certified global business professional online course section 1a business tools and the world...

CERTIFIED GLOBAL BUSINESS PROFESSIONALOnline Course

SECTION 1A

BUSINESS TOOLS AND THE WORLD MARKETPLACE

ALAN L. WHITEBREAD

COURSE INTRODUCTION

• The syllabus is online.– http://awhitebread.ba.ttu.edu

• Many full or partial lecture slides plus other support materials are online can also be found there.

INTERNATIONAL TRADE AND THE FIRM

Management

TradeFinance

Supply ChainManagement

Marketing

INTERNATIONALTRADE

Legal

Capital

Stakeholders

Environment

Government

Competition

Technologies

Human resources

ETHICS & CORE VALUES

• Morals and ethics may be different between cultures.

– MORALS• The differences between right and wrong.

– ETHICS• The values of human conduct. Whether an action is right

or wrong, and the good or bad of motives, means, and ends.


• ETHICS– Personal ethics should exceed legal requirements.

– If you have to ask about its legality, you are likely in ethical trouble.

– What is the intent of an action?• In U.S. criminal and business law, there are more severe

punishments for intent to harm.

– What are your corporate ethics?• VIDEO – Dilbert ethics


• CORE VALUES– Values and beliefs: you can not live a dual life.

– Peter Drucker, one of the great management philosophers of our time, said “It is extremely important to do the right thing”. It is equally important to also do all the right things in international trade to maximize your profitability.

STRATEGIC PLANNING

• Set goals / objectives / examine alternatives• Develop plans• Implement a plan as soon as there is enough

substance to have a fairly high probability of success.• Always have contingency plans in place.

STRATEGIC PLANNING

• What are we now?• What capabilities do we want to develop?• What businesses should we be in?• How do we get there?

– Thought processes• Your educational training

– What does the ability to memorize have to do with business career success?

• Thinking in different ways

• What are the rewards of success?• The myopia problem

“MARKETING MYOPIA”THEODORE LEVITT ARTICLE Harvard Business Review reprint, July-

August, 2004

• Myopia: defining your business too narrowly– Railroads– Corner grocery [1930] vs. supermarket

• What is happening to supermarkets today?

– Color TV [Motorola, GTE, GE]– Lead with price conundrum

• You can always get sales!• Great marketing organizations rarely have financial

problems!

STRATEGIC DIRECTION OF THE FIRM(“THE CORE COMPETENCE OF THE CORPORATION” ARTICLE)

• CORE COMPETENCY – The foundations [usually technologies] upon which

you build your business over a very long time.

• CORE COMPETENCY TESTS

• Sustainable – Very long term [5+ years]

• Competitive – Obvious customer benefits

• Advantage – Access to additional markets or market segments

AND

AND

KEY SUCCESS FACTORS

• NOT CORE COMPETENCIES• YOU MUST DO BETTER ALL THE TIME TO

KEEP UP WITH YOUR COMPETITORS.• Apply the three core competency tests

[sustainable, competitive, advantage] to the following items and see why they often fail the core competency test.

• Customer services• Design• ?

THE STRATEGIC BUSINESS UNIT (SBU)

• A UNIT OF THE FIRM THAT HAS DIFFERENT OBJECTIVES AND CAN BE PLANNED SEPARATELY FROM OTHERS.

• For instance, some of General Electric’s business units include– GE Commercial Finance -- GE Industrial– GE Consumer Finance -- GE Infrastructure– GE Healthcare -- NBC Universal

THE STRATEGIC BUSINESS UNIT (SBU)

• SBU ISSUES– RESOURCE COMPETITION

1. PEOPLE

2. MONEY

3. DEVELOPMENT RESOURCES

– FAIR PERFORMANCE MEASURES• How do you reward very different SBUs?

– WHAT IS THE ACCEPTABLE DEGREE OF AUTONOMY FOR EACH SBU?

SBU

MARKETS /

SEGMENTS

TECHNOLOGIES (gas electric fuel cell) /

PRODUCTS /

SERVICES APPLICATIONSNorth America Europe Asia Export

Business Consumer Government

Trucks

Cars

Tanks

Delivery

Transportation

War

DESIGNING THE BUSINESS PORTFOLIO

• THE VISION STATEMENT

– broadly defines what the entity should be like in 10-20 years.

– This statement needs to become part of the entity’s culture to be most effective.


• THE MISSION STATEMENT– provides a path to achieve a vision through clear

objectives. It will contain many of the nine following elements.

• Customers; products/services; markets; technologies; concern for survival/growth; philosophy; self-concept; public image; employees

– U.S. Department of State Mission Statement• Create a more secure, democratic, and prosperous world

for the benefit of the American people and the international community.


• CORE COMPETENCIES

• CONSIDER THE FOLLOWING

– What is the fit with other SBUs?

– What synergies exist?

– How may this impact competition?

SWOT ANALYSISComplete the analyses for your firm and your major competitors.

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

LEVERAGE

PROBLEMS

CONSTRAINTS VULNERABILITIES

Mar

ket

Gro

wth

Rat

eL

OW

H

IGH

QUESTION MARKS

CASH COWS DOGS

HIGH LOW Relative Market Share

Typical SBU movements are indicated by the arrows.

STARS

BOSTON CONSULTING GROUP:GROWTH – SHARE MATRIX

Divest or discontinue

Decide quicklyInvest heavily

Milk for $$$

GE STRATEGIC BUSINESS PLANNING MATRIX

• Market Attractiveness– Market size, growth rate,

potential– Competition– Profitability– Government regulation– ?

• Business Strength– Market share– Customer & market

knowledge– Cost efficiency– Technology– ?

MA

RK

ET

AT

TR

AC

TIV

EN

ES

SM

arke

t siz

e, g

row

th ra

te, p

oten

tial,

…

Lo

wM

ediu

mH

igh

Strong Medium Weak

BUSINESS STRENGTHMarket share, Customer & market knowledge, Cost efficiency, Technology, …

Invest & grow Selective growthHarvest: divest

/ dissolve

GE STRATEGIC BUSINESS-PLANNING MATRIX*

A

C

BD

The arrow indicates the movement of the SBU over n years.

Bad SBU and getting worse

SBU losing ground

Improving SBU

SBU going where we want it to go.

ORGANIZATIONAL CHANGE

• Change is difficult.

• Change is often resisted overtly and covertly.

• Change is uncomfortable.

• Change is a way of life.

• Change is why we have developed to where we are today.

SCENARIO PLANNING

• Learn how to think differently by– Challenging conventional wisdom

– Challenging assumptions

– Utilizing different thought processes

– Utilizing entirely different perspectives in your analysis

– Comparing outcomes of different thought methodologies

FIVE TYPES OF DEVELOPMENT PROJECTS

R&D ADVANCED DEVELOPMENT

PROJECT:GENETIC

ENGINEERING

NEW CORE PRODUCTNEXT GENERATION

PRODUCTADDITION TO

PRODUCT FAMILYDERIVATIVES AND

EXTENSIONS

ALLIANCES PARTNERSHIPS

PROJECTSNEW CORE PROCESS

BREAKTHROUGH PROJECT:

NEW FAMILY OF DRUGS

R&D JOINT VENTURENEXT GENERATION

PROCESS

SINGLE

DEPARTMENT UPGRADE

PLATFORM PROJECT:APPLE iMAC:

TRANSLUCENT PLASTIC

COLORATION TECHNOLOGY

INCREMENTAL

CHANGE

DERIVATIVE PROJECT:

SIMPLE SIZE CHANGE

MORE PRODUCT CHANGE LESSP

R

O

C

E

S

S

C

H

A

N

G

E

For more information see Creating Project Plans to Focus Product Development, Harvard Business Review, Vol. 70, No. 2, p.74.

EASIEST

HARDEST

SMALL

LARGE

ANSOFF’S PRODUCT / MARKETEXPANSION GRID

1. Market

penetration

or

saturation

2. Product

development

[Internal or

External]

3. Market

development

[channels of

distribution issue]

4. Diversification

[usually by

acquisition]

Existingproducts

Newproducts

Existingmarkets

Newmarkets

These show ways to grow your business generally go from easiest [#1] to hardest [#4].

