The Data Institute Acquisition Manual

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ACQUISITION MANUAL for THE TARGET COMPANY

6
Corporate Development
7
Product Management
8
Overseas Development
9
Product Distribution & Service
10
Advertising + P.R.
16
New Technology Primers
17
Physical Process & Orders
18
Competition Analysis
19
Product Perceptions
20
Customer Perceptions
Financial
Industry
Markets
Products
Data Grids
World MDB
Research MDB
Product MDB
Corporate MDB
Reference MDB

Volume
8

 

Overseas Development Guide

Exports of products and services will help the Company to defuse the risks inherent in concentrated national customer bases and the development of new geographic markets will inevitably produce long term turnover improvements.

Xenophobia often serves the prejudices and purposes of sales management who, wrongly, plead the inaccessibility of overseas markets.

Problems associated with the development of overseas markets for the Company are presented (by country) in this section. In total over 200 countries are covered.

One market spreadsheet per country analyzed is given in this section. The full World Overseas Development Guide is called a "Market Manual" and is a separate document of some 900 pages.

Resource and cash availability coupled with economic growth is implicit to the attractiveness of any overseas market, thus this section provides details of macro-economic activity and factors.

Turnover Improvement through Overseas sales scenarios are also shown to demonstrate the financial impact of overseas markets on company profit and loss and / or the overall benefits of capacity utilization through the sales of obsolete or die-hard products in less developed countries.

  1. Overseas Development Scenarios

  2. Overseas Development Strategy

  3. Guide to over potential overseas target markets

  4. Manuals

 

KEY TOWNS & CITIES IN THE DATABASE

 

COUNTRIES IN THE DATABASE

 


 

 

1

Overseas Development Scenarios:

 

 

Market & Revenue Comparisons:  Scenarios

 

Target Company

Base Reference Market

 
   Market Definitions  

 

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 

 

 Financial Definitions

 

 

 

2

Overseas Development Strategy:

 

OVERSEAS DEVELOPMENT


Overseas development does not involve any new principles not found in domestic marketing, but nevertheless it deserves special attention because of:

1) its growing importance as an area of marketing opportunity, and
2) its greater level of risk and uncertainty stemming from the Export Manager's unfamiliarity with other cultures.

Doing business abroad requires learning about quite different economic, political, and cultural environments. The Overseas Director should make a decision in favour of overseas marketing only when both the opportunities appear attractive relative to those at home and the resources are available for carrying out overseas development.

In entering overseas marketing, the first step is to compare the various foreign markets and make market selections on the basis of a hard evaluation of the probable rate of return on investment. Given an attractive market, it can be entered in three ways: export, joint venturing, and direct investment. Many companies start as exporters, move to joint venturing, and finally undertake direct investment as their overseas business expands. A few become multinational corporations with worldwide markets and operating strategies. Companies must also decide on the extent to which their products, communications, distribution and pricing should be adapted and individualized to individual foreign markets. Finally, they must develop an effective organization for pursuing overseas development. Most firms start with an export department and graduate to an overseas division. A few pass this stage and move to a multinational organization, which means that worldwide marketing is planned and managed by the top officers of the corporation.

Most of the Company's executives still think of their market as customers located in their own country; and ordinarily, most firms would prefer home marketing to foreign marketing. Home marketing is generally simpler and safer. The businessmen do not have to learn another language, deal with a different currency, face political and legal uncertainties, adapt the product to a different set of needs and expectations, and so on. There are, in fact, only two factors that might draw one into overseas development. First, one might be pushed into it by the general lack of opportunity in the home market; where the potential national opportunities may be low or growing very slowly, or one's own government may be anti-business or tax heavily. Second, one might be pulled into it by great and inviting opportunities for one's product in other countries. Without necessarily abandoning the home market, one may find other markets an attractive place to make a profit even after discounting the extra encumbrances and irritations one might face in operating abroad.

One may ask whether overseas development involves any new principles that have not been examined as part of effective marketing management in general. After all, a foreign market consists of consumers, producers, resellers, and governments buying products and services. These buyers have to be researched, and products, prices, promotion, and distribution adapted to their needs. Overseas development would seem to pose no new problems not already faced by the seller who is trying to market successfully in different regions within his country. Our justification for a separate treatment lies not in propounding any new principles, as the steps, concepts, and techniques for effective marketing management are the same, but the justification lies in the fact that differences between nations are typically more striking than regional differences within one country. The Export Manager must master special environmental factors and institutions and be prepared to drop some of his most basic assumptions about market operations and even "human nature." The discussion that follows is designed to sensitize him to the special factors and problems faced in taking his product abroad.


