CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 1A
BUSINESS TOOLS AND THE WORLD MARKETPLACE
ALAN L. WHITEBREAD
COURSE INTRODUCTION
• The syllabus is online.
– http://awhitebread.ba.ttu.edu
• Many full or partial lecture slides plus other support
materials are online can also be found there.
INTERNATIONAL TRADE AND THE FIRM
Legal
Human resources
Management
Environment
Stakeholders
Technologies
Marketing
Capital
INTERNATIONALSupply Chain
TRADE
Management
Trade
Finance
Competition
Government
ETHICS & CORE VALUES
• Morals and ethics may be different between cultures.
– MORALS
• The differences between right and wrong.
– ETHICS
• The values of human conduct. Whether an action is right
or wrong, and the good or bad of motives, means, and
ends.
ETHICS & CORE VALUES
• ETHICS
– Personal ethics should exceed legal requirements.
– If you have to ask about its legality, you are likely in
ethical trouble.
– What is the intent of an action?
• In U.S. criminal and business law, there are more severe
punishments for intent to harm.
– What are your corporate ethics?
• VIDEO – Dilbert ethics
ETHICS & CORE VALUES
• CORE VALUES
– Values and beliefs: you can not live a dual life.
– Peter Drucker, one of the great management
philosophers of our time, said “It is extremely important
to do the right thing”. It is equally important to also do
all the right things in international trade to maximize
your profitability.
STRATEGIC PLANNING
• Set goals / objectives / examine alternatives
• Develop plans
• Implement a plan as soon as there is enough
substance to have a fairly high probability of success.
• Always have contingency plans in place.
STRATEGIC PLANNING
•
•
•
•
What are we now?
What capabilities do we want to develop?
What businesses should we be in?
How do we get there?
– Thought processes
• Your educational training
– What does the ability to memorize have to do with business
career success?
• Thinking in different ways
• What are the rewards of success?
• The myopia problem
“MARKETING MYOPIA”
THEODORE LEVITT ARTICLE Harvard Business Review reprint, JulyAugust, 2004
• Myopia: defining your business too narrowly
– Railroads
– Corner grocery [1930] vs. supermarket
• What is happening to supermarkets today?
– Color TV [Motorola, GTE, GE]
– Lead with price conundrum
• You can always get sales!
• Great marketing organizations rarely have financial
problems!
STRATEGIC DIRECTION OF THE FIRM
(“THE CORE COMPETENCE OF THE CORPORATION” ARTICLE)
• CORE COMPETENCY
– The foundations [usually technologies] upon which
you build your business over a very long time.
• CORE COMPETENCY TESTS
• Sustainable – Very long term [5+ years]
AND
• Competitive – Obvious customer benefits
AND
• Advantage – Access to additional markets or
market segments
KEY SUCCESS FACTORS
• NOT CORE COMPETENCIES
• YOU MUST DO BETTER ALL THE TIME TO
KEEP UP WITH YOUR COMPETITORS.
• Apply the three core competency tests
[sustainable, competitive, advantage] to the
following items and see why they often fail the
core competency test.
• Customer services
• Design
• ?
THE STRATEGIC BUSINESS UNIT (SBU)
• A UNIT OF THE FIRM THAT HAS DIFFERENT
OBJECTIVES AND CAN BE PLANNED SEPARATELY
FROM OTHERS.
• For instance, some of General Electric’s business
units include
– GE Commercial Finance
– GE Consumer Finance
– GE Healthcare
-- GE Industrial
-- GE Infrastructure
-- NBC Universal
THE STRATEGIC BUSINESS UNIT (SBU)
•
SBU ISSUES
–
RESOURCE COMPETITION
1. PEOPLE
2. MONEY
3. DEVELOPMENT RESOURCES
–
FAIR PERFORMANCE MEASURES
•
–
How do you reward very different SBUs?
WHAT IS THE ACCEPTABLE DEGREE OF AUTONOMY
FOR EACH SBU?
Trucks
Cars
Tanks
SBU
TECHNOLOGIES (gas electric fuel cell) /
PRODUCTS /
SERVICES
MARKETS /
SEGMENTS
North America Europe Asia Export
Business Consumer Government
A
P
P
Delivery
L
I Transportation
C
War
A
T
I
O
N
S
DESIGNING THE BUSINESS PORTFOLIO
• THE VISION STATEMENT
– broadly defines what the entity should be like in 10-20
years.
