Article Assignments: This assignment is a review/analysis and critique of an article. The article chosen may be selected from the

IF THE HOMEWORK YOU DID FOR THE LAST chapter shows you have a marketable and profitable product that will sell in sufficient volumes, you now are ready to commit resources (time and money) to the project. But before you do, make sure you address the next six commonalities of the import/export transaction:

• Develop a market plan.

• Prepare for negotiations.

• Understand the tips and traps of culture.

• Consider intellectual property rights.

• Learn about communications.

• Get ready to travel.

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THE MARKET PLAN

You have determined that your project is viable. Now write a long-range market plan, then execute it.

A market plan is simply a process recorded on paper that allows you to think through the many logical ways to reach buyers and convince them to say yes to a sale. It is important to integrate the international market plan with the firm's overall strategic business plan. (See Chapter 6 for details about how to write a business plan.)

Use the following logical, step-by-step process to write your market plan:

1. Objectives

Examples:

• Sales of $XXX,XXX by the end of the second year.

• Expansion into countries A and B by the end of the third year.

2. Specific tactics

Examples:

• Radio advertising in two cities.

• Three direct mailings to each company or person on a specific list.

• An Internet Web site that advertises the address.

3. Schedule of activities or action plan

Examples:

• A list of trade shows indicating which you will attend, including dates and duration of trips to visit overseas distributors, with their names, addresses, and phone numbers.

• Specific assignments of responsibility (an essential feature of an action plan).

4. Budget for accomplishing the action plan

A list of every conceivable cost associated with marketing the product.

Don't scrimp on the budget, because this is where most startup firms underestimate. Initial marketing costs will be high.

Segmenting the Market

Marketing segmentation enables an import/export organization to choose its customers and

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fashion its marketing strategy on the basis of (1) identified customer wants and requirements and (2) the response to the firm's specific desires and needs. You should visualize segmentation on both a macrolevel and a microlevel.

Macro: From the Greek makros, long. It is a combining form meaning large.

Micro: From the Greek mikros, small. It is a combining form meaning little, small, microscopic.

Macro segmentation. Macro segmentation divides a market by such broad characteristics as industry shipments, location, and firm size. An import macrosegment might be the dividing of a city into marketing segments. On a larger scale, it might involve dividing the United States into regions, prioritizing those regions, then developing a microplan for each region.

Export macrosegments might include prioritizing continents or countries within a continent; better yet, export macrosegments might sort by language, purchasing power, or cultural preference.

Microsegmentation. Microsegmentation finds the homogeneous customer groups within macrosegments. Microsegmentation therefore seeks to find out who makes the decisions for each homogeneous group. It pinpoints where (by address) potential customers (by name) can say yes to a buying decision. From this analysis, a promotional strategy can be designed to target the decision-making units (DMUs).

An import microsegmentation might take the data from your market research effort and identify where the wholesalers are located. If you list and prioritize these decision makers by name and address, you will have a very logical specific plan of attack for your marketing effort.

Your marketing plan and schedule should cover a three-to five-year period, depending on the kinds of products you market, your competitors, and your target markets. Be sure to write this plan no matter how small the import/export project. Only when the plan is in writing will it command proper attention and receive adequate allocation of funds.

Executing the Market Plan

Next comes the fun-putting the plan into action by actively marketing the product through trade shows, advertisements, television promotions, and direct mail, all in accordance with your budgeted plan. Remember, nothing happens in a business until something is sold.

Personal Sales

The two basic approaches to selling internationally, for both imports and exports, are direct and indirect sales. In the direct sales method, a domestic manufacturing firm has its own marketing department that sells to a foreign distributor or retailing firm and is responsible

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for shipping the goods overseas. In the indirect sales method, the firm uses a middleman, who usually assumes the responsibility for moving the goods.

This is where your import/export business fits into the picture. You may sell directly to retailers or to distributors/ wholesalers. Regardless of where your targeted DMU is in the market channel, keep in mind that international sales are just like domestic sales: someone makes personal contact and presents a portfolio, brochures, price lists, and/or samples to decision makers (potential buyers) who can say yes.

HOT TIP: Making sales requires persistence and determination. Follow up, then follow up again.

Trade Shows (Fairs)

If you are attending a trade fair or show for the first time, consider using it as the keystone of your sales trip. Allow time afterward to visit companies you meet at the fair.

