International Sales and Distribution Management

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Scope of Presentation Introduction

The Nature of International Markets

Choosing the Market

Culture and International Business

Aspects of Doing International Business

Risk Involved in Doing Business Internationally

Selling in International Markets

Role of Logistics Companies

Legal and Social Aspects

Profile of International Salesperson

Pricing and Payment Terms in International Trade

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Scope of Presentation cont.. Currency of Pricing

Packing and Shipping

Market Intelligence and Research

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THE PAST DECADE HAS BEEN A NUMBER OF CHANGES IN THE GLOBAL SITUATION. CHIEF AMONG THESE ARE THE OPENING UP IN RUSSIA, INDIA, AND THE EASTERN EUROPEAN COUNTRIES AND THE EMERGENCE OF CHINA AS A MAJOR MARKET. THE SIGNING OF THE WTO HAS OPENED UP MANY NEW AREAS TO FREER TRADE SUCH AS AGRICULTURE, TEXTILES, AND SERVICES. Introduction

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INTERNATIONAL MARKETS VARY IN TERMS OF DEVELOPMENT--- AT ONE END YOU HAVE AFFLUENT AND HIGHLY DEVELOPED MARKETS SUCH AS THE US AND THE WESTERN COUNTRIES AND ON THE OTHER THERE ARE MARKETS THAT ARE VERY POOR AND UNDEVELOPED SUCH AS A FEW MARKETS IN AFRICA. EACH OF THESE OFFER OPPORTUNITIES FOR DIFFERENT REASONSHIGHLY DEVELOPED COUNTRIES DUE TO THERE HIGH LEVELS OF CONSUMPTION AND ALSO BECAUSE OF THEIR HIGH COST OF MANUFACTURE AND THE POOR UNDEVELOPED COUNTRIES DUE TO THEIR LACK OF INDUSTRIES AND INFRASTRUCTURE. THE TYPES OF PRODUCTS, WHICH WILL BE SOLD IN EACH OF THESE MARKETS, WILL DIFFER DEPENDING ON THE LEVEL OF DEVELOPMENT. The Nature of International

Markets

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COUNTRIES LIKE:

US, JAPAN AND KOREA

---OUTSOURCE THE MANUFACTURE OF PRODUCTS TO COUNTRIES LIKE INDIA DUE TO THE LOWER COST OF PRODUCTION.

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Choosing the Market

THIS IS A VERY IMPORTANT ELEMENT IN INTERNATIONAL MARKETING. SOME OF THE FACTORS TO BE BORNE IN MIND WHILE CHOOSING THE MARKET TO ENTER ARE:

-THE SIZE OF THE MARKET;-THE LANGUAGE AND CULTURE OF THE MARKET;-THE COMPETITION IN THE MARKET;-PROXIMITY OF THE MARKET, AND-POLITICAL AND FINANCIAL STABILITY OF THE COUNTRY.

WHILE SIZE OF THE MARKET IS AN OBVIOUS ATTRACTION, THE MANUFACTURER MUST BEAR IN MIND THAT ALL LARGE MARKETS WILL INEVITABLY BE MORE COMPETITIVE AS EVERY MANUFACTURER WANTS TO GET A SLICE OF THE MARKET. THE U.S. AND, MORE RECENTLY, INDIA ARE GOOD EXAMPLES OF LARGE MARKETS THAT ARE VERY COMPETITIVE. SMALL MANUFACTURERS MAY FIND IT DIFFICULT TO SERVICE THE LARGE MARKETS AND WOULD BE COMFORTABLE IN CHOOSING SMALL MARKETS.

