Export Promotions

INTERNATIONAL MARKETING

Section 2 – I

Export Promotions

The last “P” of international marketing – promotion.

Promotional Methods:

1. Advertising – consists of visual and oral messages that aim to inform and persuade consumers to buy products and service.

Export Pricing and Costing

INTERNATIONAL MARKETING

Section 2 – H

Export Pricing and Costing

Price:

a. Business person’s point of view:

- it provides for the recovery of costs of the elements of the marketing mix.

- it generates revenue for the firm.

- the monetary figure for which he sells his products to his customers.

b. Consumer’s point of view:

- the value placed by consumers for the amount they pay for the goods and services.

- it is what the consumer is willing to pay and not what the business person is willing to charge.

Export Distribution Channels

INTERNATIONAL MARKETING

Section 2 –G

Export Distribution Channels

         How the product will reach the end-user in the right place, at the right time and in the right condition, requires knowledge of alternative channels of distribution and the different ways of handling the physical distribution of the goods.

Export Packing, Marking and Labeling

INTERNATIONAL MARKETING

Section 2 –F

Export Packing, Marking and Labeling

Export Packing

          Export Packing refers to the proper way of protecting the good for a secured and safe travel going to the country of destination. The goods must arrive at the buyer’s destination in superb condition, having withstood natural calamities, handling stress, attempted pilferage and the like.

Developing Products for the Foreign Market

INTERNATIONAL MARKETING

Section 2 –E

Developing Products for the Foreign Market

          Some manufacturers perceive their products as mere goods made in factories and afterwards sold to the market.

          Buyers see these goods differently.  For them, a product is a combination of both physical and non-physical elements which are all included in the purchase.

The Product

          Three levels of a product:

1.       Core Product – the core benefit that a buyer gets from purchasing the product. It answers the question “What is the buyer really buying?” Thus, a consumer purchasing a suitable and good-quality face powder is not really buying cosmetic but hope.

2.       Actual Product – it refers to the product’s brand name, quality level, packaging, design and features.

3.       Augmented Product – the additional consumer services and benefits. These include post-sale services, warranties, repair services and a toll-free number to call in cased of problems.

          A product successful in one market may have to adapted to sell well in another market for the following reasons:

·         Difference in physical conditions

·         Difference in the purpose the product is intended for

·         Difference in local tastes

·         Difference in social values

·         Difference in the capacity to pay of the said market

The Product and Company Image

          The product reflects the company’s image. It also enhances the company’s reputation. But developing the product and company image is very costly. But there are some useful and inexpensive steps to be undertaken, here are some:

         

·         Deal only with reputable sales agents or importers/wholesalers. It is likely that the respect rubs off on the goods they are selling and the company they are representing.

·         Give importers your best possible service to ensure that they will sell your products with enthusiasm.

·         Supply helpful, well written sales literature. Sometimes, the cost can be defrayed by your foreign associates.

The Product’s Life Cycle  

          A manufactured product has a life cycle (birth, growth, maturity, decline)- a sequence of stages in the life of a product brought about by changes in the marketing situations that impact both the marketing strategies and the marketing mix.

Shown below is the life cycle of a product in the garments industry as detailed in seven stages:

Stage 1: Creation

Stage 2: Acceptance by fashion trendsetters

Stage 3: Adoption by manufacturers

Stage 4: High-fashion distribution

Stage 5: Mass acceptance, production and distribution

Stage 6: Popularity decline

Stage 7: Abandonment

Product Line Alternatives

          The different options to the exporters pertinent to product and promotion adaptations necessary in global marketing.

          The product line alternatives are:

1.       Straight Extension – This refers to attempts to sell the product using local promotion strategy in a foreign country. This method will mean no additional research, development and promotion expense for the exporter. But this might prove very costly in the long run because a single mistake results in bigger losses.

2.       Communication Adaptation – The product remains basically the same but the promotion differs. The promotion modification cost is lower compared with the cost of redeveloping or physically changing the product.

3.       Product Adaptation – This means modifying a product to meet local conditions or preferences without changing the promotion strategy. This method is used by most soap and detergent manufacturers.

