Company that failed due to lack of development. What practices could they use in the future for success?

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Research one company that struggled or failed at a particular endeavor because it did not follow best practices for development and marketing in the global business community. Write a 500 to 750 word essay describing how the company may improve their marketing strategies to be more successful in the future.

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1230_Ch03 11/13/08 10:17 AM Page 37 C H A P T E R 3 PLANNING AND NEGOTIATING TO WIN I f you have a marketable and profitable product or service that will sell in sufficient volume, you now are ready to commit resources (time and money) to the project. But before you do, make sure you complete the following homework steps: 1. 2. 3. 4. 5. 6. Develop a market plan Prepare for negotiations Understand the tips and traps of culture Consider intellectual property rights Learn about communications Get ready to travel Face up to the fact that international marketing is a step up from domestic marketing because it involves more complexity. The more countries, languages, and cultures with which you become involved, the more your planning will require special attention. Don’t hesitate to call in consultants and other experts to read over your plan and offer criticism. This can pay off and save you money in the long run. 37 1230_Ch03 38 11/13/08 10:17 AM Page 38 I m p o rt / E x p o rt The Market Plan You have determined that your project is viable; now write a long-range market plan, and then execute it. A market plan is simply a process, recorded on paper, that allows you to think through the many logical ways to reach buyers and convince them to agree to a sale. It is important to integrate the international market plan with the firm’s overall strategic business plan. See Chapter 6 (“How to Set Up Your Own Import /Export Business”) for details about how to write a business plan. Follow the following logical, step-by-step process to write your market plan: 1. Objectives: Examples: • Sales of $XXX,XXX by the end of the second year • Expansion into countries A and B by the end of the third year 2. Specific tactics: Examples: • Radio advertising in two cities • Three direct mailings to each company or person on a specific list • Develop an Internet Web site and advertise the address 3. Schedule of activities or action plan: Examples: • A list of trade shows indicating those that you will attend, including dates and duration of trips to visit overseas distributors, with their names, addresses, and phone numbers • Specific assignments of responsibility (an essential feature of an action plan) 4. Budget for accomplishing the action plan: • Include every conceivable cost associated with marketing the product. This is where most start-up firms underestimate. Initial marketing costs will be high. 1230_Ch03 11/13/08 10:17 AM Page 39 PL A N N ING A ND NE G OT I AT ING TO W IN Segmenting the Market Marketing segmentation enables an import /export organization to choose its customers and fashion its marketing strategy based both on identified customer wants and requirements, and on response to the startup’s specific desires and needs. You should visualize segmentation on both a macro and a micro level. Macro. From the Greek word makros meaning long. It is a combining form meaning large. Micro. From the Greek word mikros meaning small. A combining term meaning little, small, microscopic. Macro Segmentation Macro segmentation divides a market by such broad characteristics as industry shipments, location, firm size, and the like. An import macro segment might be dividing a city into marketing segments. On a larger scale, it might involve dividing the United States into regions, prioritizing those regions, and then developing a micro plan for each region. Export macro segments might include prioritizing of continents or of countries within a continent; better yet, export macro segments might sort by language, purchasing power, or cultural preference. Micro Segmentation Micro segmentation finds the homogeneous customer groups within macro segments and, therefore, attempts to find out who makes the decisions for each homogeneous group. Micro segmentation pinpoints where (by address) and who (by name) can say yes to a buying decision. From this analysis, a promotional strategy can be designed to target the decision-making units (DMUs). 