New exporters may be inclined to use the same sales channels in the international market as they use in the domestic market. However, the methods that successfully reach customers and sell products and services in the domestic market may not work in the foreign market because of different political, economic and cultural influences.

The selection of sales channels is a balance between market coverage and costs. The more sales channels that organizations use, the better the coverage—but the higher the costs. Each additional channel not only adds costs, it can also attract sales from other pre-existing channels.

When selecting the right combination of channels for the sales and distribution of products and services, international trade practitioners consider several factors.

1. Target market buying behaviours

It is vital that an organization knows where and how customers want to buy its products and services. Market research is the key to answering these questions. During market research, demographic, psychographic, geographic and behavioural characteristics are considered to answer questions such as: where do customers in the target market buy similar products and services? In stores? Online? From sales representatives? The exporter must also consider the international sales and marketing plan and what the organization wants to achieve in that specific market.

2. Product and service characteristics

The characteristics of products and services are primary considerations when making decisions about how to sell and distribute products to an international market. Is the product light and small or is it a single piece of industrial equipment weighing several tonnes? Is the product perishable or hazardous, requiring special shipping and handling conditions? Can the service be delivered online or does it require face-to-face interaction?

Consider the product or service life cycle. New and unknown products and services are better sold by staff with the required technical knowledge. As the technology gets more widespread and standardized along with the knowledge of how to use it, technical expertise becomes less important. At this stage, using distributors makes sense. In fact, at the maturity stage in the life cycle, delivery time and price become more important than the need for specialized knowledge.

As products and services increase in value, exclusivity or price, exporters may prefer to use personal forms of selling. This can include the use of agents that are familiar with the target market. This is a good strategy for selling products and services that require a considerable degree of cultural awareness. Alternatively, staff from headquarters may be sent abroad to direct the sales effort. This is often the case for products requiring specialized technical knowledge that may not be available locally. Custom-designed products such as industrial machine parts are not good candidates for distributors because of the level of specialized knowledge required to handle them properly and to advise users. In contrast, inexpensive products that are easily stocked and simple to service are good candidates for distributors.

3. Market location

The location of the target market, including proximity to the export location, will influence the sales channels selected. Is it a neighbouring country accessible via a well-established road system or is it on the other side of the globe? Can the market be accessed by established shipping, rail or trucking routes? How long will it take to reach the market and restock supplies? What types of sales channels are available in this location? The geography of the target market, the distances between customers and the availability of different types of sales channels in that location all affect sales channel decisions.

Want to learn more about how to select the best sales channels for your business based on considerations of coverage, cost, partner relationships and location? Check out the FITTskills Selling to International Markets online workshop!

4. Competition

The sales, marketing and pricing strategies used by competitors can help organizations choose the best sales channels for their own products and services. If it has worked for competitors with similar offerings, it can also work for the organization. No matter whether the organization uses similar or different channels, it will strive to deliver and distribute its products and services as well as, or better than, the competition. It can gain competitive advantage by making it easier for customers to access its products and services, and by providing timely deliveries and inexpensive shipping.

5. Local business practices

Local business practices are another factor to consider when selecting sales channels. For example, when retailers make frequent purchases in small volumes, organizations need to find ways to warehouse and distribute products in the local market in response to that practice.

Take the example of agents and distributors in Latin America. In Latin America, agents and distributors are independent businesspeople who tend to look out for themselves. This tendency can be countered by having the organization’s executives build relationships with Latin American industry association leaders. Exporters using this approach are likely to find that new opportunities arise. These are opportunities that a local distributor or agent may not have access to, given the importance of power and status in the Latin American business culture. Even when agents and distributors are successful in visiting prospects and closing sales, their efforts can produce better results when the company executives are simultaneously building relationships and getting involved with senior industry leaders.

6. Legislation

Organizations must consider how legislation influences the sale and distribution of products and services in domestic and international markets. For example, Scotland has restrictions on holding and using personal data. Japan has legal requirements concerning store size and the opening of new retail outlets. Until 2001, China prohibited the direct involvement of foreign companies in its distribution and retail sectors.

Countries may also have special packaging and labelling requirements. This may include determining a permissible number of units per package (single, in pairs, tens, dozens, etc.) as well as what materials can be used in the package—some jurisdictions specify that a certain type of material must be used or that a certain percentage of the packaging materials must come from recycled material. They may also specify what information must be included on product labels as well as the languages to be used.

Domestic governments also have requirements for goods and services being exported from their country. The requirements vary based on the nature of the products and services, but they likely include obtaining a business number, providing a detailed description of the goods including country of origin, and reporting the goods at a designated export office within the required time frame. In some cases, they require permits and export declarations as well.

7. Market coverage

The extent of market coverage—the percentage of the total market that may be reached through marketing or sales activities—is a crucial consideration for entering a market. This applies to both selling and distribution activities. If an agent or distributor only operates within a specific geographic jurisdiction within the market, the company must decide if that geographic market coverage is sufficient for its needs. In some cases, particularly when entering a large market for the first time, some companies may decide to limit market coverage due to supply concerns or as a way to test the market.

