER
REAL, FALSE, STALLS
HOT PROSPECT
TRIAL & ACTUAL CLOSE
EFFECTIVENESS
NEEDS &
VALUE
QUALIFIED !FAB
COGNITIVE DISSONANCE
MARKETING DEPARTMENT LEADS
VS. COLD CALLS
Copyright A. Whitebread, 2001-2007.
CONTINUING CUSTOMER
THE SALES CYCLE [center] AND PROSPECT FUNNEL
HANDLING INQUIRIES
• Understand where you are in the sales cycle.
• When– should I acknowledge correspondence?– should I provide information?– should I refer the inquiry to a reseller?– should I check credit and other references?– should I provide a quote including terms?– should I send a sales person?
SECTION 3B: REVIEW
• You should now have knowledge of– Keys to success
• Knowledge, commitment, relationships, focus, negotiations: types, characteristics, tactics, and expressions
– Misconceptions about what an American firm can and can not legally do in international business.
– Export assistance• U.S. Departments of Commerce, State, Treasury and Agriculture,
World Trade Centers
– Bureau of Industry & Security, EAR, dual-use, anti-boycott, red flag indicators, lists to check
– Handling inquiries– Comparative business culture: Americans and You