COMPETITIVE ADVANTAGE OF THE FIRM:PORTER’S THREE GENERIC STRATEGIES

OVERALL COST LEADERSHIP

Hard to maintain long term.

DIFFERENTIATION

Focus on perceived value.

NICHE

Understanding and focus.

No direct battles with major competitors.

INDUSTRY

WIDE

MARKET

SEGMENT

ONLY

Customer Perceived Uniqueness Low Cost Position

COMPETIVE

SCOPE

COMPETITIVE ADVANTAGE

MARKETING MIX [The 4 P’s]

PRICE-List price-Discounts

-Allowances-Terms and conditions of sale

PROMOTION-Advertising

-Public Relations-Sales promotion

-Trade Shows

PLACE-Channels-Coverage

-Transportation-Logistics

PRODUCT-Variety-Design

-Features-Branding

-Packaging

ATTACKING COMPETITORS:GAPS—THE THREE DIMESIONS

MARKETS / SEGMENTS

CHANNELS OF DISTRIBUTION

TECHNOLOGIES

PRODUCTS

SERVICES

APPLICATIONS

13

2

2

PRODUCT LINE PLANNINGAPPLICATION SUMMARY OF GAP ANALYSIS

PRODUCT PLACE PROMO-TION

PRICE COMPETI-TION

Features Expand channels

Stimulate light users

How to compete

Brands Intensify coverage

Attract non-users

Penetrate / Substitute

Market segments

Use more each time

Model number

Services added

To maximize your return,you would always do price

gaps last.


SECTION 1B

THE WORLD MARKETPLACE

ALAN L. WHITEBREAD

WORLD TRADE BEFORE 600 B.C.

• Complex, advanced societies stretch across the southern half of Europe, the Middle East, and Asia.– Phoenecians

– ?

• China traded along the ‘Silk Road’ – more than 2,500 miles– Find a map on the internet to see this extensive trading

network.

WORLD TRADE BEFORE 600 B.C.

• India – Trades textiles, …

• The Roman Empire – Trades gold, silver, wine and glass.

• A limited view of the world– Go to any map library on the internet and explore maps

of this time period. Look at the different perspectives of the world between those in Europe and those in the Far East.

WORLD TRADE 600 – 1500 A.D.

• For centuries the Arab civilization based on trade dominated large areas of Africa, Asia and even parts of Europe.

– Textiles, carpets, ivory, gold, spices and ceramics – The Arabic language and an educated culture were the

common threads with such items as• Sugar growing and refining• Mangos and yams• Chess and algebra

• Death of the Prophet Muhammad 632– Trade follows the spread of the Muslim faith to

• China, Mongolia, Spain, Mali, and many other places.

WORLD TRADE 1500 - 1800

• 1500-Europe lags culturally and economically• Italian trade with Levant through Venice triggers the

Renaissance.• European discovery voyages find many surprising

civilizations. • Plundering, conquest, and the spread of Christianity• 10-12 million slaves were shipped from Africa & South

America to North America– more than 2 million die en route


• INDUSTRIAL REVOLUTION – 17th – 20th centuries– Manufacturing capacity develops– Need for power generation develops– Need for labor and productivity develops

• Adam Smith – The Wealth of Nations, 1776• Specialization and Division of Labor• Theory of Absolute Advantage• Theory of Comparative Advantage

MERCANTILISM

• A 16th century economic thought which contended that nations should export more than they import.

• It is the government’s responsibility to create an environment that promotes the advance of mercantilism.

MERCANTILISM AND ADAM SMITH

• He contended that a laissez-faire [no interference] government approach to trade was superior since it let the market forces address the issues.

Adam Smith – An Inquiry into the Nature and Causes of The Wealth of Nations, 1776

• The beginning of classical economics• The invisible hand [free market]• Some basic assumptions of economics

– Economic man [rational economic behavior]

– Perfect competition: symmetry [equal power of competitors]

– Perfect market knowledge

– Equilibrium [the magic point of supply and demand]

– Opportunity cost

Specialization and Division of LaborAdam Smith

• The division of labor represents a qualitative increase in productivity.

• Specialization leads to greater skill and greater productivity of the workers.

One man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business, to whiten the pins is another; it is even trade by itself to put them into the paper.

-The Wealth of Nations, Adam Smith, 1776

THEORY OF ABSOLUTE ADVANTAGEAdam Smith

• Countries have advantages and / or disadvantages in– labor,

– skills,

– and natural resources

as they relate to the total cost of production.

THEORY OF ABSOLUTE ADVANTAGEAdam Smith

A country should export those products which it can produce at lower cost than others, and it should import those products which can be produced at lower cost by others. (Adam Smith, Wealth of Nations)

Hypothetical Example: (for a given level of resource input)

Product US JapanComputers 20 10

---- or ----Automobiles 10 20

Therefore: What should the US produce and what should Japan

produce?

THEORY OF COMPARATIVE ADVANTAGE

Relative production costs are more meaningful in determining what trade should take place than absolute production costs. Even if a country has an absolute advantage in the production of all products, it should produce those products for which it has the greatest comparative advantage and it should import other products.

-David Ricardo, 1817

THEORY OF COMPARATIVE ADVANTAGE EXAMPLE

PRODUCT US JAPAN US COMPARATIVE ADVANTAGE

Computers 20 10 20:10 or 2:1

OR

Automobiles 30 20 30:20 or 1.5:1

Therefore: What should the U.S. produce and what should Japan produce?


• INDUSTRIAL REVOLUTION [15th – 16th centuries]– An increased need for raw materials– Why was colonization needed for

• Resources• Markets

• INDUSTRIAL REVOLUTION [17th – 20th centuries]– Development of trading centers

• London, Marseilles, Seville, and Constantinople Which is now called ___ ?


• Americas independence broke up European empires.

• British open markets for the products of new manufacturing industries and secure supplies of needed raw materials.


• The world divided into metropolitan [trading] centers and colonial dependencies.

• Advances in communications and transportation increase the volume and speed of trade. Sound familiar?

THE WORLD IS NOT AS IT SEEMS

Africa compared to the Former Soviet Union

33 % LARGER! Compare this to the Peter’s projection.

The former Soviet Union was 8.7 million

square miles

Africa is 11.6 million square miles -

ECONOMIC GEOGRAPHY

1998 Per Capita Income

China Hong Kong, China India Singapore

1998 Population

China Hong Kong, China India Singapore

CHINA

INDIA

SINGAPORE

HONG KONG

Notice the difference in population and per capita income. Just because a country has a lot of people does not mean it has a large market for your products. If you are dealing with consumer products, disposable income is a better measure

than per capita income.

COUNTRY ECONOMIC STRUCTURE

PER CAPITA INCOME

INDUSTRIALIZED G8

INDUSTRIALIZING

RAW MATERIAL EXPORTING

SUBSISTENCE

INDIA

MEXICO

BRUNEI - OIL

COSTA RICA - BANANAS

AFGHANISTAN

ETHIOPIA$100

$35,000+

$11,999

$5,000

$19,999

This is an example of combining scales—level of development and per capita income.

INDUSTRIALIZED NATIONS

G8

PEOPLES LIFESTYLE = ?

INCOME = ?

LIVING CONDITIONS = ?

INFRASTRUCTURE = ?

VALUE-ADDED CAPABILITIES = ?

WORLD HOT SPOTSAir Security International

http://www.airsecurity.com/hotspots/HotSpots.asp • Review all hot spots for the current day.

• This is one of many private and public groups that provide daily updates on troubled areas of the world.

INTERNATIONAL MARKETING / COMMERCE

SECTION 2A

CULTURAL ISSUES - 1

ALAN L. WHITEBREAD

CULTURE: DEFINITIONS

• Culture is a set of beliefs and values that are passed from generation to generation in a society.

• Culture is like an iceberg—easy to observe the obvious items, but most of it is not easily noticed or observed.

CULTURE

• Culture exists but is rarely discussed in its own environment.

• Cultural relativism is the idea that any individual’s behavior and beliefs make sense in their native culture.