4.       Dual Adaptation – This means that both the product and the promotion have to be changed to adapt to local situations.

5.       Product Invention – This practically calls for the creation of an entirely new product which will serve the unmet need or demand in the market.

The Need for Product Development

          Constant changes in the market requirements, technology, consumer preferences and lifestyles dictate the need for continuous product development. Therefore, product development is essential to keep the exporting company on the competitive edge.

          The following are some misconceptions and assumptions on the meaning of product development:

-          Product development is a sure solution to business problems.

-          It is identical to developing new designs.

-          It is the sole responsibility of the designer

-          It is purely a creative activity.

With these unqualified notions, there is a need to rationalize the product development process as follows:

1.       Product Development as a Business Tool –product development aims to achieve the business objectives. It should be viewed as a function of marketing and production, depending on the company’s orientation. As such, product development can help:

-          Develop current products for existing markets

-          Develop new products for existing markets

-          Develop new product for new markets

2.       Product Development as a Group Effort – product development cannot be done by a single person, but by a team with ideas in order to reach the best possible innovative concept. The team is usually composed of members belonging to the management, marketing, production and design departments.

3.       Product Development as a Process – product development undergoes a process. It requires close coordination of individual activities that will translate into a successful end product. Product development is a process of developing new products, and/or updating or abandoning existing products to meet changing market requirements or production capacity.

Sustainable Product Development Program

          Because product development is a continuing concern, a company will be successful if it has a sustainable product development program. A company is said to be ready if it has a clear business plan, well established objectives and programs as well as the sources needed for product development.

Product Development Program in the Philippines

          If you are considering what product to export, below are the ways to help:

·         Find out what you are really interested in.

·         Scout for products that are readily available. Identify them and you will be surprised at the number of products that you can choose from.

·         Once the product is available, you still have to make the modifications and adaptations to make sure that you product suits your market.

The Product Development and Design Center of the Philippines (PDDCP) – is an agency under the Department of Trade and Industry. It aims to promote product development as a tool for improving the quality and competitiveness of Philippine products.

          The following are PDDCP’s services:

1.       Product Design

2.       Package Design

3.       Product Technology Demonstration

4.       Design and Technical Information

5.       Library

Export Market Research

INTERNATIONAL MARKETING

Section 2 –D

Export Market Research

          Market Research is considered as a crucial part of marketing and selling. Export Market Researches are designed for companies that require specialized information concerning a particular product or industry in a specific market.

          Market research abroad is different from the market done locally. Culture is a very important factor to consider before entering and placing a product in a diverse market.

Elements of Export Market Research Report

1.       The Market Potential

a.       County’s trade restrictions – one of the reasons for restricting exports is to protect the environment. There are products listed as endangered species or affected by environmental concerns.

The most common documentary requirement in almost all trading nations is the Certificate of Origin which certifies that the raw materials used in making the product are obtained from that country.

b.      Market Access – Tariffs and quotas are just one of the concerns exporters should consider. Apart from that, you have to be familiar with other necessary requirements the target market country may ask for.

The country’s political climate or situation should also be considered.

c.       Market Size, Patterns and Growth – part of the market research is to study the market as a whole. The essential data can be taken from annual trade statistics published by every country.

When you are interested in a particular country, visit its local embassy.

The Internet is a very good source of data on market size, patterns and growth.

d.      Competition – competition is part and parcel of any business venture even if you have already created your niche in the market.

Exporting to other countries would definitely be competitive. There always be other competitors or you may be the competitor in the particular industry of the country that you want to export to.

e.      Price Structure – price is the only area in global marketing mix where policy can be changed quickly without large direct cost implications; however, it is important that management realizes that constant fine-tuning of prices in overseas market should be avoided and that many problems are not best addressed by pricing actions.