The international trader attends trade shows for five basic reasons:

1. To make contacts

2. To identify products for import or export

3. To evaluate the competition (often done without exhibiting) 4. To find customers and distributors for import or export 5. To build sales for existing distributors

HOT TIPS ON TRADE FAIRS

• If you are exhibiting to sell, don't overcommit. You may get more business than you can handle reasonably.

• If you are searching for products to import, don't buy until you have done your homework.

• Take more business cards to the trade show than you think you will need. Have your fax number, Web site, and e-mail address on your card.

• Obtain translation/interpreter assistance from a local university or college.

• If you are exhibiting to sell, consider prior advertisement to let potential customers know you will be there.

Trade Missions. Trade missions are trips made for the express purpose of promoting and participating in international trade. State and local governments organize several kinds of trade missions for exporters.

Special Missions. These are organized and led by government officials with itineraries designed to bring you into contact with potential buyers and agents. You pay your own expenses and a share of the costs of the mission.

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Seminar Missions. Similar to the specialized trade mission, seminar missions add several one-or two-day technical presentations to the trip by a team of industry representatives.

Industry-Organized, Government-Approved Trade Missions. Though these missions are organized by chambers of commerce, trade associations, or other industry groups, government officials often provide assistance prior to and during the trip.

Catalog Shows and Video/Catalog Exhibitions. These are the least expensive ways to develop leads, to test markets, and to locate agents-because you don't have to be there. You simply send along product catalogs, brochures, and other sales aids to be displayed at exhibitions organized by government officials and consultants.

Video/catalog exhibitions are ideal for promoting large equipment or machinery, which is costly to ship.

Trade Show Central. This free Internet service (www.tscentral.com) provides information on more than 50,000 trade shows, conferences, and seminars as well as 5000 service providers and 8000 venues and facilities around the world.

Advertising

All companies advertise to communicate with customers. Exporters and importers must ask themselves whether advertising is both important to sales and affordable. The assistance of an agency familiar with the market environment you wish to target could be critical to the success of your advertising campaign. Some countries do not carry television and radio advertising. In addition, cultural differences often require more than a simple translation of promotional messages.

In countries with low literacy rates, you may prefer to avoid elaborate print vehicles such as magazines, concentrating instead on outdoor advertising such as billboards, posters, electric signs, and streetcar/bus signs. These reach wide audiences in most countries.

Distributors

A distributor is a merchant who purchases merchandise from a manufacturer at the greatest possible discount and resells it to retailers for profit. The distributor carries a supply of parts and maintains an adequate facility for servicing. The distributor buys the product in its own name, often arranging payment terms on a credit basis. A written contract usually defines the territory to be covered by the distributor, the terms of sale, and the method of compensation (see "Avoiding Risk" in Chapter 5). The work is usually performed on a commission basis, without assumption of risk, and the representative may operate on either an exclusive or a nonexclusive basis. The contract is established for a specific time frame such that it may be renewable with satisfactory performance.

As with domestic sales, foreign retailers usually buy from the distributor's traveling sales force, but many buy through catalogs, brochures, or other literature.

Importers and exporters seldom sell directly to the end user. The practice is not

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recommended, because (1) it is timeconsuming and (2) it leads to goods being impounded or sold at auction when the buyer doesn't know his or her own trade regulations.

Overseas Trader's Checklist

Here's what you want from a foreign representative:

Q A solid reputation with suppliers and banks.

Q Financial strength.

V Experience with the product or a similar product.

Q A sales organization.

Q A sales record of growth.

Q Customers.

Q Warehouse capacity.

Q After-sales service capability.

C~( Understanding of regional culture and business practices.

Knowledge of both English and the language of the country.

Q Knowledge of marketing techniques (promotion, advertisement, etc.).

Trading Partner's Checklist

Here's what the foreign representative wants from you:

V Excellent products.

Q Exclusive territories.

Q Training.

V Parts availability.

Q Good warranties.

Q Advertising and merchandising support.

Q Credit terms, discounts, and deals.

Commissions on direct sales by the manufacturer in the distributor's territory.

Q Minimum control and/or visits.

Q Freedom to negotiate price.

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Q Ability to deal with one person.

Security that the product will not be taken away once it is established in the territory.

Right to terminate the agreement when the representative pleases.