Market coverage also refers to the extent that selling and distribution activities will access the targeted customers or market segments. For example, an exporter of luxury products may not require their market coverage in a foreign country to extend beyond the major urban centres.

8. Customer support services

Regardless of the distance between headquarters and the international market, today’s communications systems enable parties to communicate almost instantaneously via telephone, instant messaging, text messaging and emails. Communication technology helps to avoid some of the constraints posed by earlier communication methods and allows agents, distributors and consumers to have their queries answered quickly.

International markets and customers may be several time zones removed from the source of the information or service. As a result, exporters find themselves under pressure from competitors to provide 24/7 services to international customers. Customers increasingly expect customer service agents and technicians to be available around the clock. The complexity and newness of products and services will determine whether exporters choose to have their own employees or intermediaries provide customer support services. If the exporter requires little to no customer service, they can use intermediaries such as agents or distributors. For complicated products, like computers and other equipment, exporters need to provide access to local technicians for repairs and maintenance.

9. Cost

An obvious consideration when developing a sales channel strategy is cost, particularly the cost-benefit analysis of one strategy versus another. Every link in the sales network implies a cost. The level of control and customer reach may be lower for certain distribution methods but could also be less expensive. Thereby offsetting loss in sales volumes.

The post 9 factors exporters should consider when selecting sales channels appeared first on Trade Ready.

In business, establishing an edge over the competition is the holy grail. Once you have it, sales and success are sure to follow. But actually achieving this minor miracle, especially in a new-to-you international market, requires a significant investment in research, marketing and product development.

Since this is what business all strive for when they go global, and there is no magic formula for success, we thought it was the perfect subject for this month’s #TradeElite Twitter chat.

FITT’s monthly Twitter chats bring together an expert panel – the “#TradeElite”, typically with diverse geographical, sector and focus backgrounds, and ask them to answer questions about the topics that matter most to you, out there making trade happen. Though we feature a panel, we open every chat to participation from all. And through these interactive chats a wave of useful insights and advice pours in and we share it with you here.

Enjoy, and join us next month (scroll to the bottom of the article for details)!

Panelists:

Rob Ward (@1robward) Co-founder of Grocery Accelerator Ltd, the UK’s leading provider of investment funding, coaching and mentoring for early stage FMCG products in the food & drink grocery market, based out of Norfolk, UK.

Simon Slyper (@SimonTradeBuzz) International Trade and Compliance Specialist for Amscan, the largest designer, manufacturer and distributor of decorated party goods and party accessories in the world, based in New York City, USA.

Kevin Sullivan (@KPSully448) Regional Account Manager / Food & Beverage Sector Lead at Export Development Canada, based in the Greater Toronto Area​, CA

Audrey Ross (@tresAudrey​) Logistics & Customs Specialist at Orchard International Inc, a full-service provider of turnkey solutions and sourcing for private label cosmetics, beauty, and bath products, based in Toronto, CA

Here’s a good place to start: What does it mean to have a competitive edge within a market?

A1. @FITTNews It means you are the leader / hold the market share / have the most customers / have the most expertise in that market. #TradeElite

— audrey ross (@tresAudrey) May 24, 2018

A1. Being first to market is a way to gain competitive edge. Innovation & strategy play a big role in being first product to market. #tradeelite

— audrey ross (@tresAudrey) May 24, 2018

What are some strategies that your business can take to develop close relationships with local businesses in the new market you are trying to enter?

A1 first learn their etiquette: Body language, customs, manners…

— Rob Ward (@1robward) May 24, 2018

A1 eating habits, routines, flavour preferences, timing…

— Rob Ward (@1robward) May 24, 2018

A1: Do any of your existing customers have subsidiaries in this new market? If so, can you leverage your relationship and track record with this customer to ask them for a shot at quoting business in this new local market?

— Kevin Sullivan (@KPSully448) May 24, 2018

A1 @SimonTradeBuzz Building relationships often means One on Ones. Get your passport ready! Connecting on social media, at tradeshows and maintaining communication build up a relationship. #tradeelite

— audrey ross (@tresAudrey) May 24, 2018

What legal strategies and concerns must your business take into account when entering a new market?

A2. You want to get an expert local representative. THis is one of those areas you cannot skimp on. Rules are very different in different markets. Save yourself a mess and get an expert. That said, there is a lot of research you can do up front for free #TradeElite https://t.co/qNTfBeocI8

— audrey ross (@tresAudrey) May 24, 2018

For UK & EU, significant homework needed to be clear about on-pack claims. Also worth considering joining protocols if you’re compliant https://t.co/N8xMtPRHki

— Rob Ward (@1robward) May 24, 2018

A1: Take advantage of consultations with @TCS_SDC and @ExportDevCanada trade advisory teams to source information at free of charge before finally consulting with your own legal team.

