module 1: need and importance of trade events for business development masato abe, phd private...
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Module 1: Need and Importance of Trade Events for Business
Development
Masato Abe, PhDPrivate Sector and Development Section
Trade and Investment DivisionUnited Nations ESCAP
19 June 2012
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Objectives of my sessions
Present internationalization process Learn how to develop an export product Understand key challenges & tools in
marketing an export product Learn effective skills & techniques for
successful export promotion Understand the roles of key players Share knowledge & experience
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Outline A case study on internationalization A group exercise to develop an
export potential product A group exercise to develop export
customers Lectures on trade tends and other
issues
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ESCAP
United Nations Economic and Social Commission for Asia and the Pacific
Asia and the Pacific (AP) 58 regional members and associated members
plus 3 non AP members Including all 10 ASEAN member states
Policy advocacy and technical assistance for regional development
Headquarters in Bangkok Nine branches
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My background Merchant / farmer’s family Marketing, business administration &
economics Japanese / US business Sales, marketing, logistics &
procurement UN Asia-Pacific
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Case Studyon
Internationalization
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A Case of the M Group of Japan
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Ball guide postfor large sized press dies
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DistributionCentre J
Supplier L
Cus
tom
ers
600km
Lao PDR Thailand
Japan
Viet Nam
DistributionCentre V
1 month by ocean
1200km
100km
Supplier T
5 days by air
Development ofCross-Border Supply Chains
Customers
DistributionCentre T
Customers
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Discussion What were challenges? Any good strategy? New development?
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Group Exercise
How to develop a export product
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Stages in the process of export product identification(public sector’s perspectives)
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Entrepreneurship required
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Form groups Two to four people per group Same gender & similar age group if
possible
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Develop an export product Get a novel idea through
Knowledge & experience Copying & modifying something marketable
Three techniques1) Reviewing available resources2) “Negative keyword” method3) “Who x What x How” method
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1. Reviewing Available Resources (1)
Human resources Natural endowment Financial assets Tangible assets Human networks Yourself Others
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1. Reviewing Available Resources (2)
Human ResourcesExperience, educationcertificatesinterests &hobbies
NetworksSupporters,
family& friends
MoneyOwn capitalsgrants, loans
& salaries
AssetsBuildings,facilities,equipments & intellectual property
Entrepreneur
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Exercise Think any resources individually, including
resources available around your home town
Present them to your team members
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2. “Negative Keyword” Method
Expensive Inconvenient Lacking Late / slow Old / outdated Unstylish Confused Ugly Unsatisfactory Unreliable …
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Exercise Using the ‘negative keyword method,’
identify 3 to 5 products with export opportunity
Present them to your team members
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3. “Who x What x How” Method (1)
Examples
Customers Products / Services Channels & DistributionsX X
Femaleprofessionals
Stylish dressesHigh-end specialized shopat a prestigious location
X X
Middle agedcitizens
Healthy foodsRestaurant with low
calorie dishesX X
Pre-schoolchildren
ConversationalEnglish
Bilingual kindergartenX X
Who What How
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3. “Who x What x How” Method (2)
Who
What
How
Young mid-classprofessionals
Affordablesecondhand
cars
Online auctionw/ quality assurance
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Team Exercise Come up with 1 to 3 ideas for any line of
business for export, which your team may wish to run if you have opportunity
Use either or all three methods Reviewing available resources “Negative keyword” method “Who x What x How” method
Think twice why your team likes it (them) Write down your ideas as detailed as possible Discuss with team mates Choose one export product for further exercise
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Useful Techniques for new product developmenta. Market & Product Mix Analysisb. Mission Analysisc. SWOT Analysisd. 4Ps / 4Cs / 4Ase. 6W & 1H
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Useful techniques for new product developmenta. Market & Product (Service) Mix Analysisb. Mission Analysisc. SWOT Analysisd. 4Ps / 4Cs / 4Ase. 6W & 1H
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Market & Product Mix Analysis Sale promotion
New market penetration
New product/service development
New Business
Present products/services Present MarketX
New Products/Services New MarketX
New Products/Services Present MarketX
Present Products/Services New MarketX
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Exercise Conduct the Market & Product Mix Analysis
based on the export product which your team is developing
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Useful techniques for export product developmenta. Market & Product (Service) Mix Analysisb. Mission Analysisc. SWOT Analysisd. 4Ps / 4Cs / 4Ase. 6W & 1H
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Mission analysisIdentify the key tasks of your export firm
QuestionsWhat is the mission of a automobile sale dealer? What is its most important task?
