CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online Course SECTION 6A INTERNATIONAL MARKET RESEARCH ALAN L. WHITEBREAD.

CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online Course SECTION 6A INTERNATIONAL MARKET RESEARCH ALAN L. WHITEBREAD

MARKET RESEARCH OVERVIEW
The collection and analysis of data for market decisions about COMPETITORS MARKETS PRODUCTS RESPONDENTS STRATEGY OPTIONS Strategic Marketing for Evaluation data for -Strategy analysis -Setting objectives -New business analysis Market Planning for Market segmentation Market share Market potential Competitive analysis Product Management for Ideas for new or enhanced products Timing of product introductions 4 P's decisions Product Development for Product concept testing End use testing Sales techniques Price testing

WHY USE MARKET RESEARCH?
TO UNDERSTAND CUSTOMER & PROSPECT NEEDS AND WANTS. TO IMPROVE THE CHANCE SUCCESS OF NEW PRODUCTS. TO SELL MORE, PRICE BETTER, AND IMPROVE ADVERTISING EFFECTIVENESS. TO GAIN EFFICIENCY [CUT COSTS].

REASONS FOR INTERNATIONAL MARKETING RESEARCH
The firm needs to understand any new environment in terms of different business conduct and practices, cultures, levels and types of competition, product, service, package and other requirements, and distribution systems.

ASSESSING FOREIGN MARKETS
Screen for [country / region] markets Determine the size of potential markets Determine potential company sales by market Conduct specialized research to improve the firm’s position

ENTERING FOREIGN MARKETS: FIVE INITIAL QUESTIONS
1. Which markets are the most attractive? 2. How large are those markets? 3. How intense is competition in those markets? 4. How much business can I reasonably expect to do in those markets? 5. Can I expect a sufficient return to make it worth entering the market?

SOURCES OF INFORMATION: IN-HOUSE
The majority of corporate information Financial & marketing information systems Develop a list of items Executives based abroad, subsidiaries & affiliates Face-to-face conversations increase understanding and gain subtleties

SOURCES OF INFORMATION: COMMERCIAL SOURCES
Full-service research [give examples] Exploratory Understand the problem Define issues and hypotheses Descriptive Magnitudes Product potential, attributes, … Casual Test cause-and-effect relationships Test hypotheses about cause-and-effect relationships

Research approaches / methodologies Observational Focus Group Survey Behavioral Experimental control groups, placebos, …

Specialized research for certain techniques and markets personal interviews focus groups telephone or mail survey product tracking customer satisfaction measurement, ...

THE MARKET RESEARCH PROCESS
Clearly define [1] the problem and [2] the research objectives Develop the research plan Collect data Make decisions Present the findings Analyze the data

SOURCES OF RELIABLE DATA
Library Use a full government repository D&B Exporter’s Encyclopedia [~184 countries] CIA World Factbook [2004 – 268 entities online] Internet Must be recognizable Beware of bias, limitations, and lack of comparability

SECONDARY DATA SOURCES International organizations
IMF, World Bank, WTO, UN Statistics Division See UN Agencies World Bank Group International Monetary Fund [IMF] World Intellectual Property Organization [WIPO] and more, see or search for “WIPO home”.

SECONDARY DATA SOURCES Governments Trade [business] associations
Research firms standard reports Periodicals / books Numerous databases Investment groups University centers

U.S. SOURCES OF GOVERNMENT ASSISTANCE
U.S. Department of Commerce GLOBUS (Global Business Opportunities) offers daily trade leads from the Trade Opportunities Program (TOPS), as well as the Department of Agriculture. GLOBUS also offers daily procurement activity from the Defense Logistics Agency, the United Nations, and the Commerce Business Daily leads. You can also explore USA Trade® Online and EuroTrade Online for additional detailed information.

U.S. SOURCES OF GOVERNMENT ASSISTANCE
Export-Import Bank [EXIMBANK] Foreign Agricultural Service [FAS] Agency for International Development [USAID] Overseas Private Investment Corporation [OPIC] SBA International Trade Center [ITC] DOS Trade & Development Agency Department of Transportation Department of the Treasury U. S. Trade Representative Many, many more

EXPORT STATISTICS WEBSITES
GOVERNMENT Export. Gov market research now includes the Information Center data MARKET RESEARCH FIRMS and SOURCES Frost & Sullivan, Nielson, American Marketing Association list of market research firms CONSULTING FIRMS McKinsey & Company A. T. Kearny

INTERNATIONAL SOURCES OF ASSISTANCE
The World Bank The World Trade Organization Regional trade organizations The United Nations OECD IMF Various international organizations and associations Other governments Many, many more

SECONDARY DATA ISSUES USING DATA FROM EXISTING SOURCES
Data was not gathered for the specific project MINIMAL COST AND EFFORT POSSIBLE PROBLEMS accuracy / reliability availability timeliness comparability of data / degree of fit

PRIMARY RESEARCH Used when good secondary data is not available
Provides accurate data for answers to a given research problem Potential problems Difficulty in obtaining the data Cost Time to gather the data

DATA AND ITS USE QUALITATIVE DATA QUANTITATIVE DATA Symbolic data
Only subjective data Understand behavior Evaluate reactions Describe small groups of subjects or individuals in depth Exploratory role [generate ideas and hypotheses] Depth and richness of information QUANTITATIVE DATA Numeric data Objective data Measure a market Describe groups of consumers [structured by parameters] Extrapolate from a sample to the general population [market or market segment] Representative data

INTERNATIONAL MARKETING RESEARCH ISSUES
Research design may be much more complex Data collection costs may be much more The challenge of coordinating research across multiple markets/countries and languages can be very large. Understanding the results requires the appropriate paradigm adjustments.

How do I compare markets to recognize unique characteristics? Different techniques may be required to study small or different markets. There is a lack of data consistency for a given term. For instance, in the EU, there is not common definition for any of the following terms. Educational level, marital status, and social class among others

Developing country data and using unfamiliar resources may be questionable – at best! Test for the compatibility and the comparability of data. Consumers may be hard to reach.

Markets have different definitions Regional, national, international Data must have the same meaning & the same level of Validity Does it measure what it intends to measure? Integrity Is it accurate? Reliability How much error exists?

CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online Course SECTION 6B MARKETING BARRIERS ALAN L. WHITEBREAD

POLITICAL LEGAL ENVIRONMENT
Governments have needs because of Political reasons Financial reasons Special interest reasons Different legal systems operate differently and may not use the rule of law

MARKETING BARRIERS Impediments to the unrestricted free market flow of goods and services. Rationale for marketing barriers Protect infant industries Reduce unemployment Equalize costs and prices to their nation’s level – How? Reduce balance of payments – How? Enhance national security

TARIFFS Taxes levied by a government on an import [rarely an export] of an item to Protect domestic industries by Providing a price support Assuring profits so they can be used for reinvestment and growth Building scale and becoming more competitive Increase employment

TARIFFS Protective Tariffs Revenue Tariffs Increase domestic prices
Reduce consumption Tend to have the highest rates Revenue Tariffs Generate income for governments Usually on high-volume products Tend to have the lowest rates

TARIFF TYPES Single-Stage Value Added Cascade Excise
Collected at one stage in the value chain Retail sales tax Value Added Multistage, non-cumulative consumption tax on the value added at each stage of a value chain Cascade Cumulative and collected only once VAT [EU] Excise One time charge levied on specific products Tires, alcohol

TARIFF DURATION AND TYPES
Effective until changed by the government Specific duties – tied to weight or quantity Ad valorem duties – tied to product value Combined duties – specific and ad valorem Tariff surcharge Temporary Countervailing duty [see anti-dumping] Long term Up to 5 years in the U.S.

HTS AND TARIFF ENGINEERING
Tariff engineering is the deliberate changing of a product to reduce the amount of tariffs due coming into a country. A couple of examples will show what can be done. A nylon jacket typically has a duty of 32%. By adding a water-resistant coating the duty rate drops to 7%. Hypothetically, product A has an import duty of 40%. Product A has three components which have a duty of 6% each. So as long as you can assemble and repackage for less than the 34% difference, shipping components saves money.