– This statement needs to become part of the entity’s
culture to be most effective.
DESIGNING THE BUSINESS PORTFOLIO
• THE MISSION STATEMENT
– provides a path to achieve a vision through clear
objectives. It will contain many of the nine following
elements.
• Customers; products/services; markets; technologies;
concern for survival/growth; philosophy; self-concept;
public image; employees
– U.S. Department of State Mission Statement
• Create a more secure, democratic, and prosperous world
for the benefit of the American people and the
international community.
DESIGNING THE BUSINESS PORTFOLIO
• CORE COMPETENCIES
• CONSIDER THE FOLLOWING
– What is the fit with other SBUs?
– What synergies exist?
– How may this impact competition?
SWOT ANALYSIS
Complete the analyses for your firm and your major competitors.
STRENGTHS
LEVERAGE
CONSTRAINTS
WEAKNESSES
OPPORTUNITIES
VULNERABILITIES
PROBLEMS
THREATS
Market Growth Rate
LOW
HIGH
BOSTON CONSULTING GROUP:
GROWTH – SHARE MATRIX
STARS
QUESTION MARKS
Invest heavily
Decide quickly
CASH COWS
DOGS
Milk for $$$
Divest or discontinue
HIGH
LOW
Relative Market Share
Typical SBU movements are indicated by the arrows.
GE STRATEGIC BUSINESS PLANNING
MATRIX
• Market Attractiveness
– Market size, growth rate,
potential
– Competition
– Profitability
– Government regulation
– ?
• Business Strength
– Market share
– Customer & market
knowledge
– Cost efficiency
– Technology
– ?
GE STRATEGIC BUSINESS-PLANNING
MATRIX*
Market share, Customer & market knowledge, Cost efficiency, Technology, …
Market size, growth rate, potential, …
Low Medium
High
MARKET ATTRACTIVENESS
BUSINESS STRENGTH
Strong
Medium
SBU going where we
want it to go.
Weak
SBU losing ground
C
A
The arrow indicates the movement
of the SBU over n years.
D
B
Bad SBU and getting
worse
Improving SBU
Invest & grow
Selective growth
Harvest: divest
/ dissolve
ORGANIZATIONAL CHANGE
• Change is difficult.
• Change is often resisted overtly and covertly.
• Change is uncomfortable.
• Change is a way of life.
• Change is why we have developed to where
we are today.
SCENARIO PLANNING
• Learn how to think differently by
–
–
–
–
–
Challenging conventional wisdom
Challenging assumptions
Utilizing different thought processes
Utilizing entirely different perspectives in your analysis
Comparing outcomes of different thought
methodologies
FIVE TYPES OF DEVELOPMENT PROJECTS
LARGE
P
R
HARDEST
MORE
R&D ADVANCED
DEVELOPMENT
PROJECT:
GENETIC
ENGINEERING
O
PRODUCT CHANGE
LESS
C
E
NEW CORE PRODUCT
NEXT GENERATION
PRODUCT
ADDITION TO
PRODUCT FAMILY
DERIVATIVES AND
EXTENSIONS
S
S
C
ALLIANCES
PARTNERSHIPS
PROJECTS
NEW CORE PROCESS
R&D JOINT VENTURE
NEXT GENERATION
PROCESS
BREAKTHROUGH
PROJECT:
NEW FAMILY OF
DRUGS
H
A
N
SINGLE
DEPARTMENT
UPGRADE
G
E
SMALL
INCREMENTAL
CHANGE
For more information see Creating Project Plans to Focus Product
Development, Harvard Business Review, Vol. 70, No. 2, p.74.
PLATFORM
PROJECT:
APPLE iMAC:
TRANSLUCENT
PLASTIC
COLORATION
TECHNOLOGY
DERIVATIVE
PROJECT:
SIMPLE SIZE CHANGE
EASIEST
ANSOFF’S PRODUCT / MARKET
EXPANSION GRID
Existing
products
Existing
markets
New
markets
1. Market
penetration
or
saturation
3. Market
development
[channels of
distribution issue]
New
products
2. Product
development
[Internal or
External]
4. Diversification
[usually by
acquisition]
These show ways to grow your business generally go from
easiest [#1] to hardest [#4].