— Kevin Sullivan (@KPSully448) May 24, 2018

True! @ExportDevCanada & @TCS_SDC are SO helpful to Cdn biz! @USTradeRep can help out American biz. UK has some amazing chamber of commerces, like @NEEChamberJac plus @tradegovuk! Every country wants to facilitate business! #tradeelite https://t.co/ImwdASGAxF

— audrey ross (@tresAudrey) May 24, 2018

the best legal strategy is knowing and learning the rules of the game of the target market, never step in before analyzing the risks. It takes time but not following a structured strategy may be detrimental to your success. Ask for advice an incorporate it into your X’s BP

— Adriana Carrillo (@acarrillo2016) May 24, 2018

We’ve got “do your homework” & “Due diligence” & “do the math” on the board in this chat already. What if you don’t want to do stuff to go global? Hire a CITP who’s been trained & qualified by @FITTNews #TradeElite

— audrey ross (@tresAudrey) May 24, 2018

Is it necessary to design new products/services in a new market?

A3: Yes and no. It depends on the product/service. @McDonalds, for example, does a great job of not necessarily inventing an entirely new product, but adjusting it to meet local tastes. Some markets may call for radical change, but market testing is essential #TradeElite

— Simon Slyper (@SimonTradeBuzz) May 24, 2018

A3: what @SimonTradeBuzz said. In many cases you may realize terrific returns with existing product offering. Of course, budget for and be prepared to pivot to adapt to local market. “Test orders” using online platforms in markets like China work well for gaining a pulse

— Kevin Sullivan (@KPSully448) May 24, 2018

A3. It is not necessary. It IS necessary to ensure your product / service is compliant to meet product safety standards, or local regulations, is usable for a customer unfamiliar with the product. #tradeelite

— audrey ross (@tresAudrey) May 24, 2018

How important is speed to market when it comes to being competitive?

Speed to #market is very important, even critical in many instances. There are narrow windows of opportunity for market success depending on the product or service. Cost/benefit needs to be weighed. @TradeElite

— Simon Slyper (@SimonTradeBuzz) May 24, 2018

Being #competitive depends on how different you are from the others, how well you fit in the needs of the target consumers. Innovations are just popping up every day make sure to differentiate as much possible to allow you not to have to speed on

— Adriana Carrillo (@acarrillo2016) May 24, 2018

A4. If you are trying to be 1st- then it’s important. Try not to lose sight of what may be needed post-launch. If you don’t have cust service or supply chain or delivery established you could ruin all of your hard work. (Case Study: Target Canada) #tradeelite

— audrey ross (@tresAudrey) May 24, 2018

What about marketing, messaging and local endorsements? How important are these and what are some success strategies?

A5: Local endorsements are important, but conduct #duediligence on your potential local partner. What is their reputation in the local market? #YouTube #influencers in local markets may be a powerful tool to attract buzz for your product/service. #TradeElite

— Simon Slyper (@SimonTradeBuzz) May 24, 2018

key ingredient – how well you mix the local culture flavour with your own marketing flavour. Hiring a local marketing agency may also be the right step

— Adriana Carrillo (@acarrillo2016) May 24, 2018

A5. Another area where research & local connections are key. Culture has a huge influence on what we find funny / appropriate / catchy what works in one market & one language may not be well received in another. #tradeelite

— audrey ross (@tresAudrey) May 24, 2018

A5. Work with locals on your marketing / advertising strategies. When hiring people look for recommendations & get them to present actual numbers. Have they done new product launches? new brands? #tradeelite

— audrey ross (@tresAudrey) May 24, 2018

Do you need to have boots on the ground to compete in an international market?

A6: Not necessarily. You may even be able to leverage contacts in your local market who are already well entrenched in your target market. Partner with these sourcing companies to help you build a beachhead and penetrate the market(s). Expand organically from there.

— Kevin Sullivan (@KPSully448) May 24, 2018

I will always recomend having a high level of collaborative relationships in the target market. Join local chambers of commerce and have a presence in their activities.

— Adriana Carrillo (@acarrillo2016) May 24, 2018

A6. Not really in the age of the internet but if you want someone executing your vision you may need to establish a presence. Or at least the perception that you are simply a flight away & can & will be there to ensure things are running well. #tradeelite

— audrey ross (@tresAudrey) May 24, 2018

Need to be the right boots! Ones that truly listen and learn, yes. Ones that kick… get knocked out! https://t.co/hb0H5UmD6S

— Rob Ward (@1robward) May 24, 2018

What are some warning signs that you may have trouble competing in a certain market?

High competition of similar products and lack of differentiation. Also, no actual bilateral protocols for new products accessing new markets

— Adriana Carrillo (@acarrillo2016) May 24, 2018

A7. If you don’t see a lot of foreign brands being successful or if you come across regulations (or lack of regulations) that leave you open to IP risk or investment risk. #tradeelite

— audrey ross (@tresAudrey) May 24, 2018

A7. There is a fine line of governing to protect your national interests & being unreasonably unfair to foreign biz. Often markets w/ limited infrastructure or inflated bureaucracy can be unfriendly. There are still ways to succeed, it’s just a more effort. #tradeelite

— audrey ross (@tresAudrey) May 24, 2018

Read the rest of the chat and join future discussions by following the #TradeElite hashtag. And stay tuned for the next #TradeElite chat, coming up Thursday, June 14 at 2:30-3:30PM ET, and if you haven’t yet, join us on Twitter at @FITTNews.

The post How can your business get a competitive edge in global markets? appeared first on Trade Ready.

When a company has completed the process of market research and has confirmed that, given its resources, it is capable of successfully entering a specific international market, it is time to develop a strategy for market entry.