• Ethnocentrism describes looking at the world from your cultural viewpoint. – Being ethnocentric could cause you to introduce

an inappropriate product or marketing mix because you did not adapt it to the other culture.

SOME CHARACTERISTICS OF CULTURE

• Culture defines acceptable behaviors.• Culture limits choices of products, channels, promotion

appeals, and marketing efforts.• The work ethic and labor laws come from the native

culture.

• Culture is a shared meaning system and set of social expectations that is always slowly evolving.


• Culture develops common habits and thoughts, simplifying communication.– Think about conversations about football [U.S.]

or soccer in other countries.

• Culture is slowly learned over a lifetime.– Adaptive behavior occurs when a person

changes a behavior pattern to be constructive.• Don’t stand with your arms folded across your chest at

an international trade show as it is viewed as negative not constructive behavior.

– Enculturation or socialization• When you live in another culture for some time you learn

it through acculturation.


• Cultures may have very different behaviors in the same situation.– Cultural differences can easily be seen in the behavior

of two people from two different cultures.

– Each culture defines acceptable and unacceptable behavior.

• Gestures

– Culture’s impact on behavior also affects buyer behavior and consumption patterns.


• Culture goes from generation to generation with little change. Enduring cultures perpetuate themselves and resist change.

• Culture is the set of generations of experiences over many centuries. Different cultures adapt to change at different rates.

HOW WOULD YOU DIFFERENTIATE ONE CULTURE FROM ANOTHER?

• ART, SCULPTURE, and ARCHITECTURE• AUTHORS and POETS WORKS• DANCE, FESTIVALS, and FASHION• EDUCATION• MUSIC and THEATRE• PHILOSOPHY• RELIGION

• Use examples from your travels.

HOFSTEDE’S CULTURAL DIMENSIONS:117,000 IBM employees in 88 countries

• #1 – INDIVIDUALISM: The degree to which the individual’s interests are more important than those

of the group.– Low [Collective]

• Ecuador, Guatemala, Japan

– High [Individual]

• U.S., Australia

• #2 – MASCULINITY: The degree to which male dominance is accepted.

– Low [Feminine]

• Finland, Norway, Sweden

– High [Masculine]

• Austria, Italy, Japan, Mexico

HOFSTEDE’S CULTURAL DIMENSIONS

• #3 – UNCERTAINTY AVOIDANCE: The degree to which people deal with ambiguous or uncertain situations and

have created beliefs and institutions to avoid them.– Low [Risk Accepting]

• Denmark, Great Britain, Jamaica, Singapore, Sweden, U.S.– High [Risk Averse]

• Argentina, Greece, Israel, Italy, Japan, Portugal

• #4 – POWER DISTANCE → EQUALITY : The acceptance of an unequal distribution of power of entities.

– Low [Egalitarian; boss gains trust of employees]• Australia, Austria, Denmark, Israel, Canada, U.S.– High [Hierarchical; the boss must be obeyed]

• Brazil, China, India, Malaysia, Mexico, Panama, Turkey

MATERIAL ACHIEVEMENT

• The degree to which the dominant values of a society are money, personal possessions, and success.

PERSONAL SPACE IN THE U.S.

THE GREATER THE POWER DISTANCE SCORE, THE GREATER THE SPACING.

THIS WOULD BE TRUE FOR COLOMBIA, PAKISTAN, THAILAND, AND SIMILAR SCORES.

INTIMATE

DISTANCE

<18”

PERSONAL

DISTANCE

18” TO 48”

SOCIAL

DISTANCE

48” TO 96”

PUBLIC

DISTANCE

96” TO 120”

THE NOTION / PERCEPTION OF TIME

Past Present Future

United States

Japan Past PresentFuture

China

Russia

Past Present Future

Past Present Future

For more detailed information see Riding the Waves of Culture, Trompenaars and Hampden-Turner, 2nd edition, 2000

Americans easily link past and present and future when discussing a topic, while Russians tend to focus on past or present or future.

ARRIVING FOR THE FIRST TIME- CULTURE SHOCK !

• LANGUAGE• DRESS• ETIQUETTE• MOOD• LONELINESS – an outsider• THEIR NOTION OF TIME• DECISION-MAKING PROCESSES

CULTURE SHOCK!What are the other culture’s …

– SYMBOLS– HEROES– RITUALS– VALUES– CUSTOMS– COLORS

– TRADITIONS– RELIGIONS– SUPERSTITIONS– DESIGN ISSUES– HOLIDAYS– LAWS

WHAT DO YOU NEED TO KNOW TO EFFECTIVELY DEAL WITHIN A DIFFERENT

CULTURE?• Adapt products, processes, and

services to local markets.

• Build relationships.

• Embrace the local culture.

• Employ locals.

• Help employees understand your culture.

COMMUNICATIONS TIPS

• Be direct in low-context cultures. – U.S. and Northern Europe

• Be less direct in high-context cultures. – Japan, Latin America, and Saudi Arabia

• Always refer to months when writing and how to write dates.

• Avoid references to weekend, eight-hour day, dinner time and lunch time.

– Work, break, and lunch hours and what different meals are called vary widely.

ASPECTS OF COMMUNICATION

• Verbal– Direct or indirect

– Style [Business or personal]

– Humor

• Nonverbal– Written

– Gestures– Style [Business or personal]

THE FORCES OF CULTURE:LANGUAGE

• Communication using words and symbols with rules for their assembly into sentences or their equivalent.

• Language plays a large role in the methods of thinking.

• Non-verbal forms of communication [e.g., body language, gestures, ...] and their successful interpretation are often even more culturally dependent.

MOST POPULAR LANGUAGES

• ENGLISH*, CHINESE MANDARIN – Over 1,000,000,000 people– English is the fastest-growing language

• SPANISH and PORTUGUESE – Over 500,000,000 people

• RUSSIAN, BENGALI, ARABIC – Over 200,000,000 people

COMMUNICATION TIPS

• Write at an appropriate level.• Speak clearly, simply, and slowly. • Make your counterpart feel comfortable with your

language—be helpful and empathetic.• Use highly qualified native translators [written] and

interpreters [spoken].– Understand levels of interpreter expertise

– Understand interpreter specialization

COMMUNICATING EFFECTIVELY

• Avoid all – metaphors [he's a bear], – clichés [every man for himself], – jargon [HACCP testing], – idioms [you're right on the right track], – and slang [humungous],– difficult or rarely used words and / or phrases and / or

meanings.

• Remember, literal translations often don't make sense.

NONVERBAL COMMUNICATION

• Facial expression– Head shaking: agreement / disagreement

• Gestures– Europe – men greeting by kissing on the cheek

three times.

– U.S. = ?

• Posture– Sitting back in the chair: listening, not highly

interested

– Leaning forward in the chair: attentive and interested

NONVERBAL COMMUNICATION

• Tone of voice: authority to empathy• Dress: expensive = power

– Expensive: power• Navy blue thin pin striped suit: authority / control

• Crying: sadness / joy• Time

– Ladies: How long would you wait for a date?– Men: How long will you wait for your date to get ready?


SECTION 2B

CULTURAL ISSUES - 2

ALAN L. WHITEBREAD

MEETING AND GREETING

• Making an initial contact• The first meeting VIDEO: Cinzano

• Names• Titles / rank• Showing respect• Formal distance• Proper gifts and gift-giving

• Be careful of improper gifts and gift treatment

CONVERSATION

• Proper topics• Topics to avoid include

– ?

• The role of humor• Be direct or not?

NEGOTIATIONS

• Typical negotiating tactics– Which style?

– How is compromise viewed?

– How do you overcome an impasse?

– What is the normal bargaining process?

SOCIAL

• What is the normal role of– women in business?

– the importance of respect?

– individuality?• What is the importance of the person vs. the group?

• What social barriers exist?

THE FORCES OF CULTURE:THE FAMILY

• A related group of people that influences and is influenced by the culture around it.

• The family is the primary method by which culture is transmitted from one generation to another. – In early years, children primarily learn from

their parents. • Cultural changes have changed the nature

of families. – Review the history of women working outside

the home in the U.S.