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NEGOTIATIONS

Bargaining is a custom in many societies. But culturally nothing comes less naturally to Americans. The United States operates on a fixed-price system, and most buyers have grown up with the notion of purchasing off the shelf at the offered price or not buying at all. Of course, comparative shopping is native to everyone's buying psyche, so when the international stakes increase and foreign competitors (often born cultural negotiators) begin to force your hand, your instincts should give you some basis for taking the right action. You can make the right moves if you prepare.

Preparations

Unfortunately, too many people wander into international bargaining situations with no plan and no idea how to proceed. For them, it's an ad lib and ad hoc operation all the way. For some, lack of preparation is the result of a sense of superiority, but for most it's pure ignorance of the number and competence of the ferocious competitors out there scouring the world for scraps of business.

The first step in preparing for international negotiations is to develop a complete assessment of your firm's capabilities. Analyze your strengths and weaknesses, particularly in terms of managerial skills, product delivery, technical abilities, and global resources.

Next, analyze your target-the company or country you intend to sell your product to. Keep in mind that the human and behavioral aspects of your negotiations will be vital.

• Understand the place in the world where you will be traveling.

• Know the target area's culture, history, and political processes.

• Pay particular attention to the importance of face saving to the people of the country where you will be negotiating.

• Assess the host government's role in country negotiations.

• Determine the importance of personal relations.

• Learn how much time you should allow for negotiations.

• Be sure the final agreement specifies terms for the cost, quality, and delivery of the product. Quality can be assured only by seeing the product, but cost and delivery terms are the result of a quote agreed to by the seller.

In Japan, young executives role-play negotiations before they make an initial quote. They form teams, sit around a table with a chalkboard nearby, and pretend to negotiate the deal. Each team has a set of negotiating alternatives related to the country it is pretending to represent. Sometimes the players cut their offer price by 10 percent; if that doesn't work, they cut it another 5 or 10 percent. Other ploys are (1) offering lower-interest-rate loans than

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competitors, (2) offering better after-sales service warranties, and (3) providing warehouses for parts. Sometimes, even the cost of advertising can make the difference in the sale.

Agreeing to a Contract

After you obtain the initial quotations as explained in Chapter 2, the next step in any international business arrangement is to reach an agreement or a sales contract with your overseas partner.

Negotiating is integral to international trade, and an importer/exporter should be ready to offer or ask for alternatives by letter, fax, or e-mail. In the highly competitive international business world, a trader's ability to offer reasonable terms to customers may mean the difference between winning and losing a sale.

Exporters are finding it increasingly necessary to offer terms ranging from cash against shipping documents to time drafts and open accounts, and even installment payments spread over several years. More sophisticated business arrangements such as countertrade-which includes barter, product buyback, counterpurchase, and after-sales serviceare also negotiable. Figure 3-1 illustrates the concept.

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Fig. 3-1. Countertrade

Countertrade: A general international trade term for a variety of methods to conduct reciprocal trade in which the seller is required to accept goods or other instruments of trade, in partial or whole payment for its products.

Barter: Trade in which merchandise is exchanged directly for other merchandise without use of money.

Product buyback: Principally applicable for the construction and supply of plant and equipment. The major characteristic is its long-term aspect.

Counterpurchase: A common form of countertrade in which the seller receives cash but contractually agrees to buy local products or services as a percentage of cash received and over a stated period of time.

The trader must have a list of alternatives ready. Keep negotiations open and don't firm them up on paper until a general agreement has been reached. The following is a partial list

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of alternatives and conditions you may wish to consider during negotiations:

• Quantity price breaks (don't offer just one price)

• Discounts for cash deals or even down payments

• Countertrade offers to those countries short on foreign exchange

• Guaranteed loans

• Low-interest loans

• Time payments

• Home factory trips for training

Let your banker, freight forwarder, or customs house broker review the final offer or quotation. A second pair of experienced eyes can save you money. (See Chapters 7 and 8 respectively for an explanation of the freight forwarder and customs house broker.)

Foreign Corrupt Practices Act (FCPA)

During your negotiations make sure you stay on the right side of the Foreign Corrupt Practices Act (FCPA) of 1977. In essence, this act makes it illegal for companies to bribe foreign officials, candidates, or political parties. Make certain that everything is in the contract and has a price. Don't get caught making illegal payments or gifts to win a contract or sale. The penalties are severe-subject to a five-year jail sentence and a fine of up to $15,000.

The law does not address itself to "facilitating payments," those small amounts used to expedite business activities. These payments are euphemistically referred to in various countries as "mordida," "grease," "bakshish" (small amount of money), "rashoa" (big amount of money), "cumsha," or "squeeze." Nevertheless, great care should be exercised in this regard as well.