A wide range of options exists for companies to approach the market, and to develop and maintain a long-term and successful presence there.

Because so many options exist, it is critical to select the right market-entry strategy. Probably the first question to answer is whether to work directly with customers or to use some form of distribution, whereby a company’s products or services are managed or impacted in one way or another by a third party. There are pros and cons to both options.

Direct sales enable a product or service provider to minimize prices to end-users and to control the relationship directly. Conversely, leveraging a company as a partner along the supply chain prior to its arrival at the ultimate customer may facilitate more reach into a market but can also increase end-user prices and complicate communications with customers.

Feeling overwhelmed? Start by asking a few questions

When developing a market-entry and maintenance strategy, a variety of other factors must be considered:

What method best suits your company’s product or service? What is the layout of existing distribution networks, and what forces drive them? What is the competition doing, and what can be improved? What does the market research indicate are the drivers of customer buying behaviour? What investment needs to be allocated, in both the short and long term? How will the strategy need to be modified as you (the exporter) progress through the market- development cycle?

Most importantly, what are the critical success factors that could determine the difference between success and failure in a target export market?

All of these and more must be carefully considered as one develops an international market-entry strategy. Before getting started, get familiar with the crucial elements you’ll need to address in a successful strategy.

Your 9 step market entry checklist

The following checklist can help identify the steps required for successful market entry:

1. Successful market entry begins with domestic-market establishment and ultimately ends with investment in the new market.
2. Selecting the correct market-entry strategy is a critical decision, and can mean the difference between success and failure.
3. Selling directly to customers or through distribution is governed by the population of potential customers and by the value of the product or service being offered.
4. When selling through distribution, understanding all available channel options, and how to manage them, is critical to the success of the market-expansion initiative.
5. Competition comes not only from other providers of similar products and services but also from “non-competing” product lines that can occupy the attention of channel partners.
6. Clear communications between suppliers and channel partners make it possible to adjust to changing market conditions.
7. Selling is not convincing customers to do what you want; it is helping customers make astute purchasing decisions.
8. Strong relationships are important to doing business between all cultures, and contact must be maintained through both personal visits and ongoing remote and electronic communications.
9. Successful market entrants must possess management commitment, financial resources, staff and capacity to handle increased demand, language capability and availability to travel.

Preparation and understanding are crucial to successfully entering a new international market. Developing and implementing the correct market-entry strategy at the outset can often make the difference between success and failure. Key components of a successful market entry include identifying and selecting the appropriate distribution channel options and ensuring clear communication with the business partners that are vital for success.

The post Simplify your market entry strategy with this 9 step checklist appeared first on Trade Ready.

Businesses do not exist in isolation. They are part of a complex network that involves customers, suppliers and competitors. Thus both business planning and day-to-day operations must take place with one eye always firmly fixed on this larger context.

How is the firm positioned within its industry?

How does its performance compare with other firms?

How effective is it vis-à-vis its competitors?

Benchmarking is a tool that enables managers to answer these questions. It can show exactly how a company compares to its competition.

Benchmarking provides an early warning system that can spot flaws and weaknesses before they grow into crises that can destroy the company. What’s more, it can point to the kinds of corrective measures that managers can use to get their firm back on track.

It is also a systematic comparative analysis. It involves comparing a company either to the industry standard or to one or more competitors using a number of well-defined and easily-understood indicators.

What managers will find difficult is gathering the information required to perform a detailed and useful comparison, and acting to correct the weak areas identified by benchmarking.

Why should you be benchmarking?

Benchmarking is a technique used to establish performance measures of the effectiveness and efficiency of the internal operations and competitiveness of a company in the marketplace.

The process involves comparing the performance of the company against competitors that are generally accepted as being the industry leaders.

Companies use benchmarking to:

• solve problems;
• plan;
• set goals;
• improve processes;
• innovate;
• re-engineer products; and
• set strategy.

Benchmarking helps companies to adopt and adapt the best industry wide practices tobtheir own needs without having to go through the more painful process of trial and error. It also lifts companies out of the status quo and can be applied internally to improve management skills. 

Do the right math

The essence of benchmarking is comparison. There are two types of comparisons: internal comparisons can be made within a company (better or worse than previous years); external comparisons can be made between a company and the industry (better or worse than another company or than the industry average). Apart from comparing companies, the performance of different products can also be compared.

Comparisons should always be made using exactly the same type of measurement, arriving at a result in exactly the same way. Thus annual results should be recorded over the same fiscal year to avoid seasonal differences.

Terms such as ‘profits’ should be used precisely and consistently (pre-tax or after-tax). Comparisons should also be expressed in numbers rather than relying on opinions or feelings expressed in words. The numbers should be expressed in the same way.

Ratios and percentages allow for comparisons even when the absolute results for firms are very different. On the other hand, averages can be misleading if they contain extreme differences.

For example, a statement such as “on average, products spend 50 days in inventory” can conceal the fact that two older lines, each accounting for 25 percent of sales spend 75 days in inventory and one new product accounting for 50 percent of sales spends only 25.

Clearly it would be more useful to know this detail since it allows for judgments to be made about which products move fastest and why.