What is its most productive activity?
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Team ExerciseIdentify the key mission & task of your export firm
Pick the most critical activity
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Useful Techniques for Turnaround Management1. Mission Analysis2. Market & Product (Service) Mix Analysis3. SWOT Analysis4. 4Ps / 4Cs / 4As5. 6W & 1H
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SWOT Analysis (1) Probably the most popular technique for turnaround management
Positive Negative
Internal(Strength) (Weakness)
External(Opportunity) (Threat)
X X X X
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SWOT Analysis: A Case (1)Positive Negative
Internal(Strength)- Low cost
- Good after-service
(Weakness)- Little customer
base
External
(Opportunity)- Growing market
(aging, beauty conscious)
- Unsatisfactory products / services
(Threat)- Dominance by market leaders
Hair piece (wig for men) sales through Internet with excellent after services
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Group work Conduct the SWOT analysis for your firm /
product
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Useful Techniques for Turnaround Management1. Mission Analysis2. Market & Product (Service) Mix Analysis3. SWOT Analysis4. 4Ps / 4Cs / 4As5. 6W & 1H
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4Ps, 4Cs and 4As 4Ps
Product, Pricing, Placement (or distribution) and Promotion
4Cs Consumer, Cost, Convenience and
Communication 4As
Acceptance, Availability, Awareness and Affordability
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Exercise Choose one of 4Cs, 4Ps and 4As; then,
detail out your firm’s export business
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Useful Techniques for Turnaround Management1. Mission Analysis2. Market & Product (Service) Mix Analysis3. SWOT Analysis4. 4Ps / 4Cs / 4As5. 6W & 1H
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6W & 1H Who: Customers What: Products / services Why: Value added Where: Country, city, area, shop By whom: Employees When: Business hours / seasons How: Channels & distributions;
trade process; Internet; price & sales terms;
volume
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Exercise Detail out your firm’s export business
using 6W&1H
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Group presentation Present your group’s product and its
business plan
Evaluate other teams’ products
Give feedback to other teams’ presentations
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Group Exercise:Customer
development
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Objectives of customer development Develop products (and services) for export Gain new customers/intermediaries in
neighbouring, regional & global markets Strengthen relationship with existing
customers/intermediaries Increase the amount of exports Achieve the above objectives effectively
and efficiently Cost vs. benefit
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Major challenges Unknown market Lack of network Internationalization process Different culture Intensified competition Poor management skills Lack of financing
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Competitiveness enhancement QDC
Quality Delivery Cost (price)
Cost saving Productivity up (input vs. output) Flexibility up New idea / new market
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Trade promotion tools Develop or refine products (& services) for export
by communicating with potential customers Gain new customers/intermediaries in
neighbouring, regional, and global markets Strengthen relationship with existing customers
and intermediaries Increase the amount of exports Achieve the above objectives effectively and
efficiently
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Various trade promotion tools:Cost and target
High
Cost
Low
Salesperson
Advertisement(Newspaper,
magazine, journal, directories, TV, radio)
Direct mail(Mail, email, telephone)
Internet(Homepage/portal)
WideTarget customersNarrow
Trade fair/mission
Source: Modified from Japan Finance Corporation (2008)
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Key Topics for Export Promotions Objectives of export promotions Players Products (and/or services) for export Markets Export operations Customer development Trade fair Budgeting Evaluation Others
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Key Players Exporting firms (e.g. manufacturers, distributors
& vendors; exhibitors) Business associations (e.g. chambers of
commerce and industry) Promotion event organizers & consultants (e.g.
