CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 6A
INTERNATIONAL MARKET RESEARCH
ALAN L. WHITEBREAD
MARKET RESEARCH OVERVIEW
Strategic Marketing for
Market Research
The collection and analysis of
data for market decisions about
COMPETITORS
MARKETS
PRODUCTS
RESPONDENTS
STRATEGY OPTIONS
Evaluation data for
-Strategy analysis
-Setting objectives
-New business analysis
Market Planning for
Market segmentation
Market share
Market potential
Competitive analysis
Product Management for
Ideas for new or enhanced products
Timing of product introductions
4 P's decisions
Product Development for
Product concept testing
End use testing
Sales techniques
Price testing
WHY USE MARKET RESEARCH?
• TO UNDERSTAND CUSTOMER & PROSPECT
NEEDS AND WANTS.
• TO IMPROVE THE CHANCE SUCCESS OF
NEW PRODUCTS.
• TO SELL MORE, PRICE BETTER, AND
IMPROVE ADVERTISING EFFECTIVENESS.
• TO GAIN EFFICIENCY [CUT COSTS].
REASONS FOR INTERNATIONAL
MARKETING RESEARCH
• The firm needs to understand any new
environment in terms of different
– business conduct and practices,
– cultures,
– levels and types of competition,
– product, service, package and other
requirements, and
– distribution systems.
ASSESSING FOREIGN MARKETS
1. Screen for [country / region] markets
2. Determine the size of potential markets
3. Determine potential company sales by
market
4. Conduct specialized research to improve
the firm’s position
ENTERING FOREIGN MARKETS:
FIVE INITIAL QUESTIONS
1. Which markets are the most attractive?
2. How large are those markets?
3. How intense is competition in those
markets?
4. How much business can I reasonably
expect to do in those markets?
5. Can I expect a sufficient return to
make it worth entering the market?
SOURCES OF INFORMATION:
IN-HOUSE
• The majority of corporate information
– Financial & marketing information systems
• Develop a list of items
– Executives based abroad, subsidiaries &
affiliates
• Face-to-face conversations increase
understanding and gain subtleties
SOURCES OF INFORMATION:
COMMERCIAL SOURCES
• Full-service research [give examples]
– Exploratory
• Understand the problem
• Define issues and hypotheses
– Descriptive
• Magnitudes
• Product potential, attributes, …
– Casual
• Test cause-and-effect relationships
• Test hypotheses about cause-and-effect
relationships
SOURCES OF INFORMATION:
COMMERCIAL SOURCES
• Research approaches / methodologies
– Observational
– Focus Group
– Survey
– Behavioral
– Experimental
• control groups, placebos, …
SOURCES OF INFORMATION:
COMMERCIAL SOURCES
• Specialized research for certain
techniques and markets
– personal interviews
– focus groups
– telephone or mail survey
– product tracking
– customer satisfaction measurement, ...
THE MARKET RESEARCH PROCESS
Clearly define
[1] the problem
and [2] the
research
objectives
Make
decisions
Develop the
research
plan
Present the
findings
Collect data
Analyze the
data
SOURCES OF RELIABLE DATA
• Library
– Use a full government repository
– D&B Exporter’s Encyclopedia [~184 countries]
– CIA World Factbook [2004 – 268 entities online]
• Internet
– Must be recognizable
– Beware of bias, limitations, and lack of
comparability
SECONDARY DATA
• SOURCES
– International organizations
• IMF, World Bank, WTO,
• UN Statistics Division
– See http://unstats.un.org/unsd/default.htm
• UN Agencies
–
–
–
–
World Bank Group
International Monetary Fund [IMF]
World Intellectual Property Organization [WIPO]
and more, see http://wipo.int/portal/index.html.en
or search for “WIPO home”.
SECONDARY DATA
• SOURCES
–
–
–
–
–
–
–
Governments
Trade [business] associations
Research firms standard reports
Periodicals / books
Numerous databases
Investment groups
University centers
U.S. SOURCES OF GOVERNMENT
ASSISTANCE
– U.S. Department of Commerce
• GLOBUS (Global Business Opportunities) offers
daily trade leads from the Trade Opportunities
Program (TOPS), as well as the Department of
Agriculture.
• GLOBUS also offers daily procurement activity
from the Defense Logistics Agency, the United
Nations, and the Commerce Business Daily leads.
• You can also explore USA Trade® Online and
EuroTrade Online for additional detailed
information.
U.S. SOURCES OF GOVERNMENT
ASSISTANCE
Export-Import Bank [EXIMBANK]
Foreign Agricultural Service [FAS]
Agency for International Development [USAID]
Overseas Private Investment Corporation
[OPIC]
SBA International Trade Center [ITC]
DOS Trade & Development Agency
Department of Transportation
Department of the Treasury
U. S. Trade Representative
Many, many more
EXPORT STATISTICS WEBSITES
• GOVERNMENT
• Export. Gov market research now includes the
Information Center data
• http://www.export.gov/mrktresearch/index.asp
• MARKET RESEARCH FIRMS and SOURCES
– Frost & Sullivan, Nielson, American Marketing
Association list of market research firms
• CONSULTING FIRMS
– McKinsey & Company http://www.mckinsey.com/
– A. T. Kearny http://www.atkearney.com/
INTERNATIONAL SOURCES OF
ASSISTANCE
•
•
•
•
•
•
•
•
•
The World Bank http://www.worldbank.org
The World Trade Organization http://www.wto.org
Regional trade organizations http://www.aseansec.org/
The United Nations http://www.un.org/en/databases/
OECD http://www.oecd.org
IMF http://www.imf.org
Various international organizations and associations
Other governments
Many, many more
SECONDARY DATA ISSUES
• USING DATA FROM EXISTING SOURCES
– Data was not gathered for the specific project
• MINIMAL COST AND EFFORT
• POSSIBLE PROBLEMS
–
–
–
–
accuracy / reliability
availability
timeliness
comparability of data / degree of fit
PRIMARY RESEARCH
• Used when good secondary data is not
available
• Provides accurate data for answers to a
given research problem
• Potential problems
– Difficulty in obtaining the data
– Cost
– Time to gather the data
DATA AND ITS USE
• QUALITATIVE DATA
• QUANTITATIVE DATA
•
•
•
•
•
•
•
•
•
Symbolic data
Only subjective data
Understand behavior
Evaluate reactions
Describe small groups of
subjects or individuals in
depth
• Exploratory role [generate
ideas and hypotheses]
• Depth and richness of
information
Numeric data
Objective data
Measure a market
Describe groups of
consumers [structured by
parameters]
• Extrapolate from a
sample to the general
population [market or
market segment]
• Representative data
INTERNATIONAL MARKETING
RESEARCH ISSUES
• Research design may be much more
complex
• Data collection costs may be much more
• The challenge of coordinating research
across multiple markets/countries and
languages can be very large.
• Understanding the results requires the
appropriate paradigm adjustments.
INTERNATIONAL MARKETING
RESEARCH ISSUES
• How do I compare markets to recognize
unique characteristics?
• Different techniques may be required to
study small or different markets.
• There is a lack of data consistency for a
given term.
– For instance, in the EU, there is not common
definition for any of the following terms.
• Educational level, marital status, and social class
among others
INTERNATIONAL MARKETING
RESEARCH ISSUES
• Developing country data and using
unfamiliar resources may be questionable
– at best!
• Test for the compatibility and the
comparability of data.
• Consumers may be hard to reach.
INTERNATIONAL MARKETING
RESEARCH ISSUES
• Markets have different definitions
– Regional, national, international
• Data must have the same meaning & the
same level of
– Validity
• Does it measure what it intends to measure?
– Integrity
• Is it accurate?
– Reliability
• How much error exists?
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 6B
MARKETING BARRIERS
ALAN L. WHITEBREAD
POLITICAL LEGAL ENVIRONMENT
• Governments have needs because of
– Political reasons
– Financial reasons
– Special interest reasons
– Different legal systems operate differently and
may not use the rule of law
MARKETING BARRIERS
• Impediments to the unrestricted free
market flow of goods and services.
• Rationale for marketing barriers
– Protect infant industries
– Reduce unemployment
– Equalize costs and prices to their nation’s
level – How?
– Reduce balance of payments – How?
– Enhance national security
TARIFFS
•
Taxes levied by a government on an
import [rarely an export] of an item to
1. Protect domestic industries by
•
•
•
Providing a price support
Assuring profits so they can be used for
reinvestment and growth
Building scale and becoming more competitive
2. Increase employment
TARIFFS
• Protective Tariffs
– Increase domestic prices
– Reduce consumption
– Tend to have the highest rates
• Revenue Tariffs
– Generate income for governments
– Usually on high-volume products
– Tend to have the lowest rates
TARIFF TYPES
• Single-Stage
– Collected at one stage in the value chain
• Retail sales tax
• Value Added
– Multistage, non-cumulative consumption tax on the
value added at each stage of a value chain
• Cascade
– Cumulative and collected only once
• VAT [EU]
• Excise
– One time charge levied on specific products
• Tires, alcohol
TARIFF DURATION AND TYPES
• Tariff
– Effective until changed by the government
• Specific duties – tied to weight or quantity
• Ad valorem duties – tied to product value
• Combined duties – specific and ad valorem
• Tariff surcharge
– Temporary
• Countervailing duty [see anti-dumping]
– Long term
• Up to 5 years in the U.S.
HTS AND TARIFF ENGINEERING
• Tariff engineering is the deliberate changing of a
product to reduce the amount of tariffs due
coming into a country. A couple of examples will
show what can be done.
– A nylon jacket typically has a duty of 32%. By adding
a water-resistant coating the duty rate drops to 7%.
– Hypothetically, product A has an import duty of 40%.
Product A has three components which have a duty
of 6% each. So as long as you can assemble and
repackage for less than the 34% difference, shipping
components saves money.
IMPORT CONTROL REGULATIONS
• Voluntary export restraints [VER’s]
– Exporting countries limit shipments
• Japanese limit auto imports into US in 1980’s
• See also quotas and Orderly Market Agreements
[OMA]
• License or permit controls
– A special license or permit is required for
every shipment
• Items like alcohol, pharmaceuticals, explosives,
cosmetics
IMPORT CONTROL REGULATIONS
• Inspection
– To classify products, verify document
accuracy, check license requirements, check
health and safety requirements,
• Ingredients, diseases, design flaws, ...