THE FORCES OF CULTURE:REFERENCE GROUPS

• Can be peer groups or role models• Provide guidance for behavior that is not specifically

part of the cultural norm • Very important to socially conspicuous behavior

– clothing styles

– country examples of attire are …

EATING AND ENTERTAINING

For Business vs. in the Home

Timeliness Manners

Host expectationsGuest expectations

MANAGEMENT STYLE

Problem solving method• Do they adapt to change?

• Do they commonly work as a group?• How do they view competition?

• How do they handle disagreements?• What else?

BUSINESS MEETINGS

• Timeliness

• Structure

• Duration

• Breaks

• Food and drink service

• Presentation style

CULTURE: GIFT GIVING

• DEPENDS ON– Country

– Local practices and superstitions

– Nature of your business

– Level of the contact • e.g., the more important the individual, the nicer the gift

CULTURE: GIFT GIVING ERRORS

• KOREA– Do not open your gift in private.

• CHINA– Clocks are a symbol of bad luck.

– 4 is generally thought to be unlucky.

• MUSLIM NATIONS– Liquor is usually forbidden.

• ALL SE ASIA COUNTRIES – 13 is generally unlucky.

– Knives and scissors represent severing relationships.

CULTURE: ENTERTAINMENT

• Chinese– Entertainment ranks higher than gifts.

• Japanese– Entertainment is far less important than gifts.

CULTURE: LITTLE THINGS

• BUSINESS CARDS– 1 or 2 sides?

– You may show university degrees in Asia.

– How should one exchange and / or present one’s card?

AMERICAN CULTURE

• Value• Language• Myth • Custom• Ritual• Law• Materialistic

• Personal freedom• English• Santa Claus• Daily bath• Star Spangled Banner• Consumer protection• Diamond engagement

rings


SECTION 3A

ORGANIZATION ISSUES AND EXPORTER CHECKLIST

ALAN L. WHITEBREAD

SECTION 3

• This section is divided into two parts and each one has a set of lecture slides.

– This first lecture examines international business organization and readiness issues.

– The second lecture focuses on keys to success in international business including negotiations, sources of export assistance, and key checks you need to make about every prospect and customer.

ORGANIZATIONAL GOALS

• The key is to find a structure which allows the organization to profitably respond to market differences and dynamics.– A market difference is something that is not the same as

in another market. – A market dynamic is something that drives the market.

• Provide examples of market differences and dynamics.

ORGANIZATIONAL GOALS• TRADE-OFF

– the value of centralization comes from• knowledge• planning• co-ordination

– the value of decentralization comes from• maximize response flexibility for a local situation• possibly lose some coordination, implementation, and control

ORGANIZATIONAL STRUCTURE

• Organizational structure is a function of the situation.

• Multinationals generally use a simple, flat organization structure with few levels of management.

GLOBAL ORGANIZATION STRUCTURES

• INTERNATIONAL• GEOGRAPHIC / AREA• PRODUCT• FUNCTIONAL• MARKET / CUSTOMER• COMPLEX

INTERNATIONAL STRUCTURE

CEO or VP Marketing

ADVANTAGES -…

-…

-…

DISADVANTAGES -…

-…

-…

Copyright A. Whitebread, 2001-2007.

U.S.

Canada

Central and South

America

Europe, Africa, &

Middle East

Asia

Pacific

Export

1 - Fill in three advantages and three disadvantages of this structure.

2 – Modify this structure, do the analysis again and compare the results.

Functional areas exist in areas that are large enough to support them.

GEOGRAPHIC STRUCTURE

P R O D U C TM A N A G E RG R O U P 1


E A S T E R NS A L E S

M A N A G E R

W E S T E R NS A L E S

M A N A G E R

M A R K E T IN GC O M M U N .M A N A G E R

V PM A R K E T IN G

ADVANTAGES -SIMPLE STRUCTURE

-LOW COST OF SALES AND ADMINISTRATION

-DIRECT INTERACTION

DISADVANTAGES -NO SPECIALIZATION

-CONTROLLING HOW THE SALES FORCE SPENDS ITS TIME

-FRACTURED FEEDBACK

-COMPLETE PRODUCTS KNOWLEDGE REQUIREMENT


PRODUCT STRUCTURE

PRODUCTMANAGERGROUP 1

PRODUCTMANAGERGROUP n

SALESMANAGERGROUP 1

SALESMANAGERGROUP n

MARKETINGCOMMUN.MANAGER

VPMARKETING

ADVANTAGES -DRIVEN BY PRODUCT

PURCHASES

-SPECIALIZED KNOWLEDGE FOR SPECIALIZED PRODUCTS

-HELPS PRODUCTION SCHEDULING

DISADVANTAGES -DUPLICATION OF EFFORT

-HIGHER ADMIN. COSTS

-COORDINATION NEEDS

-MAJOR ACCOUNT PROBLEM WITH MULTIPLE

PRODUCT LINE PURCHASES


FUNCTIONAL STRUCTURE

CEO

ADVANTAGES -…

-…

-…

DISADVANTAGES -…

-…

-…


Marketing and Sales

Operations Finance and

Accounting

Human Resources

IT

1 - Fill in three advantages and three disadvantages of this structure.

2 – Modify this structure, do the analysis again and compare the results.

MARKET / CUSTOMER STRUCTURE



N A T IO N A LS A L E S

M A N A G E R

N A T IO N A LA C C O U N T S

O E M F E D E R A LG O V 'T .

M A JO RA C C O U N T SM A N A G E R


V PM A R K E T IN G

ADVANTAGES -DRIVEN BY CUSTOMER TYPE

-SALES MANAGEMENT CONTROLS FIELD TIME

-IMPROVED FEEDBACK

DISADVANTAGES -HIGHER SELLING AND ADMINISTRATIVE COSTS


COMPLEX STRUCTURE - 1

D IR E C TS A L E S

M A N A G E R S

R E S E L L E RS A L E S

M A N A G E R


M A N A G E R

T E L E S A L E SM A N A G E R

IN T E R N E TS A L E S

M A N A G E R

D IR E C TM A R K E T IN GM A N A G E R

G R O U PP R O D U C T

M A N A G E M E N T


O E M G O V E R N -M E N T



V PM A R K E T IN G

ADVANTAGES -DRIVEN BY CUSTOMER

TYPE

-SPECIALIZED SALES SKILLS

-VERY DIFFICULT FOR COMPETITVE ANALYSIS

DISADVANTAGES -REQUIRES A LOT OF

COORDINATION

-INFORMATION IS WIDELY DISSEMINATED

-HEAVY LOAD ON MARKETING

COMMUNICATION

ISSUES -RECLASSIFICATION OF

ACCOUNTS

-WHO GETS THE ACCOUNT FIRST?

-PRICE STRATEGY AND IMPLEMENTATION

INSIDE SALES OUTSIDE SALESOUTSIDE SALES


COMPLEX STRUCTURE - 2

D IR E C TS A L E S

M A N A G E R S

R E S E L L E RS A L E S

M A N A G E R


M A N A G E R

T E L E S A L E SM A N A G E R

IN T E R N E TS A L E S

M A N A G E R

D IR E C TM A R K E T IN GM A N A G E R

G R O U PP R O D U C T

M A N A G E M E N T


O E M G O V E R N -M E N T



V PM A R K E T IN G

THIS BECOMES EVEN MORE COMPLEX WITH

-MANUFACTURER’S REPRESENTATIVES

-CUSTOMER SERVICES

-TECHNICAL SALES SUPPORT

-INTERNATIONAL SALES AND SUPPORTWHERE DO YOU THINK CUSTOMER SERVICES SHOULD REPORT?


THE VALUE OF EXPORTING

• Higher revenues, AUP’s, and profits• Increased volume• Potentially lower AUC• Potential tax advantages• May extend product life cycles

WHY DON’T MORE FIRMS EXPORT?

• They are preoccupied with domestic issues / content with domestic business.

• International misconceptions– Fear of the unknown– Horror stories because of lack of knowledge.

• I lost money.• I did not get quick results.• It costs too much.• …

INTERNATIONAL ORGANIZATION:REQUIRED COMPETENCIES

• Knowledge of economic geography markets, segments, and customers

• Knowledge of industry and competitive forces

• Knowledge of the country and region

INTERNATIONAL CORPORATE CULTURE

• An multi-national corporation [MNC] knows changing its culture is an important part of improving its global competitiveness.