trade fair organizers) Governments & their export promotion agencies
(e.g. JETRO; DEP of Thailand) Both home & host Foreign market intelligence Financial/technical support
Financial institutions (e.g. commercial banks) Operational loans Export loans Foreign market intelligence
Target customers
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Products for Export Products for export
Agriculture, materials, consumer, industrial & services
Competitiveness of products Quality Delivery Cost
Product mix Firm level, sector base & provincial/national
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Group Exercise Identify a product (or line of products) for
export Discuss about target customers
Different customers for different products Agriculture Materials Light manufacturing Heavy manufacturing Consumer vs. b2b Others
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Target Markets Customers & market size Tariff & rules of origin Quality standards & regulations Competitors Local business practices
Channels & distribution
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Group Exercise
Identify a target market May use Market Analysis Tools
http://legacy.intracen.org/marketanalysis/Default.aspx
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Export Operations Pricing
Sales terms (e.g. minimum quantity/lot size) Transportation cost: FOB/CIF Profit Payment terms
Leadtime Logistics (ocean, tracking vs. air or multimodal) Export forwarders
Sales Email, fax, website, EDI Direct sales vs. channel sales Stocks & warehousing
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Group Exercise Discuss export operations for the selected
product which at least covers the following points CIF price Profit margin Leadtime How to take orders
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Three Major Export Promotion Events Trade missions
Small size Crucial support by hosts (e.g. government/business associations)
Short listed partners/buyers Market research focused Often government/business association driven
Buyer-seller meetings Middle size Proper market research needed, including sales activities Structured gathering Often business association/organizer driven
Trade fairs Large size Less marketing needed & more sale focused Loosen gathering; often open to public Often organizer driven
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High
Cost
Low
WideTarget CustomersNarrow
Cost vs. Coverage
Buyer-Seller Meetings
Trade Fairs
Trade Missions
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Cost Analysis
Number of Inquiries
Cost of Export Promotion Event
= $ per inquiry
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Trade Fair Focus
General (Hanover/Milan) or specialized (auto show) Organizers are typically responsible for:
Venue plus utilities/catering/security Stands/boards/furniture & decoration at common space Advertisements to attract participants/visitors/buyers (&
sellers) Magazines, journals, newspapers, billboards, website,
flyers, brochures, etc. Networking with Governments/business associations/mass
media Directory of exhibitors
Accommodation arrangement (e.g. official hotels) Arrangement with subcontractors for booth decollation
Associated technical conferences/shows Normally fee based
In Bangkok: $200-800/m2, perhaps plus registration fee/insurance for an international fair
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Standard Stands
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Trade Fair: Advantages For some products which are difficult to market
without providing the potential customers a chance to examine them or see the in action
“Waving the company flag” against competition; moral boosting of sales personnel & distributors
Fining an intermediary Networking with government officials & decision
makers Market research & collecting competitive
intelligence Reach a sizable number of sales prospects with a
reasonable cost
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Trade Fair: Disadvantages Expensive for firms looking only for one-
time or short-term sales Difficulty in choosing the appropriate trade
fairs Sizable workload for the participation
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Criteria for the Selection of Fair
Market Sector Size Reputation Quantity vs. quality Cost Media credentials
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Group Exercise Select a trade fair at the selected market
in 2013 perhaps using the following websites http://www.jetro.go.jp/en/database/j-messe/ http://www.fairguide.com/index.html
Go to the website of the selected fair, and summarize requirements for & offers to exhibitors
Decide space & booth size Refer to the floor plan Consider flows of visitors
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Budgeting for Exhibitors Participation fee (registration, space & furniture,
insurance) Booth decollation Numbers of staff & days Airfare & accommodation Promotional materials (in appropriate languages)
Brochures (both hard copy & softcopy on website) Catalogues with price schedule Posters/banners Samples & gifts Shows & DVDs
Preshow promotion Freight Communications & others
e.g. companions
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Public Support Home countries
JETRO’s financial support to SME exhibitors at international trade fairs
Host countries Thailand’s “Extra Night, Extra Smile”
Programme Development agencies
ESCAP’s financial support to the participants in the First GMS Trade Fair in Hanoi in 2003
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Group Exercise Budget your team’s participation in the
selected trade fair, considering public support if any
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Follow-up Activities Market research Emails/direct mails Visits Trade missions Inviting potential customers for site visit Participating in other trade fairs Open an office in the target market Others
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Evaluation 1
Number of Inquiries
Total Cost of the Fair
= $ per inquiry
Notes: 1) The smaller the more effective2) Inquiries made by potential customers at the fair and after the fair3) The number of business cards collected at the fair can be also used
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Evaluation 2
Onsite Sales at the Fair
Note: The higher the more effective
Total Cost of the Fair
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Evaluation 3
Net Profit Made from 1-year Sales ofNew Customers after the Fair
Total Cost of the Fair
Notes: 1) The higher the more effective 2) It could be seen as a very successful event if the result exceeds 1.