 

OVERSEAS ENVIRONMENTS


The one hundred and seventy-odd nations of the world differ greatly in the kind of goods and services they are ready to use. A nation’s readiness for different products and services, and its general attractiveness as a market to foreign firms, depends on its economic, political-legal, cultural and business environment.


1. ECONOMIC ENVIRONMENT

The nations of the world exhibit great variation in industrial structure and national income, both of which critically influence the goods and services they are likely to need and their ability to buy.

 

i.

Economies classified according to industrial structure

It is useful to distinguish among five types of industrial structure that a nation can have:

 

a.

Subsistence economies

In a subsistence economy the vast majority of people are engaged in simple agriculture. They consume most of their output and sell what surplus they have in order to buy simple goods and services. For obvious reasons, they offer few opportunities for exporters.

b.

Raw-material exporting economies

These economies are rich in one or more natural resources but poor in other respects and much of their revenue comes from exporting these resources. These countries are good markets for extractive equipment, tools and supplies, materials-handling equipment, and vehicles. Depending on the number of foreign businessmen and wealthy native rulers and landholders, they are also a market for Western-style commodities and luxury goods.

c.

Industrializing economies

In an industrializing economy, manufacturing is beginning to play a role of some importance, probably accounting for somewhere between 10 and 20 percent of the country's gross national product. As manufacturing increases, the country relies more on imports of textile raw materials, steel, and heavy machinery, and less on imports of finished textiles, paper products, and automobiles. The industrialization tends to create a new rich class and a small but growing middle class, both demanding new types of goods, some of which can be satisfied only by imports.

d.

Industrial economies

Industrial economies have built up their industrial base to the extent that they become exporters of manufactured goods and investment funds. They trade manufactured goods among themselves and also export them to other types of economies in exchange for raw materials and semi-finished goods. The large and varied manufacturing activities of these industrial nations and their sizable middle class make them rich markets for all sorts of goods.

e.

Post-Industrial economies

Industrial economies which have built up their industrial base to the extent that they have become un-competitive as exporters of manufactured goods and are net consumers. They trade in manufactured goods imports and also export services to other types of economies in exchange for manufactured goods. The large and varied service activities of these post-industrial nations and their sizable per capita wealth make them rich markets for all sorts of goods.


THE TRADE CELL

Target Company
Base Reference
EXPORT PRODUCT TARGETING

Subsistence Countries

Raw-Material Exporting Countries

Industrializing Countries

Industrial Countries

High Technology Countries

Performance Grid Definitions

 


Target Company
Base Reference
EXPORT TARGETING

Subsistence Economy

Raw-Material Exporting Economy

Industrializing Economy

Industrial Economy

High Technology Economy

Performance Grid Definitions


 

ii.

Economies classified according to National Incomes

The products and services consumed by a nation are also affected by its level and distribution of national income. These products can be distinguished for five different national income profiles:

 

a.

Very low family incomes

Subsistence economies tend to be characterized by very low family incomes. The families spend long hours at hard work giving only a bare living from the soil and home-grown food and homemade clothing and simple services constitute the bulk of consumer goods and services.

b.

Mostly low family incomes

Economies that are seeking industrialization along certain lines are characterized by low family incomes to allow as much as possible for capital formation. Most consumer goods are produced domestically by state owned enterprises. These nations present some opportunities for trade.

c.

Very low, very high family incomes

Several countries of the world are characterized by extremes of income, where most of the population is very poor and a small minority is very rich. This makes the market for certain products very bizarre as the masses live on subsistence farming, supplemented by the import of needed foodstuffs & textiles and the rich live on the import of expensive cars, appliances and Western amenities.

d.

Low, medium, high family incomes

Industrialization tends to be accompanied by the rise of a middle class. The very low and very high income classes tend to persist along with their distinct consumption patterns. The middle class is able to afford basic necessities and have something left over to purchase amenities.

e.