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CULTURE IS A VERY IMPORTANT FACTOR IN INTERNATIONAL MARKETING. CULTURE ENCOMPASSES EVERYTHING FROM THE WAY OF THINKING AND DOING BUSINESS TO THE CONSUMPTION PATTERNS OF THE POPULATION. UNDERSTANDING OF THE CULTURE IS IMPORTANT AS IT GIVES VITAL CLUES ON HOW TO DO BUSINESS IN THESE COUNTRIES IN THE BEST POSSIBLE WAYS.CULTURE DICTATES THE MODE OF DEALING. THE U.S. AND WESTERN COUNTRIES, THEY ARE FORTHRIGHT IN COMMUNICATING IN THEIR INABILITY TO ACCEPT THE PRODUCT, WHEREAS IN EASTERN COUNTRIES THERE ARE MORE CIRCUMSPECT. ASPECTS SUCH AS: -KEEPING TIME, -THE FORMALITIES AND COURTESIES IN DOING THE BUSINESS, -THE NEGOTIATION PROCESS -AND EVEN DRESSING VARY FROM CULTURE TO CULTURE AND NEED TO BE UNDERSTOOD TO SUCCEED. Culture and International Business

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Aspects of Doing International Business

WHENEVER BUSINESS IS TRANSACTED BETWEEN TWO COMPANIES IN DIFFERENT COUNTRIES, ONE IMPORTANT ASPECTS THAT COMES UP IS KNOWLEDGE OF LAW THAT PREVAILS IN CASE OF DISPUTE. GENERALLY. THESE ARE EARLY SPELT OUT IN THE CONTRACT DOCUMENT, BUT EVEN SO, IT CAN BE MESSY AND EXPENSIVE AT TIMES.AN IMPORTANT ASPECT OF BUSINESS THESE DAYS IS THE PROTECTION OF INTELLECTUAL PROPERTY RIGHTS.MANY COUNTRIES INCLUDING: THAILAND, INDIA AND CHINA--- HAVE LAWS THAT ARE EITHER LAX OR NOT WELL ENFORCED RESULTING IN ENFRINGEMENT OF COPYRIGHT AND LOSSES TO THE ORIGINAL MANUFACTURER.THE INDIAN PATENT ACT IS BEING AMENDED AND WILL SOON PROTECT PRODUCT PATENTS RATHER THAN PROCESS PATENTS, WHICH IT PROTECTED SO FAR.

THE TWO MAIN RISKS INVOLVED IN DOING BUSINESS INTERNATIONALLY ARE:POLITICAL RISKSCOMMERCIAL RISKSFINACIAL RISKSPOLITICAL RISKS ARE THOSE RISKS INVOLVED DISRUPTION OF CONTRACTS OR PAYMENTS DUE TO SUDDEN POLITICAL DEVELOPMENTS SUCH AS COUPS AND WARS. FINANCIAL RISKS INVOLVED THE FAILURE OF THE BUYER COMPANY TO PAY AS PER CONTRACT DUE TO BANKRUPTCY.COMMERCIAL RISKS INVOLVED THE SUDDEN CHANGE IN THE SITUATION IN THE BUYERS COUNTRY LIKE A SUDDEN SHORTAGE OF FOREIGN CURRENCY TO PAY THE INVOICES, ALTHOUGH THE EQUIVALENT LOCAL CURRENCY MAY BE AVAILABLE. Risk Involved in Doing Business Internationally

TRADE BETWEEN COUNTRIES OCCURS BECAUSE OF THE FOLLOWING REASONS: A PARTICULAR PRODUCT (ESPECIALLY NATURAL RAW MATERIALS) IS UNAVAILABLEOIL, IRON ORE, COAL, AND SO ON.

THERE ARE COST ADVANTAGE BY BUYING THE PRODUCT INSTEAD OF MANUFACTURING LOCALLYOUTSOURCING OCCURS DUE TO THIS CONSIDERATION.

THE PRODUCT OFFERED IS DIFFERENTIATED FROM THE LOCAL PRODUCTCOUNTRIES MAKE, BUY AND SELL A PRODUCT FOR EXAMPLE, INDIA MANUFACTURERS, EXPORTS AND IMPORTS AUTOMOBILES.

Selling in International Markets

A COMPANY MAY DECIDE TO SELL ITS PRODUCTS INTERNATIONAL MARKETS DUE TO ONE OR MORE FOLLOWING REASONS: IT HAS A GOOD MARKET DOMESTICALLY WHERE THE GROWTH IS LIMITED.

INTERNATIONAL MARKETS OFFER LARGE AND PROFITABLE OPPORTUNITIES.

THE COMPANY HAS EXCESS CAPACITY, WHICH THE DOMESTIC MARKET CANNOT ABSORB.