• MNC Managers accept and embrace the mission, thus forming a corporate culture.

• Changing the culture of an organization can be a long and difficult process.

EXPORTER’S CHECKLIST:THE FIRM

• Why does the firm want to pursue exports? • Is senior management committed to a multi-year effort

to succeed in international business?

– Including travel, trade shows, samples, different collateral, IP protection, …, ?

• What are management’s expectations for the export effort?

– Are they reasonable [size and time]?


SECTION 3B

KEYS TO SUCCESS AND HANDLING INQUIRIES

ALAN L. WHITEBREAD

KEYS TO SUCCESS:KNOWLEDGE

• Language, customs, lifestyles, culture, …• Control with limited flexibility• Meeting standards and regulations• Competence in international trade

KEYS TO SUCCESS:COMMITMENTS AND GOALS

• The long-term commitment of senior management • A realistic set of goals• A logical and defendable marketing plan• Always protect all your intellectual property

KEYS TO SUCCESS:BUSINESS RELATIONSHIPS

• Be patient—it takes time to establish yourself, develop trust, and build relationships.

• Be very careful selecting international resellers and / or representatives.

KEYS TO SUCCESS:MARKETING AND SALES

• FOCUS - do not chase every opportunity.• Build programs that provide resellers with the support

tools to do a great job.• Communicate with your customers in the language of

their preference – frequently!• Seek expert advise and assistance—especially in the

specialized fields of – contract law, IP, packaging and labeling,

documentation, language, …

Western Europe

Eastern Europe

KEYS TO SUCCESS:INTERNATIONAL NEGOTIATIONS

Secular-rational values

[modern, rational, non-religious]

Traditional values [religion, prior behavior]

U.S.AustraliaCanada

Self-expression values

Survival values

AfricaMiddle East

South America

The longer the arrow, the greater the difference in

values.

KEYS TO SUCCESS:PRINCIPLES OF NEGOTIATIONS

• Conflicts of interests are likely. – Why?

• All parties are seeking resolution.– Why?

• Seek an acceptable solution for all.– Do not seek the best solution for one.

– Why?

KEYS TO SUCCESS:NEGOTIATION PERSPECTIVES

1. Detail the situation by likely scenarios.

2. Develop and rank alternative outcomes.

3. Determine the rules of the game.

4. What process do we want to use?

5. What type[s] of interaction do we want?

6. What tactics will be employed?

7. How will power be used?

KEYS TO SUCCESS:NEGOTIATION TYPES

• Heavy-handed• Collaborative• Sharing• Accommodating• Competitive

COMPETITIVE NEGOTIATION

CHARACTERISTICS[Control is key, type of behavior to be used, how to

force concessions, …]

TACTICS[Bluffs, promises, rewards, threats, …]

EXPRESSIONS[Using words to deliver strong messages, …]

Competitive negotiation is composed of three major areas.

•Characteristics involve how the negotiation is to proceed.•Tactics are the tools you use to accomplish you goals.

•Expressions are ways of expressing your desires

COMPETITIVE NEGOTIATION• That is not the response we

need. You will have to do better if we are to continue doing business with you.

• There does not appear to be a quick solution to this issue, so accept our offer this time and we will accept yours the next time.

• This is a large amount of business that will help drive your costs down. We should see more of that reflected in our price.

• How do you effectively respond to each of these?

WHY ARE THESE STATEMENTS NOT TRUE FOR AN AMERICAN BUSINESS?

• We can sell our products to anyone we want, anywhere in the world.

• We know our customers and how to contact them. That is all that the law requires.

• We only sell our products domestically so export laws do not apply.

• We sell to many countries around the world so we are exempt from U.S. export control laws.

• Once our buyer pays us we do not have to be concerned about what they do with the product.


• 3PL’s do our international shipping so they [not us] are responsible for any violations.

• We do not make anything dangerous so the Export Administration Regulations do not apply.


• We keep the necessary important records for our business. The government does not care about minor details.

• We do not pay bribes to foreign officials so FCPA does not apply; but we provide almost any entertainment they want when they are here.


SPECIAL NOTICE!

• As an American business, you have a legally required obligation to know your customer, and potentially who your customer sells it to, plus how the product will be used!

EXPORT ASSISTANCE

• US DEPARTMENT OF COMMERCE

– US Foreign and Commercial Service• Product / Service / Industry Specialists• Country Desk Officers

– Collect data regarding regulations, tariffs, business practices, economic and political developments, market size and growth and trade data

• Country Service Posts / Commercial Service Offices– Foreign U.S. DOC offices that can provide business assistance.

• Bureau of Industry and Security– Mission: Advance U.S. national security, foreign policy, and

economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership.

– See http://www.bis.doc.gov • National Institute of Standards and Technology [NIST]

– Manufacturing Extension Program– See http://www.mep.nist.gov/about-mep/overview.html

• National Oceanographic and Atmospheric Administration [NOAA]

EXPORT ASSISTANCE

• US DEPARTMENT OF COMMERCE

– International Trade Administration

• Mission: to create prosperity by strengthening the competitiveness of U.S. industry, promoting trade and investment, and ensuring fair trade and compliance with trade laws and agreements.

• See http://www.trade.gov/index.asp • SBA’s SBDC International Trade Centers [ITC] and U.S.

Export Assistance Centers [USEAC]– A resource listing may be found at

http://www.sba.gov/gopher/Business-Development/International-Trade/Guide-To-Exporting/trad14.txt

– http://www.sba.gov/oit/export/useac.html

EXPORT ASSISTANCE

• World Trade Centers [WTC]– bring businesses and government agencies together to

increase foreign trade. – It is an information hub for

• market research, WTCA OnLine matchmaker, trade shows & exhibit space, business services, trade education, group trade missions, and WTC clubs.

– See http://world.wtca.org/portal/site/wtcaonline • State government agencies• Local trade associations

EXPORT ASSISTANCE

• US DEPARTMENT OF AGRICULTURE

– Agriculture commodity & marketing programs• Dairy• Grain & Feed• Tobacco, Cotton, & Seed• Forest Products• http://www.fas.usda.gov/outreach/Matrix.pdf

EXPORT ASSISTANCE

• US DEPARTMENT OF COMMERCE• US DEPARTMENT OF AGRICULTURE• US DEPARTMENT OF STATE• US DEPARTMENT OF THE TREASURY• US AID• OVERSEAS PRIVATE INVESTMENT CORPORATION

[OPIC]• EXIMBANK

EXPORT ADMINISTRATION REGULATIONS [EAR]

• The EAR is the complete set of rules and regulations that control what can be exported, to whom, and what documents are required for compliance.

EXPORT ADMINISTRATION REGULATIONS [EAR] U.S DEPARTMENT OF COMMERCE

-Bureau of Industry and Security [BIS] controls EAR including “dual-use” items.

-The Census Bureau controls the balance of the export process, i.e. SED’s, etc.

-U.S. Patent and Trademark Office

U.S. TREASURY DEPARTMENT

-Office of Foreign Assets Control [OFAC] oversees embargo and sanction lists – OFAC regulations.

EXPORT ADMINISTRATION REGULATIONS [EAR]

OTHER U.S. GOVERNMENT AUTHORITIES

-U.S. DEPARTMENT OF HOMELAND SECURITY.

-Customs and Border Protection [CBP]

-U.S. DEPARTMENT OF ENERGY

-NUCLEAR REGULATORY COMMISSION

U.S. STATE DEPARTMENT

-Directorate of Defense Trade Controls (DDTC) controls defense articles, defense services, and

related technical data including most space related agencies – ITAR

BUREAU OF INDUSTRY AND SECURITY Export Administration Regulations [EAR] – Part 734

• Items subject to the EAR include all– Items moving into or through the U.S., and– U.S. origin items, parts, and components, and– In quantities exceeding de minimus levels, and– Certain items produced outside the U.S. using U.S.

origin technology.• Items excluded from the EAR are exclusively

controlled by other U.S. departments or agencies.• The complete export regulations administration

database may be found at– http://www.access.gpo.gov/bis/ear/ear_data.html

BUREAU OF INDUSTRY AND SECURITY Dual-Use Product

• A dual-use product is any item that may have both commercial and military or proliferation applications.