IMPORT CONTROL REGULATIONS
Voluntary export restraints [VER’s] Exporting countries limit shipments Japanese limit auto imports into US in 1980’s See also quotas and Orderly Market Agreements [OMA] License or permit controls A special license or permit is required for every shipment Items like alcohol, pharmaceuticals, explosives, cosmetics

Inspection To classify products, verify document accuracy, check license requirements, check health and safety requirements, Ingredients, diseases, design flaws, ... Price controls Regulation of an industry or item Minimum price Fixed price

Rules of origin NAFTA Anti-dumping WTO plus country laws In the U.S. it is a counterveiling duty Use of Fair Trade Laws Embargo Special documentation / license / approval[s] Special fees Supplemental, administrative Quota Units and/or monetary amount

IMPORT CONTROL REGULATIONS: QUOTAS
Export Quotas Usually at beginning of a value chain Encourage value-added activities before export Import Quotas Absolute; impose specific limits on the quantity within a time period Japan: leather shoes

IMPORT CONTROL REGULATIONS: QUOTAS
Tariff Step-in tariff goes into effect once a specific quantity has been reached Tariff-rate quota [TRQ = tariff + quota] Voluntary Quantity limits by exporters to specific country, also called Voluntary Export Restraints [VER] or Orderly Market Agreements [OMA]

Domestic content regulations Australia: cigarettes must have at least 57% domestic leaf content State Trading Enterprises [STE’s] China, Japan, Korea, … Environmental Germany Green Dot Sanitary and phytosanitary barriers Guiding Principle: SAFETY

OMNIBUS TRADE AND COMPETITORS ACT OF 1988
Allows the President to negotiate trade agreements Accepts the HS code system Permits the U.S. Trade Representative to respond to unfair international trade practices Permits antidumping and counterveiling duties Protects intellectual property [IP] …

CONTRABAND (U.S.) Weapons Tobacco products and associated items
Consumables Foods, beverages, or medicines Alcoholic beverages Narcotics and drug paraphanalia Selective magazines All pornographic photos or materials

EXPORT CONTROLS US October, 2002 EMBARGO
Cuba, Iran, Iraq, Libya, North Korea, Sudan, Syria Embargoes and other special controls 27 nations with restrictions paced by US DOC, DOS, or DOT Nonproliferation, Arms Control, and International Security [NAI] Oversight List - 54 nations where you must watch subcontractors DOE Sensitive countries list 25 nations with proliferation / terrorist concerns TYPE OF PRODUCT US – Encryption technology

EXCHANGE CONTROLS: CURRENCY
Exchange rate management World Bank [IMF], regional, or central bank interference Amount of exchange with another country or the amount that can leave the country within a certain time period Conversion of the portion of country income to local / foreign currency Currency flows Devaluation

GOVERNMENT CONTROLS: EXCHANGE
Taxes and Surcharges India: Imports and protectionism Indonesia: 10% VAT + 35% luxury tax + x% sales tax Restricted foreign investment Ghana foreign investment is not allowed in 1-petty trading, 2-taxis, 3-lotteries, or 4-beauty salons and barber shops India foreigners cannot own supermarkets

GOVERNMENT CONTROLS: EXCHANGE
Local content and local laws Japan: restricts the size [of a type of retail outlet] and/or type of foreign operations. Restricted sales Brazil: you must have a manufacturing / assembly facility operating in the country to be eligible to sell that product in Brazil.

GOVERNMENT CONTROLS: MISCELLANEOUS
Guidance Government Procurement & State Trading Subsidies: Concessionary financing Lower than market interest rates Cash subsidies Price cuts or price supports Japan: for R&D expenditures

GOVERNMENT CONTROLS: MISCELLANEOUS
Favorable foreign exchange conversion rate Rebates of various taxes VAT rebates for transshipment VAT rebate for company purchases in the country in which the firm operates

NON-TARIFF TRADE BARRIERS: TRADE RESTRICTIONS
Quotas Commodity management Licensing procedures and requirements Import license [GATT] Local content [country] or local area content [trade area] requirements Price controls Embargoes

NON-TARIFF TRADE BARRIERS: ADMINISTRATION & CUSTOMS
Valuation Anti-dumping practice Tariff classification / rulings Argentina: no performance sports footwear imports Korea: oranges ≥ 2” in diameter only Documentation Certificates / certifications Fees

NON-TARIFF TRADE BARRIERS: STANDARDS & TESTING
Additional standards Manufacturing: ISO, CB Scheme, … Quality: AQL, Six Sigma, … Safety: CE Mark, CB Scheme, … Alternative testing methods Governmental acceptance of standards and testing methods Packaging, labeling, and marking requirements and standards

NON-TARIFF TRADE BARRIERS: GOVERNMENT
Government procurement Export subsidies Countervailing duty practice Assistance for domestic entities Insurance Panama, Nigeria – shipment must be insured by a national insurance company Carrier China – must use their flagged vessels for ocean transport

NON-TARIFF TRADE BARRIERS: IMPORT CHARGES AND FEES
Advance deposits Administrative fees Additional duties Phantom customs charges Import credit discrimination Variable duty and fee application Border taxes

NON-TARIFF TRADE BARRIERS: MISCELLANEOUS
Voluntary export restraints Orderly marketing agreements Trade area issues Prohibited / restricted imports EU: Genetically modified organisms [GMOs] Safe Harbor : US – EU on privacy Other restrictions Singapore: small containers only

NON-TARIFF TRADE BARRIERS: BUSINESS PRACTICES
Cartels and business associations Switzerland allows them Not illegal per se in Singapore Korea: use of radio & TV for advertising No Class A dairy products into the U.S. Corruption

CUSTOMS / ENTRY PROCEDURES
Product Classification Tied to rates and are often very arbitrary Product Valuation Usually based on transaction value Documentation Varies by country, often includes different documents and differing quantities of: Certificate of Origin a signed statement as to the origin of the export item Bill of Lading Packing List Shipper's Export Declaration [SED] Insurance Certificate [may be country specific] Import License [country specific]

CORRUPTION includes, but is not limited to,
Extortion Contract and other favors Skimming Fraud and/or misrepresentation Embezzlement Smuggling Money laundering Bribery [payoffs, kickbacks]

CORRUPTION [See Bribery – Transparency International Org.]
Russian, Chinese, Taiwanese and S. Korean companies widely seen using bribes in developing countries High propensity to bribe overseas also seen for companies from Italy, Hong Kong, Malaysia, United States, Japan, France and Spain Construction and arms industries top sectors of heaviest bribery Berlin, 14 May 2002

CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online Course SECTION 7A EVALUATING ENVIRONMENTS: RISK AND COMPETITIVE ANALYSIS ALAN L. WHITEBREAD

EVALUTING RISK COUNTRY RISK POLITICAL RISK ECONOMIC RISK LEGAL RISK
SOCIAL RISK GOVERNMENT RISK

COUNTRY RISK SOURCES Bank of America World Information Services
Business Environment Risk Intelligence [BERI] S.A. Control Risks Information Services [CRIS] Duke University Economist Intelligence Unit [EIU] Institutional Investor Moody's Investor Services Standard and Poor's Rating Group Political Risk Services Many, many more are available

COUNTRY RISK ITEMS Find a political risk map on the internet and find the highest risk nations. Economic planning failures External conflict Corruption [especially in government] Military or religion in politics Racial or national tensions Quality and strength of the legal system “the rule of law”

POLITICAL RISK ITEMS Civil strife Process deterioration
Contract repudiation [some or all] Currency controls, limits, & restrictions

POLITICAL RISKS CONFISCATION:
A government taking property without compensation. EXPROPRIATION: Government confiscation with inadequate compensation. NATIONALIZATION: Partial or complete government takeover of assets. DOMESTICATION: Transfer of ownership from a government to local individuals or organizations. GENERAL INSTABILITY RISK: Uncertainty regarding the likelihood of government actions in the future.

TYPES OF POLITICAL / ECONOMIC SYSTEMS
Centrally Planned and controlled Cuba, North Korea Democratic Socialism Sweden, Australia Radical Interventionism USA

TYPES OF POLITICAL / ECONOMIC SYSTEMS
Light Interventionism Hong Kong, Singapore Laissez-Faire Capitalism USA of the Founding Fathers Anarchy ?

MANAGING / REDUCING POLITICAL RISK
Avoid high-risk situations Avoid unstable country situations Purchase risk insurance Private insurance [CNA, …, many others] OPIC [Overseas Private Investment Corp.]

ASSESSING COUNTRY ECONOMIC RISK
Amount of foreign long-term debt Loans What types of business loans are available? Name some loan assessment measurements.

Some of many types of business loans Business equipment loans Expansion financing Factoring Import-Export financing Floor plan financing & Inventory loans Machinery loans M&A financing Real estate loans [commercial & industrial] Receivables financing Working capital financing

Inflation rate Unemployment rate Nationalized industries and trends Foreign exchange Economic volatility Taxes [as a per cent of GDP] U.S. 31% France 50% Italy 46% Germany 45%

LEGAL AND SOCIAL RISKS Type of legal system and its use
Do they have laws? How well are they enforced [if at all]? Are some people / entities above the law? Products conflict with social norms Women’s western clothing in Saudi Arabia Role and rights of Firms Women

CULTURAL COMPATABILITIES
What is the degree of fit between our culture and theirs? What do we have to do to succeed? Major potential areas of conflict Social classes to caste systems Politeness Speed of doing things ?