39 1230_Ch03 40 11/13/08 10:17 AM Page 40 I m p o rt / E x p o rt An import micro segmentation might take the data from your market research effort and identify where the wholesalers are located. If you list and prioritize these decision makers by name and address, you would have a logical and specific plan of attack for your marketing effort. Your market plan and schedule should cover a three- to five-year period, depending on the kind of product(s) you market, your competitor(s), and your target market(s). Be sure to write this plan no matter how small the import /export project. Only when it is in writing will it receive proper attention and adequate allocation of funds. Executing the Market Plan Next comes the fun—putting the plan into action and actively marketing the product through trade shows, advertisements, television promotions, and direct mail, all in accordance with your budgeted plan. Remember that nothing happens in a business until something is sold. Personal Sales The two basic approaches to selling internationally for both imports and exports are direct and indirect sales. Using the direct sales method, a domestic manufacturing firm has its own marketing department that sells to a foreign distributor or retailing firm and is responsible for shipping the goods overseas. The indirect sales method uses a middleman, who usually assumes the responsibility for moving the goods. This is where your import /export business fits into the picture. You may sell directly to retailers or to distributors/wholesalers. Regardless of where your targeted DMU is in the market channel, keep in mind that international sales are just like domestic sales: someone makes personal contact and presents a portfolio, brochure, price list, and/or sample to decision makers (potential buyers) who can say yes. 1230_Ch03 11/13/08 10:17 AM Page 41 PL A N N ING A ND NE G OT I AT ING TO W IN H OT T I P aking sales requires persistence and determination. Follow up, and then follow up again. M Trade Shows (Fairs) If you’re attending a trade fair or show for the first time, consider using it as the keystone of your sales trip. Allow time afterward to visit companies you meet at the fair. The international trader attends trade shows for five basic reasons: 1. 2. 3. 4. 5. To To To To To make contacts identify products for import or export evaluate the competition (often done without exhibiting) find customers and distributors for import or export build sales for existing distributors H OT T I P S : T R A D E FA I R S • If you are exhibiting to sell, don’t over commit. You may get more busi• • • • ness than you can handle reasonably. If you are searching for products to impor t, don’t buy until you have done your homework! Take more business cards to the trade show than you think you will need. Have your fax number, Web site, and e-mail address on your card. Obtain language translation/interpreter help from a local university or college. If you are exhibiting to sell, consider prior advertising to let potential customers know that you will be there. 41 1230_Ch03 42 11/13/08 10:17 AM Page 42 I m p o rt / E x p o rt Trade Missions Trade missions are trips made for the express purpose of promoting and participating in international trade. State, province, and local governments organize several kinds of trade missions for exporters. Special Missions These are organized and led by government officials with itineraries designed to bring you into contact with potential buyers and agents. You pay your own expenses and a share of the costs of the mission. Seminar Missions Similar to the specialized trade mission, seminar missions add several one- or two-day technical presentations to the trip by a team of industry representatives. Industry-Organized, Government-Approved Trade Missions Though these missions are organized by chambers of commerce, trade associations, or other industry groups, government officials often provide assistance prior to and during the trip. Catalog Shows and Video/Catalog Exhibitions These are the least expensive way to develop leads, to test markets, and to locate agents because you don’t have to be there. You simply send along product catalogs, brochures, and other sales aids to be displayed at exhibitions organized by governments and consultants. Video/catalog exhibitions are ideal for promoting large equipment and machinery which are costly to ship. 1230_Ch03 11/13/08 10:17 AM Page 43 PL A N N ING A ND NE G OT I AT ING TO W IN Trade Show Central This is a free Internet service that provides information on more than 50,000 trade shows, conferences, and seminars. It has 5,000 service providers and 8,000 venues and facilities around the world (www. Advertising All companies advertise to communicate with customers. Exporters and importers must ask themselves whether advertising is both important to sales and affordable. The assistance of an agency familiar with the market environment you wish to target could be critical to the success of your advertising campaign. Some countries do not carry television and radio advertising. Additionally, cultural differences often require more than a simple translation of promotional messages. In countries where illiteracy is high, you may prefer to avoid written forms of advertising such as magazines and concentrate instead on outdoor advertising such as billboards, posters, electric signs, and street car or bus signs. These reach wide audiences in most countries. Distributors A distributor is a merchant who purchases merchandise from a manufacturer at the greatest possible discount and then resells it to retailers for profit. The distributor carries a supply of parts and maintains an adequate facility for servicing. The distributor buys the product in its own name, and payment terms are often arranged on a credit basis. A written contract usually defines the territory to be covered by the distributor, the terms of sale, and the method of compensation (see “Avoiding Risk” in Chapter 5). The work is usually performed on a commission basis, without assumption of risk, and the representative may operate on either an exclusive or a nonexclusive basis. The contract is established for a specific time frame such that it may be renewable based on satisfactory performance. 