• Purely commercial items without an obvious military use are also subject to the EAR due to potential alternative uses.

BUREAU OF INDUSTRY AND SECURITY Export Administration Regulations

[EAR]• KNOWING VIOLATIONS

– Corporation - A fine of up to the greater of $50,000 or five times the value of the exports for each violation.

– Individual - A fine of up to the greater of $50,000 or five times the value of the exports or imprisonment for up to five years, or both, for each violation.

• WILLFUL VIOLATIONS– Corporation - A fine of up to the greater of $1,000,000 or

five times the value of the exports for each violation.

– Individual - A fine of up to $250,000 or imprisonment for up to ten years, or both, for each violation.

BUREAU OF INDUSTRY AND SECURITY Export Administration Regulations

[EAR]• ADMINISTRATIVE SANCTIONS• Denial of export privileges [Denied Persons List]

– See http://www.bis.doc.gov/DPL/Default.shtm for more details

– The exclusion from practice; and / or

– The imposition of a fine of up to $12,000 for each violation, except that the fine for violations involving items controlled for national security reasons is up to $120,000 for each violation.

BUREAU OF INDUSTRY AND SECURITY Office of Antiboycott Compliance

• U.S. companies receive requests to engage in activities that further or support the boycott of Israel or blacklisted companies.

• Compliance with such requests may be prohibited by the Export Administration Regulations [EAR] and may be reportable to the Department of Commerce.

• See http://www.bis.doc.gov/complianceandenforcement/antiboycottcompliance.htm for more details

BUREAU OF INDUSTRY AND SECURITYRed Flag Indicators - 1

• The customer or its address is similar to one of the parties found on the US DOC’s Denied Person’s List [DPL].

• The product's capabilities do not fit the buyer's line of business.

• Routine installation, training, or maintenance services are declined by the customer.

• Level of product sophistication far greater than usual in the intended country.

BUREAU OF INDUSTRY AND SECURITYRed Flag Indicators - 2

• A freight forwarding firm is listed as the product's final destination.

• When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export, or for re-export.

• Cash only transactions.

• See http://www.bis.doc.gov/complianceandenforcement/redflagindicators.ht

m for more examples.

BUREAU OF INDUSTRY AND SECURITY Entity List

• The Export Administration Regulations [EAR] provide that the Bureau of Industry and Security may inform exporters, individually or through amendment to the EAR, that a license is required for exports or reexports to certain entities. This is known as the Entities List.

• These end users have been determined to present an unacceptable risk of diversion to developing weapons of mass destruction or the missiles used to deliver those weapons.

• http://www.bis.doc.gov/Entities/Default.htm

BUREAU OF INDUSTRY AND SECURITY Unverified List

• The Unverified List includes names and countries of foreign persons who in the past were parties to a transaction with respect to which BIS could not conduct a pre-license check (“PLC”) or a post-shipment verification (“PSV”) for reasons outside of the U.S. Government’s control. Any transaction to which a listed person is a party will be deemed by BIS to raise a “red flag” with respect to such transaction within the meaning of the guidance set forth in Supplement No. 3 to 15 C.F.R. Part 732. The “red flag” applies to the person on the Unverified List regardless of where the person is located in the country included on the list.

• http://www.bis.doc.gov/enforcement/unverifiedlist/unverified_parties.html

OFFICE OF FOREIGN ASSETS CONTROL [OFAC]Sanctions Program and Country Summaries

• Sanctions Program and Country Summaries• Balkans

Overview of Sanctions Guidelines and Information

• Burma (Myanmar)Overview of Sanctions Guidelines and Information

• CubaOverview of Sanctions

• http://www.treasury.gov/offices/enforcement/ofac/programs/

U. S. DEPARTMENT OF STATEList of Debarred Parties

• Persons or entities with which no American person or entity can conduct business.

• http://www.pmddtc.state.gov/compliance/debar.html

• http://www.state.gov/index.htm is for all DOS items.

• One of several lists that are combined as the Excluded Parties List System [EPLS] at www.epls.gov by GSA.

THE SALES CYCLE AND PROSPECT FUNNEL

PROSPECT

APPROACH & QUALIFY

PRESENT

DEMONSTRATE

HANDLE OBJECTIONS

CLOSE

FOLLOW-UP

CUSTOMER

REAL, FALSE, STALLS

HOT PROSPECT

TRIAL & ACTUAL CLOSE

EFFECTIVENESS

NEEDS &

VALUE

QUALIFIED !FAB

COGNITIVE DISSONANCE

MARKETING DEPARTMENT LEADS

VS. COLD CALLS


CONTINUING CUSTOMER


SECTION 4A

ECONOMIC GEOGRAPHY - 1

ALAN L. WHITEBREAD

ECONOMIC ENVIRONMENT

• Economic potential– Markets in every region of the world are potential

targets for most firms.• Need to find people and / or firms willing and able to buy• Understand the purchasing power of developed vs.

underdeveloped nations• It is a selection process.• The extent of development in a nation or region is

especially important.

ECONOMIC ENVIRONMENT

• Economic analysis– There is a tremendous amount of statistics, charts,

graphs, reports, etc. are available• www.cia.gov • www.census.gov • U.S. Department of Commerce Country Commercial

Guides may be found at– http://www.buyusa.gov/home/export.html

• Most governments• International organizations

– UN– World and regional development banks– Many, many more good sources of information

UNCTAD

• United Nations Conference on Trade and Development [UNCTAD] – Trade Analysis and Information System [TRAINS]

• TRAINS based on UN Tariff and Market Access database [UN TARMAC] at http://www.unctad-trains.org

– Imports, tariffs, para-tariffs and non-tariff measures at the national tariff level At the detailed commodity level of the national tariff [HS 6-digit minimum]

– Approximately 119 member nations

• COMTRADE [UN Statistics Division] - World Integrated Trade Solution [WIT]S is the name of the software that integrates information from [ http://wits.worldbank.org/wits ]

– Exports and imports by detailed commodity code and partner country with values in USD

– Started in 1962, approximately 130 nations

UNCTAD

• WTO maintains – Integrated Database [IDB]

– Consolidated Tariff Schedule [CTS]

– MFN applied, preferential and bound tariffs at the national level, imports in value and quantity

ECONOMIC DRIVERS

• Key elements of world trade are– Capital flows

• Volume of capital movements– >$100,000,000,000 per year on the London Exchange

– Productivity growth• Output continues to grow faster than employment in

developed countries.

– What do each of these mean for global employment?

ECONOMIC DRIVERS

• Key elements of world trade– Use of natural resources

• Selling a country’s resources– What are the short term and long term implications?

• U.S. buying [not using its] resources– What are the long term implications?

– Concentration of income• Developed countries have a disproportionate [and

proportionately growing] share of total wealth• What is your most likely world scenario 30-50 years in the

future?

COMPARING COUNTRIES

• What are the bases for comparison?

• What are the key factors in the comparison?

• How will a decision be made?

The difference in 2050 is more than twice the

amount in 2005.

What are the implications of this projection?

INCOME GAPS

Developing nations per capita income

Developed nations per capita income

2000 2025 2050

Annual per

capita income

COMPARING COUNTRIES

SOURCES: World Bank, World Health Organization, International Telecommunications Union, and the International Road Federation,

CIA WorldFactbook 2002

Malaysia Indonesia Singapor

eThailand

Population [millions]

GDP / capita

22.6

$3,640

231.3

$680

4.5

$24,740

62.3

$1,970

GDP [$billions]

Computers / 100 people

82.264

13

157.284

1

111.330

51

122.731

3

COMPARING COUNTRIES

SOURCES: World Bank, World Health Organization, International Telecommunications Union, and the International Road Federation, CIA

WorldFactbook 2002

Malaysia Indonesia Singapor

eThailand

Population [millions]

GDP / capita

22.6

3,640

231.3

680

4.5

24,740

62.3

1,970

Mobile phones / 100 people

31 3 72 12

KWH per capita 2,474 345 6,641 1,352

Cars / 1000 people 147 12 122 27

SUBJECTIVE COMPARISONS

• When you are analyzing non-numeric data you have several different issues to consider.