• Price controls
– Regulation of an industry or item
• Minimum price
• Fixed price
IMPORT CONTROL REGULATIONS
• Rules of origin
– NAFTA
• Anti-dumping
– WTO plus country laws
– In the U.S. it is a counterveiling duty
•
•
•
•
Use of Fair Trade Laws
Embargo
Special documentation / license / approval[s]
Special fees
– Supplemental, administrative
• Quota
– Units and/or monetary amount
IMPORT CONTROL REGULATIONS:
QUOTAS
• Export Quotas
– Usually at beginning of a value chain
– Encourage value-added activities before
export
• Import Quotas
– Absolute; impose specific limits on the
quantity within a time period
• Japan: leather shoes
IMPORT CONTROL REGULATIONS:
QUOTAS
• Tariff
– Step-in tariff goes into effect once a specific
quantity has been reached
– Tariff-rate quota [TRQ = tariff + quota]
• Voluntary
– Quantity limits by exporters to specific
country, also called Voluntary Export
Restraints [VER] or Orderly Market
Agreements [OMA]
IMPORT CONTROL REGULATIONS
• Domestic content regulations
– Australia: cigarettes must have at least 57%
domestic leaf content
• State Trading Enterprises [STE’s]
– China, Japan, Korea, …
• Environmental
– Germany Green Dot
• Sanitary and phytosanitary barriers
– Guiding Principle: SAFETY
OMNIBUS TRADE AND
COMPETITORS ACT OF 1988
• Allows the President to negotiate trade
agreements
• Accepts the HS code system
• Permits the U.S. Trade Representative to
respond to unfair international trade
practices
• Permits antidumping and counterveiling
duties
• Protects intellectual property [IP]
• …
CONTRABAND (U.S.)
• Weapons
• Tobacco products and associated items
• Consumables
– Foods, beverages, or medicines
•
•
•
•
Alcoholic beverages
Narcotics and drug paraphanalia
Selective magazines
All pornographic photos or materials
EXPORT CONTROLS
•
EMBARGO
– US October, 2002
• Cuba, Iran, Iraq, Libya, North Korea, Sudan, Syria
•
Embargoes and other special controls
http://www.access.gpo.gov/bis/ear/pdf/746.pdf
– 27 nations with restrictions paced by US DOC, DOS, or DOT
•
Nonproliferation, Arms Control, and International Security [NAI] Oversight
List - 54 nations where you must watch subcontractors
•
DOE Sensitive countries list
http://www.ch.doe.gov/offices/OCI/SensitiveCountries/index.htm
– 25 nations with proliferation / terrorist concerns
•
TYPE OF PRODUCT
– US – Encryption technology
EXCHANGE CONTROLS:
CURRENCY
• Exchange rate management
– World Bank [IMF], regional, or central bank
interference
– Amount of exchange with another country or the
amount that can leave the country within a certain
time period
• Conversion of the portion of country
income to local / foreign currency
• Currency flows
• Devaluation
GOVERNMENT CONTROLS:
EXCHANGE
• Taxes and Surcharges
– India: Imports and protectionism
– Indonesia: 10% VAT + 35% luxury tax + x% sales tax
• Restricted foreign investment
– Ghana
• foreign investment is not allowed in 1-petty trading,
2-taxis, 3-lotteries, or 4-beauty salons and barber
shops
– India
• foreigners cannot own supermarkets
GOVERNMENT CONTROLS:
EXCHANGE
• Local content and local laws
– Japan: restricts the size [of a type of retail
outlet] and/or type of foreign operations.
• Restricted sales
– Brazil: you must have a manufacturing /
assembly facility operating in the country to
be eligible to sell that product in Brazil.
GOVERNMENT CONTROLS:
MISCELLANEOUS
• Guidance
• Government Procurement & State Trading
• Subsidies:
– Concessionary financing
• Lower than market interest rates
– Cash subsidies
• Price cuts or price supports
• Japan: for R&D expenditures
GOVERNMENT CONTROLS:
MISCELLANEOUS
• Favorable foreign exchange conversion
rate
• Rebates of various taxes
– VAT rebates for transshipment
– VAT rebate for company purchases in the
country in which the firm operates
NON-TARIFF TRADE BARRIERS:
TRADE RESTRICTIONS
• Quotas
– Commodity management
• Licensing procedures and requirements
– Import license [GATT]
• Local content [country] or local area
content [trade area] requirements
• Price controls
• Embargoes
NON-TARIFF TRADE BARRIERS:
ADMINISTRATION & CUSTOMS
• Valuation
• Anti-dumping practice
• Tariff classification / rulings
– Argentina: no performance sports footwear
imports
– Korea: oranges ≥ 2” in diameter only
• Documentation
– Certificates / certifications
• Fees
NON-TARIFF TRADE BARRIERS:
STANDARDS & TESTING
• Additional standards
– Manufacturing: ISO, CB Scheme, …
– Quality: AQL, Six Sigma, …
– Safety: CE Mark, CB Scheme, …
• Alternative testing methods
• Governmental acceptance of standards
and testing methods
• Packaging, labeling, and marking
requirements and standards
NON-TARIFF TRADE BARRIERS:
GOVERNMENT
•
•
•
•
•
Government procurement
Export subsidies
Countervailing duty practice
Assistance for domestic entities
Insurance
– Panama, Nigeria – shipment must be insured
by a national insurance company
• Carrier
– China – must use their flagged vessels for
ocean transport
NON-TARIFF TRADE BARRIERS:
IMPORT CHARGES AND FEES
•
•
•
•
•
•
•
Advance deposits
Administrative fees
Additional duties
Phantom customs charges
Import credit discrimination
Variable duty and fee application
Border taxes
NON-TARIFF TRADE BARRIERS:
MISCELLANEOUS
• Voluntary export restraints
• Orderly marketing agreements
• Trade area issues
– Prohibited / restricted imports
• EU: Genetically modified organisms [GMOs]
– Safe Harbor : US – EU on privacy
• Other restrictions
– Singapore: small containers only
NON-TARIFF TRADE BARRIERS:
BUSINESS PRACTICES
• Cartels and business associations
– Switzerland allows them
– Not illegal per se in Singapore
– Korea: use of radio & TV for advertising
– No Class A dairy products into the U.S.
• Corruption
CUSTOMS / ENTRY PROCEDURES
• Product Classification
– Tied to rates and are often very arbitrary
• Product Valuation
– Usually based on transaction value
• Documentation
– Varies by country, often includes different documents
and differing quantities of:
• Certificate of Origin
– a signed statement as to the origin of the export item
•
•
•
•
•
Bill of Lading
Packing List
Shipper's Export Declaration [SED]
Insurance Certificate [may be country specific]
Import License [country specific]
CORRUPTION
includes, but is not limited to,
•
•
•
•
•
•
•
•
Extortion
Contract and other favors
Skimming
Fraud and/or misrepresentation
Embezzlement
Smuggling
Money laundering
Bribery [payoffs, kickbacks]
CORRUPTION
[See Bribery – Transparency International Org.]
• Russian, Chinese, Taiwanese and S. Korean
companies widely seen
using bribes in developing countries
• High propensity to bribe overseas also seen for
companies from Italy, Hong Kong, Malaysia,
United States, Japan, France and Spain
Construction and arms industries top sectors of
heaviest bribery
Berlin, 14 May 2002
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 7A
EVALUATING ENVIRONMENTS: RISK AND COMPETITIVE ANALYSIS
ALAN L. WHITEBREAD
EVALUTING RISK
•
•
•
•
•
•
COUNTRY RISK
POLITICAL RISK
ECONOMIC RISK
LEGAL RISK
SOCIAL RISK
GOVERNMENT RISK
COUNTRY RISK SOURCES
•
•
•
•
Bank of America World Information Services
Business Environment Risk Intelligence [BERI] S.A.
Control Risks Information Services [CRIS]
Duke University
– http://www.duke.edu/%7Echarvey/Country_risk/couindex.htm
•
•
•
•
•
•
Economist Intelligence Unit [EIU]
Institutional Investor
Moody's Investor Services
Standard and Poor's Rating Group
Political Risk Services
Many, many more are available
COUNTRY RISK ITEMS
• Find a political risk map on the internet
and find the highest risk nations.
• Economic planning failures
• External conflict
• Corruption [especially in government]
• Military or religion in politics
• Racial or national tensions
• Quality and strength of the legal system
– “the rule of law”
POLITICAL RISK ITEMS
• Civil strife
• Process deterioration
• Contract repudiation [some or all]
• Currency controls, limits, & restrictions
POLITICAL RISKS
CONFISCATION:
A government taking property without compensation.
EXPROPRIATION:
Government confiscation with inadequate
compensation.
NATIONALIZATION:
Partial or complete government takeover of assets.
DOMESTICATION:
Transfer of ownership from a government to local
individuals or organizations.
GENERAL INSTABILITY RISK:
Uncertainty regarding the likelihood of government
actions in the future.
TYPES OF POLITICAL / ECONOMIC
SYSTEMS
• Centrally Planned and controlled
– Cuba, North Korea
• Democratic Socialism
– Sweden, Australia
• Radical Interventionism
– USA
TYPES OF POLITICAL / ECONOMIC
SYSTEMS
• Light Interventionism
– Hong Kong, Singapore
• Laissez-Faire Capitalism
– USA of the Founding Fathers
• Anarchy
–?
MANAGING / REDUCING POLITICAL
RISK
• Avoid high-risk situations
• Avoid unstable country situations
• Purchase risk insurance
– Private insurance [CNA, …, many others]
– OPIC [Overseas Private Investment Corp.]
ASSESSING COUNTRY ECONOMIC RISK
• Amount of foreign long-term debt
– Loans
• What types of business loans are available?
• Name some loan assessment measurements.
ASSESSING COUNTRY ECONOMIC RISK
• Some of many types of business loans
Business equipment loans
Expansion financing
Factoring
Import-Export financing
Floor plan financing & Inventory loans
Machinery loans
M&A financing
Real estate loans [commercial & industrial]
Receivables financing
Working capital financing
ASSESSING COUNTRY ECONOMIC RISK
•
•
•
•
•
•
Inflation rate
Unemployment rate
Nationalized industries and trends
Foreign exchange
Economic volatility
Taxes [as a per cent of GDP]
–
–
–
–
U.S.
France
Italy
Germany
31%
50%
46%
45%
LEGAL AND SOCIAL RISKS
• Type of legal system and its use
– Do they have laws?
– How well are they enforced [if at all]?
– Are some people / entities above the law?
• Products conflict with social norms
– Women’s western clothing in Saudi Arabia
• Role and rights of
– Firms
– Women
CULTURAL COMPATABILITIES
• What is the degree of fit between our
culture and theirs?
• What do we have to do to succeed?
• Major potential areas of conflict
– Social classes to caste systems
– Politeness
– Speed of doing things
–?
TYPES OF MARKET ENTRY
BARRIERS
• Competitive
– Examples?