Mostly medium family incomes

The advanced industrial nations tend to develop institutions that reduce the extremes of income. The result is a large and comfortable middle class confronted with a wide array of branded products, able to own automobiles and major appliances, as well as to enjoy leisure and take vacations.



2. POLITICAL-LEGAL ENVIRONMENT

Nations differ greatly in the attractiveness of their political-legal environment for imports and foreign investment. At least four factors should be considered by the industry when evaluating whether to do business in another country.
 

a.

Attitudes toward international buying

Some nations are very receptive, indeed encouraging to foreign firms, while others are very hostile. As an example of the former, Mexico for a number of years has been attracting foreign investment by offering investment incentives, site-locations services and a stable currency. On the other hand, India has required the firm to deal with import quotas, blocked currencies, stipulations that much of the management be nationals - and so on.

b.

Political stability

One must consider not only the host country's present political climate but also its future stability. Governments change hands, sometimes quite violently. Even without a change in government, a regime may decide to respond to new popular feelings. At worst, the foreign company's property may be expropriated; or its currency holdings may be blocked; or import quotas or new duties may be imposed. Where political instability is high, the international manager may still find it profitable to do business with the host country, but the situation will affect his mode of entry. One will tend to keep foreign stocks low and will convert currency rapidly. As a result, those in the host country end up paying higher prices, have fewer jobs, and get less satisfactory products.

c.

Monetary regulations

The company wants to realize profits in a currency of value to them. In the best situation, the foreign buyer can pay them either in the seller's currency or in hard world currencies. Short this, the Export Manager might accept a blocked currency if he can buy other goods in that country that he needs in his operation or that he can sell them for a currency he needs. In the worst case he has to take his money out of the host country in the form of relatively unmarketable products that he can sell elsewhere only at a loss. Besides currency restrictions, a fluctuating exchange rate also leads to unusual risks for the exporter.

d.

Government bureaucracy

A fourth factor is the extent to which the host government runs an efficient system for assisting foreign businessmen; efficient customs handling procedures, market information, and other factors conducive to doing business. Perhaps the most common shock to businessmen is the extent to which various impediments appear to stand in their way, all of which disappear if a suitable payment (bribe) is made to some official(s).

 


3. CULTURAL ENVIRONMENT

Perhaps the most difficult aspect of overseas development is to grasp the host country's cultural nuances. Businessmen abroad have different buying and selling styles:

South Americans are accustomed to talking business in close physical proximity with others, in fact almost nose to nose. One may retreat, the South American pursues, both end up being offended.

In face-to-face communication Japanese businessmen rarely say "No" to a businessman - who is thus frustrated, he doesn't know where he stands. Western businessmen tend to come to their point quickly and directly in business dealings and alas, Japanese businessmen tend to find this offensive.

In France, wholesalers just do not care to promote a product; they simply take the retailer's order, and then delivers it. What if a company builds its strategy around the French wholesaler?


Consumers also offer many surprises:
Does the average Frenchman uses almost twice as many cosmetics and beauty aids as does his wife?
Do the Germans and the French eat more spaghetti than the Italians?
Are French & Italian housewives not as interested in cooking as their counterparts in Germany & Belgium?



Each country (and even regional groups within each country) has cultural traditions, preferences, and taboos that must be carefully studied by the Export Manager.


 

OVERSEAS DECISIONS


In considering overseas development the industry face five major types of decisions:

1)

The international marketing decision determines whether the foreign opportunities and the firm's resources are attractive enough to justify a general interest in marketing abroad.

2)

The market-selection decision determines which foreign markets to enter.

3)

The entry and operating decision determines the best way to enter and operate in an attractive foreign market.

4)

The marketing-mix decision develops an appropriate product, price, distribution and promotion programme for that market.

5)

The marketing-organization decision determines the best way for the firm to achieve and maintain control over its international business operations.


As for the overseas development decision, firms get involved in international marketing in two ways. In some cases the firm is approached by someone - a domestic exporter, a foreign importer, a foreign government. Or the firm may start to think on its own about overseas development, because perhaps it faces overcapacity; or perhaps it forecasts better opportunities abroad than at home.

It must then determine two basic questions:

    The first is, whether overseas opportunities are sufficiently attractive to justify further investigation?

    The second is, whether the company has, or can obtain, the resources and capabilities to market abroad?