  

Estimating Market Potential

YOUR COUNTRY’S TRADE REGULATIONS	COUNTRY RESTRICTIONS
Market Access	Currency and Tax Regulations Licensing and Other Documentary Requirements Tariffs and Quotas ( applying to your country and the other country) Currency Restrictions Distribution Channels Health and Safety Regulations Political Factors Affecting Access
Market Size, Patterns and Growth	Imports (Volume, Value, Sources, Trends) Consumption (Volume, Growth, Trends, Geographic Patterns, Market Segmentation) Factors Affecting Demand (Economic, Climate and Geographic, Social and Cultural
Competition	Domestic Production, Volume and Growth Structure Market (Market Share, Plant Locations, Capacity Plans) Strength (Size and Special Advantage) Reasons for Success Gaps in Product Lines Trademarks and Patents
Price Structure	Prices to End-Users Trade Mark-Ups Transport Costs

2.       Product Requirements

a.       Product - the product itself determines whether it is going to be accepted or not by your target market. In creating an acceptable product for the global market, it is important to examine the “total” product offer.

b.      Packing for Shipment – packing is one of the necessary element I exporting. Mostly, packing is done through sea and air freight. But there are other distribution systems by which you can transport goods such as rail or road especially in Europe. Packed goods can be placed in containers or crates. Other products require more protective packing, and processed foods normally have shelf life date to contend with.

c.       Industrial Package Pack – this refers to the package handling once the products reach the country of destination. How will the products be stored? How will they be unpacked from a master carton? Are there any reuse or return requirements?

d.      Consumer Pack – potential customers are first attracted to the product’s packaging. At times, products are usually bought because of their presentation or packaging.  Packaging varies among countries. Caution and care should be observed in designing packs that might be considered offensive by a particular foreign country.

          In  export marketing, there are also practices that are standard among countries. These are transport, sales and distribution channels, pricing strategy factors, services expected by buyers, and advertising and sales promotions.

 A checklist of the different aspects in export product research.

Product	Color – technical specification Taste – reasons for use Design and styling conditions for use Materials – performance characteristics
Packing for Shipment	Handling methods – storage conditions Marketing requirements
Consumer Pack	Protective Requirements (Storage and Handling Methods, In-Store Conditions) Information Requirements (Labeling Regulations, Language, Consumer, Knowledge of the Product) Merchandising Requirements (Display Conditions, Size and Shape Requirements) Reactions to Trade Names, Colors and Symbols Usage (Dispensing Requirements, Home Storage Conditions, Reuse or Disposal Requirements) Legal Requirements (Labeling, Weights and Measures, Materials)

Dos and Don’ts of Designing Packs Worldwide

Color
France, Holland, Sweden	Green is associated with cosmetics.
France	Red is masculine. To the rest of the world, blue is masculine
Sweden	Swedes do not like packaging that shows gold or blue. Combination of white and blue, the colors of the national flag, is best avoided.
Ireland	Green and orange should be used with care
Switzerland	Yellow means cosmetics. Blue means textiles.
China	White is the color or mourning, and white-robed figures in illustrations are counterproductive. Red is happy, profitable color. Blue and white mean money.
Other Design Elements
France	Avoid illustrations showing liquor being poured.
Spain	Bikini-clad girls should not be used in illustrations.
Germany	The use of superlatives is forbidden. “Mist” is the word for dung, the word “gift” means poison.
Designing Packs Worldwide
Sweden	Consumers do not like giant packs. The brand name must be pronounceable in Swedish.
Switzerland	The oval is an omen of death.
Turkey	A green triangle signifies a free sample.
Europe generally	Designs resembling the “swastika” (Nazi sign or logo) are generally disliked.

Source: London Chamber of Commerce and Industry, 1991

3.       Marketing Practices

a.       Transport – whatever transport mode is used, you must be aware of the shipment cost. You must research the how many hours/days it would take before the goods arrive at the country of destination.

Shipping by air is done for fashionable accessories and perishable goods. packing requirements should also be strictly followed for a secured voyage of your goods.

b.      Sales and Distribution Channels – you have to find the best distribution channels that will link the producers to their final customers. New channels that identify opportunities to cut costs or develop the efficiency of reaching a particular market segment are emerging. These include Internet ordering, cable TV shopping, telephone ordering and catalogue retailing.

c.       Pricing Strategy Factors – here, you have to consider your direct or indirect competitors. Are you pricing your product too high? Do your competitors have product attributes which are not present in your product?

d.      Services Expected by Buyers – after-sales service can be in the form extended warranties, guaranteed response service agreements, installation support, support for product use and maintenance, spare parts, field service and repair. Customer loyalty is easier to preserve if there is strong after-sales service.

e.      Advertising and Sales Promotions – advertising is an important part of the communication mix especially for consumer goods which have countless small-volume customers who can be reached through mass media.