• Duties and taxes
– Examples?
• Non-tariff trade barriers
– Examples?
TYPES OF GOVERNMENT RISK
• Regulations, registrations, approvals
– Examples?
• Level of bureaucracy
– Examples?
• Taxes
– Examples?
• Support and programs
– Examples?
MINIMIZE INTERNATIONAL RISK
• Political
– Be involved at many levels
• Financial
– Borrow locally especially if it is a weak currency
– Buy investment insurance [public or private]
• Product and program
– Understand product liability
– Become culturally astute
• Intellectual property
– Protect all knowledge
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 7B
EVALUATING ENVIRONMENTS
ALAN L. WHITEBREAD
COUNTRY SELECTION:
A MULTI-STAGE PROCESS
~270 country
equivalents
Fail “must have” criteria
Fail “must have” or “key
selection” criteria
Score >X
in Ex. 6.1
Score >X
in Ex. 6.1
Fail “must
have”, or “key
selection”, or
“detailed”
criteria
Fluent
employees
are readily
available
Some
detailed
criteria
Prospects
Customers
EVALUATING / SELECTING
MARKETS
• Evaluation is based on a number of
criteria:
– market-related characteristics
– cost-related aspects
– the regulatory framework
– tariffs, duties & non-tariff trade barriers
• The entry decision may vary by country
– item weights and components
ISSUES AFFECTING THE EVALUATION /
SELECTION OF MARKETS
•
•
•
•
•
•
Strategy and objectives
Access to target market[s]
Country infrastructure
Foreign exchange
Cost of entry and on-going operation
Opportunity costs
DEVELOPING CRITERIA
• SELECT AND DEFINE CRITERIA
• Market Potential
• Size; growth rate; and … ?
– Market Access and Barriers
– Assessing Product Needs and Wants
– Appraising Quality
– Level of Competition
– Product / Service Requirements and Fit
– Logistic / Supply Chain Issues
PRODUCT – MARKET PROFILE
– Who purchases / uses the product?
• Why that person?
– What are they paying for the current solution?
• By product configuration
• Any packaging shortfalls or opportunities?
– Where is or should the product purchased?
• How strong are the current channels?
• Are they the right ones?
– What obvious benefits do we offer?
• There must be an overwhelming reason to switch.
VISITING THE POTENTIAL MARKET
• ASSESSMENT
– Confirm or contradict assumptions about the
market.
– Gather additional primary data from
•
•
•
•
Commercial sources
Governmental sources
Private market research
Secondary market research
– Develop a marketing plan in co-operation with
the local channels of distribution
SELECTING TARGET MARKETS
1. MARKET
DEFINITION
2. MARKET
SEGMENTATION
4. TARGET
MARKET
SELECTION
3. MARKET
ATTRACTIVENESS
5. MARKET
POSITIONING
MARKET SEGMENTATION
- A SIX-STEP PROCESS MARKET
SEGMENTATION
1-Identify the bases for selection
[Why are you splitting it this way?]
2-Develop detailed market segment
profiles
[Clearly identify each segment.]
MARKET TARGETING
3-Select and develop measures of
attractiveness
4-Select target markets or market
segments
MARKET
POSITIONING
5-Develop a market position for every
market segment
6-Develop the marketing mix for every
market segment
B2C MARKET SEGMENTATION
- SELECTING TARGET MARKET SEGMENTS • KOTLER’S FIVE TESTS
– MEASURABLE
• Can I quantify the size of the market segment?
– ACCESSIBLE
• Can I get to the segment with my channels of
distribution?
– SUBSTANTIAL
• Is it large enough to be worthwhile?
– DIFFERENTIABLE
• Can our products be clearly differentiated?
– ACTIONABLE
• Does my company have the necessary desire?
MARKET SEGMENTATION
• Multinational market views
– Consumers segment by:
•
•
•
•
•
Geography
Demographics
Psychographics
Behavior
Benefits
– Market segments may exhibit similar
buying behavior despite differences in
cultural backgrounds.
BUSINESS SEGMENTATION
VARIABLES
Organizational
Characteristics
-Industry
-Size
-Channel
-Operating characteristics
Product[s] or Process[es]
or Technology[ies]
-Level of technology
-Configuration
-Design
Buying Approach
-Centralization
-Functional involvement
-Partnering
Application[s]
of Products / Services
-How they are used?
-What are they used for?
BUSINESS MARKET
SEGMENTATION
MARKET (SEGMENT) NAME
Brief verbal description
INDUSTRY /
INDUSTRY /
INDUSTRY /
INDUSTRY /
SEGMENT NAME SEGMENT NAME SEGMENT NAME SEGMENT NAME
DESCRIPTION
DESCRIPTION
DESCRIPTION
DESCRIPTION
NAICS
NAICS
NAICS
NAICS
APPLICATION 1
PRODUCT 1
PRODUCT 2
APPLICATION 1
PRODUCT 1
PRODUCT 1
APPLICATION 1
APPLICATION 2
APPLICATION 3
B2B TARGET MARKET SEGMENT
CRITERIA
1. Measurable
– The degree to which you can measure buyer
characteristics
2. Accessible
– The ability to focus on target market
segments
3. Substantial
– The degree to which target market segments
are large enough and potentially profitable
enough to pursue
B2B TARGET MARKET SEGMENT
CRITERIA
4. Compatible
-The extent to which marketing and business
strengths compare to current and expected
competitive and technology states
5. Responsive
-The extent to which target market segments
respond to elements of the marketing mix
ATTITUDES
• BSB Global Scan - 18 countries
• The researchers studied
– Consumer attitudes and values
– Media viewership / readership
– Buying patterns
– Product use
• Five global psychographic segments
represent 95% of the adult populations
in the countries surveyed.
TARGETING
• Standardized Multinational Marketing
– Same mix for a broad base of buyers
• “Youthful fun”
• Coke
• Concentrated Multinational Marketing
– Choose a single segment of the global
marketing
• Very narrow market definition
– Restaurant dishwashing machines
• Chanel
TARGETING
• Differentiated Multinational Marketing
– Two or more segments with different
marketing mixes
• Use different brands
• Use different marketing programs
• Look at SWATCH and/or Calvin Klein
LEVELS OF MARKET
SEGMENTATION
MASS MARKETING
Same product to all segments
Coca Cola Early Ford
SEGMENT MARKETING
Different products to one or more segments
Proctor & Gamble Current auto manufacturers
NICHE MARKETING
Different products to different [sub-]segments
SUV’sstandard to family to luxury
MICROMARKETING
Specialized products for individuals and locations
LOCAL MARKETING
INDIVIDUAL MARKETING
[Brands, promotions]
Local chain grocery stores
[1:1 Marketing]
Amazon
MARKET SEGMENTATION:
FILLING THE GAPS
CHANNELS OF
DISTRIBUTION
1
3
2
2
TECHNOLOGIES
PRODUCTS
SERVICES
MARKETS / SEGMENTS
APPLICATIONS
The volume of the gap is an indicator of its attractiveness.
POSITIONING
• Positioning
– The perception of your product in the
mind of the customer.
• Expectations of performance and value
• How do I select positioning dimensions?
• Standardized Position
– Can you create a standard image?
– Do you want to create a standard image?
– High-tech or high-touch?
SOME AREAS OF DIFFERENTIATION
Form
Durability
Features
Reliability
Performance
Repairability
Quality
Style
Conformance
Design
POSITIONING DIMENSION CANDIDATES
AND PERCEPTUAL MAPPING
Quality
Application[s]
Occasion[s]
Lifestyle /
image
Attributes
Competition
Price
Selection of the metric and its scale of measurement [preferably
subjective] is a very difficult process. Select from the items on the left
or possibly use your two best differentiators for scale elements.
POSITIONING: PERCEPTUAL
MAPPING
Fashion Coverage
U1
C
We are not in a good
position [U] since we are so
close
Moreto many competitors.
U
More
Copy
C
C
C
C
This portrays the relative
position of our product [U] to
our competitors [C].
Artwork
C
A
B
Club Coverage
We need to find a way to
move to a new position [U1]
much further from any
competitor.
POSITIONING STRATEGIES
Against Competition
CU
We are positioned very close to a
competitor so there is little perceived
difference in the products.
Consequently, this is little or no price
differential.
Reposition
a Competitor
C
C
You reposition a competitor to a new
position so that you can occupy their
old position. This is both difficult and
risky.
POSITIONING STRATEGIES
Find a Position
C
C C
Create a Position
Un
C
We introduce a new product [Un] with
some meaningful differences from all
competitive offerings. There may be
some positive price differential and /
or market share gain.
C
C C
C
Un
We introduce a new product [Un] with
very meaningful differences from all
competitive offerings. There should
be a more positive price differential
[than with find a position] and / or
market share gain.
POSITIONING STRATEGIES
Broaden the Base
C U
C C
C
We introduce a new product with
some a little difference from existing
competitive offerings. It is difficult to
get any positive price differential in
the marketplace.
BRAND NAME SELECTION
There are many objectives for creating a successful brand name. It
should be
1. Distinctive;
2. Easy to pronounce, recognize, and remember;
3. Lack poor foreign language meanings;
4. Positive;
5. Suggesting product benefits;
6. Suggesting product quality;
7. Timeless; and/or
8. Versatile.
Strive to achieve at least three of these attributes. Look around, it
is very difficult to find a brand name that meets four or more of
these brand name objectives.
BRAND ISSUES
Consistency
Attributes
Defense Against
Competition
Credibility
Perceived Quality
and Value
Advantages
of
Brand Names
Advantages
Of
Brand Equity
Easy Identification
Brand Loyalty
Awareness
BUILD SUSTAINABLE COMPETITIVE ADVANTAGE WITH
EVERY THING YOU DO WITH YOUR BRAND!
A COMPETITIVE REPORT
• A comprehensive review of every major
competitor.
• At a minimum, it usually contains all of the
following items.
– Company profile and management structure
– Detailed financials including subsidiaries
– Market and industry research key items
– Significant events
• New product announcements
• Price change dates relative to competition
– Trade articles of note
BATTLEFIELD MAP
TYPE OF
MARKET
MARKET
MARKET
PRODUCT SEGMENT 1 SEGMENT 2 SEGMENT 3
PRODUCT A
Brand A
Brand A
PRODUCT B
PRODUCT C
PRODUCT D
Brand A
Brand B
Brand A
Brand C
Brand B
Brand B
Brand C
Brand D
A Battlefield Map helps everyone in the organization understand who they
are competing against in every category. This knowledge helps sales
people focus on what they should sell and how to sell in that situation.