Assuming these two conditions are satisfied, the firm has to define its international marketing objectives and policies:

    Will foreign marketing be a minor or major part of its business?

    Will the firm seek to market in a few countries or many countries?

    Will it simply sell its present products abroad or will it try to create new and appropriate products needed by these other countries?

    Will it prefer medium-return, medium-risk situations or high-return, high-risk situations?


 

EXPORT IMPROVEMENT EFFECT FORECASTS


This section analyses the effects of an Export Improvement programme and its inherent expenditure in terms of the industry's Financial and Operational results.

Export Improvement can bring almost instantaneous results in terms of turnover and profitability and in general terms the investment involves both short-term tactical projects in overseas markets as well as medium-term expenditure on distribution channels and marketing costs in those markets.

The Export Improvement Scenario Financial and Operational Data forecasts given make the following assumptions:-

1. Forecasts are based on all external factors:-

   a. Market Growth (Medium + Long Term)
   b. Competitive Market Factors
   c. Competitor + Industry Environment Factors

2. Forecasts assume ceteris paribus in terms of internal factors with the exception of an Export Improvement programme and its expenditure which is assumed to increase by a rate equivalent to 5% of Turnover per year.

3. Forecasts assume changes in Market Competitors. The forecast assumptions use Competitor databases to forecast changes in competitive situations which will affect the Company and includes the Competitor response (in Export Terms) to the scenario shown.

 

Export Sales Improvement


 

MARKET SELECTION DECISIONS
 

The industry should have some orderly procedure for ranking the various markets it might enter.

The market choice seems relatively simple and straightforward. Yet one can question whether the reason given for selecting a particular country - the compatibility of its language and culture - should have been given this prominence. One might propose that market selection should utilize a rate of return on investment framework. Five steps are involved:
 

i.

Estimate of current market potential

The first step is to estimate current market potential in each candidate market. This marketing research task calls for using existing published data supplemented by primary data collection through company surveys and studies of various kinds. The message is that foreign marketing research is more difficult, as a general rule, than domestic market research, for at least four reasons.

    1)  Published census and market data are usually scarce and somewhat unreliable in several countries.
    2)  Many trade associations do not make their data public.
    3)  Marketing research firms are not always of high quality.
    4)  Buyers in other countries are less used to co-operating in interviews.

ii.

Forecast of future market potential

The firm also needs a forecast of future market potential. This is complicated because the market analyst is usually insufficiently versed in the economic, political, cultural and business currents of another country. Many foreign countries do not show the stability of government, currency or law that company’s own country may show.

iii.

Forecast of market share

The difficulties of forecasting market shares are compounded in a foreign marketing environment. The Export Manager will find himself competing against other foreign marketeers as well as against home country firms. He has to estimate how the buyers will feel about the relative merits of his product, selling methods and company. Even if the buyers are impartial, their government may put up barriers in the form of quotas, tariffs, taxes, specifications or even outright boycotts.

iv.

Forecast of costs and profits

Costs will depend on the contemplated entry strategy. If one resorts to exporting or licensing, costs will be spelled out in the contracts. If one decides to locate processing facilities abroad, cost estimation will require an understanding of local labor conditions, taxes, trade practices, and stipulations regarding the hiring of nationals as key employees. After estimating future costs, one subtracts them from estimated sales to find the profits for each year of the planning horizon.

v.

Estimate of rate of return on investment

The forecasted income stream must be related to the investment stream to derive an implicit rate of return. The estimated rate of return should be high enough to cover:

    1) the industry's normal target return on its investment, and
    2) the risk and uncertainty of marketing in that country.

The risk premium has to cover not only the chance that the basic estimates of sales and costs may be wrong but also the chance that unanticipated monetary changes (devaluation, blocked currency) and political changes (future discrimination against foreigners) or even expropriation may occur.


 

ENTRY DECISIONS


Once the industry decide that a particular foreign market represents an attractive opportunity, its task is to determine the best mode of entering that market and here it has three major options: exporting (home processing and selling abroad), joint venturing (joining with foreign companies in some way), or direct investment abroad.


1. EXPORT

The simplest way for a supplier to get involved in a foreign market is to arrange to sell some of their present output abroad. They may or may not modify the product for the foreign market. Exporting allows them to enter foreign markets with a minimum of change in the product line, company organization, investment, or company mission.
 

i.