THE COMPANY HAS A CONSIDERABLE COST ADVANTAGE OVER ITS INTERNATIONAL COMPETITORS.

THE COMPANY FORESEES INCREASED COMPETITION IN THE DOMESTIC MARKET AND SEEKS TO MITIGATE THE RISK BY DIVERSIFYING.

Selling in International Markets cont

LAWS PERTAINING TO DISTRIBUTION AND RETAIL TRADE VARY BETWEEN COUNTRIES.. WHILE THE WESTERN COUNTRIES ARE VERY LIBERAL IN TERMS OF ALLOWING FOREIGN COMPANIES/NATIONALS TO SET UP TRADING OPERATIONS, LAWSIN COUNTRIES WHICH ARE LESS DEVELOPED TEND TO BE MORE RESTRICTIVE. Legal and Social Aspects

LOGISTICS PLAYS A VERY IMPORTANT PART IN INTERNATIONAL DISTRIBUTION. SINCE DISTRIBUTING PRODUCTS TO MANY COUNTRIES INVOLVES MULTIPLE MODES OF TRANSPORT AND TRADE ACROSS NATIONAL BOUNDERIES WHICH INVOLVE COMPLEX DOCUMENTATION AND PAYMENT PROCEDURES, CONSIDERABLE ATTENTION HAS TO BE PAID TO THIS ASPECT. Role of Logistics Companies

WHILE AN INTERNATIONAL SALESPERSON NEEDS TO HAVE ALL THE TRAITS EXPECTED TO HAVE A GOOD SALESPERSON, HE/SHE WOULD NEED TO HAVE THE FOLLOWING ADDITIONAL QUALITIES:

THE ABILITY TO SPEAK IN ONE OR MORE INTERNATIONAL LANGUAGE.

THE ABILITY TO ADAPT TO FOREIGN CULTURESESPECIALLY FOOD, DRINK, AND THE LIKE.

THE ABILITY TO ACT INDEPENDENTLY AND DECISIVELY.

A PLEASANT AND AMIABLE PERSONALITY.

THE ABILITY TO UNDERSTAND NOT ONLY THE PRODUCT AND PRICING, BUT ALSO FINANCING OF THE SALES. THE INSTRUMENTS OF PAYMENT, AND FOREIGN EXCHANGE RISKS.

Profile of International Salesperson

PRICING OF PRODUCTS FOR INTERNATIONAL MARKETS CAN BE DONE ON VARIOUS TERMS. SOME OF THE COMMONLY USED TERMS ARE:EX WORKS PRICE OF THE PRODUCT AT THE MANUFACTURERS FACTORY GATES.

FOT (free on truck) PRICE OF THE PRODUCT, PACKED, PALLETISED AND CONTAINERISED (WHERE APPLICABLE) AND LOADED ON A TRUCK AT THE MANUFACTURERS FACTORY GATES (INCLUDING THE LOADING CHARGES).

FAS (FREE ALONGSIDE) AT THE QUAY BESIDE THE SHIP INCLUDING THE PORT CHARGES AND NOT INCLUDING THE LOADING CHARGES.

FOB (FREE ON BOARD) THE PRICED OF THE PRODUCT, PACKED, PALLETISED AND CONTAINERISED (WHERE SPECIFIED) AND LOCATED ON THE SHIP (INCLUDING ALL THE SHIPMENT PORT CHARGES AND LOADING CHARGES). Pricing and Payment Terms in International Trade

C&F (COST AND FREIGHT) FOB PRICE OF THE PRODUCT PLUS THE COST OF THE FREIGHT TO THE DESTINATION (IT COULD BE A PORT OR AN INLAND WAREHOUSE/FACTORY PREMISES), BUT NOT INCLUDING THE CHARGES AT THE DISCHARGE PORT AND IMPORT DUTIES AND LOCAL TAXES WHICH MAY BE APPLICABLE.