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 8A
INTERNATIONAL INTELLECTUAL PROPERTY
ALAN L. WHITEBREAD
WORLD TRADE ORGANIZATION (WTO)
http://www.wto.org/english/thewto_e/thewto_e.htm
• ORIGINALLY GATT [1948 – for tariffs]
• WTO IS CURRENTLY INVOLVED IN
– INTELLECTUAL PROPERTY
– DUMPING
– SUBSIDIES [three categories from
allowable to unfair] like
• JAPAN [100% R&D reimbursement]
– SAFEGUARDS
• INDUSTRY PROTECTION [also protectionism]
WORLD TRADE ORGANIZATION (WTO)
http://www.wto.org/english/thewto_e/thewto_e.htm
– INFRASTRUCTURE: Member requirements
• CHINA:
– ACCOUNTING
» 2007 – Selected the International Financial
Reporting Standards [IFRS]
» Currently there are multiple sets of books
[1] exaggerates for superiors
[2] underreports to save taxes
[3] fairly accurate
– PENSIONS
– DISPUTE RESOLUTION
– See http://www.wto.org/english/tratop_e/region_e/region_e.htm
for a map of risk assessment.
INTELLECTUAL PROPERTY &
THE MARKETING MIX
• PRODUCT DECISIONS
– May be dependent upon patents for
• Designs
• Production processes, …
– The brand is often more important than the
product.
• PROMOTION DECISIONS
– Slogans, songs, or visual communications
that become part of the product image need
to be protected.
INTELLECTUAL PROPERTY
• DISTRIBUTION DECISIONS
– Ownership, use, and rights
– Who is allowed to do what?
• PRICING DECISIONS
– Driven by competition and the market
• IP protection may reduce competition for a limited
time.
– Price can be used as a weapon to gain share
or open up new market segments. Be careful,
this can be very dangerous.
ELEMENTS OF INTELLECTUAL
PROPERTY
• COPYRIGHT
• TRADEMARK
• SERVICE MARK
• PATENT
• TRADE SECRET
• KNOWLEDGE MANAGEMENT
ELEMENTS OF INTELLECTUAL
PROPERTY
• COPYRIGHT
– a guarantee of control of an original work
– for the original way the idea is expressed
– any type of
• artistic, dramatic, digital, literary or musical work
ELEMENTS OF INTELLECTUAL PROPERTY:
WIPO http://www.wipo.org/about-ip/en/trademarks.html
• TRADEMARK
– a guarantee of control of a work of some item
used to uniquely identify the product [or
service in some countries]
– it could be a
• word, logo, package design, slogan, or other
identifying mark
DOMAIN NAMES
• Internet addresses [domain names] are
bought and sold – sometimes for large
amounts of money.
• If a domain name infringes on a registered
trademark, the domain name will be
suspended immediately if challenged by
the trademark owner.
ELEMENTS OF INTELLECTUAL
PROPERTY
• SERVICE MARK
– some item used to uniquely identify a service
[available only in some countries]
– it could be a
• word, logo, package design, slogan, or other
identifying mark
TRADEMARKS & SERVICE MARKS ARE
AVAILABLE IN APPROXIMATELY 200 of ABOUT 270
POLITICAL ENTITIES
• There are different filing methods and
requirements in most countries.
• You have no more than six months to claim
copyright protection.
• The safe route is “first use”
– Next is “intent to use”
– Use the U.S. CASSIS System for searching marks
– See the USPTO website for detailed information.
• The level of protection by law and in practice
varies by country.
TRADEMARKS & SERVICE MARKS
AVAILABLE IN APPROXIMATELY 200 of ABOUT 250
COUNTRIES
• A Service Mark [SM] is not permitted in
some countries.
• Using a registered trade mark symbol [®]
may have serious implications in a few
countries.
• The mark can often be invalidated through
3 to 5 years of non-use.
• The EUROPEAN COMMUNITY TRADE
MARK ACT [CTM] for 15 nations has one
filing.
TRADEMARK PROTECTION
• EXHAUSTION
or “first sale” determines from when the trademark owner
may or may not have rights
-This varies by country
• UNIVERSALITY [or trade identity]
states a trademark is not only an identification of the
source of a product but remains as a part of the product.
• TERRITORIALITY
states a trademark holder has the right to control the
distribution of the trademarked product.
ELEMENTS OF INTELLECTUAL
PROPERTY
• PATENT
– A guarantee of a set of rights to control the
use of an invention
– Protects the original idea and the way it is
implemented [in some countries]
– Generally 17-20 years protection and can
vary by country and type of patent
– Many different types of patents
• What types can you name?
PRIMARY REQUIREMENTS FOR A
PATENT
• The new invention must be:
– Novel
• not known or used in the country and
• not published anywhere
– Non-obvious
• cannot be an obvious way to do something, e.g., a simple
extension of a principle
– Useful
• must have some application, even if not commercially
practical. See Wacky Patents and similar sites for many
examples.
PATENT COOPERATION TREATY [PCT]
See http://www.wipo.int/pct/en/texts/articles/atoc.htm for complete text.
• PCT is a procedure for filing patent applications
internationally. One filing results in a single
search which is accompanied by a written
opinion. You can also get a preliminary
examination. A full examination required by
national law must to done to receive a patent in
each application country.
• No “international patent” exists.
• Find a map of PCT countries on the web.
• Find a list of PCT member nations on the web.
ELEMENTS OF INTELLECTUAL
PROPERTY
• UTILITY PATENT
– Covers processes, machines, manufacture or
composition of matter, plus new and useful
improvements
• DESIGN PATENT
– Covers the appearance or ornamental design
of an article
ELEMENTS OF INTELLECTUAL
PROPERTY
• NEW HORIZONS [the U.S. is leading the
way]
– Software
– Sounds
• Examples?
– Colors
• Examples?
– Smell
• France, L’Oreal granted in 2006 – the first one is
the world for a fragrance.
PATENT VARIETY AROUND THE
WORLD
• EXAMINATION
– All patent applications are examined prior to award,
– OR some patent applications are examined prior to award.
– If there is no examination for novelty, the applicant may be able to request the
patent to office undertake such a search.
• OPPOSITION
– An opposition procedure for all patent applications,
– OR no opposition procedure.
– Pre-grant adversarial procedures can be initiated by patent office officials to
resolve disputes,
– OR no opposition procedure;
– Patent applications are published prior to award,
– OR there may be an opposition procure for some patent applications.
• RESTRICTIONS
–
–
–
–
Food and pharmaceutical applications only.
Food applications only.
Military applications only.
Time measurement and textile patents only.
TRADE SECRETS
• The Trade Secret Office, Inc. in Naperville,
Il estimates that trade secret information
worth $40,000,000,000 per year is stolen
from U.S. companies.
• Trade secret information is protected by
the
– Uniform Trade Secrets Act of 1979, and the
– Economic Espionage Act of 1996.
TRADE SECRET GUIDELINES
• COMMON SOURCES OF DISCLOSURE:
– Inadvertent 3rd-party disclosure [especially
somewhere in the supply chain]
– A disgruntled or ex-employee
– Corporate espionage
• TRADE SECRETS
–
–
–
–
–
–
Process[es] [recipes]
Controls [Escorts, documents, NDA’s, …]
Documentation
Security
Employee knowledge and awareness of the process
Stiff penalties
KNOWLEDGE MANAGEMENT
• A newly emerging business field of all
aspects of knowledge within a firm.
– Information
– Combined with experience
– Context of use
– Interpretation
– And its place in the context of the firm
KNOWLEDGE MANAGEMENT
• Intellectual property
• Knowledge within the firm
– Processes
– Systems
– Methods
– Market knowledge
• Customer / prospect lists
• Databases
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 8B
QUALITY SYSTEMS, STARNDARDS, AND SPECIFICATIONS
ALAN L. WHITEBREAD
QUALITY SYSTEMS
• Although the ISO-9000 series is often referred to
as a quality system, it is really a measure of
consistency. In particular, it says if you produce
950 good and 50 bad parts in a day, you will most
likely produce 950 good and 50 bad parts on any
day of manufacture.
• A quality system would generally go beyond this
and tell you about the quality level of the parts
produced that day.
QUALITY SYSTEMS
• ISO-9000 Series for Manufacturers
– This is the roadmap for all standards included in the series though
ISO-9004.
• ISO-9001
– The most comprehensive set of standards including design,
development, installation, production, and servicing.
• ISO-9002
– A smaller set of standards including installation, production, and
servicing.
• ISO-9003
– Standards for quality assurance for firms involved in the final testing
of products [in place of their customers doing for themselves].
• ISO-9004
– Standards for executive management to develop and implement an
effective quality management system.
QUALITY APPROACHES &
SYSTEMS
• ISO-14000 Series
Environmental
management
standards family
• QS9000 (ISO / TS-16949)
Automotive
• ISO-17779
Information Security
• SIX SIGMA
Motorola, GE, …
• Malcom Baldridge
Cadillac
ISO
http://www.iso.org/iso/en/ISOOnline.frontpage
• 146 countries working in partnership with
– International standards organizations
– Government entities and standards
– Industry associations
• including national standards organizations
– Business and consumer representatives
– Find the list of ISO members.
SIX SIGMA
• Applies to operations, technical areas, customer
services, marketing, finance, services, engineering,
…
• It is a measurement of total quality allowing a
company to quantify its effectiveness in eliminating
defects [improved quality] and variations
[consistency of a quality level] from their processes.
• A Six Sigma company will operate at a maximum
3.4 defects per million opportunities. Another way of
saying this is 99.9997% defect free.
– Motorola, General Electric, and TI are some of the
leaders in Six Sigma implementation
STANDARDS
• International
– Metric not imperial
– Numerous electrical systems
• US
– Commercial
– Government
– Numerous industry standards groups
COMMERCIAL STANDARDS
• ASTM
–
http://www.astm.org/cgibin/SoftCart.exe/BOOKSTORE/BOS/index.html?L+mystore+znwr3647+1116868729
• UL
–
http://ulstandardsinfonet.ul.com/catalog/stdscatframe.html
• ANSI
–
http://webstore.ansi.org/ansidocstore/default.asp
• many other industry and other level standards
US GOVERNMENT
STANDARDS
• Federal Standards
–
http://apps.fss.gsa.gov/pub/fedspecs/fedspecs.cfm?sort=8&firstTime=Y&RequestTimeo
ut=500
• FIPS – Federal Information Processing Standards
• MilSpec – Federal military procurement
–
http://www.dscc.dla.mil/Programs/MilSpec/
• DOD – Department of Defense
– http://ulstandardsinfonet.ul.com/catalog/stdscatframe.html
• NIST – National Institute of Standards & Testing
–
http://ts.nist.gov/ts/htdocs/210/ssd.htm
• Review these websites in some depth to see the
breadth of U.S. government standards.
