Marketing bán hàng - Chapter 16: International sales & distribution management

Chapter 16International Sales & Distribution Management1LEARNING OBJECTIVESUnderstand differences with domestic marketsChoosing the marketsEconomic, Legal & Cultural aspects of the environmentRisks involved in International businessEntry strategies for international marketsPricing, financial terms and payment methodsInformation gathering about target marketsDifferences in distribution channels and factors influencing the choiceSDM-Ch 162Tata McGraw Hill Publishing LtdWHY GO INTERNATIONAL?The WTO agreement has resulted in opening up of new areas for freer trade (Textiles, Services & Agricultural products)China, Russia, India & the East European countries have embraced free market policies resulting in huge opening up of underserved populations.Domestic competition has increased especially from imports.Outsourcing in manufacturing and services has increased due to cost pressures & improvement in infrastructure.SDM-Ch 163Tata McGraw Hill Publishing LtdCHOOSING THE MARKETFactors to be borne in mind while choosing markets:Size of the marketLanguage & Culture of the marketCompetition in the marketProximity of the marketPolitical and Financial stability of the countryEase of doing businessSDM-Ch 164Tata McGraw Hill Publishing LtdCULTURE & INTERNATIONAL BUSINESSCulture influences everything from taste & preferences to consumption patterns and attitude to foreigners.Culture influences communication modesCulture influences dress and behaviorCulture influences usage of a productLanguage is very important in international business to communicate effectively.SDM-Ch 165Tata McGraw Hill Publishing LtdLEGAL ASPECTS OF INTERNATIONAL BUSINESSLaws vary from country to country – there is no “international law”Important to know the local laws to do business – on investment, management, employment, marketing, pricing, royalties, profit repatriation, taxation etcDeveloped countries have stringent laws on safety, pollution, intellectual property rights etc.In times of disputes, which law will prevail – this needs to be spelt out in contractsSDM-Ch 166Tata McGraw Hill Publishing LtdRISKS IN INTERNATIONAL BUSINESSTwo main risks in international business:Political risks – involve disruption of contracts or payments due to sudden political changes, expropriation of businesses etcCommercial & Financial risks – failure of the buyer to pay due to bankruptcy or sudden changes in the exchange availability or rate.SDM-Ch 167Tata McGraw Hill Publishing LtdRISKS IN INTERNATIONAL BUSINESSRisks can be insured with agencies like the export credit guarantee corporation(ECGC) for a premium based on the country’s risk.Letters of credit may be guaranteed by international banks located in major financial centers like London, New York, Singapore etc.SDM-Ch 168Tata McGraw Hill Publishing LtdTRADE BETWEEN COUNTRIESReasons for trade between countries include:Non availability of a product or resourceCost advantages in buying rather than making a product locallyDifferentiated products-Luxury products or better designed products in the same category may be available from different countries (cars, electronics, textiles and garments etc)SDM-Ch 169Tata McGraw Hill Publishing LtdINTERNATIONAL TRADE – COMPANY PERSPECTIVECompanies may choose to sell internationally for the reasons given below:Limited growth in home marketOverseas markets offer large profitable opportunitiesExcess capacity which cannot be absorbed locallyCost advantage over international competitorsMitigating risk of increased domestic competition SDM-Ch 1610Tata McGraw Hill Publishing LtdENTRY STRATEGIESExporting through local agentExporting through foreign agentExporting to foreign importer / distributorSetting up local office / representativeLicensing / FranchisingSetting up Joint ventures for distribution / manufactureSetting up wholly owned manufacturing facilitiesSDM-Ch 1611Tata McGraw Hill Publishing LtdORGANIZING FOR INTERNATIONAL SALESStructure depends on volume of sales and nature of the product.In situations of low volumes, exporting through local or foreign agents is cost effectiveAs volume grows and in complex products or large value deals, using own sales personnel is preferable.To be effective, it is preferable to have local personnel in the sales forceSDM-Ch 1612Tata McGraw Hill Publishing LtdDISTRIBUTIONDistribution is a vital aspect of marketing – ensuring availability of the product in the right quantity, at the right time and right place.More important in