In performing benchmarking managers should be prepared to make adjustments so that the result is more realistic. Perhaps the most common adjustment is to take the effects of inflation into account. A company showing annual growth in revenues of 10 percent may not be growing at all if inflation is around the same rate.

Step 1: Identify the critical performance factors

Critical performance factors are also known as key performance indicators (KPI). These factors can vary widely from industry to industry. For example, in some manufacturing sectors, the amount of time goods spend in inventory may be a critical indicator of how effective a company is.

Inventory, however, would be irrelevant in a company involved in the provision of services. Financial indicators such as those involving assets may be irrelevant to small knowledge-based companies with few traditional assets such as land, buildings, cash, etc. It is very important to select those yardsticks that are meaningful within the context of the specific industries and companies to be compared.

Step 2: Build a team that will conduct the benchmarking

Larger companies will choose a cross functional team to do the benchmarking and this will be drawn from the appropriate departments affected by the critical performance area being benchmarked.

In a smaller company, all the functions of the benchmarking process may be fulfilled by the owner of the business with assistance from maybe one or two other staff or, outside consultants.

Step 3: Develop a profile of the performance indicators of the critical performance area

These performance indicators can be quantitative and qualitative with the quantitative being the measurement data produced and the qualitative being the processes used. Everybody affected by the performance area under review should be involved in drawing up the profile. This may include the human resources department, the marketing and sales group, the finance department, etc.

Step 4: Plan the data collection

Only the data required for the decision-making process need be collected. Typically, more than 80 percent of all information collected is filed and never used.

Step 5: Choose the comparison group against which the company will be benchmarked

This may be the industry as a whole, a small grouping of three or four primary competitors within the industry, the one most threatening competitor, or a firm outside the industry that faces similar challenges in its business. While it might be highly desirable to do a head-to-head comparison with the key competitor, it may simply be unrealistic and impossible to get the detailed information required to create the same profile of the competition as is possible for the firm itself.

Step 6: Do the comparison

It is recommended to use a matrix to do the comparisons between the companies being benchmarked – identifying where the company performs at a higher level and where it performs at a lower level. If possible the people doing the comparison should determine what factors contribute to positive or negative differences between the companies.

Step 7: Develop an action plan

Once the analysis is complete and the decisions made on what action is necessary following the analysis, a plan needs to be executed to implement the required changes.

Step 8: Monitor the results

Upon implementation of the action plan, it is necessary to monitor the success or otherwise of the incorporated changes. Good companies not only benchmark on a regular and consistent basis, they act on what benchmarking shows them and track the outcomes.

The post How competitive is your company? Follow these 8 steps to find out appeared first on Trade Ready.

Knowing and understanding as much as possible about the international marketplace will improve a company’s ability to achieve success in that market.

Such knowledge will provide valuable insight into the steps that must be taken to meet the demands and specific requirements of that market as well as help companies avoid critical mistakes.

Market research in itself serves no purpose. It must be directed towards some practical objective. Its principal value lies in facilitating the decision-making process. Market research should be closely coordinated with the company’s strategic plan.

The research plan must identify the issues that need to be addressed and the sources of information shown so that the marketing plan can be validated and subsequently updated through reference to the initial sources of information.

Researchers need to have terms of reference to ensure that the information gathered is focused and cost effective.

Exporters want to know what specific market opportunities are available for their product before developing an international marketing strategy. In developing that opportunity, the researcher should gather information on these topics:

1. What does the market structure look like?

Knowledge of the composition, profile or structure of a foreign market enables an exporter to plan for market entry, promotion and development of customized products or services, and address the many other issues important in entering a new market.

2. How is the market share split up?

Market share is an important consideration, but in the long term, achieving sustainable profitability in each market is the ultimate goal. Knowing how the market is currently served is important.

For example, are there any dominant competitors in the market or does each participant have only a small part of the market? Entering into a highly competitive new market means that for every product sold by the company, a competitor loses a sale.

With market share information generated through research, the marketing function can design a specific market entry strategy.

3. What are the current market trends?

Trends in international markets can indicate what products are being phased out or what new products are entering the market. With this information, the marketing function can decide if any modifications are required to its marketing strategies and plans.

Attention should be given to any trends in the economic and political environments within the target markets.

4. What size of market are you looking at?

Market size is often a major determinant when deciding to enter foreign markets. For markets of a certain size, niche marketing may be warranted.

In the case of larger markets, the emphasis may be on taking advantage of economies of scale.

5. What challenges will your product or service face?

A number of questions relating to the nature of the product or service must be considered. What is the consumption rate of the product? Is standardization an issue? Based on the information provided from the research, the marketing function would determine if any product modifications are necessary.

6. How will you price your products or services competitively?

One of the most important elements of information to be generated by market research is a sense of what the foreign customer is willing to pay for the product. Another related factor is the price of competitors’ products.

7. How will you promote your business?

Research can identify promotional channels such as radio, television, newspapers, Internet sites, bulletin boards or high-profile events. Many of these outlets have demographic information about their audiences. With this information, the marketing function can design an effective promotional program.

The existence of product-related trade shows can be determined through research—usually by referring to Global Affairs Canada (GAC) or the Federation of International Trade Associations (FITA).