TYPES OF MARKET ENTRY BARRIERS
Competitive Examples? Duties and taxes Non-tariff trade barriers

TYPES OF GOVERNMENT RISK
Regulations, registrations, approvals Examples? Level of bureaucracy Taxes Support and programs

MINIMIZE INTERNATIONAL RISK
Political Be involved at many levels Financial Borrow locally especially if it is a weak currency Buy investment insurance [public or private] Product and program Understand product liability Become culturally astute Intellectual property Protect all knowledge

CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online Course SECTION 7B EVALUATING ENVIRONMENTS ALAN L. WHITEBREAD

COUNTRY SELECTION: A MULTI-STAGE PROCESS
Fail “must have” criteria ~270 country equivalents Fail “must have” or “key selection” criteria Score >X in Ex. 6.1 Score >X in Ex. 6.1 Fail “must have”, or “key selection”, or “detailed” criteria Fluent employees are readily available Some detailed criteria Prospects Customers

EVALUATING / SELECTING MARKETS
Evaluation is based on a number of criteria: market-related characteristics cost-related aspects the regulatory framework tariffs, duties & non-tariff trade barriers The entry decision may vary by country item weights and components

ISSUES AFFECTING THE EVALUATION / SELECTION OF MARKETS
Strategy and objectives Access to target market[s] Country infrastructure Foreign exchange Cost of entry and on-going operation Opportunity costs

DEVELOPING CRITERIA SELECT AND DEFINE CRITERIA Market Potential
Size; growth rate; and … ? Market Access and Barriers Assessing Product Needs and Wants Appraising Quality Level of Competition Product / Service Requirements and Fit Logistic / Supply Chain Issues

PRODUCT – MARKET PROFILE
Who purchases / uses the product? Why that person? What are they paying for the current solution? By product configuration Any packaging shortfalls or opportunities? Where is or should the product purchased? How strong are the current channels? Are they the right ones? What obvious benefits do we offer? There must be an overwhelming reason to switch.

VISITING THE POTENTIAL MARKET
ASSESSMENT Confirm or contradict assumptions about the market. Gather additional primary data from Commercial sources Governmental sources Private market research Secondary market research Develop a marketing plan in co-operation with the local channels of distribution

SELECTING TARGET MARKETS
DEFINITION 2. MARKET SEGMENTATION 5. MARKET POSITIONING 4. TARGET MARKET SELECTION 3. MARKET ATTRACTIVENESS

MARKET SEGMENTATION - A SIX-STEP PROCESS -
1-Identify the bases for selection [Why are you splitting it this way?] 2-Develop detailed market segment profiles [Clearly identify each segment.] MARKET TARGETING 3-Select and develop measures of attractiveness 4-Select target markets or market segments MARKET POSITIONING 5-Develop a market position for every market segment 6-Develop the marketing mix for every market segment

B2C MARKET SEGMENTATION - SELECTING TARGET MARKET SEGMENTS -
KOTLER’S FIVE TESTS MEASURABLE Can I quantify the size of the market segment? ACCESSIBLE Can I get to the segment with my channels of distribution? SUBSTANTIAL Is it large enough to be worthwhile? DIFFERENTIABLE Can our products be clearly differentiated? ACTIONABLE Does my company have the necessary desire?

MARKET SEGMENTATION Multinational market views Consumers segment by:
Geography Demographics Psychographics Behavior Benefits Market segments may exhibit similar buying behavior despite differences in cultural backgrounds.

BUSINESS SEGMENTATION VARIABLES
Organizational Characteristics -Industry -Size -Channel -Operating characteristics Buying Approach -Centralization -Functional involvement -Partnering Product[s] or Process[es] or Technology[ies] -Level of technology -Configuration -Design Application[s] of Products / Services -How they are used? -What are they used for?

BUSINESS MARKET SEGMENTATION

B2B TARGET MARKET SEGMENT CRITERIA
Measurable The degree to which you can measure buyer characteristics Accessible The ability to focus on target market segments Substantial The degree to which target market segments are large enough and potentially profitable enough to pursue

B2B TARGET MARKET SEGMENT CRITERIA
Compatible -The extent to which marketing and business strengths compare to current and expected competitive and technology states Responsive -The extent to which target market segments respond to elements of the marketing mix

ATTITUDES BSB Global Scan - 18 countries The researchers studied
Consumer attitudes and values Media viewership / readership Buying patterns Product use Five global psychographic segments represent 95% of the adult populations in the countries surveyed.

TARGETING Standardized Multinational Marketing
Same mix for a broad base of buyers “Youthful fun” Coke Concentrated Multinational Marketing Choose a single segment of the global marketing Very narrow market definition Restaurant dishwashing machines Chanel

TARGETING Differentiated Multinational Marketing
Two or more segments with different marketing mixes Use different brands Use different marketing programs Look at SWATCH and/or Calvin Klein

LEVELS OF MARKET SEGMENTATION
MASS MARKETING Same product to all segments Coca Cola Early Ford SEGMENT MARKETING Different products to one or more segments Proctor & Gamble Current auto manufacturers NICHE MARKETING Different products to different [sub-]segments SUV’s standard to family to luxury MICROMARKETING Specialized products for individuals and locations LOCAL MARKETING [Brands, promotions] Local chain grocery stores INDIVIDUAL MARKETING [1:1 Marketing] Amazon

MARKET SEGMENTATION: FILLING THE GAPS CHANNELS OF DISTRIBUTION
1 3 TECHNOLOGIES PRODUCTS SERVICES APPLICATIONS 2 2 MARKETS / SEGMENTS The volume of the gap is an indicator of its attractiveness.

POSITIONING Positioning Standardized Position
The perception of your product in the mind of the customer. Expectations of performance and value How do I select positioning dimensions? Standardized Position Can you create a standard image? Do you want to create a standard image? High-tech or high-touch?

SOME AREAS OF DIFFERENTIATION
Form Features Performance Quality Conformance Durability Reliability Repairability Style Design

POSITIONING DIMENSION CANDIDATES AND PERCEPTUAL MAPPING
Quality Application[s] Occasion[s] Lifestyle / image Attributes Competition Price Selection of the metric and its scale of measurement [preferably subjective] is a very difficult process. Select from the items on the left or possibly use your two best differentiators for scale elements.

POSITIONING: PERCEPTUAL MAPPING
This portrays the relative position of our product [U] to our competitors [C]. We are not in a good position [U] since we are so close to many competitors. We need to find a way to move to a new position [U1] much further from any competitor. Fashion Coverage U1 C U More Copy More Artwork C C C A C C B Club Coverage

POSITIONING STRATEGIES
Against Competition Reposition a Competitor U C C C You reposition a competitor to a new position so that you can occupy their old position. This is both difficult and risky. We are positioned very close to a competitor so there is little perceived difference in the products. Consequently, this is little or no price differential.

Find a Position Create a Position Un Un C C C C C C C C We introduce a new product [Un] with very meaningful differences from all competitive offerings. There should be a more positive price differential [than with find a position] and / or market share gain. We introduce a new product [Un] with some meaningful differences from all competitive offerings. There may be some positive price differential and / or market share gain.

Broaden the Base C U C C C We introduce a new product with some a little difference from existing competitive offerings. It is difficult to get any positive price differential in the marketplace.

BRAND NAME SELECTION There are many objectives for creating a successful brand name. It should be Distinctive; Easy to pronounce, recognize, and remember; Lack poor foreign language meanings; Positive; Suggesting product benefits; Suggesting product quality; Timeless; and/or Versatile. Strive to achieve at least three of these attributes. Look around, it is very difficult to find a brand name that meets four or more of these brand name objectives.

BRAND ISSUES Consistency Perceived Quality and Value Attributes Easy Identification Advantages of Brand Names Of Brand Equity Defense Against Competition Brand Loyalty Credibility Awareness BUILD SUSTAINABLE COMPETITIVE ADVANTAGE WITH EVERY THING YOU DO WITH YOUR BRAND!

A COMPETITIVE REPORT A comprehensive review of every major competitor.
At a minimum, it usually contains all of the following items. Company profile and management structure Detailed financials including subsidiaries Market and industry research key items Significant events New product announcements Price change dates relative to competition Trade articles of note

BATTLEFIELD MAP TYPE OF PRODUCT MARKET SEGMENT 1 MARKET SEGMENT 2
PRODUCT A Brand A PRODUCT B Brand B PRODUCT C Brand C PRODUCT D Brand D A Battlefield Map helps everyone in the organization understand who they are competing against in every category. This knowledge helps sales people focus on what they should sell and how to sell in that situation.

CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online Course SECTION 8A INTERNATIONAL INTELLECTUAL PROPERTY ALAN L. WHITEBREAD

WORLD TRADE ORGANIZATION (WTO) http://www. wto
ORIGINALLY GATT [1948 – for tariffs] WTO IS CURRENTLY INVOLVED IN INTELLECTUAL PROPERTY DUMPING SUBSIDIES [three categories from allowable to unfair] like JAPAN [100% R&D reimbursement] SAFEGUARDS INDUSTRY PROTECTION [also protectionism]

WORLD TRADE ORGANIZATION (WTO) http://www. wto
INFRASTRUCTURE: Member requirements CHINA: ACCOUNTING 2007 – Selected the International Financial Reporting Standards [IFRS] Currently there are multiple sets of books [1] exaggerates for superiors [2] underreports to save taxes [3] fairly accurate PENSIONS DISPUTE RESOLUTION See for a map of risk assessment.