COMPETITIVE ADVANTAGE OF THE FIRM:
PORTER’S THREE GENERIC STRATEGIES
COMPETITIVE ADVANTAGE
Customer Perceived Uniqueness
Low Cost Position
C
O
M
P
E
T
I
V
E
S
C
O
P
E
INDUSTRY
DIFFERENTIATION
OVERALL COST
LEADERSHIP
WIDE
Focus on perceived
value.
Hard to maintain
long term.
MARKET
SEGMENT
ONLY
NICHE
Understanding and focus.
No direct battles with major competitors.
MARKETING MIX [The 4 P’s]
PRODUCT
PLACE
-Variety
-Design
-Features
-Branding
-Packaging
-Channels
-Coverage
-Transportation
-Logistics
PROMOTION
PRICE
-Advertising
-Public Relations
-Sales promotion
-Trade Shows
-List price
-Discounts
-Allowances
-Terms and conditions of sale
ATTACKING COMPETITORS:
GAPS—THE THREE DIMESIONS
CHANNELS OF
DISTRIBUTION
1
3
2
2
TECHNOLOGIES
PRODUCTS
SERVICES
APPLICATIONS
MARKETS / SEGMENTS
PRODUCT LINE PLANNING
APPLICATION SUMMARY OF GAP ANALYSIS
PRODUCT
PLACE
PROMOTION
PRICE
COMPETITION
Features
Expand
channels
Stimulate
light users
How to
compete
Brands
Intensify
coverage
Attract nonusers
Penetrate /
Substitute
Market
segments
Model
number
Services
added
Use more
each time
To maximize your return,
you would always do price
gaps last.
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 1B
THE WORLD MARKETPLACE
ALAN L. WHITEBREAD
WORLD TRADE BEFORE 600 B.C.
• Complex, advanced societies stretch across the
southern half of Europe, the Middle East, and
Asia.
– Phoenecians
– ?
• China traded along the ‘Silk Road’ – more than
2,500 miles
– Find a map on the internet to see this extensive trading
network.
WORLD TRADE BEFORE 600 B.C.
• India
– Trades textiles, …
• The Roman Empire
– Trades gold, silver, wine and glass.
• A limited view of the world
– Go to any map library on the internet and explore maps
of this time period. Look at the different perspectives of
the world between those in Europe and those in the Far
East.
WORLD TRADE 600 – 1500 A.D.
• For centuries the Arab civilization based on
trade dominated large areas of Africa, Asia and
even parts of Europe.
– Textiles, carpets, ivory, gold, spices and ceramics
– The Arabic language and an educated culture were the
common threads with such items as
• Sugar growing and refining
• Mangos and yams
• Chess and algebra
• Death of the Prophet Muhammad 632
– Trade follows the spread of the Muslim faith to
• China, Mongolia, Spain, Mali, and many other places.
WORLD TRADE 1500 - 1800
• 1500-Europe lags culturally and economically
• Italian trade with Levant through Venice triggers the
Renaissance.
• European discovery voyages find many surprising
civilizations.
• Plundering, conquest, and the spread of Christianity
• 10-12 million slaves were shipped from Africa & South
America to North America
– more than 2 million die en route
WORLD TRADE 1500 - 1800
• INDUSTRIAL REVOLUTION
– 17th – 20th centuries
– Manufacturing capacity develops
– Need for power generation develops
– Need for labor and productivity develops
• Adam Smith – The Wealth of Nations, 1776
• Specialization and Division of Labor
• Theory of Absolute Advantage
• Theory of Comparative Advantage
MERCANTILISM
• A 16th century economic thought which contended
that nations should export more than they import.
• It is the government’s responsibility to create an
environment that promotes the advance of
mercantilism.
MERCANTILISM AND ADAM SMITH
• He contended that a laissez-faire [no interference]
government approach to trade was superior since it let
the market forces address the issues.
Adam Smith – An Inquiry into the Nature and
Causes of The Wealth of Nations, 1776
• The beginning of classical economics
• The invisible hand [free market]
• Some basic assumptions of economics
– Economic man [rational economic behavior]
– Perfect competition: symmetry [equal power
of competitors]
– Perfect market knowledge
– Equilibrium [the magic point of supply and
demand]
– Opportunity cost
Specialization and Division of Labor
Adam Smith
• The division of labor represents a
qualitative increase in productivity.
• Specialization leads to greater skill and
greater productivity of the workers.