Additional research can yield information about the nature of promising trade shows and the characteristics of attendees. This enables the marketing function to consider the most appropriate show for a product/audience fit.

8. What kind of competition will you face?

Knowing who the competition is and what it is doing is as important in a foreign market as it is in a domestic one. Increasingly however, the pool of potential competitors is far broader, partly owing to the Internet, and partly to the fact that competition can come from outside a particular industry sector.

9. What kinds of logistics challenges will you face?

Logistics research can yield information on the availability and nature of the various channels of distribution and storage capabilities in the target market. This enables the marketing function to develop a logistics plan to get the product to the customer as quickly and as cost effectively as possible.

10. Are there any cultural issues in your target market?

Significant cultural issues may not always be covered in the standard secondary sources of information.

There are however, many sources especially focused on intercultural effectiveness or cross-cultural interaction, that can offer very practical insight. Additionally, the researcher may consult with business people who have worked in the target market or with travelers who have spent a significant amount of time there.

The objective is to identify significant cultural issues that might pose a barrier to successful entry. Such barriers might require adjustments either to the market entry strategy, the sales approach, product positioning, labeling or even the product itself.

The foregoing research topics can be effectively organized by using various techniques such as PEST analysis, SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, as well as Porter’s “Five Forces” analysis.

Each of the techniques or models suggested can be readily applied to international markets, and can be valuable in analysis conducted in the context of international marketing activities.

The post 10 questions you should ask for your foreign market expansion strategy appeared first on Trade Ready.

Philosopher and novelist Ayn Rand recognized in her masterpiece “Atlas Shrugged” that corruption leads to the interference of trade and, eventually, to a doomed society.

Several different studies and articles confirm the negative consequences and costs of corruption for a country.

But it does not stop there. As business is part of society, corruption also dooms companies.

The known corporate corruption cases of the past show that it is impossible to control bribery and limit it to just one area or region. Even if corruption is practiced only in receptive sectors and/or countries, it is not a sustainable business strategy.

The infection can begin with one simple bribe

Companies are like living organisms that can be infected by the virus of corruption.

Similar to a viral contagion, corruption will spread throughout an organization if not treated intensively at the onset of symptoms with an antibiotic called “zero tolerance.”

To illustrate this point, let’s imagine that a sales employee pays a bribe to a procurement person at a potential customer’s company to ensure a project win. From this point in the decision-making process, the combination of price and quality plays only a subordinate role.

The winning factor is the bribe.

Inside the selling company, the impact is a decline in the importance of production and project management relative to sales. Management attention and employee focus shifts to sales, as this function is considered most valuable for the company.

In this situation, the selling company ensures business by strengthening relationships through illegal payments.

Production and project management employees are less motivated, as they feel they are no longer valued.

In response, these teams produce lower-quality work. Poor motivation leads to a decreased sense of employee loyalty, which can result in higher rates of theft, sabotage, internal fraud and employee turnover.

Meanwhile, management loses interest in how tasks are achieved, preferring instead to focus only on sales results.

The virus easily spreads from department to department

The growing infection soon spreads to the procurement department. As the internal priority is clearly the “successful” sales department, procurement loses its independence and is now advised by sales.

Procurement is pushed to use certain providers, based on whether the bribery model requires a third party or if the supplier is a family member of the prospective customer. As with the production team, we find the same effects of employee demotivation.

Corruption is not part of a culture, but a learned behavior often used to create a shortcut through complex legal environments. Many companies have an extensive system of guidelines, policies and tools.

Employees who see that bypassing external laws is acceptable corporate behavior may also assume this practice applies to internal regulations.

Conflicts of interest can increase, as internal connections become more important than the quality of employee output.

A common result is that talented employees offered the opportunity to work elsewhere will leave, while less talented employees remain.

In addition to the psychological effects on employee behavior, corruption also affects transparency and internal processes.

Winning a project with a bribe sends the wrong message to the development team, as they can only analyze the relationship between price and quality to the project win rate, but cannot include illegal payments as a key factor.

The infection starts effecting quality of work, competitive edge

Due to this hidden information, the development team wrongly concludes that the company’s solutions are competitive and that investment is unnecessary. In contrast, competitors that work with full transparency foster the development of better solutions.

Over time, the company that succeeds because of bribery loses its competitive edge. To compensate for this weakness, it has to increase the size of bribe payments – a situation that the potential recipients exploit.

Eventually, the bribes are not large enough to justify the difference in competitiveness. And if a significant number of talented employees have left to work at another company, it will be difficult to switch strategies to foster the development of superior products or identify less costly production methods.

By this time, the virus has also infected the bribed company. Because of bribe payments, the procurement employee has selected a sub-optimal solution for the company. Now this company is not using the best and/or the most cost-effective materials for its own production.

It becomes less competitive and no longer offers attractive solutions. A sales employee working for the bribed company needs to find another factor to win business, and may be tempted to offer a bribe.

You can kill the virus

If we see a company as a living organism, then some kind of preventive treatment should be prescribed for this disease.

Compliance workshops can work much like vaccinations. With relevant case discussions and role-playing exercises, employees can learn about potential situations they could face, how to react, and what consequences could occur.

