How do you develop the product or service offering?
Do we adapt our product to the local market or use a standardised international product?
More likely to adapt when
- Customers are different- lower level of income, different culture, language, etc.
- Compliance with local laws
- Government pressure for local content
More likely to standardise when
- Common international customers
- Production economies of scale and other global economic benefits
- Home country image appears desirable to local customers – e.g. they really want French couture fashion
In practice, some degree of adaptation is almost certain
Do we sell our complete product range internationally or do we select some products from the range?
- Foreign product ranges are usually shorter than home market : they focus on the really top sellers because it is cheaper and less complex, especially when there is a need to adapt.
- Customers and competitors may also determine the initial approach:
- Customers considerations: is an individual line acceptable? Are they happy with a more limited range?
- Competitors issues: have rivals left a gap in the market?
In practice, it is usually better to start with a limited range which can then be extended
What do we do about after sales service and warranties?
Some firms supplement international distribution efforts by national service support: for some products and services, it is difficult to provide an adequate level of service from the home country or some other distant location – like an Asian call-centre for the UK or France. But this will mean training people locally to service the product: a significant investment
However, it can be a means to provide competitive advantage. And it may be essential if competing against strong local firms with local service. Warranties can also provide competitive advantage – e.g. look at the Japanese car companies that for many years provided car warranties that were superior to their rivals. But warranties are not cheap and may need to vary country-by-country
Do we have a phased introduction of new products around the world? Or do we launch at the same time everywhere?
Unless the product is truly unique and in exceptional demand, most companies would opt for phasing new product launches mainly because of the heavy resources involved, e.g. Playstation 3 started in Japan, then North America, then Europe
So which country (or region) comes first? Often the home country to iron out any problems. Then the most likely target – often the USA because of its high wealth per head – with other countries to follow. Then usually, but not necessarily, the less developed countries.
What about distribution and logistics policies?
They can be a major contributor to both profit and quality service internationally
It is important to distinguish between the basic decision on the method of market entry and the subsequent task of gaining distribution once this entry method has broadly been achieved. We are concerned with the latter here.
There are five main issues:
- Distributor agreements
There is a need to distinguish between:- Trading: a national distributor is appointed to handle the import of foreign goods
- Licensing: national distributor manufactures the product under license
- Agency: an independent company, often in the home country, contracts to undertake the exporting of product to one or more countries
A distribution agreement is a legal document – whatever method is chosen above – that will specify the responsibilities of all parties above. The agreement will cover such matters as pricing, currency, the basis of payment – e.g. commission percentage, sales and marketing support, etc.
- Motivation and communication issues with the distributor
Distributors are, in many respects, a customer of the company and need to be motivated and communicated with if they are to give good service. For example, an export distributor will usually have an influence over the level of service to customers, the paperwork, the answering of queries, the return of damaged stock, etc. The distributor may also control the availability of stock, stock levels, invoicing, etc
How do you motivate the distributor to give good service? Some suggestions: regular communications, visits, training, incentives, audit procedures – perhaps involving independent customer surveys – regional meetings, joint participation in trade fairs. - Retail and wholesale issues
These begin with understanding the distribution structure in countries – e.g. Small or large shops? The method of transport using road, rail, air, etc? Some countries use wholesalers extensively. As a starting point, it is paramount to discover the level of service required by customers– daily, weekly, size of drops, etc. - Logistics mix – there are five main decision areas:
- Facility decisions: how many warehouses and plants should we have? Where located?
- Inventory decisions: how much inventory to hold in a particular country or region? Where? What technology for picking inventory? Do our customers require just-in-time delivery?
- Communications decisions: Flow of information just as important as physical flow of goods – invoicing, orders, demand forecasting, sales reporting issues
- Utilisation decisions: packaging or palletising? Containerisation?
- Transport decisions: Own transport fleet or leased vehicles? How often deliver? How schedule deliveries?
Keypoint: all these issues must be matched to customer requirements.
- The impact of new technologies
New technologies have revolutionised international delivery – for example, bar coding, telecomms linkages, mobile tracking of vehicles, individual tracking of consignments, There is scope here for new developments to save money and improve service levels.