– A fixed point of reference is critical.

– Non-numeric data is hard to compare.

– You must develop a meaningful scale.

SUBJECTIVE COMPARISONS:How would you compare these?

Egypt Mexico Netherlands

Describe the level of technology

? ? ?

Describe the culture

? ? ?

? Select from: primitive, simple, moderate, advanced


SECTION 4B

ECONOMIC GEOGRAPHY - 2

ALAN L. WHITEBREAD

COUNTRY ECONOMIC STRUCTURE:Combining two scales

PER CAPITA INCOME

INDUSTRIALIZED G8

INDUSTRIALIZING

RAW MATERIAL EXPORTING

INDIA

MEXICO

BRUNEI - OIL


AFGHANISTAN

ETHIOPIA $100

$35,000+

$11,999

$5,000

$19,999

SUBSISTENCE

The World Bank scale can be found at Data & Statistics: Country Classification at http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20420458~menuPK:6

4133156~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html

AFGHANISTAN

ETHIOPIA

PEOPLE =

INCOME =

LIVING CONDITIONS =

INFRASTRUCTURE =

VALUE-ADDED CAPABILITIES =

SUBSISTENCE ECONOMIES

INDIA

MEXICO

BRUNEI - OIL


AFGHANISTAN

ETHIOPIA

G8

BRAZIL

MEXICO

CHINA

INDONESIA

CHAD

INDIA

G8

STAGE OF DEVELOPMENT

PER CAPITA INCOME

It is common for lesser developed

nations to be in very different positions on

different scales.

PURCHASING POWER PARITY (PPP)

• CONCEPT– The exchange rate should approximate a rate that

equalizes the price of an identical basket of goods and services in different nations.

PURCHASING POWER PARITY (PPP)

• THE WAY IT WORKS– A McDonald’s Big MacTM is produced in about 120

countries.

– The Big Mac PPP is the exchange rate that would have a hamburger cost the same in every country.

– Comparing these prices with actual rates tends to signal if a currency is undervalued or overvalued.

• Purchasing Power Parity– Divide the local price by the American price.

COMMUNICATIONS INFRASTRUCTURE

• Telephone Companies

• Internet Service Providers

• Cable Systems

• Satellite Systems

UTILITIES INFRASTRUTURE

• Energy

• Water

• Sewer

• Environmental – Garbage / landfill

– Recycling

UN WORLD POPULATION PROJECTIONS

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000

Medium

High

Low

o

o

oo

U.S. Census Bureau, international Data Base, April 2005 version

Why are they different?What does each scenario implyon a global basis? to your firm?

POPULATION PYRAMIDS http://www.census.gov/ipc/www/idbpyr.html


SECTION 5A

GLOBAL STRATEGY, PLANNING, AND PROGRAMS

ALAN L. WHITEBREAD

COMPETITIVE ANALYSIS & STRATEGY

• Industry Analysis• National Competitive Advantages• Competitive Advantage & Strategic Models• Strategic Positions• Role of Competitive Innovation

PORTER’S FIVE FORCES MODEL:Industry Analysis

See Michael E. Porter, Competitive Strategy, New York Free Press, 1980, for more information.

What is the amount of rivalry among existing competitors?

What is the bargaining

power of your key customers?

What is the threat of

substitute products and/or

services?

What is the bargaining

power of your key suppliers?

What is the threat of

significant new entrants?

DIMENSIONS OF GLOBAL COMPETITION

• Success in global markets is determined by your ability to establish competitive advantages– On a regional or national level

– On an industry level

– And on a firm level

• You must clearly understand– Competitive forces in the industry and

– Your firm’s position within an industry

NATIONAL COMPETITIVE ADVANTAGEAll forces interact in various ways in different situations.

DEMAND FUNCTIONS AND

CHARACTERISTICS

RELATED AND SUPPORTING INDUSTRIES

FACTORS THAT AFFECT THE

BUSINESS

STRATEGY, STRUCTURE, AND RIVALRY

The nation’s position in factors of

production.

In country

In country

In country

COUNTRY-SPECIFIC ADVANTAGES INCLUDE

• COST ADVANTAGE– Due to materials or supply chain advantages

• LABOR ADVANTAGE– Especially in underdeveloped nations

• SHIPPING HUB – Netherlands for Europe

• INFRASTRUCTURE– Especially industrialized nations

• RELATED / SUPPORTING INDUSTRIES• COUNTRY-OF-ORIGIN

– May be significant

COUNTRY-SPECIFIC ADVANTAGES: DEMAND CONDITIONS

• Important domestic-market demand components include– Size of domestic demand

– Composition of domestic demand

– The forces behind, and pattern of, domestic demand growth

– How will domestic customers pull the products into foreign markets?

– Are you increasing your domestic sales?

COUNTRY-SPECIFIC ADVANTAGES: RELATED & SUPPORTING INDUSTRIES

• AN ADVANTAGE WHEN THE FIRM’S HOME COUNTRY / MARKET HAS INTERNATIONALLY COMPETITIVE INDUSTRIES

– Industries that are related to or in direct support;

– Suppliers providing inputs to downstream industries;

– That function so that contact and coordination gives access to foreign markets; and / or

– Have clusters of geographic concentrations of interconnected companies in a particular field

FIRM STRATEGY, STRUCTURE, AND RIVALRY

• Differences in management styles, skill sets, and strategic perspectives create advantages and disadvantages.

• Domestic rivalry has a strong influence on competitive advantage because it– keeps an industry dynamic, and

– creates pressure on all firms to improve and innovate.

• The intensity of competition and quality of competitors are important.

FIRM-SPECIFIC ADVANTAGES

• INTELLECTUAL PROPERTY• KNOWLEDGE MANAGEMENT• BRAND EQUITY• CONTROL OF MATERIALS / COMPONENTS• DISTRIBUTION CONTROL• CAPACITY• TECHNOLOGY• HUMAN RESOURCES

OTHER FORCES

• GOVERNMENT– Buyer of products and services

– Maker of policies on • Labor• Capital formation• Product standards• Environmental issues• Nature of competition• Tax

– How do various governments affect your organization?

COMPETITIVE ADVANTAGE OF THE FIRM:PORTER’S THREE GENERIC STRATEGIES

OVERALL COST LEADERSHIP

Hard to keep long term

DIFFERENTIATION

Focus on differentiation and perceived value

NICHE

Understand segments and focus attack.

No direct battles with major competitors

INDUSTRY

WIDE

MARKET

SEGMENT

ONLY

Customer Perceived Uniqueness Low Cost Position

COMPETIVE

SCOPE

COMPETITIVE ADVANTAGE

THREE STRATEGIC POSITIONS

• VARIETY-BASED– Engage in a limited number of activities related to

delivering a product.

• NEEDS-BASED– Engage in a specific customer segment with a relatively

broad set of needs.

• ACCESS-BASED– Uniquely or preferentially reach a specific market

[segment or sub-segment].

STRATEGIC PERSPECTIVES• Advantage: there is less risk if several advantages exist.

• Gaps exist and present opportunities in competitive offerings which are focused on specific market areas.

• Changing the rules: refuse to play by the rules set by industry leaders-set your own rules [dangerous]!

• Collaboration: use know-how developed by other companies to innovate quicker.

THE PRODUCT LIFE CYCLE OVERVIEW

TIME

Manage the Marketing Mix (4P’s) – The marketing mix may be different in each country or market and each stage of the product life cycle.

Country 1In Decline

MaturityIntroduction Growth

TOTAL S ALESCountry 1 + Country 2

Country 2Country 1

INTERNATIONAL MARKET TERMS

• Multinational– Composed of any combination of regional and/or

country markets

• Regional– Composed of multiple countries in a defined geographic

area

• Country– A single country

INTERNATIONAL PRODUCT MARKETS

• Multinational– Sell product[s] around the world or in multiple regions

with only cosmetic changes.