INTELLECTUAL PROPERTY & THE MARKETING MIX
PRODUCT DECISIONS May be dependent upon patents for Designs Production processes, … The brand is often more important than the product. PROMOTION DECISIONS Slogans, songs, or visual communications that become part of the product image need to be protected.

INTELLECTUAL PROPERTY
DISTRIBUTION DECISIONS Ownership, use, and rights Who is allowed to do what? PRICING DECISIONS Driven by competition and the market IP protection may reduce competition for a limited time. Price can be used as a weapon to gain share or open up new market segments. Be careful, this can be very dangerous.

ELEMENTS OF INTELLECTUAL PROPERTY
COPYRIGHT TRADEMARK SERVICE MARK PATENT TRADE SECRET KNOWLEDGE MANAGEMENT

COPYRIGHT a guarantee of control of an original work for the original way the idea is expressed any type of artistic, dramatic, digital, literary or musical work

ELEMENTS OF INTELLECTUAL PROPERTY: WIPO http://www. wipo
TRADEMARK a guarantee of control of a work of some item used to uniquely identify the product [or service in some countries] it could be a word, logo, package design, slogan, or other identifying mark

DOMAIN NAMES Internet addresses [domain names] are bought and sold – sometimes for large amounts of money. If a domain name infringes on a registered trademark, the domain name will be suspended immediately if challenged by the trademark owner.

SERVICE MARK some item used to uniquely identify a service [available only in some countries] it could be a word, logo, package design, slogan, or other identifying mark

There are different filing methods and requirements in most countries.
TRADEMARKS & SERVICE MARKS ARE AVAILABLE IN APPROXIMATELY 200 of ABOUT 270 POLITICAL ENTITIES There are different filing methods and requirements in most countries. You have no more than six months to claim copyright protection. The safe route is “first use” Next is “intent to use” Use the U.S. CASSIS System for searching marks See the USPTO website for detailed information. The level of protection by law and in practice varies by country.

A Service Mark [SM] is not permitted in some countries.
TRADEMARKS & SERVICE MARKS AVAILABLE IN APPROXIMATELY 200 of ABOUT 250 COUNTRIES A Service Mark [SM] is not permitted in some countries. Using a registered trade mark symbol [®] may have serious implications in a few countries. The mark can often be invalidated through 3 to 5 years of non-use. The EUROPEAN COMMUNITY TRADE MARK ACT [CTM] for 15 nations has one filing.

TRADEMARK PROTECTION EXHAUSTION
or “first sale” determines from when the trademark owner may or may not have rights -This varies by country UNIVERSALITY [or trade identity] states a trademark is not only an identification of the source of a product but remains as a part of the product. TERRITORIALITY states a trademark holder has the right to control the distribution of the trademarked product.

PATENT A guarantee of a set of rights to control the use of an invention Protects the original idea and the way it is implemented [in some countries] Generally years protection and can vary by country and type of patent Many different types of patents What types can you name?

PRIMARY REQUIREMENTS FOR A PATENT
The new invention must be: Novel not known or used in the country and not published anywhere Non-obvious cannot be an obvious way to do something, e.g., a simple extension of a principle Useful must have some application, even if not commercially practical. See Wacky Patents and similar sites for many examples.

PATENT COOPERATION TREATY [PCT] See http://www. wipo
PATENT COOPERATION TREATY [PCT] See for complete text. PCT is a procedure for filing patent applications internationally. One filing results in a single search which is accompanied by a written opinion. You can also get a preliminary examination. A full examination required by national law must to done to receive a patent in each application country. No “international patent” exists. Find a map of PCT countries on the web. Find a list of PCT member nations on the web.

UTILITY PATENT Covers processes, machines, manufacture or composition of matter, plus new and useful improvements DESIGN PATENT Covers the appearance or ornamental design of an article

NEW HORIZONS [the U.S. is leading the way] Software Sounds Examples? Colors Smell France, L’Oreal granted in 2006 – the first one is the world for a fragrance.

PATENT VARIETY AROUND THE WORLD
EXAMINATION All patent applications are examined prior to award, OR some patent applications are examined prior to award. If there is no examination for novelty, the applicant may be able to request the patent to office undertake such a search. OPPOSITION An opposition procedure for all patent applications, OR no opposition procedure. Pre-grant adversarial procedures can be initiated by patent office officials to resolve disputes, OR no opposition procedure; Patent applications are published prior to award, OR there may be an opposition procure for some patent applications. RESTRICTIONS Food and pharmaceutical applications only. Food applications only. Military applications only. Time measurement and textile patents only.

TRADE SECRETS The Trade Secret Office, Inc. in Naperville, Il estimates that trade secret information worth $40,000,000,000 per year is stolen from U.S. companies. Trade secret information is protected by the Uniform Trade Secrets Act of 1979, and the Economic Espionage Act of 1996.

TRADE SECRET GUIDELINES
COMMON SOURCES OF DISCLOSURE: Inadvertent 3rd-party disclosure [especially somewhere in the supply chain] A disgruntled or ex-employee Corporate espionage TRADE SECRETS Process[es] [recipes] Controls [Escorts, documents, NDA’s, …] Documentation Security Employee knowledge and awareness of the process Stiff penalties

KNOWLEDGE MANAGEMENT A newly emerging business field of all aspects of knowledge within a firm. Information Combined with experience Context of use Interpretation And its place in the context of the firm

KNOWLEDGE MANAGEMENT Intellectual property Knowledge within the firm
Processes Systems Methods Market knowledge Customer / prospect lists Databases

CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online Course SECTION 8B QUALITY SYSTEMS, STARNDARDS, AND SPECIFICATIONS ALAN L. WHITEBREAD

QUALITY SYSTEMS Although the ISO-9000 series is often referred to as a quality system, it is really a measure of consistency. In particular, it says if you produce 950 good and 50 bad parts in a day, you will most likely produce 950 good and 50 bad parts on any day of manufacture. A quality system would generally go beyond this and tell you about the quality level of the parts produced that day.

QUALITY SYSTEMS ISO-9000 Series for Manufacturers ISO-9001 ISO-9002
This is the roadmap for all standards included in the series though ISO-9004. ISO-9001 The most comprehensive set of standards including design, development, installation, production, and servicing. ISO-9002 A smaller set of standards including installation, production, and servicing. ISO-9003 Standards for quality assurance for firms involved in the final testing of products [in place of their customers doing for themselves]. ISO-9004 Standards for executive management to develop and implement an effective quality management system.

QUALITY APPROACHES & SYSTEMS
ISO Series Environmental management standards family QS9000 (ISO / TS-16949) Automotive ISO Information Security SIX SIGMA Motorola, GE, … Malcom Baldridge Cadillac

ISO http://www.iso.org/iso/en/ISOOnline.frontpage
146 countries working in partnership with International standards organizations Government entities and standards Industry associations including national standards organizations Business and consumer representatives Find the list of ISO members.

SIX SIGMA Applies to operations, technical areas, customer services, marketing, finance, services, engineering, … It is a measurement of total quality allowing a company to quantify its effectiveness in eliminating defects [improved quality] and variations [consistency of a quality level] from their processes. A Six Sigma company will operate at a maximum 3.4 defects per million opportunities. Another way of saying this is % defect free. Motorola, General Electric, and TI are some of the leaders in Six Sigma implementation

STANDARDS International US Metric not imperial
Numerous electrical systems US Commercial Government Numerous industry standards groups

COMMERCIAL STANDARDS ASTM UL ANSI
UL ANSI many other industry and other level standards

US GOVERNMENT STANDARDS
Federal Standards FIPS – Federal Information Processing Standards MilSpec – Federal military procurement DOD – Department of Defense NIST – National Institute of Standards & Testing Review these websites in some depth to see the breadth of U.S. government standards.

NATIONAL INSTITUTE OF STANDARDS [NIST] http://www. nist
Measurement standards Provide measurement traceability, at necessary levels of accuracy, to national standards Documentary standards Specify characteristics of products, processes, services, or systems. See standards information, (which includes Export Alert! an notification service), standards coordination and participation in standards activities, and training Conformity assessment/accreditation Procedures for demonstrating compliance with standards and regulations, including NIST guides to EU directives Information technology standards

PACKAGES AND TESTING Fiberboard Boxes Plastic & Metal Drums and Pails
Plastic & Glass Bottles and Jars Paper, Plastic, and Fabric Bags Infectious Substance Shippers Radioactive Materials Shippers Pallet & Bulk Load Systems Metal, Plastic, and Fiberboard Intermediate Bulk Containers

PRODUCT RELIABILITY TESTING
How is the product likely to be used? What can happen to the product? How should we protect the product … In shipment? In use?