NATIONAL INSTITUTE OF STANDARDS
[NIST] http://www.nist.gov/public_affairs/standards.htm
• Measurement standards
– Provide measurement traceability, at necessary levels of accuracy, to
national standards
• Documentary standards
– Specify characteristics of products, processes, services, or systems.
See standards information, (which includes Export Alert! an e-mail
notification service), standards coordination and participation in
standards activities, and training
• Conformity assessment/accreditation
– Procedures for demonstrating compliance with standards and
regulations, including NIST guides to EU directives
• Information technology standards
PACKAGES AND TESTING
•
•
•
•
•
•
•
•
Fiberboard Boxes
Plastic & Metal Drums and Pails
Plastic & Glass Bottles and Jars
Paper, Plastic, and Fabric Bags
Infectious Substance Shippers
Radioactive Materials Shippers
Pallet & Bulk Load Systems
Metal, Plastic, and Fiberboard
Intermediate Bulk Containers
PRODUCT RELIABILITY TESTING
• How is the product likely to be used?
• What can happen to the product?
• How should we protect the product …
– In shipment?
– In use?
PRODUCT SPECIFICATIONS
•
•
•
•
•
•
•
•
Model number
Description
Features and benefits
Pictures and/or drawings
Specifications
Serial number & location
Lot or batch number and location
Pick any technical product you use and find
its technical specifications on the web.
SHOULD I STANDARDIZE
PRODUCTS?
ADVANTAGES
DISADVANTAGES
Cost reduction through
economies of scale
Product does not match market
segment need closely enough
More consistent quality
Must meet all the packaging
requirements with a limited
number of packages
Improved operations due to less
variety
Explosion in number of products
to be made and inventoried
Improved inventory control
Standard products must
compete against strong local
competitors
GLOBAL BUSINESS PROFESSIONAL
Online/Distance Learning Course
SECTION 9A
FOREIGN MARKET ENTRY ALTERNATIVES
ALAN L. WHITEBREAD
POTENTIAL TRADE BENEFITS FOR
THE FIRM
• Incremental profitability
• Acquire / increase economies of scale
• Take advantage of differential growth rates
in [country] markets
• Take advantage of product / market
differences
• Extend product life cycles
– Remember, the more technologically
advanced products are generally introduced
over time from the most to least advanced
economies.
MARKET ENTRY FACTORS
-CHALLENGES•
•
•
•
•
•
GOVERNMENT and BORDER STABILITY
FOREIGN EXCHANGE
INTELLECTUAL PROPERTY RIGHTS
RESTRICTIONS / QUOTAS
SHIPPING RISK AND PIRACY
MANAGEMENT COMMITMENT
SELECTING FOREIGN MARKETS
• DETERMINE MARKET
ATTRACTIVENESS
– ECONOMIC GEOGRAPHY
– DRIVING FACTORS
– MARKET RESEARCH
• EVALUATE AND MANAGE RISKS
• EVALUATE THE COMPETITIVE
POSITION
– LEONTIF INPUT-OUTPUT DATA
– COMPETITOR INFORMATION
– HOW IS INFORMATION TREATED?
MARKET EXPANSION STRATEGIES
• NARROW FOCUS
– concentrated markets / countries
• COUNTRY FOCUS
– country-by-country
• COUNTRY DIVERSIFICATION
– concentrated markets in multiple countries
• GLOBAL DIVERSIFICATION
– diverse markets in multiple countries
FOREIGN MARKET ENTRY
ALTERNATIVES
CONTRACTUAL
DIRECT
FRANCHISING
INVESTMENT
INDIRECT
LICENSING
EXPORTING
DIRECT
EXPORTING
COMMITMENT, RISK, CONTROL, PROFIT POTENTIAL
COPYRIGHT A. WHITEBREAD, 2001-2007
ENTERING FOREIGN
MARKETS
INDIRECT EXPORTING
• RISKS
– LIABILITY, CONTROL
– VERY ERRATIC DEMAND
– FIT WITH OPERATIONS
• REWARDS
– VERY LITTLE SALES EFFORT
– INCREMENTAL VOLUME AND PROFIT
Manufacturer
COPYRIGHT A. WHITEBREAD, 2001-2007
Agents / Distributors
[Not in destination country
- Usually in home country]
ENTERING FOREIGN
MARKETS
DIRECT EXPORTING
• RISK
– CONTROL OF INDEPENDENT RESELLERS
• REWARD
• DIRECT CONTACT WITH LOCAL MARKET
Resellers
[Usually not in
home country]
Manufacturer
COPYRIGHT A. WHITEBREAD, 2001-2007
Sales
Subsidiary
Individual
Accounts
OEM’s
ENTERING FOREIGN MARKETS
LICENSING & FRANCHISING
• RISK
– CONTROL OF RESELLERS
• REWARDS
– MINIMIZE ENTRY RISK
– PROFIT STREAM
Resellers
Manufacturer
COPYRIGHT A. WHITEBREAD, 2001-2007
Licensees
or
Franchisees
Individual
Accounts
ENTERING FOREIGN
MARKETS
DIRECT INVESTMENT
[ACQUISITION, GREENFIELD, BROWNFIELD]
• RISKS
– START-UP OPPORTUNITY COST; INVESTMENT; WC
– COUNTRY STABILITY; CURRENCY EXCHANGE
• REWARDS
– DIRECT MARKET CONTACT
– PROFIT STREAM
Manufacturer
Subsidiary
(Manufacturing)
COPYRIGHT A. WHITEBREAD, 2001-2007
Resellers
OEMs
Individual
Accounts
ENTERING FOREIGN
MARKETS
CONTRACTUAL
[JOINT VENTURE, STRATEGIC ALLIANCE, CONTRACT MANUFACTURING]
• RISKS
– AUDIT & CONTROL
– START-UP INVESTMENT; WC
• REWARDS
– MINIMIZE ENTRY RISK
– PROFIT STREAM
Manufacturer
Contract
Manufacturing
COPYRIGHT A. WHITEBREAD, 2001-2007
Resellers
Individual
Accounts
LIKELY ENTRY ALTERNATIVES
SITUATION
OPTION[S]
A small firm wants to export only.
Indirect or direct
exporting
A specialized machinery manufacturer wants to
increase their presence in key country markets.
Add and develop
key resellers
A firm is having difficulty supplying enough goods
to a regional market.
Contract
manufacturing,
DFI, or JV
A firm wants to aggressively increase its sales in a
region
DFI or JV
ENTITY OPTIONS
• Sole Proprietorship
• Corporation
– C or S in the U.S.
• Partnership
– General
– Limited Liability Partnership [LLP]
• Limited Liability Company [LLC]
INVESTMENT INCENTIVES
• LOCAL AND STATE
– Driven by job creation
– Frequently number of jobs is more important than
quality of jobs or total payroll
– Major tax relief
– Free infrastructure improvements
– Significant cash reimbursement
• Relocation
• Facilities
• Capital / Equipment
– Significant training allocation
INVESTMENT INCENTIVES
• NATIONAL
– Duty exemptions [materials and equipment]
– Expediting paperwork & eliminating fees
– Additional tax exemptions
– Potential reduced tax rates
• Ireland 10% for certain manufacturers vs. 38% for
the other manufacturers
– Potential duty free imports
– Potential full or partial VAT exemption
FOREIGN /FREE TRADE ZONE [FTZ]
• FTZs are secure areas are usually located in or
near a customs or border patrol area.
• An FTZ is a port of entry but it is legally
considered to be outside the customs territory
for the purpose of product entry procedures and
tariff laws.
• FTZs are part of a duty deferral program.
FTZ BENEFITS
• Duties and taxes are deferred until they are
transferred to a territory for consumption.
• There generally is no time limit on merchandise
in the FTZ.
• Materials in the FTZ can be transformed into
something else.
• There are reduced or no duties on damaged
goods.
• Customs clearance and duty drawback delays
are virtually eliminated.
FOREIGN / FREE TRADE ZONE [FTZ]
• Merchandise can pass through without
paying duty until it leaves the FTZ for the
country in which the zone is located or, if
reexported, no duty is due in the FTZ
country.
• Many forms of FTZs
– Warehousing
– Assembly
– Manufacture
FREE PORT ZONE
• A port with relaxed jurisdiction with respect
to the country of location. Most commonly
this means being free of customs or being
a special customs zone with favorable
customs regulations
• Country listing at
http://en.wikipedia.org/wiki/Free_port
GLOBAL BUSINESS PROFESSIONAL
Online/Distance Learning Course
SECTION 9B
CONSUMER AND BUSINESS BUYER BEHAVIOR
ALAN L. WHITEBREAD
CULTURE AND THE CONSUMER
• THREE MAJOR GROUPS
– Culture – Society influence
– Subculture – Group life experiences
– Social Class – Social divisions
• SOCIAL FACTORS
– Family, reference group, role, status
• THESE MAY BE VASTLY DIFFERENT AS YOU
GO FROM COUNTRY-TO-COUNTRY OR
EVEN WITHIN A COUNTRY..
CULTURE AND INDIVIDUALS
• Why study individuals?
– Individuals have meaningful lives through
experiences in the world.
– Individuals are shaped by their culture.
– Consumption [buyer behavior] patterns can
best be understood in a cultural context.
RELATING CONCEPTS TO
MARKETING
• An individual is a socio-cultural locus.
– Individuals interpret motivation.
– Individuals pay attention to cues.
– A cultural context provides implicit and
explicit messages.
• Aggressive behavior is O.K. in certain sports
[fighting in hockey vs. basketball], but not
otherwise
RELATING CONCEPTS TO
MARKETING
• What is the link with marketing?
– Products relate to cultural ideas and
practices.
– Value systems are important.
• MATERIALISM: The importance a consumer
attaches to worldly possessions
– Compare the U.S. to your experience in other
countries.
RELATING CONCEPTS TO
MARKETING
• What is the link with marketing?
– Products relate to cultural ideas and practices.
– Value systems are important.
• MATERIALISM: The importance a consumer attaches
to worldly possessions
– Compare the U.S. to your experience in other
countries.
FOUR TYPES OF BUYING
DECISIONS
HIGH INVOLVEMENT
[Quality – Service – Facts]
Use personal sales
LOW INVOLVEMENT
[Obvious differences]
Use advertising, POP
Significant
differences
between
brands
Complex
Buying
Behavior
VarietySeeking
Behavior
Few
differences
between
brands
DissonanceReducing Buying
Behavior
Habitual
Buying
Behavior
DURABLE GOODS
[Furniture, appliances,
long-lasting items…]
Use subjective appeals,
advertising
NON-DURABLE GOODS
[Grocery items, frequent
purchases, …]
Use sales promotion,
price
CONSUMER BUYER DECISION
PROCESS
How is this done from afar?