Like an antivirus, this knowledge stays inside the employee and can be activated when needed.

Bureaucracy provokes corruption and vice versa.

To avoid this downward spiral, a company should establish internal processes that are as simple as possible to ensure transparency and employee accountability. Compliance Officers cannot do their jobs only from behind closed office doors.

They must be easy to reach and well-known across the company. Trusted employees can be offered the additional role of “Compliance Promoter,” and IT tools can ensure that an anonymous reporting system is available 24 hours a day.

Compliance training sessions cannot be limited to presentations about rules and regulations. It they are, employees will only behave if they feel controlled.

Instead, companies need to establish a values-based culture where employees understand their role inside the organization and how corruption could affect their job.

In this culture, everyone is equipped to face difficult situations – and not just employees in typical risk groups such as sales or procurement.

Is your company protected against this kind of “corruption contagion”? What kinds of “vaccinations” does your company have in place to stave off bribery and corruption?

The post How corruption spreads like a virus and what you can do to stop it from infecting your company appeared first on Trade Ready.

Tariffs are taxes that countries impose on imported products for one of two major purposes: protectionism or social change.

Most countries participate in the World Trade Organization. This worldwide independent body acts as mediator between countries to resolve trade disputes, often over trade rules for imports, and is dedicated to the reduction and removal of all tariffs between member nations. In spite of these efforts, there is still a long way to go.

Tariffs in global trade 101

The basic truth in international business is that countries have competitive advantages over other countries. These advantages can be in access to raw materials, cheap labor, and technological expertise.

As a result of these advantages, the cost of products produced in those countries can often be significantly lower.

Governments then use tariffs to ‘level the playing field,’ so that products produced internally can compete with lower cost imports.

Governments also use tariffs as leverage to encourage social change. Most countries are not at all receptive to other governments telling them what to do.

On the other hand, they are usually very interested in improving their economies. They can therefore be persuaded to implement changes in human rights practices, corruption, pollution, etc., in exchange for reduced tariffs and greater access to markets for their exports.

Because countries use tariffs as a tool, they can change as frequently as government priorities do. For the importer, this requires constant vigilance. Policy changes can profoundly impact profitability and change the competitive balance in the marketplace.

Get your calculators ready

Navigating the complex tariff schedules can be a daunting task. If you fail to identify the product correctly, you can face penalties and fines, perhaps even loss of import privileges.

Inaccurately identifying the country of origin can have serious consequences.

Even the tiniest discrepancies in the description of the product can cause huge differences in the duties charged.

Let’s say you are an Italian shoe manufacturer and would like to import running shoes to the United States. In this case, the tariff rate is based upon the value of the shoes.

If our shoes are worth more than $6.50 but not over $12.00, then we can use the harmonized tariff schedule and look up code 6402.91.8005 – “Tennis shoes, basketball shoes, gym shoes, training shoes and the like”. There is no special tariff rate for Italy or the European Union, so we know we will be charged the default rate of $0.90 / pair + 20% of the value of the shoes.

If those same shoes came from Colombia, the rate would be $0.54 / pair + 12% of the value of the shoes. And if they were made in Morocco they can be imported duty-free.

To further complicate matters, if the value of the shoes exceed $12.00 they must be imported on code 6402.91.9005 and the tariffs are slightly lower.

This creates the following bizarre scenario:

If the shoes are valued at $12.00, the tariff per pair is $3.30 bringing the cost per pair to $15.30. If the manufacturer should implement a 2% price increase to $12.24, the tariff per pair is only $2.45, so the cost per pair becomes $14.69!

Get to know the rules even better than U.S. Customs

We advise our clients to get a binding opinion from the U.S. Customs and Border Protection agency before importing a product into the U.S. This opinion will provide some clarity in terms of tariffs, and eliminate surprises at the border that could adversely affect the bottom line.

To our amazement, we found that the changing rules sometimes confuse the very agency tasked with enforcing them.

One of our clients is an importer of tahini, a sesame seed based product. They identified a particular strain of the seed, grown in Ethiopia, which has the taste they sought.

They contracted with a factory in Israel to manufacture the product and began importing tahini duty-free under the free trade agreement between Israel and the United States. This arrangement allowed them to contain their costs, while introducing their product to the U.S. market.

In July of 2014, we began negotiations with a factory in Ethiopia to manufacture the product closer to the source, thus eliminating the cost of transporting the seeds to Israel.

When we sought guidance from Customs and Border Protection, our first response was that the import, classified under 2008.19.9090, would not qualify for any trade preference, and as such would be charged the default tariff of 17.9% (much too high to make it economically feasible).

However, the rules on this were confusing at best.

In the past, importing tahini from Ethiopia could be done duty-free, since it was covered under the General System of Preferences (GSP). Unfortunately, the GSP was allowed to expire on July 31, 2013.

Products from Ethiopia also qualify for special duty-free treatment under the African Growth and Opportunity Act (AGOA). However, tahini was not among the products that were included in AGOA. Careful research uncovered an obscure paragraph in the rules which stated:

“Imports of GSP-eligible imports for beneficiary countries of the African Growth and Opportunity Act (AGOA) will continue to be eligible for duty-free entry, notwithstanding the lapse in GSP authorization, pursuant to the provisions in the statute governing the AGOA program”

We presented this citation to the agency and received a binding opinion that no tariff would be charged.