43 1230_Ch03 44 11/13/08 10:17 AM Page 44 I m p o rt / E x p o rt As with domestic sales, foreign retailers usually buy from the distributor’s traveling sales force, but many buy through catalogs, brochures, or other literature. Importers and exporters seldom sell directly to the end user. It is not recommended because: (1) it is time consuming, and (2) it leads to goods being impounded or sold at auction when the buyer doesn’t know his or her own trade regulations. Overseas Trader’s Checklist What you want from a foreign representative is: • • • • • • • • • • • • A solid reputation with suppliers and banks Financial strength Experience with the product or a similar product A sales organization Modern communications such as Internet, fax, and so on A sales record of growth Customers Warehouse capacity After-sales service capability Understanding of regional culture and business practices Knowledge of both English and the language of the country Knowledge of marketing techniques (promotion, advertisement, etc.) Trading Partner’s Checklist What the foreign representative wants from you is: • • • • • • Excellent products Exclusive territories Training Parts availability Good warranties Advertising and merchandising support 1230_Ch03 11/13/08 10:17 AM Page 45 PL A N N ING A ND NE G OT I AT ING TO W IN • Credit terms, discounts, and deals • Commissions on direct sales by the manufacturer in the distributor’s territory • Minimum control and/or visits • Freedom to price • Dealing with one person • Security that the product will not be taken away once it is established in the territory • The right to terminate the agreement when he or she pleases Negotiations Bargaining is a custom to people of many nations. But culturally nothing comes less naturally to Americans. The United States is a nation that operates on a fixed-price system, and most buyers have grown up with the notion of purchasing off the shelf at the price offered or not buying at all. Of course, comparative shopping is native to everyone’s buying psyche, so when the international stakes and the competition increase, often companies from nations that are born cultural negotiators begin to force your hand. Your instincts should provide some basis for taking the right action and you can make the right moves if you prepare. An agent/distributor contract should be considered and should include issues of industrial property rights, territory covered (exclusive and nonexclusive contracts), the problems of terminating the contract, and the possibility of the host country switching from contract laws to labor laws according to the comparative size of the principal’s company and distributor’s company. Preparations Unfortunately, all too many people wander into international bargaining situations with no plan and no idea of how to proceed. For some, lack of preparation is the result of a sense of superiority, but for most it’s pure ignorance about the number and competence of the ferocious competitors out there scouring the world for scraps of business. 45 1230_Ch03 46 11/13/08 10:17 AM Page 46 I m p o rt / E x p o rt The first step in preparing for international negotiations is to develop a complete assessment of your firm’s capabilities. Analyze your strengths and weaknesses, particularly in terms of managerial skills, product delivery, technical abilities, and global resources. Next, analyze your target—the company or country you intend to sell your product to. Keep in mind that the human and behavioral aspects of your negotiations will be vital. For example: • Understand the place in the world where you will be traveling. • Know its culture, history, and political processes. • Play particular attention to the importance of face-saving to the people of the country where you will be negotiating. • What is the host government’s role in negotiations? • How important are personal relations? • How much time should you allow for negotiations? • Be sure that the final agreement specifies terms for the cost, quality, and delivery of the product. Quality can be assured only by inspection of the actual product, but cost and delivery terms are the result of a quote agreed to by the seller. In Japan, young executives role-play negotiations before they make an initial quote. They form teams, sit around a table with a chalkboard nearby, and pretend to negotiate the deal. Each team has a set of negotiating alternatives related to the country they are pretending to represent. Sometimes they cut their offer price by 10 percent; if that doesn’t work, they cut it by another 5 or 10 percent. Other ploys are: (1) offering loans with lower interest rates than their competitors; (2) offering better aftersales service warrantees; or (3) providing warehouses for parts. Sometimes even the cost of advertising can make the difference in the sale. Agreeing to a Contract After obtaining the initial quotations as explained in Chapter 2, the next step in any international business arrangement is to reach an agreement or a sales contract with your overseas partner. 