Consumer defines the need or problem.
Consumer searches for a solution.
Consumer evaluates reasonable alternatives.
G F
E E
T E
D
Consumer makes a purchase decision.
G B
O A
Consumer makes a postpurchase evaluation
O C
SATISFIED or DISSATISFIED
D K
UNDERSTANDING CONSUMERS
• The market
– What is / are the consumer’s
• Ability to pay?
– Examine GNP and GNI per capita, disposable income
per capita
• Needs?
• Buying motives?
– Be especially sensitive in collective societies.
• Actual buying process?
• Consumption patterns?
BUSINESS & CONSUMER MARKET
DIFFERENCES
• PRODUCTS
– specification and performance
•
•
•
•
•
•
•
PURCHASE VOLUMES
PRICING STRATEGY AND TACTICS
PROMOTION METHODS
DISTRIBUTION CHANNELS
CUSTOMER RELATIONS
DECISION-MAKING PROCESSES
NEGOTIATIONS
B2B MARKETING
•
B2B marketing consists of selling to
businesses for the following three applications.
1. Internal consumption for use in their business.
–
Staples for the office.
2. As a component part that will be put with other
parts to product a finished product.
–
The box the finished product goes into to be put on the
shelf.
3. As a finished product that will be sold to other
businesses.
–
An accessory like an additional game controller.
BUSINESS PRODUCTS CLASSIFICATION
For an Auto Plant
INSTALLATIONS
Factories, support buildings, large machines, large
material handling equipment
RAW MATERIALS
Rolled steel, rubber, plastic resins
COMPONENTS
Spark plugs, radiators, steering wheels
ACCESSORY
EQUIPMENT
Drill presses, assembly lines, small material
handling equipment
MRO SUPPLIES
Maintenance, Repair,
Operation
Cleaning supplies, office supplies, toilet tissue,
BUSINESS SERVICES Grounds maintenance, cleaning service, office
equipment servicing
WHAT IS SCM TODAY?
It is the seamless end-to-end management
of a complex set of decisions requiring the
exchange and flow of information,
products, services, and money.
-Institute for Supply Management
Simply put,
SCM involves everything from taking
materials out of the ground to the satisfied
customer.
FIRMS USING SUPPLY CHAIN
MANAGEMENT
The Aromatics (Thailand) Public Co. Ltd.
plus every other company, governmental agency, and
organization.
[ASU video
i2 video]
SUPPLY CHAIN MANAGEMENT
Mining companies –
Manufacturers –
Suppliers –
Assemblers –
Services
MARKETS
Consumers:
Customers
Prospects
Suspects
SUPPLIER’S
SUPPLIERS
SUPPLIERS
Your entity is
always the
FOCAL
FIRM.
Resellers of
all kinds or
final
purchasers
Final
purchaser
s of
resellers
CUSTOMER’S
CUSTOMERS
FOCAL
FIRM
FOCAL FIRM
NEW PRODUCT
DEVELOPMENT
CUSTOMERS
SUPPLY CHAINS ARE
INTERDEPENDENT
MARKET
Consumers:
Customers
Prospects
Suspects
FOCAL FIRM
CUSTOMERS
SUPPLIERS
SUPPLIERS’
SUPPLIERS
If you change one thing in a
supply chain, you know that
one or more other things will
be affected. So you must
make decisions for the good
CUSTOMERS’
of the entire supply chain, not
CUSTOMERS
for a specific area.
For instance, the system
losses in all other areas may
greatly exceed the benefit to
THE SUPPLY CHAIN AT WORK:
A product flow view – the auto industry
UPSTREAM
DOWNSTREAM
DEALERS
STEEL
UPSTREAM
DIRECT
FORD, GM
RENTAL
CONSUMERS
BUSINESSES
COMPANY
SUPPLIER
SUPPLIER
CHRYSLER
AGENCIES
CONSUMERS
3RD
TIER
2ND
TIER
1ST
TIER
Manage all other tiers.
STEEL
FASTENERS
RADIATORS
FOCAL FIRM
OEM
FLEETS
SPECIAL
VEHICLES
VEHICLES
Raw materials, semi-finished, and component
products
Finished products
and components
CREATING CUSTOMER VALUE:
DEMAND PULLS ALL PRODUCT!
B2C
B2B
Suppliers
Manufacturers
Warehouses
or Distribution
Centers
Resellers
B2B or B2C
Consumers
INFORMATION, PRODUCTS AND SERVICES, MONEY
Planning and forecasting accuracy are critical as any delay in the system has a ripple effect!
BASIC ECONOMICS
EQUILIBRIUM
INELASTIC
ELASTIC
DEMAND
DEMAND
P
R
I
C
E
QUANTITY
Small Q
Small  P
DEMANDED
LARGE  P
LARGE  Q
[PER PERIOD]
BASIC ECONOMICS
P
DEMAND FOR A
DEMAND FOR A
DEMAND FOR A
NECESSITY:
SUBSTITUTE:
SUBSTITUTE:
SALT
PEANUTS
COTTON
QUANTITY
PRODUCT
INDUSTRY
DEMANDED
SUBSTITUTION
OVERSUPPLY
?
R
I
C
E
BUSINESS DEMAND
• Inelastic demand
• Fluctuating demand
• Derived demand
• Joint demand
BUSINESS DEMAND
DERIVED DEMAND
Situations were demand for products and services is
derived from the demand for their customers’
products and services
EXAMPLE: PC’s drive computer chips
JOINT DEMAND
Situations where two products are used together and
demanded together
EXAMPLE: Coke + iron ore to make pig iron
BUSINESS CLASSIFICATION
• NORTH AMERICAN INDUSTRIAL
CLASSFICATION SYSTEM [NAICS]
–
–
–
–
–
SUPPLY-ORIENTED SYSTEM
20 SECTORS: 1,174 INDUSTRIES [and growing]
NAFTA: 5 DIGITS + 6TH FOR COUNTRY CODE
COMPATIBLE WITH ISIC Rev. 3 [UN] [SITC]
CONTINUALLY UPDATED
• Services is now the major development project.
THE ECONOMY AND NAICS
Manufacturing
31-33
Services
51-89
Agriculture
11
Wholesale
42
Information
51
Mining
21
Retail
44-45
Finance
52
Public
Administration
92
Professional
Services
54
Management
Companies
55
Utilities
22
Real Estate
53
Arts / Enter.
61
Construction
23
Health
62
Accommodation
72
Other Services
81
Transportation
48-49
Administration
Waste Mgt.
56
Educational
71
UNDERSTANDING NAICS CODES
http://www.census.gov/epcd/naics02/naicod02.htm
DIGIT
First 2
NAICS
Number
32
ECONOMIC SECTOR
3rd
326
ECONOMIC SUB-SECTOR
Plastics and Rubber Products Manufacturing
4th
3261
INDUSTRY GROUP
Plastics Product Manufacturing
5th
32612
DETAILED INDUSTRY GROUP
Plastics Pipe, Pipe Fitting, and Unlaminated Profile
Shape Manufacturing
6th
326122
U.S. INDUSTRY - SPECIALIZED
Plastics Pipe and Pipe Fitting Manufacturing
BUSINESS BUYER CLASSIFICATION
PRODUCERS
Purchase products for producing other
goods and services
RESELLERS
Purchase finished goods for resale,
rental, or leasing for a profit
GOVERNMENTS Federal, state, and local governments
[all different buyer behaviors]
NPOs
Purchase finished goods and services
for resale, rental, or leasing for a profit
B2B CHANNELS – TYPES OF
DISTRIBUTORS [see NAICS codes]
•
•
•
•
•
•
•
•
•
•
•
General Line
Material handling / Material handling supplies
Plastic
MRO
Electrical
HVAC
Plumbing
Power distribution
Medical instruments / Medical supplies
Chemical
…many more
RELATIONSHIP MARKETING
CUSTOMER
QUALITY
SERVICE
MARKETING
TRUST – BONDING – EMPATHY – RECIPROCITY
GOVERNMENT PURCHASING:
The US system is not typical
Public review
• Open bids
• Freedom of Information Act [federal]
Varying amount of paperwork depending on the
total value of the purchase
Drive for cost minimization
but exclusives are possible
Domestic suppliers have a strong advantage
ELEMENTS OF TOTAL COST FOR
INTERNATIONAL SOURCING
• Base price
• Tooling
Common additional international price factors
• Changes to packaging
• Transportation from x
• Additional insurance
• Document fees
• Port handling charges
• Taxes [all kinds]
• Possibly travel
• Escalation of prices
• Customs duties
• Payment terms &costs
• Port storage / handling
• Customs brokers
• Communications
• Inventory costs
FINDING LEADS
• How do I find potential buyers?
– Methods
• Explore numerous online sources on your own
• Search for your industry conferences, organizations, press
releases, publications, …
– U.S. Department of Commerce
• GLOBUS (Global Business Opportunities) offers daily trade
leads from the Trade Opportunities Program (TOPS), as well
as the Department of Agriculture.
• GLOBUS also offers daily procurement activity from the
Defense Logistics Agency, the United Nations, and the
Commerce Business Daily leads.
• http://www.stat-usa.gov/tradtest.nsf
GLOBAL BUSINESS PROFESSIONAL
Online/Distance Learning Course
SECTION 10A
CHANNELS OF DISTRIBUTION
ALAN L. WHITEBREAD
CHANNEL POWER and
DIFFERENTIAL ADVANTAGE
• POWER
– Obtained through differential advantage
• DIFFERENTIAL ADVANTAGE or
SUSTAINABLE COMPETITVE ADVANTAGE
CAN BE ANY OF THE FOLLOWING.
–
–
–
–
–
Physical / experiential
Psychological [communication / perception]
Purchase environment
Total cost including price and terms of sale
Post-purchase satisfaction [cognitive dissonance]
WHY ARE CHANNELS IMPORTANT?
• One of the least developed areas of business, they present an
opportunity to rapidly expand sales and profitability
– ALTOIDS [Kraft Foods, Altria] went from <$10M to >$100M by changing
from a niche to a mass distribution strategy including supermarkets,
drug chains, and mass merchandisers. There was no change to the
other 3 P’s.
• Companies have prospered and declined primarily based on
their evolving [or not] channel strategies.
– Stanley [tools] / Office products firms / Dell and Compaq
• What have you noticed Dell doing differently with its channels in the
last few years?
• The emergence of multi-channel shopping provides firms the
opportunity to provide products through multiple channels.