PRODUCT SPECIFICATIONS
Model number Description Features and benefits Pictures and/or drawings Specifications Serial number & location Lot or batch number and location Pick any technical product you use and find its technical specifications on the web.

SHOULD I STANDARDIZE PRODUCTS?
ADVANTAGES DISADVANTAGES Cost reduction through economies of scale Product does not match market segment need closely enough More consistent quality Must meet all the packaging requirements with a limited number of packages Improved operations due to less variety Explosion in number of products to be made and inventoried Improved inventory control Standard products must compete against strong local competitors

GLOBAL BUSINESS PROFESSIONAL Online/Distance Learning Course SECTION 9A FOREIGN MARKET ENTRY ALTERNATIVES ALAN L. WHITEBREAD

POTENTIAL TRADE BENEFITS FOR THE FIRM
Incremental profitability Acquire / increase economies of scale Take advantage of differential growth rates in [country] markets Take advantage of product / market differences Extend product life cycles Remember, the more technologically advanced products are generally introduced over time from the most to least advanced economies.

MARKET ENTRY FACTORS -CHALLENGES-
GOVERNMENT and BORDER STABILITY FOREIGN EXCHANGE INTELLECTUAL PROPERTY RIGHTS RESTRICTIONS / QUOTAS SHIPPING RISK AND PIRACY MANAGEMENT COMMITMENT

SELECTING FOREIGN MARKETS
DETERMINE MARKET ATTRACTIVENESS ECONOMIC GEOGRAPHY DRIVING FACTORS MARKET RESEARCH EVALUATE AND MANAGE RISKS EVALUATE THE COMPETITIVE POSITION LEONTIF INPUT-OUTPUT DATA COMPETITOR INFORMATION HOW IS INFORMATION TREATED?

MARKET EXPANSION STRATEGIES
NARROW FOCUS concentrated markets / countries COUNTRY FOCUS country-by-country COUNTRY DIVERSIFICATION concentrated markets in multiple countries GLOBAL DIVERSIFICATION diverse markets in multiple countries

FOREIGN MARKET ENTRY ALTERNATIVES
DIRECT EXPORTING FRANCHISING INDIRECT INVESTMENT CONTRACTUAL LICENSING COMMITMENT, RISK, CONTROL, PROFIT POTENTIAL COPYRIGHT A. WHITEBREAD,

ENTERING FOREIGN MARKETS
INDIRECT EXPORTING RISKS LIABILITY, CONTROL VERY ERRATIC DEMAND FIT WITH OPERATIONS REWARDS VERY LITTLE SALES EFFORT INCREMENTAL VOLUME AND PROFIT Manufacturer Agents / Distributors [Not in destination country - Usually in home country] COPYRIGHT A. WHITEBREAD,

DIRECT EXPORTING RISK CONTROL OF INDEPENDENT RESELLERS REWARD DIRECT CONTACT WITH LOCAL MARKET Manufacturer Sales Subsidiary Resellers [Usually not in home country] Individual Accounts OEM’s COPYRIGHT A. WHITEBREAD,

LICENSING & FRANCHISING RISK CONTROL OF RESELLERS REWARDS MINIMIZE ENTRY RISK PROFIT STREAM Manufacturer Licensees or Franchisees Resellers Individual Accounts COPYRIGHT A. WHITEBREAD,

ENTERING FOREIGN MARKETS [ACQUISITION, GREENFIELD, BROWNFIELD]
DIRECT INVESTMENT [ACQUISITION, GREENFIELD, BROWNFIELD] RISKS START-UP OPPORTUNITY COST; INVESTMENT; WC COUNTRY STABILITY; CURRENCY EXCHANGE REWARDS DIRECT MARKET CONTACT PROFIT STREAM Manufacturer Subsidiary (Manufacturing) Resellers Individual Accounts OEMs COPYRIGHT A. WHITEBREAD,

CONTRACTUAL [JOINT VENTURE, STRATEGIC ALLIANCE, CONTRACT MANUFACTURING] RISKS AUDIT & CONTROL START-UP INVESTMENT; WC REWARDS MINIMIZE ENTRY RISK PROFIT STREAM Resellers Contract Manufacturing Manufacturer Individual Accounts COPYRIGHT A. WHITEBREAD,

LIKELY ENTRY ALTERNATIVES
SITUATION OPTION[S] A small firm wants to export only. Indirect or direct exporting A specialized machinery manufacturer wants to increase their presence in key country markets. Add and develop key resellers A firm is having difficulty supplying enough goods to a regional market. Contract manufacturing, DFI, or JV A firm wants to aggressively increase its sales in a region DFI or JV

ENTITY OPTIONS Sole Proprietorship Corporation Partnership
C or S in the U.S. Partnership General Limited Liability Partnership [LLP] Limited Liability Company [LLC]

INVESTMENT INCENTIVES
LOCAL AND STATE Driven by job creation Frequently number of jobs is more important than quality of jobs or total payroll Major tax relief Free infrastructure improvements Significant cash reimbursement Relocation Facilities Capital / Equipment Significant training allocation

INVESTMENT INCENTIVES
NATIONAL Duty exemptions [materials and equipment] Expediting paperwork & eliminating fees Additional tax exemptions Potential reduced tax rates Ireland 10% for certain manufacturers vs. 38% for the other manufacturers Potential duty free imports Potential full or partial VAT exemption

FOREIGN /FREE TRADE ZONE [FTZ]
FTZs are secure areas are usually located in or near a customs or border patrol area. An FTZ is a port of entry but it is legally considered to be outside the customs territory for the purpose of product entry procedures and tariff laws. FTZs are part of a duty deferral program.

FTZ BENEFITS Duties and taxes are deferred until they are transferred to a territory for consumption. There generally is no time limit on merchandise in the FTZ. Materials in the FTZ can be transformed into something else. There are reduced or no duties on damaged goods. Customs clearance and duty drawback delays are virtually eliminated.

FOREIGN / FREE TRADE ZONE [FTZ]
Merchandise can pass through without paying duty until it leaves the FTZ for the country in which the zone is located or, if reexported, no duty is due in the FTZ country. Many forms of FTZs Warehousing Assembly Manufacture

FREE PORT ZONE A port with relaxed jurisdiction with respect to the country of location. Most commonly this means being free of customs or being a special customs zone with favorable customs regulations Country listing at

GLOBAL BUSINESS PROFESSIONAL Online/Distance Learning Course SECTION 9B CONSUMER AND BUSINESS BUYER BEHAVIOR ALAN L. WHITEBREAD

CULTURE AND THE CONSUMER
THREE MAJOR GROUPS Culture – Society influence Subculture – Group life experiences Social Class – Social divisions SOCIAL FACTORS Family, reference group, role, status THESE MAY BE VASTLY DIFFERENT AS YOU GO FROM COUNTRY-TO-COUNTRY OR EVEN WITHIN A COUNTRY..

CULTURE AND INDIVIDUALS
Why study individuals? Individuals have meaningful lives through experiences in the world. Individuals are shaped by their culture. Consumption [buyer behavior] patterns can best be understood in a cultural context.

RELATING CONCEPTS TO MARKETING
An individual is a socio-cultural locus. Individuals interpret motivation. Individuals pay attention to cues. A cultural context provides implicit and explicit messages. Aggressive behavior is O.K. in certain sports [fighting in hockey vs. basketball], but not otherwise

RELATING CONCEPTS TO MARKETING
What is the link with marketing? Products relate to cultural ideas and practices. Value systems are important. MATERIALISM: The importance a consumer attaches to worldly possessions Compare the U.S. to your experience in other countries.

FOUR TYPES OF BUYING DECISIONS
Complex Buying Behavior HIGH INVOLVEMENT [Quality – Service – Facts] Use personal sales LOW INVOLVEMENT [Obvious differences] Use advertising, POP Variety- Seeking Behavior Significant differences between brands Dissonance- Reducing Buying Behavior Habitual Buying Behavior Few differences between brands DURABLE GOODS [Furniture, appliances, long-lasting items…] Use subjective appeals, advertising NON-DURABLE GOODS [Grocery items, frequent purchases, …] Use sales promotion, price

CONSUMER BUYER DECISION PROCESS How is this done from afar?
Consumer defines the need or problem. Consumer searches for a solution. CONSUMER BUYER DECISION PROCESS How is this done from afar? Consumer evaluates reasonable alternatives. G E T O D Consumer makes a purchase decision. F E D BA C K Consumer makes a postpurchase evaluation SATISFIED or DISSATISFIED

UNDERSTANDING CONSUMERS
The market What is / are the consumer’s Ability to pay? Examine GNP and GNI per capita, disposable income per capita Needs? Buying motives? Be especially sensitive in collective societies. Actual buying process? Consumption patterns?