Indirect export

The seller can enter the exporting field in two broad ways. He can hire independent overseas marketing distributors (the indirect method), or he can assume direct responsibility for selling to the foreign buyers or importers (the direct method).

The indirect method is the more popular for the firm that is just beginning its overseas exporting activity. First, it involves less investment as the firm does not have to develop an overseas salesforce or set of contacts. Second, it involves less risk as overseas marketing distributors presumably bring know how and services to the relationship and the seller should make fewer mistakes.

Three types of domestic distributor arrangements are available to the exporter. They may engage a domestic-based export agent, whereby the distributor obtains the supplier's product and sells it abroad on his own account. Thus the supplier is relieved of all aspects of the international marketing task because they make his sales simply to the export agent. Or they may engage in a domestic-based export agent and in this case the supplier retains some of the chores and all the risk, because the agent simply agrees to seek overseas buyers for a commission. Finally, they may join a co-operative organization that carries out exporting activities on behalf of several producers and is partly under the administrative control of the supplier. This form is often used by producers of primary products for overseas selling. Another form consists of a piggyback arrangement between two or more domestic suppliers trying to develop a complementary overseas product line.

ii.

Direct export

Sellers who are approached by foreign buyers will most likely undertake direct export instead of paying service charges to distributors. So will larger sellers or those whose market has grown to sufficient size to justify undertaking their own export activity. The investment and risk are somewhat greater, but so is the potential return.

Here, too, there are several ways in which the industry can carry on direct exporting activities. It may set up a domestic-based export department consisting of an export sales manager with some clerical assistants. This department does the actual selling and draws on the regular company departments for marketing assistance in advertising, credit, logistics, and so on. Or it may graduate to a self-contained export department or sales subsidiary carrying out all the activities involved in export, and possibly having distinct profit responsibility. The company might set up an overseas sales branch (or subsidiary) in addition to, or instead of, a domestic export department. An overseas sales branch allows the supplier to achieve greater presence and supervision in the foreign market. The sales branch handles sales distribution, and/or warehousing and promotion as well. It often serves as a display centre and customer service centre. Still another alternative is the use of traveling export salesmen. The company can decide to have one or more home-based salesmen travel abroad at certain times to take orders or find business. Or direct exporting may involve contracting with foreign-based distributors or agents to sell the company's goods. Distributors would buy his goods; agents would sell on his behalf. In either case they may be given exclusive rights to represent the supplier: that is, they act as the sole importer. Or they may be given general rights.




2. JOINT VENTURING

A second broad method of entering a foreign market is to join with nationals of the foreign country to set up process and marketing facilities. Joint venturing differs from exporting in that a partnership is formed that leads to some process facilities abroad, and it differs from direct investment in that an association is formed with someone in that country. Four types of joint venture can be distinguished:
 

i.

Licensing

This is a comparatively simple way for a firm to become involved in overseas markets. The licenser offers a license in the foreign market, offering the right to use a process, trademark, or other item of value for a fee or royalty. The licenser gains entry into the market at little risk; the licensee gets production expertise, or a well-known product or name, without having to start from scratch.

Licensing has potential disadvantages in that the firm has less control over the licensee than if it had set up its own process facilities. Furthermore, if the licensee is very successful the firm has forgone these profits, and if and when the contract ends, it may find it has set up a competitor. To avoid these dangers the licenser must establish a mutual advantage in working together and a key to doing this is to remain innovative so that the licensee continues to depend upon him.

ii.

Contract production

Instead of licensing a foreign company to produce and market its products, the firm may wish to retain the marketing responsibility. Yet, it may not be ready to invest in its own foreign facilities. Under these conditions, an excellent option is to contract with local suppliers to produce the product.

Contract processing has the drawback of less control over the process and the loss of potential profits on processing. Conversely, it offers the supplier a chance to get started faster, with less risk and with the possibility to form a partnership or buy out the local firm if the venture is profitable.

iii.

Management contracting

Where the firm agrees to supply the management know-how to a foreign company that will supply the capital. Thus, the firm is really exporting management services rather than its own products.