One man draws out the wire, another
straightens it, a third cuts it, a fourth points it, a
fifth grinds it at the top for receiving the head; to
make the head requires two or three distinct
operations; to put it on is a peculiar business, to
whiten the pins is another; it is even trade by
itself to put them into the paper.
-The Wealth of Nations, Adam Smith, 1776
THEORY OF ABSOLUTE ADVANTAGE
Adam Smith
• Countries have advantages and / or disadvantages in
– labor,
– skills,
– and natural resources
as they relate to the total cost of production.
THEORY OF ABSOLUTE ADVANTAGE
Adam Smith
A country should export those products which it can produce at
lower cost than others, and it should import those products
which can be produced at lower cost by others. (Adam Smith,
Wealth of Nations)
Hypothetical Example: (for a given level of resource input)
Product
Computers
US
20
Japan
10
---- or ----
Automobiles
10
20
Therefore: What should the US produce and what should Japan
produce?
THEORY OF COMPARATIVE ADVANTAGE
Relative production costs are more meaningful in
determining what trade should take place than absolute
production costs. Even if a country has an absolute
advantage in the production of all products, it should
produce those products for which it has the greatest
comparative advantage and it should import other
products.
-David Ricardo, 1817
THEORY OF COMPARATIVE
ADVANTAGE EXAMPLE
PRODUCT
US
JAPAN
US COMPARATIVE
ADVANTAGE
Computers
20
10
20:10 or 2:1
20
30:20 or 1.5:1
OR
Automobiles
30
Therefore: What should the U.S. produce and what should
Japan produce?
WORLD TRADE 1500 - 1800
• INDUSTRIAL REVOLUTION [15th – 16th
centuries]
– An increased need for raw materials
– Why was colonization needed for
• Resources
• Markets
• INDUSTRIAL REVOLUTION [17th – 20th
centuries]
– Development of trading centers
• London, Marseilles, Seville, and Constantinople
Which is now called ___ ?
WORLD TRADE 1800 - 1914
• Americas independence broke up European empires.
• British open markets for the products of new
manufacturing industries and secure supplies of
needed raw materials.
WORLD TRADE 1800 - 1914
• The world divided into metropolitan [trading] centers
and colonial dependencies.
• Advances in communications and transportation
increase the volume and speed of trade. Sound
familiar?
THE WORLD IS NOT AS IT SEEMS
Africa compared to the Former Soviet Union
The former Soviet
Union was 8.7 million
square miles
Africa is 11.6 million
square miles 33 % LARGER! Compare this to the Peter’s projection.
ECONOMIC GEOGRAPHY
1998 Per Capita Income
1998 Population
CHINA
SINGAPO
RE
HONG KONG
INDIA
China
Hong Kong, China
India
Singapore
China
Hong Kong, China
India
Singapore
Notice the difference in population and per capita income.
Just because a country has a lot of people does not mean it
has a large market for your products. If you are dealing with
consumer products, disposable income is a better measure
than per capita income.
COUNTRY ECONOMIC STRUCTURE
INDUSTRIALIZED
INDUSTRIALIZING
G8
$35,000
PER CAPITA+
INCOME
INDIA
$19,999
MEXICO
RAW MATERIAL
EXPORTING
SUBSISTENCE
BRUNEI - OIL
$11,999
COSTA RICA - BANANAS
AFGHANISTAN
ETHIOPIA
This is an example of combining scales—level of development
and per capita income.
$5,000
$100
INDUSTRIALIZED NATIONS
G8
PEOPLES LIFESTYLE = ?
INCOME = ?
LIVING CONDITIONS = ?
INFRASTRUCTURE = ?
VALUE-ADDED CAPABILITIES = ?
WORLD HOT SPOTS
Air Security International
http://www.airsecurity.com/hotspots/HotSpots.asp
• Review all hot spots for the current day.
• This is one of many private and public groups that
provide daily updates on troubled areas of the world.
INTERNATIONAL MARKETING / COMMERCE
SECTION 2A
CULTURAL ISSUES - 1
ALAN L. WHITEBREAD
CULTURE: DEFINITIONS
• Culture is a set of beliefs and values that are
passed from generation to generation in a
society.
• Culture is like an iceberg—easy to observe the
obvious items, but most of it is not easily
noticed or observed.
CULTURE
• Culture exists but is rarely discussed in its
own environment.