BUSINESS & CONSUMER MARKET DIFFERENCES
PRODUCTS specification and performance PURCHASE VOLUMES PRICING STRATEGY AND TACTICS PROMOTION METHODS DISTRIBUTION CHANNELS CUSTOMER RELATIONS DECISION-MAKING PROCESSES NEGOTIATIONS

B2B MARKETING B2B marketing consists of selling to businesses for the following three applications. Internal consumption for use in their business. Staples for the office. As a component part that will be put with other parts to product a finished product. The box the finished product goes into to be put on the shelf. As a finished product that will be sold to other businesses. An accessory like an additional game controller.

BUSINESS PRODUCTS CLASSIFICATION For an Auto Plant
INSTALLATIONS Factories, support buildings, large machines, large material handling equipment RAW MATERIALS Rolled steel, rubber, plastic resins COMPONENTS Spark plugs, radiators, steering wheels ACCESSORY EQUIPMENT Drill presses, assembly lines, small material handling equipment MRO SUPPLIES Maintenance, Repair, Operation Cleaning supplies, office supplies, toilet tissue, BUSINESS SERVICES Grounds maintenance, cleaning service, office equipment servicing

WHAT IS SCM TODAY? It is the seamless end-to-end management of a complex set of decisions requiring the exchange and flow of information, products, services, and money. -Institute for Supply Management Simply put, SCM involves everything from taking materials out of the ground to the satisfied customer.

FIRMS USING SUPPLY CHAIN MANAGEMENT
The Aromatics (Thailand) Public Co. Ltd. plus every other company, governmental agency, and organization. [ASU video i2 video]

SUPPLY CHAIN MANAGEMENT
Mining companies – Manufacturers – Suppliers – Assemblers – Services Your entity is always the FOCAL FIRM. Resellers of all kinds or final purchasers Final purchasers of resellers MARKETS Consumers: Customers Prospects Suspects SUPPLIER’S SUPPLIERS SUPPLIERS FOCAL FIRM CUSTOMERS CUSTOMER’S CUSTOMERS FOCAL FIRM NEW PRODUCT DEVELOPMENT

SUPPLY CHAINS ARE INTERDEPENDENT
SUPPLIERS’ SUPPLIERS SUPPLIERS FOCAL FIRM MARKET Consumers: Customers Prospects Suspects CUSTOMERS If you change one thing in a supply chain, you know that one or more other things will be affected. So you must make decisions for the good of the entire supply chain, not for a specific area. For instance, the system losses in all other areas may greatly exceed the benefit to the one area. This causes the supply chain to lose efficiency. CUSTOMERS’ CUSTOMERS

THE SUPPLY CHAIN AT WORK: A product flow view – the auto industry
UPSTREAM DOWNSTREAM STEEL COMPANY 3RD TIER UPSTREAM SUPPLIER 2ND TIER FASTENERS DIRECT SUPPLIER 1ST TIER Manage all other tiers. RADIATORS FORD, GM CHRYSLER FOCAL FIRM OEM VEHICLES DEALERS RENTAL AGENCIES CONSUMERS BUSINESSES CONSUMERS FLEETS SPECIAL VEHICLES Raw materials, semi-finished, and component products Finished products and components

CREATING CUSTOMER VALUE: DEMAND PULLS ALL PRODUCT!
B2C B2B Suppliers Manufacturers Warehouses or Distribution Centers Resellers B2B or B2C Consumers INFORMATION, PRODUCTS AND SERVICES, MONEY Planning and forecasting accuracy are critical as any delay in the system has a ripple effect!

BASIC ECONOMICS P R I C E QUANTITY DEMANDED [PER PERIOD] EQUILIBRIUM
INELASTIC DEMAND ELASTIC Small Q LARGE  P Small  P LARGE  Q

BASIC ECONOMICS P R I C E QUANTITY DEMANDED DEMAND FOR A NECESSITY:
SALT SUBSTITUTE: PEANUTS COTTON INDUSTRY OVERSUPPLY PRODUCT SUBSTITUTION ?

BUSINESS DEMAND Inelastic demand Fluctuating demand Derived demand
Joint demand

BUSINESS DEMAND DERIVED DEMAND JOINT DEMAND
Situations were demand for products and services is derived from the demand for their customers’ products and services EXAMPLE: PC’s drive computer chips JOINT DEMAND Situations where two products are used together and demanded together EXAMPLE: Coke + iron ore to make pig iron

BUSINESS CLASSIFICATION
NORTH AMERICAN INDUSTRIAL CLASSFICATION SYSTEM [NAICS] SUPPLY-ORIENTED SYSTEM 20 SECTORS: 1,174 INDUSTRIES [and growing] NAFTA: 5 DIGITS + 6TH FOR COUNTRY CODE COMPATIBLE WITH ISIC Rev. 3 [UN] [SITC] CONTINUALLY UPDATED Services is now the major development project.

THE ECONOMY AND NAICS Manufacturing 31-33 Services 51-89 Public
Administration 92 Wholesale 42 Information 51 Professional Services 54 Agriculture 11 Retail 44-45 Finance 52 Management Companies 55 Mining 21 Real Estate 53 Arts / Enter. 61 Utilities 22 Health 62 Accommodation 72 Construction 23 Other Services 81 Transportation 48-49 Educational 71 Administration Waste Mgt. 56

UNDERSTANDING NAICS CODES http://www.census.gov/epcd/naics02/naicod02.htm
DIGIT NAICS Number First 2 32 ECONOMIC SECTOR 3rd 326 ECONOMIC SUB-SECTOR Plastics and Rubber Products Manufacturing 4th 3261 INDUSTRY GROUP Plastics Product Manufacturing 5th 32612 DETAILED INDUSTRY GROUP Plastics Pipe, Pipe Fitting, and Unlaminated Profile Shape Manufacturing 6th 326122 U.S. INDUSTRY - SPECIALIZED Plastics Pipe and Pipe Fitting Manufacturing

BUSINESS BUYER CLASSIFICATION
PRODUCERS Purchase products for producing other goods and services RESELLERS Purchase finished goods for resale, rental, or leasing for a profit GOVERNMENTS Federal, state, and local governments [all different buyer behaviors] NPOs Purchase finished goods and services for resale, rental, or leasing for a profit

B2B CHANNELS – TYPES OF DISTRIBUTORS [see NAICS codes]
General Line Material handling / Material handling supplies Plastic MRO Electrical HVAC Plumbing Power distribution Medical instruments / Medical supplies Chemical …many more

RELATIONSHIP MARKETING TRUST – BONDING – EMPATHY – RECIPROCITY
CUSTOMER SERVICE QUALITY MARKETING TRUST – BONDING – EMPATHY – RECIPROCITY

GOVERNMENT PURCHASING: The US system is not typical
Public review Open bids Freedom of Information Act [federal] Varying amount of paperwork depending on the total value of the purchase Drive for cost minimization but exclusives are possible Domestic suppliers have a strong advantage

ELEMENTS OF TOTAL COST FOR INTERNATIONAL SOURCING
• Base price • Tooling Common additional international price factors • Changes to packaging • Escalation of prices • Transportation from x • Customs duties • Additional insurance • Payment terms &costs • Document fees • Port storage / handling • Port handling charges • Customs brokers • Taxes [all kinds] • Communications • Possibly travel • Inventory costs

FINDING LEADS How do I find potential buyers? Methods
Explore numerous online sources on your own Search for your industry conferences, organizations, press releases, publications, … U.S. Department of Commerce GLOBUS (Global Business Opportunities) offers daily trade leads from the Trade Opportunities Program (TOPS), as well as the Department of Agriculture. GLOBUS also offers daily procurement activity from the Defense Logistics Agency, the United Nations, and the Commerce Business Daily leads.

GLOBAL BUSINESS PROFESSIONAL Online/Distance Learning Course SECTION 10A CHANNELS OF DISTRIBUTION ALAN L. WHITEBREAD

CHANNEL POWER and DIFFERENTIAL ADVANTAGE
Obtained through differential advantage DIFFERENTIAL ADVANTAGE or SUSTAINABLE COMPETITVE ADVANTAGE CAN BE ANY OF THE FOLLOWING. Physical / experiential Psychological [communication / perception] Purchase environment Total cost including price and terms of sale Post-purchase satisfaction [cognitive dissonance]

WHY ARE CHANNELS IMPORTANT?
One of the least developed areas of business, they present an opportunity to rapidly expand sales and profitability ALTOIDS [Kraft Foods, Altria] went from <$10M to >$100M by changing from a niche to a mass distribution strategy including supermarkets, drug chains, and mass merchandisers. There was no change to the other 3 P’s. Companies have prospered and declined primarily based on their evolving [or not] channel strategies. Stanley [tools] / Office products firms / Dell and Compaq What have you noticed Dell doing differently with its channels in the last few years? The emergence of multi-channel shopping provides firms the opportunity to provide products through multiple channels. You buy toilet paper at a retail store for your home but you purchase it in large quantities for your factory from a paper products distributor.

CHANNELS PRODUCTS & SERVICES APPLICA-TIONS MARKET[S] SEGMENT[S] Channels of distribution tie markets, segments, products, services, and applications together.