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TIPS AND TRAPS OF CULTURE

The very thought of doing business in a foreign culture can be a major barrier to negotiations, but it shouldn't be. After all, traders are known for their spirit of curiosity, inquisitiveness, and risk taking.

Developing overseas alliances does present new elements of risk and due diligence, along with the inherent challenges brought by distance, differing cultural motivations and priorities, and effective integration of differing approaches and objectives. But that's what brings the rewards.

Can one culture be superior to another? Political systems, armies, navies, and even economic systems may be superior, but cultures are not.

The best way to appreciate another culture is to "walk in the other person's shoes"-that is, visit or live in the country and get a feel for the similarities and differences. Short of that, this section of the chapter is the next best thing, because its purpose is to help you break through cultural barriers. You are cautioned that to be effective in your business dealings it is essential to be prepared. Do your homework before you interact in a new country, and then get on with doing business.

Does understanding foreign cultural values really make a difference? You bet it does!

One person who had traveled overseas regularly and had made friends in many countries, said, "They're more like us than they're different." What the visitor meant was that they like kids, they want children to be educated, they understand business, and they work hard. What he didn't say was that the differences are what affect attitudes-so much at times that some managers won't even consider entering the market to do business with "them."

What Is Culture?

Culture is a set of meanings or orientations for a given society, or social setting. It's a complex concept because there are often many cultures within a given nation. For an international businessperson the definition is more difficult, because a country's business culture is often different from its general culture. Thus the environment of international business is composed of language, religion, values and attitudes, law, education, politics, technology, and social organizations that are different.

Whatever a nation's culture is, it works for that society. In order to function within it, you must get on the bandwagon.

The Japanese do it very well. They learn how to penetrate foreign markets by sending their managers to live and study in "the other person's shoes." Their mission is to develop relationships with contemporaries that will last for years. The Japanese don't try to change the way of life in the other country; they learn about it. When they go home, they are specialists in marketing and production in the country that they researched.

It's a country's culture that regulates such things as sexuality, child raising, acquisition

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of food and clothing, and incentives that motivate people to work and buy products. All these things are of course major factors in marketing products.

The Nine Elements of Business Culture

Business culture is secondary to a country's general culture, but it provides the rules of the business game and explains the differences and the priorities.

Relationships. Mistrust is reduced when relationships are developed over a long period of time. To meet this challenge, you need to understand the countries, people, and cultures where you intend to do business.

Language. Ask international traders what language they speak, and they will say the language of the customer.

Language is the thing that sets humans off from other forms of life. It is the way you tell others about your history and your intentions for the future. Language is the means of communicating within a culture. For people in a given culture, their language defines their socialization.

Body Language. Body language is the subtle power of nonverbal communication. It's the earliest form of communication you learn, and you use it every day to tell other people how you feel about yourself and them.

This language includes your posture, gestures, facial expressions, and costumes, the way you walk, and even your treatment of time, material things, and space.

Religion. Religion plays a major part in the cultural similarities and differences of nations. In itself religion can be a basis of mistrust and a barrier to trade.

Religion is often the dominant influence for the consumer of products. Such things as religious holidays determine buying and consumption patterns. Knowing what is forbidden and what a society expects as a result of various religious beliefs affects market strategy.

Values and Attitudes. The role of values and attitudes in international business is difficult to measure, but vital to success. Work ethic and motivation are the intangibles that affect economic performance.

The values of a society determine its attitudes toward wealth, consumption, achievement, technology, and change= and you must evaluate all of them in terms of the host culture. Researching attitudes about openness and receptivity to new technology is essential to marketing.

Laws and Legal Environment. The laws of a society are another dimension of its culture. They are the rules established by authority and social interaction. On the one hand, laws provide an opportunity to handle the mistrust of doing business across international boundaries; on the other hand, they can become barriers and constraints to operations. The laws of nations are often greatly different. About half the nations of the world are under a form of either Napoleonic code or common law; the other half are under Muslim, Communist, or indigenous laws. None of the world's legal systems is truly pure. Each nation

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has its unique laws; nevertheless, similarities and mixtures abound within each classification.