1230_Ch03 11/13/08 10:17 AM Page 47 PL A N N ING A ND NE G OT I AT ING TO W IN Negotiating is integral to international trade, and an importer/ exporter should be ready to offer or ask for alternatives using simple letters, faxes, or e-mails. In the highly competitive international business world, a trader’s ability to offer reasonable terms to customers may mean the difference between winning and losing a sale. Exporters are finding it increasingly necessary to offer terms ranging from cash against shipping documents to time drafts, open accounts, and even installment payments spread over several years. More sophisticated business arrangements such as countertrade, which includes barter, product buyback, counterpurchase, and after-sales service, are also negotiables. Figure 3.1 illustrates the concept. Figure 3.1 Countertrade IMAGE AND/OR TEXT OMITTED PER PUBLISHER -- ProQuest 47 1230_Ch03 48 11/13/08 10:17 AM Page 48 I m p o rt / E x p o rt Countertrade. A general international trade term for a variety of methods to conduct reciprocal trade in which the seller is required to accept goods or other instruments of trade, in partial or whole payment for its products. Barter. Trade in which merchandise is exchanged directly for other merchandise without the use of money. Product buyback . Principally applicable for the construction and supply of plant and equipment. Major characteristic is its long-term aspect. Counterpurchase. One of the most common forms of countertrade in which the seller receives cash but contractually agrees to buy local products or services as a percentage of cash received and over an agreed period of time. The trader must have a list of alternatives ready. Keep negotiations open and don’t firm them up on paper until a general agreement has been reached. The following is a partial list of alternatives and conditions you may wish to consider during negotiations: • • • • • • • Quantity price breaks (don’t offer just one price) Discounts for cash deals or even down payments Offer countertrade to those countries short on foreign exchange Guaranteed loans Low-interest loans Time payments Home factory trips for training Let your banker, freight forwarder, or customs house broker review the final offer or quotation. A second pair of experienced eyes can save you money. (See Chapters 7 and 8, respectively, for an explanation of the freight forwarder and customs house broker.) 1230_Ch03 11/13/08 10:17 AM Page 49 PL A N N ING A ND NE G OT I AT ING TO W IN Foreign Corrupt Practices Act (FCPA) During your negotiations, make sure you stay on the right side of the Foreign Corrupt Practices Act (FCPA) of 1977, amended by the International Anti-Bribery and Fair Competition Act of 1998. In essence, this act makes it illegal for companies to bribe foreign officials, candidates, or political parties. Make certain that everything in the contract has a price. Don’t get caught making illegal payments or gifts to win a contract or sale. Two kinds of penalties can be imposed for violation of the FCPA, criminal and civil. Criminal Penalties The following criminal penalties may be imposed for violations of the FCPA’s antibribery provisions. Corporations and other business entities are subject to a fine of up to $2 million. Officers, directors, stockholders, employees, and agents are subject to fines of up to $100,000 and imprisonment for up to five years. Moreover, fines under the Alternative Fines Act may be quite a bit higher; the actual fine may be up to twice the benefit that the defendant sought to obtain by making the corrupt payment. You should also be aware that fines imposed on individuals may not be paid by their employer or principal. Civil Penalties The U.S. Attorney General or the SEC, as appropriate, may bring a civil action for a fine of up to $10,000 against any firm as well as any officer, director, employee, or agent of a firm, or stockholder acting on behalf of the firm, who violates the antibribery provisions. The specified dollar limitations are based on the egregiousness of the violation, ranging from $5,000 to $100,000 for a natural person, and $50,000 to $500,000 for any other person. The law does not address itself to “facilitating payments,” those small amounts used to e ...
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