international marketing section 1a introduction and objectives alan l. whitebread

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.


• 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.


• 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


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– 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?


• 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

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th ra

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tial,

…LO

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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

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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


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


– 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


– 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


– 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.


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



Sales ManagerProduct Group A

Sales Manager Product Group B


Manager


1. driven by product purchases

2. specialized sales force knowledge for specialized products

3. helps forecasting and production scheduling


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


1. 2. 3.


1. 2. 3.

MARKET / CUSTOMER STRUCTURE

VP Marketing



National Sales Manager

Major Accounts Manager


Manager

National Accounts OEM AccountsFederal

Government


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


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


Direct Marketing Manager



Manager

National Accounts

OEM AccountsFederal

GovernmentTelesales Manager

Direct Sales Managers

Reseller Sales Managers

Internet Sales Manager


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


Direct Marketing Manager



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


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.


• 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.


• 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.


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 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


– 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 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


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.


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.


• 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.


• 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

international marketing section 1a introduction and objectives alan l. whitebread

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