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Other Benefits of Trade Fairs Strengthening relationship with exiting
customers, business associations & other key players
Gaining market intelligence Customers Competitors Public regulations
Gaining new knowledge Technology Techniques Management
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Other Issues
Organizing trade missions, buyer-seller meetings and/or conferences back to back with trade fairs
Business development services needed Networking with local firms
Experts/consultants
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Key Points for Organizers Long-term planning
Ideally announce the fair more than 1.5 years before
Selection of right sectors Proper advertisements to attract right
people/agencies, as both exhibitors & buyers/visitors
Networking with Governments & business associations
Effective cost management Seek public sponsorships
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Framework for Export Promotion
Export Product Development(QDC, Sales Terms, Export Operations)
Trade Fairs / Trade Missions
Follow-up Activities(Marketing Research, Advertisements, Fairs, Brach Office)
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Final discussion Discuss the roles of governments &
business associations for export promotion
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For further inquiry, contact
Masato Abe, Ph.D.Economic Affairs OfficerPrivate Sector and Development SectionTrade and Investment DivisionUnited Nations ESCAPBangkok, [email protected]
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Drivers Growing Asia
NIEs & ASEAN Emerging markets (e.g. China & India)
Trade & FDI led development strategies The Western world as major markets
Globalization Regional integration (e.g. AEC 2015, SAARC, BIMSTEC)
Policy Liberalization & free trade agreements Including trade, investment, capital & finance, HR
Technological / system innovation Transportation and ICT
Global supply chains Increasing competition
Pressures for low cost & high quality production Low labour cost
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Drivers (continued) New management strategies & techniques
EDI, ERP, JIT, lean manufacturing, TCM, SCM, etc
Willingness to be internationalized
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Flying geese
Source: GRIPS
Catching-up process of industrialization of latecomer economies (Akamatsu 1962) from import to production and export from simple to more sophisticated product from advanced to developing countries
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Major sources of FDI inflows to ASEAN (Millions of dollars)
Region/Economy 1998-2000 average 2008-2010 average
AmountShare(%) Amount
Share (%)
United States 5,466 22.4 5,394 10.1
European Union 7,943 32.5 11,036 20.6
Japan 2,042 8.4 5,426 10.1
ASEAN 1,759 7.2 8,926 16.7
Australia -513 -2.1 1,109 2.1
New Zealand 49 0.2 91 0.2
China 74 0.3 2,834 5.3
Republic of Korea 194 0.8 2,279 4.3
India 71 0.3 1,319 2.5
Others 7,356 30.1 15,157 28.3
ASEAN+3 4,068 16.6 19,465 36.3
ASEAN+6 3,676 15.0 21,985 41.0
Average flows to ASEAN 24,441 53,572
Source: ESCAP (2012), based on ASEAN statistics
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Toyota’s global supply chains
Source: Toyota, 2012
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Comparison of national and global supply chains
.