There are times when exporters do not have a say in the promotion of the product to the end customer. However, the exporter can extend his services beyond the selling the product to the importer. He should foresee how the target market will respond to the product with the aid of advertisement or sales promotion. An example is to print the labels or instructions using the other country’s language or own symbols

Some useful tips in advertising in Asia:

-          Trying to solicit an immediate response from a potential customer is contrary to traditional buying habits. Instead, the advertiser should plan carefully the offer and refrain from hard-sell approaches.

-          Asians are more conservative than Westerns, and they consider human relationships important. When family life is used as a theme, the advertisement becomes appealing.

-          Asian are collective. Testimonial especially from revered personalities can lead to attractive advertisements.

Marketing Practices

Transport	Freight Rates – Speed and Frequency Reliability – Risks Packing Requirements
Sales and Distribution Channels	Normal Channels for the Product Alternative Channels Advantages, Disadvantages and Feasibility of Using Normal or Alternative Channels Delivery Time Requirements Mark-Ups and Discounts of Each Level Major Distributors
Pricing Strategy	Practical Limits – Likely Reactions of Competitors Supply of Competing Products Prices of Competing Products – Product Advantages
Services Expected by Buyers	Technical Advice – Replacement of Defective Merchandise Guarantees Repairs and Maintenance – Spare Parts
Advertising and Sales Promotion	Media and Techniques Mainly Used Timing and Geographic Concentration Sales Messages Emphasized in Advertisement

The Export Merchandiser

INTERNATIONAL MARKETING

Section 2 -C

The Export Merchandiser

          In starting your career in the export industry, there is no better way to be able to learn the ropes of the trade than to be employed as an export merchandiser.

         An Export Merchandiser is someone who links the buyer from one country to a seller or supplier in another country.

Duties and Responsibilities of an Export Merchandiser

FUNCTIONS	ACTIVITIES
Buyer Sourcing, Handling and Assistance	Undertakes a market research and prepares for the buyer’s visit. Arranges for the buyer’s hotel accommodations, transportation, etc. Studies the buyer’s product preferences and specifications.
Supplier Sourcing, Identification and Evaluation	Visits factories or prospective suppliers to broaden supplier’s base Evaluates suppliers in terms of product, capacity, clientele, reliability, pricing, etc. Negotiates with vendors, if necessary, concerning product specifications, pricing, etc.
Negotiation	Matches the buyer’s specifications and the supplier’s capabilities and present these options to the buyers Initiates the counter sampling and alternative product sourcing to meet the buyer’s requirements Prepares guidelines and terms that will later on be applied to the negotiations and confirmation of orders with the buyers and suppliers Submits final quotations and samples for approval and confirmation Prepares a pro forma invoice for the buyers stating the specifications for the payments and shipping terms Prepares the P.O. to vendor upon the approval of the buyer Prepares the authorization to start production the moment the buyer gives his approval
Order Follow-Up	Prepares a timetable during pre-production and production stages Conducts plan visits to follow-up the status of the product/order Closely monitors the production process and sends progress reports to the buyer Establishes clear measures for quality control, and effects the same in inspecting all orders placed during production and post-production prior to loading Ensures on-time delivery of the goods to the buyer Negotiates with buyer in case of delay

          

Getting Started In Export

INTERNATIONAL MARKETING

Section 2 -B

Getting Started In Export

          The simplest explanation in going to the export business is that you produce something, find a foreign buyer and sell it.

           Then you need to decide on the mode of export entry to adopt.

Modes of Export Entry:

·         Entry Mode 1: Producer-Exporter

-          You produce the product for export.

-          You carry the inventory.

-          You promote the product.

-          You contact and negotiate with the buyer.

-          You package and ship the goods to the buyer.