• Regional– Sells product[s] to multiple countries in a defined

geographic area with only cosmetic changes.

• Country– Sells product[s] throughout a country with few if any

changes.

• Local – Sells a specific product for a defined locale.

IMPLEMENTING SUPERNATIONAL PROGRAMS

• Coordination of market activities– Regional [multiple nations]

– National

– State equivalent

– Local

• Provide acceptable levels of decision-making for program flexibility and speed.

• Monitor progress

REQUIREMENTS FOR A GLOBAL PROGRAM

• STANDARDS– Company name, logo, and placement of these items

• Compare General Electric items around the globe

– A standard brand or trademark• Usually with some modifications – see Coca-Cola and

McDonalds

– A leadership position

THE MANY DIMENSIONS OF MANAGING WORLD MARKETING ACTIVITIES

LOGISTICS

SYSTEMS AND TRANSACTIONS

OPERATIONS

MARKETING PROGRAMS

MARKETING MIX

SUPPLY CHAIN OR

VALUE CHAIN MANAGEMENT

MARKETING MIX

• Which products?• Which channels of distribution?• What promotions?• What price structures?

SYSTEMS AND TRANSACTIONS

• What types of transactions?– Purchase order, internet, verbal, …

– By each, or case, or pallet, or truck, …

• What terms of sale?– Cash, check, credit card, letter of credit …

• How will they be supported?• What systems are required?

MARKETING PROGRAMS

• What is the scope of each program?• What is the timing of each program?• What are the implementation changes due to the

defined area?

OPERATIONS

• Which manufacturing facilities will support this?• What sourcing issues must be met?• How do we link sales forecasts, manufacturing

schedules, and logistics functions for this product [set]?

• How do we get enough product to our customers for the product launch?

LOGISTICS

• Is the supply steady or erratic?• What are the delivery requirements?• How much inventory? • Where should the inventory be located?• What are expected delivery times?• What does this do to our vendors?• What potential problems exist?

SUPPLY CHAIN

• Ad agencies

• PR firms

• Promotional firms

BUSINESS PLAN CONTENTS

• Executive Overview• Marketing Opportunity

– USP, FABs

• Product Development– Cost, time, risk analysis, other issues

• Go to Market Strategy– Launch, Roll-out

• Detailed Financial Analysis

MARKETING

• Customer Analysis: the need• Competitive Analysis• Company Analysis• Market segments and target markets• The Marketing Mix• Roll-out Plan• Summary of benefits

PRODUCT DEVELOPMENT

• Summary of issues

• Significant hurdles

• Remaining items

ROLL-OUT PLAN

• Detailed introduction to the market– Possibly in stages

– Gantt chart[s]

• Department agreement

• Remaining special concerns

THE MARKETING BUDGETGantt Chart

CAMPAIGN TIMELINE: SMALLER COMPANY

Week Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15RESEARCHCustomer/Prospect Research

CAMPAIGN CREATION & MANAGEMENTBrainstormingCreationPresentation to Top ExecsMeeting and AssignmentsOngoing Weekly Status Meetings

ADVERTISING: PRINTCreate Media Plan (Print and Online)Buy Print MediaDesignPhotography and/or illustrationProductionCopywriting and ReviewFinal Negatives, Insertion OrdersShip Negatives and Orders to Publications

FINANCIAL ANALYSIS

• Comprehensive set of financials– Statements

• Line item detail• Possible stage evaluation and review

– Detailed capital requirements

– Human resources

– Project analysis• DCF, IRR, ?

BUDGETING

• Top-down or bottom-up approach– Expected units

– Expected revenues and sources

– Avg. selling price, gross margin

– Estimated average standard costs

– Marketing expenses• Line item detail by area• Implementation • Timing issues and other schedules

– Projected pre-tax income


SECTION 5B

GLOBAL STRATEGY, PLANNING, AND PROGRAMS

ALAN L. WHITEBREAD

U.S. LAW

• The Webb-Pomerene Act of 1918 allows U.S. firms to join forces in export activities. These activities will not be subject to the Sherman Act.

EXPORT PROMOTION

• International Partner Search [USDOC]– The U.S. Commercial Service’s International Partner

Search will put our trade specialists in over 60 countries to work finding you the most suitable strategic partners. You provide your marketing materials and background on your company. We use our strong network of international contacts to interview potential partners and provide you with a list of up to five pre-qualified partners.

– http://www.export.gov/salesandmarketing/IPS.asp

EXPORT PROMOTION

• Gold Key Service [USDOC]– Representatives of U.S. businesses planning to

visit a country to explore business / investment prospects are encouraged to use the custom-tailored "Gold Key Service" provided by the U.S. Embassy’s Commercial Section. This service combines orientation briefings, introductions to potential business partners, assistance in developing a sound marketing strategy, and effective follow-up. The service has a small fee. Companies interested in this service are requested to contact the U.S. Embassy's Commercial Section well in advance of their arrival.

– http://www.export.gov/salesandmarketing/gold_key.asp

HARMONIZED TARIFF SYSTEM [HTS]IMPORTS

• The HTS assigns 6-digit codes for general categories. All definitions must conform to the first 6-digit framework.

• The harmonized code number is also used to assist customs with duty assessments.

• It is helpful, and in some countries required, to have the code included on the commercial invoice.

• FOR CLASSIFICATIONS AND RATES GO TO http://www.usitc.gov/tata/hts/

DETERMINING AN HS CODE:1 Liter Frozen Orange Juice in a Container

20 Chapter 20 - Preparations of vegetables, fruit, nuts or other parts of plants

2009 Fruit juices (including grape must) and vegetable juices, not fortified with vitamins or minerals, unfermented and not

containing added spirit, whether or not containing added sugar or other sweetening matter:

Orange juice:

2009.11 Frozen:

2009110020 In containers each holding less than .946 liter liters

2009110040 In containers each holding .946 liter or more but not more than 3.785 liters . . . . . . . .liters

2009110060 In containers of more than 3.785 liters liters

SCHEDULE HTS

• All of the imports of the U.S. are based on the Harmonized Tariff System [HTS] which is based on the Harmonized Commodity Description and Coding System (HS), administered by the World Customs Organization in Brussels.

• The 4- and 6-digit HS product categories are required. In advanced economies like the U.S. they are also subdivided into 8-digit unique rate lines and 10-digit non-legal statistical reporting categories.

• Import codes are administered by the U.S.

International Trade Commission [USITC].

SCHEDULE B CODES

• Administered by the U.S. Bureau of the Census• Schedule B export codes

– http://www.census.gov/foreign-trade/schedules/b [browse]

• Schedule B numbers must be reported on the Electronic Export Information [EEI] form in the U.S. Customs and Border Patrol Automated Export System [AES].

• For how to correctly complete an EEI form go to – http://www.cbp.gov/xp/cgov/trade/automated/aes/

• This export form is required for – any shipment covered under a "validated license“; or– mail shipments over $500; or– all other shipments valued over $2,500

– And for shipments to Puerto Rico, the U.S. Virgin Islands, and former Pacific Trust Territories if they meet any of the above conditions.

• It must be filed via AES Direct – a free service of the U.S. Customs and Border Patrol.

• See http://export.gov/logistics/eg_main_018121.asp for additional export information!

SHIPPER’S EXPORT DECLARATION [SED] U.S. FORM 7525V

• It is strongly recommended that you always include the following statement on your SED or in your Automated Export System [AES] document and all physical copies.

– “The commodities, technology or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. laws is prohibited.”

SHIPPER’S EXPORT DECLARATION [SED] U.S. FORM 7525V

THE RIGHT HS / SCHEDULE B CODE

• It must be correct!– Can be 6 to 10 digits

• IF IT IS WRONG– MANY BAD THINGS CAN HAPPEN if the error

is discovered

-OUTBOUND

- INBOUND

- FINANCIAL INSTRUMENT

EXPORT COMMODITY CONTROL LIST

• 10 categories including– Defense articles & services / national security– Dangerous drugs and narcotics– Endangered plants and wildlife– Chemicals– Radioactive materials– Explosives– and more!

• Export Administration Regulations are at – http://www.access.gpo.gov/bis/ear/ear_data.html

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