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How SMEs fit into global supply chains
Source: UNIDO (2001)
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AEC 2015 The ASEAN Economic Community (AEC) Regional economic integration by 2015 for
ASEAN countries Free movement of goods, services,
investment, skilled labour and freer flow of capital
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AEC: Key objectives A single market and production base A competitive economic region A region of equitable economic
development A region fully integrated into the global
economy.
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AEC: Key characteristics Fair competition Consumer protection Intellectual Property Rights Infrastructure development Product and service standards
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AEC: Present status Completed 187 measures (67.5%) out of 277
measures by the end of 2011 Some measures due for implementation have not
been fully implemented Delays in ratification of signed ASEAN-wide agreements
and their alignment into national domestic laws as well as delays in implementation of specific initiatives
E.g., Measures for the free flow of service, transportation, cooperation in food, agriculture and forestry etc.
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CLMV countries in AEC 2015 Relatively less developed than the ASEAN 6
counties Special schedule for CLMV countries
mainly in the elimination of tariffs and non-tariff barriers) Completed most of the tasks for AEC 2015 with
some weaker links remained compared to other countries For example, intellectual property rights, SME
development and taxation ASEAN Integration (IAI) Work Plan 2 (2009-2015)
Human capital and institutional strengthening Slow implementation
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The impact of AEC Challenges
Intensified competition domestic and international players Access to credit, labour mobility, technology development,
market access and political risk More measures for promoting SMEs
A survey conducted by The University of the Thai Chamber of Commerce (2012) The majority of Thai SMEs did not understand the benefits and
challenges of regional integration Investment liberalisation, service liberalisation, reduction of non-
tariff barriers, rules of origins and single standards for Asean products
Lack of readiness on financial support, low development of human resources at both the management level and workers, low development of ICT, high production and labour costs, low support from government agencies, and a low level of logistics development
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Case of Myanmar Development of Industries with agriculture Enhancement of production and quality of industrial
products Increased production of new types of machinery and
equipment Creation of suitable conditions for industrialized state Human resource development Coordination among various agencies in economic and
social activities Integration of the business community into international
trade and globalized economy
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Issues and challenges in
marketing products
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Firm typology
Export
Domestic/LocalMarket
HighTechLow
Tech
CottageEnterprises
SupportingEnterprises
DomesticMarket-oriented
Enterprises
Export-orientedEnterprises
Source: Uchikawa & Keola (2009)
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DiscussionWhat are the issues & obstacles
to improve the determinants of export competitiveness in your country?
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Determinants of export competitiveness Internal to enterprise
Contestable market power Capacity to respond effectively to competitors Capacity & flexibility to respond to changing
environment Capacity to create new market niches
External to enterprise Market access Access to resources Business related regulatory framework Supporting services
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Internal vs. External
- Market access- Access to resources
- Business related regulatory framework-Supporting services
- Contestable market power- Capacity to respond effectively to competitors
- Capacity & flexibility to respond to changing environment- Capacity to create new market niches
Enterprise
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Internal: Market power Branding Customer loyalty Distribution channels Pricing Quality …
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Internal: Capacity to respond effectively to competitors Substitutes for products & services Diversified product & service lines Low cost structure Flexibility …
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Internal: Capability & flexibility to respond to changing environment The availability of key resources Capacity for process & product innovation Flexible supply chains …
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Internal: Capability to create new market niches Marketing capability Culture of innovation Customer (or market) orientation …
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External: Access to resources People Skills, knowledge & technology Capitals Supplies Natural endowment …
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External: Regulatory framework The process of business registration &
licensing Taxation Competition Bankruptcy Property & intellectual property rights Trade & investment policy Customs procedures …
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External: Supporting services Physical infrastructure & logistics systems General & vocational education Training services Professional services, such as accounting
& legal advice Business incubation R&D & technology transfer… …
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Business Competitiveness Framework
- Market access- Access to resources
- Business related regulatory framework- Supporting services
- Contestable market power- Capacity to respond effectively to competitors
- Capacity & flexibility to respond to changing environment- Capacity to create new market niches
Enterprise
QDC (Quality, Delivery, Cost)
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Others: Access to Finance Own capitals Family, relatives, friends Commercial loans Public grants Public loans Collaterals
Land registration Micro loans Angles
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Session-end discussionShare any policy initiatives in
your country to improve export competitiveness
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Six areas for public interventions Pro-business legal & regulatory framework Supporting infrastructure Enhanced access to finance Entrepreneurship development Technology transfer & adaptation (plus
R&D) Business development services
Entrepreneur centred development strategy
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Special economic zones
Source: FIAS (2008)
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Advantages of special economic zones
Static advantages Dynamic advantages
Direct employment creation and income generation
Technology transfer
Export growth and export diversification Skill upgrading
Increase in foreign direct investment Local development
Increase in foreign exchange earnings Empowerment of women
Government revenue Indirect employment creation
Source: FIAS (2008).