international markets due to distance and transportation time.Importers, manufacturers and retailers are increasingly asking for Just in Time deliveries.Distribution strategy varies from market to market depending on size and local conditions.Multiple channels may be used in countries.SDM-Ch 1613Tata McGraw Hill Publishing LtdDISTRIBUTION OPTIONSDepends on the volume of the businessPositioning of the productInfrastructure of distribution in the countryLocal laws – some countries insist on local companies in the distribution businessInternet as a channel of sales and distributionSDM-Ch 1614Tata McGraw Hill Publishing LtdROLE OF LOGISTICSVery important aspect of international sellingLogistics can make up over 15% of the cost of the productInvolves multiple modes of transport – land, sea and airConsiderable paperwork and formalities to be completed in international tradeLogistics providers now offer complete one stop solution including distribution, invoicing and collection of paymentSDM-Ch 1615Tata McGraw Hill Publishing LtdPROFILE OF AN INTERNATIONAL SALES PERSONPleasant and amiable personalityAbility to adapt to foreign culture – especially food, drink etcConversant in one or more foreign languagesAbility to act independently and decisivelyAbility to understand complexities of financing, foreign exchange etcSome local sales persons in the force will be useful to overcome some barriers and leverage local networks for business developmentSDM-Ch 1616Tata McGraw Hill Publishing LtdPRICING AND PAYMENT TERMSCommon pricing terms are:Ex Works – at the mfrs factory gateFOT, FOR – free on truck / rail –loaded on truck/railFAS – free along side – at port next to shipFOB – free on board – loaded on ship C&F – cost and freight – inclusive of to destinationCIF – cost, insurance and freight – inclusive to destinationSDM-Ch 1617Tata McGraw Hill Publishing LtdPRICING AND PAYMENT TERMSPayment terms can include:Cash in advanceCash on delivery – cash against documentsConsignment basis – payable after saleUsance – payment days after acceptance of documentsLetter of creditLong term credit financing – for machinery / projectsEach method has risks for the buyer or seller. The LC offers safety and comfort for bothSDM-Ch 1618Tata McGraw Hill Publishing LtdCURRENCY OF PRICINGThe US Dollar is the most widely used currency for pricing international salesImporters in some countries may prefer invoicing in local currencies like Japanese Yen or Euro or Pound Sterling, Singapore Dollars or UAE Dirhams Saudi riyals etc.This reduces the risk of exchange rate fluctuations for the buyerExchange fluctuation is a major risk for sellers and can be managed by hedging the currency.SDM-Ch 1619Tata McGraw Hill Publishing LtdPACKING AND SHIPPINGPacking is of two types:Industrial packing – bulk for protection during shipping & transportConsumer packing – to enhance sales appealPacking could makeup up to 5% of product costsCountries have laws or practices in packing which must be understood and adhered to.Packing depends on the product and must be suitable for containerized shipping and mechanical handling.SDM-Ch 1620Tata McGraw Hill Publishing LtdMARKET INTELLIGENCE Secondary data is very easy to gather from various publications, agencies like chambers of commerce, trade bodies, embassies, trade shows, internet, banks etcUsually secondary data is sufficient to establish the feasibility of the market.Care must be taken to understand the data and the measures used before drawing conclusions.SDM-Ch 1621Tata McGraw Hill Publishing LtdKey LearningsMarkets differ in culture, language, taste, consumption patterns, economic strength, level of development of market and distribution infrastructureThe main risks in international business are political and commercial and financialCurrency fluctuation is major risk.Risks can be mitigated by hedging or insuringLegal aspects of a country must be understood well before venturing inSDM-Ch 1622Tata McGraw Hill Publishing LtdKey LearningsThe organizing for international markets starts with choosing the market, planning suitable entry strategies, staffing with salespersons of appropriate profile, pricing the products in an acceptable currency, distributing the products based on the market needs and infrastructure, in suitable packing for efficient handling and consumer appeal.Payment terms must be acceptable to buyer and seller with minimum risk to both.Secondary market data can be collected from various sources before venturing into the market.SDM-Ch 1623Tata McGraw Hill Publishing Ltd