– You buy toilet paper at a retail store for your home but you purchase it
in large quantities for your factory from a paper products distributor.
CHANNELS
PRODUCTS &
SERVICES
APPLICATIONS
MARKET[S]
SEGMENT[S]
Channels of distribution tie markets, segments,
products, services, and applications together.
INTERNATIONAL DISTRIBUTION
•
•
•
•
•
Channel Structures
Distribution Patterns
Types of Resellers
Channel Selection
Channel Relationships
CHANNEL STRUCTURES
PRODUCERS
AND
CONSUMERS
PROVIDERS
CHANNELS PROVIDE UTILITY OF PLACE, TIME, POSSESSION, &
INFORMATION
CHANNEL STRUCTURE
• What are the types of channel members?
• What is the channel intensity for the
– Firm
– Market
• How many channels should be used?
CHANNEL MEMBERS
MANUFACTURER
• Manufacturers, importers, or primary
providers are the original source of
the product / service.
CHANNEL MEMBERS
MANUFACTURER
DISTRIBUTOR
or
WHOLESALER
• Manufacturers or importers or
primary providers
• Large resellers generally servicing
smaller resellers
– DISTRIBUTOR to DEALER for B2B
– WHOLESALER to RETAILER for B2C
• Can also be dealer direct, club, mail
order / catalog, …
CHANNEL MEMBERS
MANUFACTURER
NATIONAL
or REGIONAL
RETAIL CHAIN
• Manufacturers or importers or
primary providers
• Significant purchasing power for
multiple retail brands / stores
– Department store, mass merchandiser,
specialty store, category killer,
convenience store, off-price retailer,
supermarket, …
– Potentially club, mail order / catalog,
co-op, licensees, …
CHANNEL MEMBERS
MANUFACTURER
DISTRIBUTOR
or
WHOLESALER
DEALER
or
RETAILER
• Manufacturers or importers or
primary providers
• Large resellers generally servicing
smaller resellers
• Generally smaller resellers
–
–
–
–
Smaller retailers, franchisees, VARs, …
Rack jobbers
Potentially licensees
Beware of the DEALER label – it can mean
the same as DISTRIBUTOR in some
channels.
CHANNEL MEMBERS
• Manufacturers or importers or
primary providers
DISTRIBUTOR
WHOLESALER • Large resellers generally servicing
smaller resellers
DEALER
• Generally smaller resellers although
or
RETAILER
there are very large retailers
MANUFACTURER
[BUSINESS]
CONSUMER
• Consumers of various types
CHANNEL MEMBERS
MANUFACTURER
•
•
DISTRIBUTOR
WHOLESALER
•
Manufacturers or importers or primary
providers
Large resellers generally servicing
smaller resellers
Generally smaller resellers although
there are very large retailers
DEALER
or
RETAILER
•
BUSINESS
CONSUMER
Business consumers of various types
generally purchasing for
1. Consumption
2. As a component of a finished product
3. As a final product
DEFINING CHANNEL STRATEGY
AND OBJECTIVES
•
•
•
•
•
Market share / volume
Market coverage [density of distribution]
Distribution strategy
Channel roles, expectations, and controls
Others
–
–
–
–
Presence and continuity
Channel alignment, control, length, and leadership
Distribution and channel logistics
Profitability
CHANNEL STRATEGIES
• Use the market segments to determine
which sets of channels of distribution may
be the optimum one.
– One often finds that channel sets are not
optimized.
– This requires significant discussion with
existing channel members.
• Build a new channel of distribution
– Risky and expensive
– Consider an acquisition
INTERNATIONAL CHANNELS
• They may be longer and thus require a larger
number of intermediaries.
– Wholesalers, distributors, retailers, and many other
types exist.
– In some countries like Japan, laws prevent you from
shortening the channel.
• They are more complex to manage due to the
idiosyncrasies of intermediaries and their
environments.
• They are more difficult to effectively and
economically control.
TYPES OF VERTICAL MARKETING
SYSTEMS [VMS]
Greater
CORPORATE
Common Ownership at Different Channel Levels
CONTRACTURAL
Degree Contractual Agreements Among Channel Members
of
Direct
Control
ADMINISTERED
Leadership is Assumed by One or a Few Dominant
Members; Contracts are not common
Lesser
TYPES OF CHANNELS
International Vertical Marketing Systems [VMS]
Corporate
Subsidiary
or JV
More
Contractual
Resellers
Licensees [Franchisees]
Degree of
Direct
Control
Administered
No agreement
Less
International channels of distribution may use any possible combination
of the above systems. There is frequently significant region-to-region
variation and sometimes major country-to-country differences. Each
business must build the best combination for their needs.
DISTRIBUTION STRATEGY:
INTENSITY
INTENSIVE
Frito-Lay:
we need to have potato chips
available everywhere.
SELECTIVE
Panasonic:
we need to select technically
competent resellers.
EXCLUSIVE
Jaguar:
we need a single strong dealer in
every territory.
CHANNEL MAPS:
Understanding the channel flow
• A channel map provides a picture of the
flow of goods and/or services through the
various functional channel members.
• It is a great tool for explaining your
system, or system changes and why they
are needed. It is especially good for
explaining changes or new channels to
your sales organizations.
B2B [INDUSTRIAL] CHANNEL MAP
[Simple direct distribution]
Manufacturer
Manufacturer’s
sales branch
Manufacturer’s
Internet site
B2B CONSUMERS
Manufacturer’s
representative
B2B [INDUSTRIAL] CHANNEL MAP
[Simple indirect distribution]
Manufacturer
Manufacturer’s
sales branch
Manufacturer’s
Internet site
Manufacturer’s
representative
Many Types of Industrial Distributors [See NAICS]
May Resell to Many Types of Industrial Dealers
B2B CONSUMERS
CONSUMER CHANNEL MAP
[Simple distribution]
Manufacturer
Manufacturer’s
Internet Site
Mass
Merchandiser’s
Internet Site
Wholesaler
Retail Store
Direct distribution
Indirect distribution
CONSUMERS
DIRECT DISTRIBUTION
Pros
Cons
• Close to customers
• Active market
development
• Greater control over
strategies
• More uniform
implementation of policies
• Increased market
knowledge
• Difficult to manage if not
familiar with new market
• Time consuming
• Expensive
• Costly to maintain without
sufficient volume
INDIRECT DISTRIBUTION
Pros
•
•
•
•
Simple
Inexpensive
Small start-up costs
Intermediaries usually
represent several clients
Cons
• Lose marketing control
in target market
• Depend on
performance of
intermediary
• Potential reseller
conflict of interest
• Intermediary may have
significant bargaining
power
THINKING ABOUT CHANNELS OF
DISTRIBUTION
• To build good channels of distribution one
needs to understand the buying choices
and preferences of every channel level.
– For example, what choices do you have for
where to purchase a digital camera?
•
•
•
•
•
•
Camera specialty store
Discount merchandiser
Warehouse club
Drug store
Online
Where else?
TYPES OF RESELLERS:
WHOLESALING INTERMEDIARIES
Merchant Wholesalers
-Take Title to Goods
-Independently owned
-Distributors / Dealers
-Fairly standard arrangements
Representatives
-Independently owned
-Never take Title to Goods
-Help negotiate business
arrangements
-Be careful of payments !
Distributors - Wholesalers
Dealers - Retailers
Exporter
Export Trading Company
[possibly state controlled]
Agent
Broker
Export Broker
Export Management Company
Manufacturer’s Rep.
Freelance Sales Person
EXPORT MANAGEMENT COMPANY
AND EXPORT TRADING COMPANY
EMC
ETC
Yes
Yes plus imports –
mostly exempt from
antitrust [U.S.]
Usually yes
Can be from no to a
joint venture
Handles promotions
Yes
Yes
Communicates /
arranges logistics
Yes
Yes
Usually a commission
or fee arrangement
As negotiated
Handles all export
operations
Under contract
Compensation
For details of an ETC, see the Export Trading Company Act of 1982. ETCs work much like a Japanese
sogoshosha.
WHOLESALER PROBLEMS
• Problems of fragmentation
• If the number of wholesalers is high, transaction costs are
high drive consumer prices up.
• Smaller firms carry smaller lines, less variety, smaller
assortment; have limited market coverage and service
• Dealing with fragmentation
– Increase company role
• Increase direct investment into building channels
• Use master wholesalers to reach smaller ones
– Use pull strategy [large consumer firms only]
• Heavy consumer advertising to build demand
RESELLERS ADD VALUE
BY PERFORMING FUNCTIONS
• FOR THE SUPPLIER
• FOR THE CUSTOMER
•
•
•
•
•
•
•
•
•
•
•
-Market coverage
-Sales contact
-Inventory
-Order processing
-Information
-Customer support
-Information
-Credit
-Customer service
-Technical support
-Allocating / expediting
• -How can you be sure your
representative is doing this?
CUSTOMER-CHANNEL MEMBER
INTERACTION AND THE NATURE
OF THE EXCHANGE
TRANSACTIONAL EXCHANGE RELATIONAL EXCHANGE
Short-term oriented
Past, present, and future
considered
Sharp-in, sharp-out
Reciprocity
Self-interest only
Relationships
No concern for the future
Long-term focus
One shot deals
Win-Win
How will this impact [1] the traits of the sales people you hire, [2] requirements for the manufacturer’s
sales organization training, and [3] sales compensation?
NEW DISTRIBUTION SYSTEMS
HORIZONTAL
MARKETING
SYSTEM
HYBRED
MARKETING
SYSTEM
Two or More
Companies at One
Channel Level Join
Together to Follow
a New Opportunity.
A Firm Sets Up
Multiple Marketing
Channels to Reach
One or More
Customer Segments.
Nontraditional Banks in Grocery
Stores
Use three - Retailers,
Catalogs, and Sales
Force
UNDERSTANDING CHANNELS
• Some preliminary information can be
gathered on the Internet from large
research houses.
– Retail see http://www.atkearney.com/main.taf?p=5,3,1,110,1
– Search for other data using “global retail
opportunity ranking”.
• This must be supplemented with additional
materials before key entry or expansion
decisions are made.
SOURCES OF INTERNATIONAL
RESELLER INFORMATION
•
•
•
•
•
•
Competitor’s resellers
Consultants
Directories [country or industry]
Industry Associations [and directories]
Trade shows
U.S. Department of Commerce
– International Partner Service
– Export Marketing Service
– Other programs
BUSINESS CLASSIFICATION
http://www.census.gov/epcd/www/naicstab.htm
• NORTH AMERICAN INDUSTRIAL CLASSIFICATION
SYSTEM (NAICS)
– Focuses on new and emerging industries, industries using
new technologies, and service industries
– Provides for comparability with Canada and Mexico
– Adds U.S. industries to provide more detail
• NORTH AMERICAN PRODUCT CLASSIFICATION
SYSTEM (NAPCS)
– An initiative of the statistical agencies of Canada, Mexico,
and the United States to develop a comprehensive demandoriented product classification system.