INTERNATIONAL DISTRIBUTION
Channel Structures Distribution Patterns Types of Resellers Channel Selection Channel Relationships

CHANNELS PROVIDE UTILITY OF PLACE, TIME, POSSESSION, & INFORMATION
CHANNEL STRUCTURES PRODUCERS AND PROVIDERS CONSUMERS CHANNELS PROVIDE UTILITY OF PLACE, TIME, POSSESSION, & INFORMATION

CHANNEL STRUCTURE What are the types of channel members?
What is the channel intensity for the Firm Market How many channels should be used?

CHANNEL MEMBERS MANUFACTURER Manufacturers, importers, or primary providers are the original source of the product / service.

CHANNEL MEMBERS Manufacturers or importers or primary providers
Large resellers generally servicing smaller resellers DISTRIBUTOR to DEALER for B2B WHOLESALER to RETAILER for B2C Can also be dealer direct, club, mail order / catalog, … DISTRIBUTOR or WHOLESALER

Significant purchasing power for multiple retail brands / stores Department store, mass merchandiser, specialty store, category killer, convenience store, off-price retailer, supermarket, … Potentially club, mail order / catalog, co-op, licensees, … NATIONAL or REGIONAL RETAIL CHAIN

Large resellers generally servicing smaller resellers Generally smaller resellers Smaller retailers, franchisees, VARs, … Rack jobbers Potentially licensees Beware of the DEALER label – it can mean the same as DISTRIBUTOR in some channels. DISTRIBUTOR or WHOLESALER DEALER or RETAILER

Large resellers generally servicing smaller resellers Generally smaller resellers although there are very large retailers Consumers of various types DISTRIBUTOR WHOLESALER DEALER or RETAILER [BUSINESS] CONSUMER

Large resellers generally servicing smaller resellers Generally smaller resellers although there are very large retailers Business consumers of various types generally purchasing for Consumption As a component of a finished product As a final product DISTRIBUTOR WHOLESALER DEALER or RETAILER BUSINESS CONSUMER

DEFINING CHANNEL STRATEGY AND OBJECTIVES
Market share / volume Market coverage [density of distribution] Distribution strategy Channel roles, expectations, and controls Others Presence and continuity Channel alignment, control, length, and leadership Distribution and channel logistics Profitability

CHANNEL STRATEGIES Use the market segments to determine which sets of channels of distribution may be the optimum one. One often finds that channel sets are not optimized. This requires significant discussion with existing channel members. Build a new channel of distribution Risky and expensive Consider an acquisition

INTERNATIONAL CHANNELS
They may be longer and thus require a larger number of intermediaries. Wholesalers, distributors, retailers, and many other types exist. In some countries like Japan, laws prevent you from shortening the channel. They are more complex to manage due to the idiosyncrasies of intermediaries and their environments. They are more difficult to effectively and economically control.

TYPES OF VERTICAL MARKETING SYSTEMS [VMS]
Greater CORPORATE Common Ownership at Different Channel Levels CONTRACTURAL Contractual Agreements Among Channel Members Degree of Direct Control ADMINISTERED Leadership is Assumed by One or a Few Dominant Members; Contracts are not common Lesser

TYPES OF CHANNELS International Vertical Marketing Systems [VMS]
Corporate Subsidiary or JV Contractual Resellers Licensees [Franchisees] Administered No agreement International Vertical Marketing Systems [VMS] Degree of Direct Control More Less International channels of distribution may use any possible combination of the above systems. There is frequently significant region-to-region variation and sometimes major country-to-country differences. Each business must build the best combination for their needs.

DISTRIBUTION STRATEGY: INTENSITY
INTENSIVE Frito-Lay: we need to have potato chips available everywhere. SELECTIVE Panasonic: we need to select technically competent resellers. EXCLUSIVE Jaguar: we need a single strong dealer in every territory.

CHANNEL MAPS: Understanding the channel flow
A channel map provides a picture of the flow of goods and/or services through the various functional channel members. It is a great tool for explaining your system, or system changes and why they are needed. It is especially good for explaining changes or new channels to your sales organizations.

B2B [INDUSTRIAL] CHANNEL MAP [Simple direct distribution]
Manufacturer Manufacturer’s sales branch Manufacturer’s Internet site Manufacturer’s representative B2B CONSUMERS

B2B [INDUSTRIAL] CHANNEL MAP [Simple indirect distribution]
Manufacturer Manufacturer’s sales branch Manufacturer’s Internet site Manufacturer’s representative Many Types of Industrial Distributors [See NAICS] May Resell to Many Types of Industrial Dealers B2B CONSUMERS

CONSUMER CHANNEL MAP [Simple distribution]
Manufacturer Manufacturer’s Internet Site Mass Merchandiser’s Internet Site Wholesaler Retail Store Direct distribution Indirect distribution CONSUMERS

DIRECT DISTRIBUTION Pros Cons Close to customers
Active market development Greater control over strategies More uniform implementation of policies Increased market knowledge Cons Difficult to manage if not familiar with new market Time consuming Expensive Costly to maintain without sufficient volume

INDIRECT DISTRIBUTION
Pros Simple Inexpensive Small start-up costs Intermediaries usually represent several clients Cons Lose marketing control in target market Depend on performance of intermediary Potential reseller conflict of interest Intermediary may have significant bargaining power

THINKING ABOUT CHANNELS OF DISTRIBUTION
To build good channels of distribution one needs to understand the buying choices and preferences of every channel level. For example, what choices do you have for where to purchase a digital camera? Camera specialty store Discount merchandiser Warehouse club Drug store Online Where else?

TYPES OF RESELLERS: WHOLESALING INTERMEDIARIES
Merchant Wholesalers -Take Title to Goods -Independently owned -Distributors / Dealers -Fairly standard arrangements Distributors - Wholesalers Dealers - Retailers Exporter Export Trading Company [possibly state controlled] Representatives -Independently owned -Never take Title to Goods -Help negotiate business arrangements -Be careful of payments ! Agent Broker Export Broker Export Management Company Manufacturer’s Rep. Freelance Sales Person

EXPORT MANAGEMENT COMPANY AND EXPORT TRADING COMPANY
EMC ETC Handles all export operations Yes Yes plus imports – mostly exempt from antitrust [U.S.] Under contract Usually yes Can be from no to a joint venture Handles promotions Communicates / arranges logistics Compensation Usually a commission or fee arrangement As negotiated For details of an ETC, see the Export Trading Company Act of ETCs work much like a Japanese sogoshosha.

WHOLESALER PROBLEMS Problems of fragmentation
If the number of wholesalers is high, transaction costs are high drive consumer prices up. Smaller firms carry smaller lines, less variety, smaller assortment; have limited market coverage and service Dealing with fragmentation Increase company role Increase direct investment into building channels Use master wholesalers to reach smaller ones Use pull strategy [large consumer firms only] Heavy consumer advertising to build demand

RESELLERS ADD VALUE BY PERFORMING FUNCTIONS
FOR THE SUPPLIER -Market coverage -Sales contact -Inventory -Order processing -Information -Customer support FOR THE CUSTOMER -Information -Credit -Customer service -Technical support -Allocating / expediting -How can you be sure your representative is doing this?

CUSTOMER-CHANNEL MEMBER INTERACTION AND THE NATURE OF THE EXCHANGE
TRANSACTIONAL EXCHANGE RELATIONAL EXCHANGE Short-term oriented Past, present, and future considered Sharp-in, sharp-out Reciprocity Self-interest only Relationships No concern for the future Long-term focus One shot deals Win-Win How will this impact [1] the traits of the sales people you hire, [2] requirements for the manufacturer’s sales organization training, and [3] sales compensation?

NEW DISTRIBUTION SYSTEMS
HORIZONTAL MARKETING SYSTEM Two or More Companies at One Channel Level Join Together to Follow a New Opportunity. Nontraditional - Banks in Grocery Stores HYBRED MARKETING SYSTEM A Firm Sets Up Multiple Marketing Channels to Reach One or More Customer Segments. Use three - Retailers, Catalogs, and Sales Force

UNDERSTANDING CHANNELS
Some preliminary information can be gathered on the Internet from large research houses. Retail see Search for other data using “global retail opportunity ranking”. This must be supplemented with additional materials before key entry or expansion decisions are made.

SOURCES OF INTERNATIONAL RESELLER INFORMATION
Competitor’s resellers Consultants Directories [country or industry] Industry Associations [and directories] Trade shows U.S. Department of Commerce International Partner Service Export Marketing Service Other programs

BUSINESS CLASSIFICATION http://www.census.gov/epcd/www/naicstab.htm
NORTH AMERICAN INDUSTRIAL CLASSIFICATION SYSTEM (NAICS) Focuses on new and emerging industries, industries using new technologies, and service industries Provides for comparability with Canada and Mexico Adds U.S. industries to provide more detail NORTH AMERICAN PRODUCT CLASSIFICATION SYSTEM (NAPCS) An initiative of the statistical agencies of Canada, Mexico, and the United States to develop a comprehensive demand-oriented product classification system.