-          You are paid on the agreed amount of sales.

·         Entry Mode 2: Exporter- Trader

-          You do not manufacture.

-          You buy directly from the producer or supplier.

-          You carry the inventory.

-          You promote the product.

-          You contact and negotiate with the buyer.

-          You package and ship the goods to the buyer.

-          Your buyer pays you directly.

-          Sometimes, you provide materials, working capital and technology to your supplier.

·         Entry Mode 3: Subcontractor

-          You must meet producer’s (contractor’s). The name of the game in exp[ort is volume which is most often not met by even seasoned exporters. They turn to smaller firms which will produce for them either the whole or partial quantity.

-          Your contractor gives you assistance either in form of raw materials, design, quality specifications, technology and sometimes, the working capital.

·         Entry mode 4: Selling Agent

-          A producer appoints you to act as the producer’s agent. You sell the producer’s products to importers.

-          You represent the interests of the producer.

-          You market the product.

-          You assist the producer in shipment.

-          You prepare the sales documents in the producer’s name.

-          You are paid either in salary or commission.

·         Entry mode 5: Buying Agent

-          You are the importer’s representative. You reside in the exporter’ home country.

-          You source the product from local suppliers based on the buyer’s requirements and specifications.]

-          You negotiate the purchase of the product.

-          You check the product before shipment in the interest of the buyer, and ensure timely delivery of the product.

-          You are paid a salary or commission for services rendered to the importer.

          Many business persons say that being an agent requires the minimum in terms of financial and investment. With a telephone, fax machine and personal computer, you can already be in business.

          Can you be both a buying and a selling agent at the same time? The most cunning business persons would say ‘yes’. But business ethics dictate that you should only be serving the interest of one entity.

          As a start, it will be good to learn the ropes by working first in an export firm before trying it on your own. Some begin as export merchandisers for buying offices, and fortunately find themselves establishing their own.

Rationale for Export

INTERNATIONAL MARKETING

Section 2 -A

Rationale for Export

        

          In this section, you will primarily learn the four P’s of Marketing and their application in export marketing.

The Need to Export

If you have considered a career in exporting, you, at least need to have and follow a master plan when you venture into it, Basically this plan should include the following considerations:

·         Decision to go to into export

-          The very first thing you to ask is whether you are to export or not. To answer this, you have to make a SWOT ( strength, weaknesses, opportunities and threats) analysis.

-          The external strengths and opportunities represent a bigger framework which from which your export business will operate.

·         Decision on the mode of venturing into export

-          This decision will depend on your SWOT analysis.

·         Decision to conduct export market research

-          Business firms must face the tasks of creating strategies that foresee and counter the rapid changes in the global markets.

-          Export market research aims to find out the appropriate product and market for you. the research plus the SWOT analysis would finally give you an idea and make you decide whether to go into export or not.

-          This involves the preparation of a business plan.

International Trade Terms

INTERNATIONAL MARKETING

Section 1-E

International Trade Terms

        To facilitate better understanding among countries, the ICC (International Chamber of Commerce) has provided international rules for the interpretation of commonly used words the “International Rules for the Interpretation of Trade Terms”.

INCOTERMS (International Commercial Terms) – these delineates the responsibilities of the seller (or exporter) to the buyer (or importer).

There are 13 incoterms categorized into 4 groups:

A.      Departure (E) – release of goods by the seller to occur at the sellers’ location.

1.       EXW – Ex-Works Factory

-          The seller is responsible for the goods only inside/within the factory premises. The responsibility for the goods is transferred to the buyer once he picks up from the seller’s factory. 

-          The seller fulfills his obligation when he has made the goods available at his premises (warehouse or factory) with packaging.

-          The seller is not responsible for loading the goods on a ship, airline or any kind of transport.

-          The seller is not responsible for loading the goods on vehicle provided by the buyer or for clearing the goods for export, unless agreed upon.

-          The buyer bears all the costs and risks in taking the goods from seller’s premises to the specified destination, including the name and contracting of carriage that will bring them to his country.

-          For the price quotation (EXW) Read: USD 3.50 EXW (warehouse or location)