For most dealings, you will be chiefly interested in the law as it relates to contracts, but you should always consider litigation as a last resort. Settle disputes in other ways if possible. Litigation is only for the stupid or the rich, because it usually involves long delays, during which inventories are tied up and trade is halted. Lawsuits are costly, not just because of the money, but also because of the broken relationships that result. Most international commercial disputes can be solved by conciliation, mediation, and arbitration. The arbitration service provided by the International Chamber of Commerce can often be written right into a sales contract, just in case the unspeakable should happen.

Education. Culture shapes your thoughts and emotions. Motivation is influenced by your education as well as by other things such as values and religion, as already discussed. The biggest international difference is the educational attainment of the population. The next biggest difference is the educational mix. In some countries such as the United States there is little difference in the mix. Practically all Americans are educated through twelfth grade, making education no longer a function of wealth. This is not so in many other countries. It is not unusual to find only the elite of some nations educated to the levels that Americans assume for all people. The impact of education is therefore profound for marketing products as well as for establishing relationships, because good communications are often based on relative education capacities and standards.

Technology. The most recent change in technology is our growing control over energy and information. The word technology begets concepts such as science, development, invention, and innovation. Some languages lack precise words to express these concepts. Understanding the technological gap among nations is an essential element to exporting products across borders. Wide gaps still exist between the most advanced nations and those we call "traditional societies." It is clear that training is needed to transfer technology, and the impact of that transfer on social environments must be considered. You should always look at technology from the importing country's point of view.

Social Organization. Social stratification is the hierarchy of classes within a society-the relative power, social priorities, privilege, and income of those classes. Each class within a system has somewhat different and distinct tastes, political views, and consumption patterns. Many countries have a socioreligious ideology that allows rank to be intrinsic and inherited biologically. This implies that different categories of humans are culturally defined as if consisting of different worth and potential for performance. Regardless of how you react to such noncompetitive socialization, such ideas are predictable in some countries. Faced with such a system of socioreligious rank, you need to learn how to deal with it-not attempt to change it.

Practical Applications

Now that you have an appreciation of culture, let's take a look at the practical side.

It's important to understand as much about the culture of a country as possible, even when just visiting on business trips. To begin, let's look at some generalities-ideas that will help you make a good impression no matter where you're doing business.

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Saving face is not just an Asian concept, although it is particularly sensitive in those countries. Avoiding embarrassment to others, particularly ranking persons, is essential wherever you are in the world.

People of any country like to talk about their own land and culture. If you ask questions that show genuine interest, you will cultivate people's respect. But no one likes critical questions, such as "Why don't you do it this way?" Or "How come you do it that way?" Above all, people don't want to hear how much better it is where you come from.

First impressions do count, and the wrong first impression can stop your business deal in its tracks. Bad first impressions are all but impossible to overcome.

Tips for Business Travelers

1. Smile! It's the universal business language and overcomes many problems.

2. But smile right. A tight smile with lips parted in an ellipse around the teeth comes across as phony and dishonest. Smile easily-with your full teeth exposed and the corners of your mouth pulled up. This kind of smile says, "Hi, I'm sure pleased to meet you!"

3. Look the part. Grooming is important all over the world. Studies indicate that most people are more attracted to others who are neat, well groomed, and crisply dressed.

4. Flash your eyebrows. In most cultures raising the eyebrows almost instinctively in a rapid movement and keeping them raised for about half a second is an unspoken signal of friendliness and approval.

5. Lean forward. Liking is produced by leaning forward.

6. Look for similarities. People tend to like others who are like them, so common experiences and interests are often a starting point for producing liking.

7. Nod your head. People like other people who agree with them and are attentive to what they are saying.

8. Open up. Closed hands and arms crossed in front of the chest may give the impression that you're resisting the other person's ideas. Open, frequently outstretched arms and open palms project the opposite.

Tips for Women

1. Never give a man a gift, no matter how close the business relationship. A small gift for his family might do.

2. Give gifts from the company, never from you.

3. If you are married, use Mrs. when overseas, even if you don't at home.

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4. Avoid eating or drinking alone in public. Use room service, or invite a woman from the office where you are doing business to join you at a restaurant.

5. If the question of dinner arises and is useful to cement the deal, avoid any doubts by inviting your counterpart's family.

6. Make a point to mention your husband and ask about your male counterpart's family. Some businesswomen who are not married invent a fiance or steady back home.

7. Try not to be coy about flirtations. Turn them off immediately with a straightforward no.

8. Be aware of the culture, and dress to fit as closely as your wardrobe will permit. Conservatism works.

About Jokes

The people of every country …