The moral of the story is that careful research and diligence is the only way to guarantee that your imports will be treated fairly and the proper tariffs applied.

What products could your business potentially reduce tariffs on with some more research? Do you have any stories to share on the topic of tariff rules?

The post What you need to know about tariff rules to avoid getting overcharged for your imports appeared first on Trade Ready.

There are a number of ways in which a company can pursue an offensive strategy:

1. Direct attack

It can slash prices, introduce new features, launch comparison advertisements unfavourable to the competition, or go after parts of the market that the competition has served poorly.
For smaller companies, such strategies can be accompanied by low-cost guerrilla marketing campaigns designed to attract attention.

2. End-run

Companies can avoid direct competition but still pursue an offensive attack by going into unoccupied markets or countries that have been ignored completely by the rest of the industry.

3. Pre-emption

Sometimes the first company into a market gains a position from which later entrants cannot dislodge it. The first company into a market can secure relationships with the best suppliers, it can acquire the best locations, and it can target and build relationships with the best customers.

4. Acquisition

A truly aggressive company with deep pockets can eliminate a rival simply by purchasing it. Acquiring a company in a foreign market can also bring with it a position in the marketplace, geographic coverage, and established relationships. Even so, such a strategy is complex and expensive, and it should not be pursued unless it can be shown to be contributing to the firm’s bottom line. It may also run afoul of local competitive or anti-monopoly legislation.

On the other side, there are also a number of defensive strategies that managers can adopt to deflect attacks from competitors.

Want to learn more about how to keep your customers happy by addressing the specific needs of your target markets? Check out the FITTskills Products & Services for a Global Market online course.

Defensive strategies:

 1. Exclusion

One way of defending a position is to set up exclusive arrangements with key suppliers in the market. Such exclusive arrangements can block the access of rivals to the best suppliers, sources or partners.

2. Pricing

A simple strategy is to match any price cuts by the competition with similar discounts, as long as the price war does not get out of hand and ruin both sides.

 3. Features

Adding new features or capabilities can be a positive and appealing way of countering a competitive challenge.

 4. Service

A company can respond to competitor price-cuts or new features by emphasizing after-sales service or warranties, implicitly demonstrating that it stands by the superiority of its products.

5. Advertising

A strong public campaign demonstrating commitment to the market, confidence in the products, or a willingness to meet the competitor’s challenge.

6. Counter-parry

Companies respond to an attack in their own market from a foreign competitor by moving into the competitor’s home market. This can draw off resources and blunt the initial foray. When Fujitsu entered the American market, Kodak responded by marketing in Japan. Goodyear responded to Michelin in North America by marketing in Europe. To do this effectively, the new entry has to establish itself as a good corporate citizen in the new environment. Companies will participate in community and family oriented events to position themselves as friendly and familiar rather than foreign and aggressive.

It should be noted that all of the preceding examples were framed as individual instances of offence or defence.

In fact, the international environment is far more complicated, with global corporations pursuing numerous lines of business in many markets with many competitors simultaneously. As a result, competitive strategy can get extremely complex.

Ultimately, the choice of a strategy will depend on country-by-country analysis. International managers should remain sensitive to regional differences and local variations, developing strategies customized to the specific circumstances in each country in which they operate.

There is, however, also the possibility of pursuing corporate-level strategies that focus on getting the best mix of products and markets given the nature of the competition.

The post Checklist of some offensive and defensive competitive strategies for international business appeared first on Trade Ready.

Business economist Michael Porter identified the following five forces of competition, which can be used to analyze an industry or market and formulate a competitive strategy:

1. The threat of new entrants or barriers to entry. The threat of new companies entering a market adds to the level of competition. Existing competitors and governments will often take action to inhibit the entrance of new competitors. These actions act as market entry barriers.
2. Intensity of rivalry among existing competitors in the market. Competitors in a market will always be attempting to gain a competitive advantage. The effect of competition is often to reduce profits. Markets with few competitors will experience less rivalry. High fixed costs, high exit costs, and slow market growth all increase the level of rivalry between competitors in the market.
3. The threat posed by substitute products. Substitute products are those products that can replace a product but are not a direct competitor. For example, plastic bottles can be substituted for aluminum cans. A drastic reduction in the price of plastic bottles will create competitive pressures on the aluminum can industry. When a product has many potential substitutes in a market, its competitiveness is reduced.
4. The bargaining power of buyers. When buyers in a market are powerful, they can determine the price paid for supplies. This will increase the level of competition among suppliers. Buyers are powerful when there are few of them or when they are powerful enough to purchase suppliers.
5. The bargaining power of suppliers. If suppliers in a market are powerful, then they can exert pressures on buyers. These pressures will include high prices that will make buyer companies less competitive. Suppliers are powerful in markets when they are concentrated or integrated or when there are significant costs associated with switching suppliers. Suppliers are weak when there are many of them competing against each other.

The post Entering new markets: Five forces of competition appeared first on Trade Ready.