Management contracting is a low-risk method of getting into a foreign market and it starts yielding income right from the beginning. The arrangement is especially attractive if the contracting firm is given an option to purchase some share in the managed company within a stated period. On the other hand, the arrangement is not sensible if the company can put its scarce management talent to better uses if there are greater profits to be made by undertaking the whole venture. Management contracting prevents the company from setting up its own operations for a period of time.

iv.

Joint-ownership ventures

An increasingly popular arrangement is for foreign investors to join with local investors to create a local business in which they share joint ownership and control. The foreign investor may buy an interest in a local company, a local company may buy an interest in an existing operation of a foreign company, or the two parties may form a new business venture.

From the point of view of the foreign investor, a joint venture may be necessary or desirable for economic or political reasons. Economically, the firm may find it lacks the financial, physical, or managerial resources to undertake the venture alone. Or the foreign government may require joint ownership with local companies as a condition for entry.

Joint ownership can have certain drawbacks for the foreign firm. The partners may disagree over investment, marketing, or other policies. Whereas many Western firms like to reinvest earnings for growth, local firms often like to pay out these earnings. Whereas Western firms tend to accord a large role to marketing, local investors may see marketing as simply selling. If the Western firm has only a minority interest, then its views are overruled in these disagreements. Furthermore, joint venturing can hamper the plans of a multinational company seeking to carry out specific processing and marketing policies on a worldwide basis. The agreement may also make it difficult for the foreign firm to enter other markets where its partner already operates.


Target Company
Base Reference
OVERSEAS DEVELOPMENT STRATEGY

Export : Indirect

Export : Direct

Joint Ventures : Investment Based

Joint Ventures : Local Investment Based

Direct Investment 

Performance Grid Definitions


Target Company
Base Reference
MARKET DEVELOPMENT STRATEGY

Import : Indirect

Import : Direct

Joint Ventures : Investment Based

Joint Ventures : Local Investment Based

Direct Investment

Performance Grid Definitions



3. DIRECT INVESTMENT

The ultimate form of involvement in a foreign market is investment in foreign-based assembly or processing facilities. Companies just starting out in the market would be well advised to avoid this scale of participation at the outset. However, as experience is gained through export channels and if the foreign market appears large enough, foreign production facilities offer distinct advantages. The industry may secure these advantages partially through licensing or joint-ownership ventures, but if it wants full control (and profits), it may give serious consideration to direct investment.

The advantages of direct investment are several.

First, the firm may secure real cost economies in the form of cheaper labor or raw materials, foreign government investment incentives, freight savings, and so on.

Second, the firm will gain a better image in the host country because it demonstrates its concern with that country's future.

Third, the firm develops a deeper relationship with government, customers, local suppliers, and distributors, enabling it to make a better adaptation of its products to the local marketing environment.

Fourth, the firm retains full control over the investment and therefore can develop processing and marketing policies that serve its long-term overseas objectives.

The main disadvantage is that the firm has exposed a large investment to certain risks, such as blocked or devalued currencies, worsening markets, or expropriation. In some cases, however, the firm has no choice but to accept these risks if it wants to operate effectively in the host country.



4. MULTINATIONAL MARKETING

We have been examining the nature, advantages, and disadvantages of different modes of entry into a particular foreign market that appear attractive. If the company eventually gets involved in several foreign markets, it will want to begin thinking about its entire system for operating abroad rather than making ad hoc adaptations in each individual market. In fact, it may stop thinking of itself as a national seller who ventures abroad and instead as a global seller who operates in many countries, including the home country. At this point the company begins to think about developing a worldwide network of process facilities and serving a plurality of markets through a global marketing strategy. Such companies are called multinational corporations:

The multinational corporation is defined as a company which has a direct investment base in several countries, which generally derives from 20 - 50 percent or more of its net profits from foreign operations, and whose management makes policy decisions based on the alternatives available anywhere in the world.


 

MARKETING-MIX DECISIONS


Companies that operate in one or more foreign markets must decide how much, if at all, to adapt their product and marketing mix to local conditions.


1. PRODUCT AND PROMOTION

There are five possible strategies involving the adaptation of product and marketing communications to a foreign market:

 

i.

Straight extensions

This means introducing the product in the foreign market in the same form and with the same communications that the company uses at home. The strategy is a tempting one because it involves no additional expense of research and development, processing retooling or setup, inventory control or marketing communication reprogramming.

ii.