THE ECONOMY AND NAICS
Manufacturing
31-33
Services
51-89
Agriculture
11
Wholesale
42
Information
51
Mining
21
Retail
44-45
Finance
52
Professional
Services
54
Management
Companies
55
Utilities
22
Real Estate
53
Arts / Enter.
61
Construction
23
Health
62
Accommodation
72
Public
Administration
92
Other Services
81
Transportation
48-49
Administration
Waste Mgt.
56
Educational
71
UNDERSTANDING NAICS CODES
http://www.census.gov/epcd/naics02/naicod02.htm
DIGIT
First 2
NAICS
Number
32
ECONOMIC SECTOR
3rd
326
ECONOMIC SUB-SECTOR
Plastics and Rubber Products Manufacturing
4th
3261
INDUSTRY GROUP
Plastics Product Manufacturing
5th
32612
DETAILED INDUSTRY GROUP
Plastics Pipe, Pipe Fitting, and Unlaminated Profile
Shape Manufacturing
6th
326122
U.S. INDUSTRY - SPECIALIZED
Plastics Pipe and Pipe Fitting Manufacturing
B2B CHANNELS – TYPES OF
DISTRIBUTORS [see NAICS codes]
•
•
•
•
•
•
•
•
•
•
•
General Line
Material handling / Material handling supplies
Plastic
MRO
Electrical
HVAC
Plumbing
Power distribution
Medical instruments / Medical supplies
Chemical
…many more
LARGE ACCOUNT MANAGEMENT
PERSONNEL CHARACTERISTICS
• OEM / NATIONAL ACCOUNTS
MANAGERS
–
–
–
–
Manage multiple projects
Extensive contacts throughout the client firm
Politically astute
Equally comfortable on the factory floor and in the
boardroom
– Highly respected by their organization
– Extensive product knowledge
– Very self-sufficient
• RFP, RFQ, organizing and managing resources
LARGE ACCOUNT MANAGEMENT
PERSONNEL CHARACTERISTICS
• B2B RESELLER MANAGERS
– Good product knowledge
– Sound sales skills through sales training
– Provider of information and training
– Well-liked motivator
– Provide various types of assistance
• Customer issues
• Problem resolution
• Delivery schedules
LARGE ACCOUNT MANAGEMENT
PERSONNEL CHARACTERISTICS
• B2C RESELLER MANAGERS
– Good knowledge of products, planograms, and
retailing
– Sound sales skills through sales training
– Provider of information and training
– Well-liked motivator that is really good with
consumers
– Provide various types of assistance
• Customer issues
• Problem resolution
• Delivery schedules
SELECTING CHANNEL MEMBERS
• A key to solid long-term growth is selecting
resellers that fit a defined profile. Some key
profile items include …
– Have they successfully sold similar products?
– How may their competitive lines impact our sales?
– Can they adequately cover the territory [number of
sales people, locations, …]?
– Will they fit with our corporate culture and
philosophy?
SELECTING CHANNEL MEMBERS
• SCREENING AND SELECTING CHANNEL
MEMBERS: CRITERIA
–
–
–
–
–
–
–
Must fit the customer profile [characteristics]
Meet minimum qualifications
Use and acceptable sales style
Possess product and market segment knowledge
Possess industry experience
The product[s] will fit with existing product lines
They are willing and able to perform all specified
channel role[s]
SELECTING CHANNEL MEMBERS
• SCREENING AND SELECTING CHANNEL
MEMBERS: CRITERIA [continued]
– Must be a team player
– Sales strategy: existing and potential fit
– Make some sales calls with their people to verify
sales skills
• as a trainee / prospective employee
– Administrative / management fit
– Management orientation [long vs. short] and
chemistry
– Risk assessment
– Check references [industry, suppliers]
STRUCTURING CHANNELS WITH
TERMS & CONDITIONS OF SALE
ACCOUNT TYPE
PAYMENT TERMS
Regional
Distributor
Choose from:
Net _ days
Prompt pay discount
…
DELIVERY TERMS
Choose from:
FOB [Ex works]
Time
Special charges
Shipping fees
Drop ship
…
SPECIAL TERMS
Choose from:
Inventory
adjustment
Minimum order size
…
PROMOTION AND
INCENTIVES
Choose from:
Co-op advertising
Sales promotions
…
Most
Favorable
Terms
Distributor
Dealer
B2B Consumer
Least
Favorable
Terms
PROACTIVE CHANNEL
STRATEGIES
• Product differentiation
– Exclusive features for appeal to target
markets
• Strategic pricing
– Larger price differentials, more exploitation
• Intermediary development
– Give intermediaries less incentive to cheat
• Marketing information systems
– Better unit tracking to identify sources of leaks
TYPES OF CHANNEL PROMOTIONS
• OFF INVOICE - temporary price reduction
• BILL-BACK - retailer bills manufacturer at the
end of the promo
• BONUS - extra cash payment for sales
• FREE GOODS
• CONSIGNMENT - manufacturer financing of
reseller inventory
• CONTESTS - for reseller and sometimes their
sales people
• COOPERATIVE ADVERTISING ALLOWANCES
• RESELLER LISTING - reseller listed in
manufacturer’s ad[s]
• INVENTORY ADJUSTMENT
STRATEGY FOR NEW MARKET
ENTRY
• ENTRY OPTIONS
– Use established channels [competitive]
– Build your own channels [risky and expensive]
– Abandon the market
• You must provide incentive to channel
members to accept a new product /
vendor.
• Direct distribution is often the most
effective alternative.
SUMMARY
• Channel decisions are difficult to manage
globally.
• A global marketer must
– tailor the marketing program to different types of
channels
– and / or introduce new retail / merchandising
concepts
• Effective channel management is dependent on
control—from the selection process through the
implementation of roles, expectations, and
controls.
GLOBAL BUSINESS PROFESSIONAL
Online/Distance Learning Course
SECTION 10B
USPPI, CISG, RESELLER AGREEMENTS AND CHECKLISTS
ALAN L. WHITEBREAD
U.S. PRINCIPLE PARTY IN INTEREST
[USPPI] RESPONSIBILITIES
• For products purchased and shipped direct to
U.S, resellers are considered domestic sales,
even if ultimately destined for export.
• The U.S. Reseller is responsible as the USPPI
when forwarding product to any foreign
destination.
• This applies to shipments to any
–
–
–
–
–
Domestic location, or
Subsidiary [regardless of location], or
Foreign trade zone, or
Drop shipped to a customer requested location
See http://www.aesdirect.gov/support/usppi_overview.html for details.
UN CONVENTION FOR THE INTERNATIONAL
SALE OF GOODS - CISG
• Effective January 1, 1988 CISG replaced
the United Nations Commission on
International Trade Law [UNCITRAL]
• It
– Involves places of business in different
nations
– Is based on French Civil Code
– Is approved by ~62 member nations, ~ 8
organizations
UN CONVENTION FOR THE INTERNATIONAL
SALE OF GOODS - CISG
• Is not concerned with the
– Validity of contracts, or
– Competency of parties, or
– Rights of third parties.
UN CONVENTION FOR THE INTERNATIONAL
SALE OF GOODS - CISG
• Does not apply to
– Sales of consumer goods, or
– Items with special regulations
• securities, ships, aircraft, and electricity, or
– Labor services, or
– The supply of goods for manufacture IF the
buyer supplies a large portion of the finished
product content.
CHANNEL CONTRACTS
• There are many types of channel of
distribution contracts including
– Distributor / Dealer
– Wholesaler / Retailer
– Manufacturer’s representative
– Try not to use “agent” or “agency”.
• Tying [franchises: full line purchases]
CONTRACT ISSUES
The Territory
• A detailed description of the “territory”
[geographic, product line, channel, account(s) or
other] to which the agreement applies. This
should include any logical extensions like new
products or new programs. It may also address
expansion and/or contraction of the territory.
• Is this for a[n] “exclusive”, “non-exclusive”,
“restricted”, or “general” reseller?
• What are the rights of the exporter to add
resellers of other types in the defined territory?
CONTRACT ISSUES
Status of the Reseller
• Is the reseller “independent” or
“associated” in some manner?
• Beware of the reseller being an “agent”—
this is very sensitive on a country-bycountry basis—most are not. In general,
the only right to bind your company should
be with your express written approval.
CONTRACT ISSUES
Duties of the Reseller
• What marketing activities should the reseller perform?
• Are there performance targets? If so, clearly explain and quantify
each one.
• What level of respect should the reseller have for patent and
property rights?
• There should be a provision in the contract that the reseller and its
employees know about and will comply with all requirements of the
Foreign Corrupt Practices Act [FCPA] and other applicable U.S.
laws.
• The reseller and its employees will comply with the laws of all
countries where they will conduct business on behalf of your
company. Why?
CONTRACT ISSUES
Duties of the Reseller - continued
• Are there any reporting obligations? Be specific
and show examples.
• There should be a provision in the contract that
the reseller and its employees know about and
will comply with all requirements of the Foreign
Corrupt Practices Act [FCPA] and other
applicable U.S. laws.
• The reseller and its employees will comply with
the laws of all countries where they will conduct
business on behalf of your company. Why?
CONTRACT ISSUES
Duration, Terms, and Conditions of Sale
• What is the initial duration of the contract and
how can it be extended in time?
• What are the method and terms of payment, and
conditions of sale? Be very specific!
• If there are any payments, commissions, or
other financial amounts due the reseller enclose
specific details. Note: some countries prohibit
payment to foreign bank accounts or other
indirect methods.
CONTRACT ISSUES
General Items
• Include all restrictions that apply to the
contract—export controls, U.S. and foreign
government laws or policies—be
complete!
• Generally, the reseller shall not sell,
distribute, or represent competitive
products and/or services if you provide a
full line of products.
– What will you allow if you can not supply a full
line of products?
CONTRACT ISSUES
General Items
• What is the governing law of the contract and
relevant arbitration [if chosen]?
• The contract should be the sole agreement to
govern the business relationship.
• What languages is [are] to be used for the
agreement?
• How can the agreement be modified?
CONTRACT ISSUES
Termination
• What are the grounds for each party to terminate
the agreement?
• What is the length of notice required for
termination?
• What are the consequences of termination for
each party?
• This is an especially sensitive area. Make sure
to retain highly qualified international contract
law expertise!