THE ECONOMY AND NAICS Manufacturing 31-33 Services 51-89 Public
Administration 92 Wholesale 42 Information 51 Professional Services 54 Agriculture 11 Retail 44-45 Finance 52 Management Companies 55 Mining 21 Real Estate 53 Arts / Enter. 61 Utilities 22 Health 62 Accommodation 72 Construction 23 Other Services 81 Transportation 48-49 Educational 71 Administration Waste Mgt. 56

UNDERSTANDING NAICS CODES http://www.census.gov/epcd/naics02/naicod02.htm
DIGIT NAICS Number First 2 32 ECONOMIC SECTOR 3rd 326 ECONOMIC SUB-SECTOR Plastics and Rubber Products Manufacturing 4th 3261 INDUSTRY GROUP Plastics Product Manufacturing 5th 32612 DETAILED INDUSTRY GROUP Plastics Pipe, Pipe Fitting, and Unlaminated Profile Shape Manufacturing 6th 326122 U.S. INDUSTRY - SPECIALIZED Plastics Pipe and Pipe Fitting Manufacturing

B2B CHANNELS – TYPES OF DISTRIBUTORS [see NAICS codes]
General Line Material handling / Material handling supplies Plastic MRO Electrical HVAC Plumbing Power distribution Medical instruments / Medical supplies Chemical …many more

LARGE ACCOUNT MANAGEMENT PERSONNEL CHARACTERISTICS
OEM / NATIONAL ACCOUNTS MANAGERS Manage multiple projects Extensive contacts throughout the client firm Politically astute Equally comfortable on the factory floor and in the boardroom Highly respected by their organization Extensive product knowledge Very self-sufficient RFP, RFQ, organizing and managing resources

B2B RESELLER MANAGERS Good product knowledge Sound sales skills through sales training Provider of information and training Well-liked motivator Provide various types of assistance Customer issues Problem resolution Delivery schedules

B2C RESELLER MANAGERS Good knowledge of products, planograms, and retailing Sound sales skills through sales training Provider of information and training Well-liked motivator that is really good with consumers Provide various types of assistance Customer issues Problem resolution Delivery schedules

SELECTING CHANNEL MEMBERS
A key to solid long-term growth is selecting resellers that fit a defined profile. Some key profile items include … Have they successfully sold similar products? How may their competitive lines impact our sales? Can they adequately cover the territory [number of sales people, locations, …]? Will they fit with our corporate culture and philosophy?

SCREENING AND SELECTING CHANNEL MEMBERS: CRITERIA Must fit the customer profile [characteristics] Meet minimum qualifications Use and acceptable sales style Possess product and market segment knowledge Possess industry experience The product[s] will fit with existing product lines They are willing and able to perform all specified channel role[s]

SCREENING AND SELECTING CHANNEL MEMBERS: CRITERIA [continued] Must be a team player Sales strategy: existing and potential fit Make some sales calls with their people to verify sales skills as a trainee / prospective employee Administrative / management fit Management orientation [long vs. short] and chemistry Risk assessment Check references [industry, suppliers]

STRUCTURING CHANNELS WITH TERMS & CONDITIONS OF SALE
ACCOUNT TYPE PAYMENT TERMS DELIVERY TERMS SPECIAL TERMS PROMOTION AND INCENTIVES Regional Distributor Choose from: Net _ days Prompt pay discount … FOB [Ex works] Time Special charges Shipping fees Drop ship Inventory adjustment Minimum order size Co-op advertising Sales promotions Distributor Dealer B2B Consumer Most Favorable Terms Least Favorable Terms

PROACTIVE CHANNEL STRATEGIES
Product differentiation Exclusive features for appeal to target markets Strategic pricing Larger price differentials, more exploitation Intermediary development Give intermediaries less incentive to cheat Marketing information systems Better unit tracking to identify sources of leaks

TYPES OF CHANNEL PROMOTIONS
OFF INVOICE - temporary price reduction BILL-BACK - retailer bills manufacturer at the end of the promo BONUS - extra cash payment for sales FREE GOODS CONSIGNMENT - manufacturer financing of reseller inventory CONTESTS - for reseller and sometimes their sales people COOPERATIVE ADVERTISING ALLOWANCES RESELLER LISTING - reseller listed in manufacturer’s ad[s] INVENTORY ADJUSTMENT

STRATEGY FOR NEW MARKET ENTRY
ENTRY OPTIONS Use established channels [competitive] Build your own channels [risky and expensive] Abandon the market You must provide incentive to channel members to accept a new product / vendor. Direct distribution is often the most effective alternative.

SUMMARY Channel decisions are difficult to manage globally.
A global marketer must tailor the marketing program to different types of channels and / or introduce new retail / merchandising concepts Effective channel management is dependent on control—from the selection process through the implementation of roles, expectations, and controls.

GLOBAL BUSINESS PROFESSIONAL Online/Distance Learning Course SECTION 10B USPPI, CISG, RESELLER AGREEMENTS AND CHECKLISTS ALAN L. WHITEBREAD

U.S. PRINCIPLE PARTY IN INTEREST [USPPI] RESPONSIBILITIES
For products purchased and shipped direct to U.S, resellers are considered domestic sales, even if ultimately destined for export. The U.S. Reseller is responsible as the USPPI when forwarding product to any foreign destination. This applies to shipments to any Domestic location, or Subsidiary [regardless of location], or Foreign trade zone, or Drop shipped to a customer requested location See for details.

UN CONVENTION FOR THE INTERNATIONAL SALE OF GOODS - CISG
Effective January 1, 1988 CISG replaced the United Nations Commission on International Trade Law [UNCITRAL] It Involves places of business in different nations Is based on French Civil Code Is approved by ~62 member nations, ~ 8 organizations

Is not concerned with the Validity of contracts, or Competency of parties, or Rights of third parties.

Does not apply to Sales of consumer goods, or Items with special regulations securities, ships, aircraft, and electricity, or Labor services, or The supply of goods for manufacture IF the buyer supplies a large portion of the finished product content.

CHANNEL CONTRACTS There are many types of channel of distribution contracts including Distributor / Dealer Wholesaler / Retailer Manufacturer’s representative Try not to use “agent” or “agency”. Tying [franchises: full line purchases]

CONTRACT ISSUES The Territory
A detailed description of the “territory” [geographic, product line, channel, account(s) or other] to which the agreement applies. This should include any logical extensions like new products or new programs. It may also address expansion and/or contraction of the territory. Is this for a[n] “exclusive”, “non-exclusive”, “restricted”, or “general” reseller? What are the rights of the exporter to add resellers of other types in the defined territory?

CONTRACT ISSUES Status of the Reseller
Is the reseller “independent” or “associated” in some manner? Beware of the reseller being an “agent”—this is very sensitive on a country-by-country basis—most are not. In general, the only right to bind your company should be with your express written approval.

CONTRACT ISSUES Duties of the Reseller
What marketing activities should the reseller perform? Are there performance targets? If so, clearly explain and quantify each one. What level of respect should the reseller have for patent and property rights? There should be a provision in the contract that the reseller and its employees know about and will comply with all requirements of the Foreign Corrupt Practices Act [FCPA] and other applicable U.S. laws. The reseller and its employees will comply with the laws of all countries where they will conduct business on behalf of your company. Why?

CONTRACT ISSUES Duties of the Reseller - continued
Are there any reporting obligations? Be specific and show examples. There should be a provision in the contract that the reseller and its employees know about and will comply with all requirements of the Foreign Corrupt Practices Act [FCPA] and other applicable U.S. laws. The reseller and its employees will comply with the laws of all countries where they will conduct business on behalf of your company. Why?

CONTRACT ISSUES Duration, Terms, and Conditions of Sale
What is the initial duration of the contract and how can it be extended in time? What are the method and terms of payment, and conditions of sale? Be very specific! If there are any payments, commissions, or other financial amounts due the reseller enclose specific details. Note: some countries prohibit payment to foreign bank accounts or other indirect methods.

CONTRACT ISSUES General Items
Include all restrictions that apply to the contract—export controls, U.S. and foreign government laws or policies—be complete! Generally, the reseller shall not sell, distribute, or represent competitive products and/or services if you provide a full line of products. What will you allow if you can not supply a full line of products?

CONTRACT ISSUES General Items
What is the governing law of the contract and relevant arbitration [if chosen]? The contract should be the sole agreement to govern the business relationship. What languages is [are] to be used for the agreement? How can the agreement be modified?

CONTRACT ISSUES Termination
What are the grounds for each party to terminate the agreement? What is the length of notice required for termination? What are the consequences of termination for each party? This is an especially sensitive area. Make sure to retain highly qualified international contract law expertise!

CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online Course SECTION 6A INTERNATIONAL MARKET RESEARCH ALAN L. WHITEBREAD.

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CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online Course SECTION 6A INTERNATIONAL MARKET RESEARCH ALAN L. WHITEBREAD.

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