Communication adaptation

The company introduces its unchanged product but modifies its communications. Logic rather than fancy is used in advertising copy in Scandinavia; big colored illustrations and terse copy in Spain; sex appeal is avoided in Pakistan; and a hundred other communication adaptations are made. The appeal of a communication-adaptation strategy is its relatively low cost of implementation.

iii.

Product adaptation

This involves altering the product to meet local conditions or preferences without altering the marketing communications. Many suppliers vary the size or contents of their foods, fertilizers, clothing, or appliances to meet local conditions. This strategy involves extra engineering and production cost but may be better than introducing an unaltered product possessing less appeal.

iv.

Dual adaptation

This involves altering both the product and the communications to increase the product's acceptability. Dual adaptation is an expensive strategy but is worthwhile if the target markets are large enough.

v.

Product invention

This involves creating a new product to meet a need in another country. Product invention would appear to be the costliest of all strategies, but the payoffs to the successful firm also appear to be the greatest.



2. PRICING

Suppliers often price their products lower for the foreign market than for the domestic market. This may be a response to lower incomes abroad, keener competition, or the use of the foreign market as a dumping ground for surpluses. Although the price quoted to agents abroad may be lower, these agents may not lower the retail price. Foreign distributors often prefer high unit margins, even though this leads to a smaller volume. They also like to buy on credit, although this increases the supplier's cost and risk.


Target Company
Base Reference
OVERSEAS MARKETING-MIX

Straight Extensions

Communication Adaptation

Product Adaptation

Dual Adaptation

Product Innovation

Performance Grid Definitions



3. DISTRIBUTION CHANNELS

The industry must take a whole-channel view of the problem of getting their products to the final users or consumers. They must see the channel of distribution as an integrated whole, from the supplier on one end to the final user or buyer on the other end.

The first link, seller's organization, supervises the channels and is part of the channel itself.

The second link, channels between nations, gets the products to the overseas markets.

The third link, channels within nations, is extremely pertinent. Too many suppliers think of their channels as ending with the channels between nations, and they fail to observe what happens to their product once it arrives in the foreign market. If the channels within the foreign market are weak or inefficient, then the target customers fail to achieve satisfaction and the company fails to achieve its international objectives.

With respect to consumer goods, within-country channels of distribution vary considerably from country to country. There are striking differences in the size distribution of retailing units.

For example, food channels in the USA are dominated by the large supermarket chain; in France, hyper-markets are progressing but food retailing is still serviced by small retailers; in India, food is sold mainly through thousands of individual tradesmen in open markets or in tiny shops.

Second, the services offered by retailers vary considerably, with much more personal attention and bargaining in countries such as India as compared with the USA.

Third, there tends to be greater specialization in the assortment of goods handled by retailers in the lower-income economies.

Fourth, the retailing system in other countries tends to be more stratified according to class structure; thus selecting the retailer is tantamount to selecting the social class the product will reach.

With respect to industrial goods, within-country channels in advanced countries resemble those found in the United States. In the less-developed countries, importers are strong and the foreign supplier must often leave his products in their hands. If they seek their own distributors, they must carefully sort out the good ones from the poor ones. Often they have to offer exclusive distribution to a local distributor, and their fate in this market is tied up with how well they make their choice.


 

DISTRIBUTION CHANNEL INVESTMENT EFFECT FORECASTS


This section analyses the effects of a Distribution Channel Improvement programme and its inferred expenditure in terms of the industry's Financial and Operational results.

Distribution Channel Investments can bring almost immediate results in terms of turnover and profitability and in general terms the investment involves both short-term tactical projects as well as medium-term expenditure on equipment and capital projects.

The Financial and Operational Distribution Channel Investment Scenario Data forecasts given make the following assumptions:-

1. Forecasts are based on all external factors:
  a. Market Growth (Medium + Long Term)
  b. Competitive Market Factors
  c. Competitor + Industry Environment Factors

2. Forecasts assume ceteris paribus in terms of internal factors with the exception of a Distribution Channel Improvement programme and its expenditure which is assumed to increase by a rate equivalent to 5% greater than the competitor average

3. Forecasts assume changes in Market Competitors. The forecast assumptions use Competitor databases to forecast changes in competitive situations which will affect the Company and includes the Competitor response (in Distribution Channel Terms) to the scenario shown.