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Transportation Cost: International Commercial Terms by ICC
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Cash Flow Management The biggest reason of corporate failure Time gap between receivables & payables
Sales CustomerPayment
Procurement Payment tosuppliers
Receivables
PayablesTime Gap
Operating funds needed
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Methods of financing
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Trade cycle Marketing/sales
Trade/credit information Negotiations
Production Warehousing Transportation Delivery
Trade finance instruments Debt financing Asset based financing Export factoring Leasing Open account Advance payment Raising capital Letter of credit
Facilitating payments Documentary collection Mitigating risks Export guarantee Export insurance Forfeiting Hedging
Trade cycle and trade finance instruments
Source: Authors’ compilation, based on ESCAP, 2005b.
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Terms of trade payment
Source: ESCAP, 2005b.
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Question Given the different financial instruments and
firm heterogeneity, how should policymakers address the financing needs of exporting firms in the Asia-Pacific region?
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What is Export Business Plan? Objectives
Detail out a business idea to workable actions Develop sales, supply & financial plans Mobilize financial support from the public and
commercial financial institutions Find any missing holes
Various users Entrepreneurs
Develop a concrete & executable plan Brush up ideas
Public & commercial financial institutions Evaluate feasibility for funding consideration Use it as a supporting document for grants/loans
Employees / suppliers Know a clear corporate direction
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What is the Export Business Plan? (continued) Resources mobilization
Finance HR
Three financial scenarios Conservative Most likely Ambitious
Part of the “Plan-Do-See” process
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Necessary Components Marketing Sales forecast Procurement Production Funding Others…
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Procurement Plan What: Materials, components,
labours, services Where: Suppliers & supply markets When: Leadtime How: Price & payment terms How much: Volume, quantity, duration
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Production Plan (if needed) What: Products & services Where: Factories & warehouses When: Leadtime How: Methods, technology,
machineries, equipments How much: Volume, quantity
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Funding Plan Funds needed for a start-up
Facilities & equipments (factories, warehouses, shops, machines, goods & automobiles)
Operating costs (supplies, salaries, rents, interests) – at least for 2-3 months
Funds raising Own capitals (ideally, more than 50% of total funds) Support from family, relatives, friends & others Public grants Public loans (normally collateral required) Commercial loans (collateral required) Others
Funds Needed & Funds Raising must be equal
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Income Forecast Two kinds of monthly income forecasts
(beginning & 1 year later) Details
Revenues (most likely) Costs of products / services if any Operating expenses
Salaries Rent for facilities Others (advertisements, utilities, etc.)
Interests (5%) / installments of loans, if any Net income
Tax (25%)
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A Simplified Export Business Plan Two-page business plan, widely used in Japan Two-part format
1. Business Proposal (first page) Line of business Location Start-up date Missions, objectives & business opportunity Background & experience Products & services Strength Challenges & weakness Customers, channels & distributions Suppliers (procurement)
2. Financial planning (second page) Capital requirement & funding plan Income forecast (beginning & 1 year later)
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A Good Export Business Plan Two parts of the business plan (business
proposal & financial plan) are consistent Funding plan can support both initial asset
investments & operating expenses (at least initial 2-3 months)
Make business in black in 1 year Make sure adequate provision for loan
installments