CIF (COST, INSURANCE AND FREIGHT) C&F PRICE PLUS THE INSURANCE CHARGES FROM THE MANUFACTURERS FACTORY TO THE FINAL DESTINATION (EITHER A PORT OR THE IMPORTERS WAREHOUSE INLAND) INCLUDING MARINE INSURANCE. Pricing and Payment Terms in International Trade cont

EXPORTS ARE NORMALLY PRICED IN HARD CURRENCYTHE MOST COMMON BEING THE US DOLLAR. EXPORTS CAN ALSO BE PRICED IN EUROS OR JAPANESE YEN OR EVEN INDIAN RUPEES. ONE OF THE RISKS INVOLVED IN INTERNATIONAL BUSINESS IS THE FLUCTUATION OF THE VALUE OF CURRENCY OF PRICING WITH RESPECT TO THE LOCAL CURRENCY.BANKS OFFER VARIOUS INSTRUMENTS LIKE FORWARD CONTRACTS AND OPTIONS ON FUTURE TRANSACTIONS TO HEDGE THE RISKS OF ADVERSE MOVEMENTS OF FOREIGN EXCHANGE RATES. IN ADDITION, WHERE THE EXPORTERS NEED CASH IMMEDIATELY, BANKS OFFER FORTAITING FACILITIES WHERE THEY EFFECTIVELY DISCOUNT THE RECEIVABLES AND TAKE THE RISK OF COLLECTION ON THEMESELVES. THIS, HOWEVER COULD BE AN EXPENSIVE PROPOSITION AND DETAILS CAN VARY WITH THE COUNTRY OF IMPORT, IMPORTERS CREDIT RATING AND VARIES FROM TIME TO TIME. Currency of Pricing

PACKING GOODS FOR EXPORT IS A VERY IMPORTANT ELEMENT OF MARKETING. THE PACKING SHOULD BE LIGHT AND STRONG AND MUST BE APPEALING FOR THE END CUSTOMERS. USUALLY BUYERS TEND TO SPECIFY THE TYPE OF PACKING REQUIRED. FOR EXAMPLE, SOME IMPORTERS OF SHIRTS MAY WISH THEM TO BE HANGER PACKED SO THAT THEY CAN READILY PUT UP AT THE RETAILERS ON ARRIVAL. THEY MAY FURTHER WISH TO HAVE THEM IN CARTONS OF CERTAIN NUMBERS EACH SO THAT THEY MAY ALLOCATE THEM TO VARIOUS STORES. THEY MAY EVEN SPECIFY THE SIZE MIX PER CARTON, COLOUR MIX AND WEIGHT OF THE CARTON FOR EASY HANDLING.

Packing and Shipping

THIS IS A VERY CRUCIAL ACTIVITY FOR ANY EXPORTER. COLLECTING PRIMARY MARKET DAT IS VERY EXPENSIVE AND HENCE NOT FEASIBLE FOR MOST COMPANIES. SECONDARY DATA IS AVAILABLE FROM A NUMBER OF SOURCES WHICH CAN BE COLLATED TO GET A CLEAR UNDERSTANDING OF THE MARKET. SOME OF THE SOURCES OF SECONDARY DATA ARE:- EMBASSIES/ CONSULATES OF THE IMPORTING COUNTRY- INDIAN MISSIONS IN THE HOST COUNTRY- TRADE AND INDUSTRY ORGANIZATIONS LIKE CII, FICCI, - ASSOCHAM, EEPC, AEPC, CAPEXCIL, AND MANY OTHERS- CHAMBERS OF COMMERCE AND INDUSTRY IN THE - -IMPORTING COUNTRY- COMMERCIAL BANKS- EXIM BANK- ECGC- TRADE JOURNALS AND PUBLICATIONS- INTERNET WEBSITES Market Intelligence and Research

IN ADDITION, MANY OF THE CHAMBERS OF TRADE AND INDUSTRY FREQUENTLY HOST BUSINESS DELEGATIONS FROM VARIOUS COUNTRIES AND ALSO SPONSOR DELEGATIONS OF INDIAN BUSINESSMAN TO THOSE COUNTRIES. SUCH MEETS CAN BE VERY USEFUL IN GATHERING A LOT OF INFORMATION APART FROM ESTABLISHING CONTACTS WITH PROSPECTIVE BUSINESSMEN IN THOSE COUNTRIES. Market Intelligence and Research cont..

END OF PRESENTATIONGOOD DAY!

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