 

Distribution Channel Improvement


 

ORGANIZATION DECISIONS


Firms manage their overseas activities in many different ways. The different organizational arrangements often parallel their degree of involvement and experience in international marketing and their overseas marketing objectives.


1. EXPORT DEPARTMENT

A firm gets started in overseas markets by responding to a few orders that come in unsolicited and at first it simply ships out the products. If its international sales expand, the firm organizes an export department consisting of a sales manager and a few staff. As sales increase further, the staff of the export department is expanded to include various marketing services so that it can go after business more aggressively and not depend on the domestic staff. If the firm moves beyond exports into joint ventures or direct investment, the export department will no longer serve these purposes.



2. INTERNATIONAL DIVISION

Many firms eventually become involved in a number of different overseas markets and ventures. A firm may export to one country, license to another, have a joint-ownership venture in a third, and own a subsidiary in a fourth, and it may eventually create an international division or subsidiary with responsibility for all of its overseas activity. The international division is headed by a manager who has goals and budgets and is given total responsibility for the firm's growth in the overseas market.

Overseas divisions are organized in a variety of ways. Usually the international division's corporate staff consists of functional specialists in marketing, processing, research, finance, planning and personnel. This staff will plan for, and provide services to, various operating units.

The operating units may be organized according to one or more of three principles. First, the operating units may be geographical organizations. For example, reporting to a division manager for different areas such as North America, Latin America, Europe, Africa, and the Far East. Each area manager is responsible for a salesforce, sales branches, distributors, and licensees in his area. Or the operating units may be product-group organizations, with a manager responsible for worldwide sales of each product group. They may draw on corporate staff area specialists for expertise on different areas. Finally, the operating units may be overseas subsidiaries, each headed by a manager and the various subsidiary managers report to the director of the international division.

A major disadvantage of the overseas-division concept is that the corporation's top management may think of it as just another division and never really get involved enough to fully appreciate and plan for global marketing. Top management may not give the division the attention it deserves, and in difficult times may deprive it of adequate supplies or budget.


3. MULTINATIONAL ORGANIZATION


Several firms have passed beyond the international-division organization into a true multinational. Thus top corporate management and staff are involved in the worldwide planning of processing facilities, marketing policies, financial flows, and logistical systems. The various operating units around the world report directly to the chief executive, not to the head of an overseas division. The company trains its executives in worldwide operations, not just domestic or international. Management is recruited from many countries; components and supplies are purchased where they can be bought cheaply; and investments are made where the anticipated returns are greatest.


Target Company
Base Reference
OVERSEAS ORGANIZATION

Export Department : Head Office Based

Export Department : Regionally Based

International Division : Regionally Based

International Division : Locally Based

Multinational Organization

Performance Grid Definitions


Target Company
Base Reference
MARKET ORGANIZATION

Export Department : Head Office Based

Export Department : Regionally Based

International Division : Regionally Based

International Division : Locally Based

Multinational Organization

Performance Grid Definitions


 

 

3

Potential Overseas Markets

 

Markets

CURRENCY DATA:  The currency figures given in this report are in U.S. Dollars.
If the Windows Regional Settings on your computer is set to a non-U.S. setting then the currency symbol ($) may appear in the local currency (, , , etc.).
Either reset your Regional settings, or alternatively read all currency figures in this report as being U.S. Dollars (US$).

 Market Definitions

 

Product Shares

CURRENCY DATA:  The currency figures given in this report are in U.S. Dollars.
If the Windows Regional Settings on your computer is set to a non-U.S. setting then the currency symbol ($) may appear in the local currency (, , , etc.).
Either reset your Regional settings, or alternatively read all currency figures in this report as being U.S. Dollars (US$).

 Market Definitions

 

Industry Norms

CURRENCY DATA:  The currency figures given in this report are in U.S. Dollars.
If the Windows Regional Settings on your computer is set to a non-U.S. setting then the currency symbol ($) may appear in the local currency (, , , etc.).
Either reset your Regional settings, or alternatively read all currency figures in this report as being U.S. Dollars (US$).

Industry Definitions

 

  
 

4

Data Manuals:

 

MANUALS

The following manuals are available on request:-

 


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