• Cultural relativism is the idea that any
individual’s behavior and beliefs make sense
in their native culture.
• Ethnocentrism describes looking at the
world from your cultural viewpoint.
– Being ethnocentric could cause you to introduce
an inappropriate product or marketing mix
because you did not adapt it to the other culture.
SOME CHARACTERISTICS OF
CULTURE
• Culture defines acceptable behaviors.
• Culture limits choices of products, channels, promotion
appeals, and marketing efforts.
• The work ethic and labor laws come from the native
culture.
• Culture is a shared meaning system and set of social
expectations that is always slowly evolving.
SOME CHARACTERISTICS OF
CULTURE
• Culture develops common habits and
thoughts, simplifying communication.
– Think about conversations about football [U.S.]
or soccer in other countries.
• Culture is slowly learned over a lifetime.
– Adaptive behavior occurs when a person
changes a behavior pattern to be constructive.
• Don’t stand with your arms folded across your chest at
an international trade show as it is viewed as negative
not constructive behavior.
– Enculturation or socialization
• When you live in another culture for some time you learn
it through acculturation.
SOME CHARACTERISTICS OF
CULTURE
• Cultures may have very different behaviors in the
same situation.
– Cultural differences can easily be seen in the behavior
of two people from two different cultures.
– Each culture defines acceptable and unacceptable
behavior.
• Gestures
– Culture’s impact on behavior also affects buyer
behavior and consumption patterns.
SOME CHARACTERISTICS OF
CULTURE
• Culture goes from generation to generation with little
change. Enduring cultures perpetuate themselves and
resist change.
• Culture is the set of generations of experiences over
many centuries. Different cultures adapt to change at
different rates.
HOW WOULD YOU DIFFERENTIATE
ONE CULTURE FROM ANOTHER?
•
•
•
•
•
•
•
ART, SCULPTURE, and ARCHITECTURE
AUTHORS and POETS WORKS
DANCE, FESTIVALS, and FASHION
EDUCATION
MUSIC and THEATRE
PHILOSOPHY
RELIGION
• Use examples from your travels.
HOFSTEDE’S CULTURAL DIMENSIONS:
117,000 IBM employees in 88 countries
• #1 – INDIVIDUALISM: The degree to which the
individual’s interests are more important than those
of the group.
– Low [Collective]
• Ecuador, Guatemala, Japan
– High [Individual]
• U.S., Australia
• #2 – MASCULINITY: The degree to which male
dominance is accepted.
– Low [Feminine]
• Finland, Norway, Sweden
– High [Masculine]
• Austria, Italy, Japan, Mexico
HOFSTEDE’S CULTURAL
DIMENSIONS
• #3 – UNCERTAINTY AVOIDANCE: The degree to which
people deal with ambiguous or uncertain situations and
have created beliefs and institutions to avoid them.
– Low [Risk Accepting]
• Denmark, Great Britain, Jamaica, Singapore, Sweden, U.S.
– High [Risk Averse]
• Argentina, Greece, Israel, Italy, Japan, Portugal
• #4 – POWER DISTANCE → EQUALITY : The acceptance
of an unequal distribution of power of entities.
– Low [Egalitarian; boss gains trust of employees]
• Australia, Austria, Denmark, Israel, Canada, U.S.
– High [Hierarchical; the boss must be obeyed]
• Brazil, China, India, Malaysia, Mexico, Panama, Turkey
MATERIAL ACHIEVEMENT
• The degree to which the dominant values of a society
are money, personal possessions, and success.
PERSONAL SPACE IN THE U.S.
INTIMATE
PERSONAL
SOCIAL
PUBLIC
DISTANCE
DISTANCE
DISTANCE
DISTANCE
<18”
18” TO 48”
48” TO 96”
96” TO 120”
THE GREATER THE POWER DISTANCE SCORE,
THE GREATER THE SPACING.
THIS WOULD BE TRUE FOR COLOMBIA,
PAKISTAN, THAILAND, AND SIMILAR SCORES.
THE NOTION / PERCEPTION OF TIME
Past
United States
Russia
Future
Past PresentFuture
Japan
China
Present
Past
Past
Present
Present
Future
Future
Americans easily link past and present and future when discussing a topic, while
Russians tend to focus on past or present or future.
For more detailed information see Riding the Waves of Culture, Trompenaars and Hampden-Turner, 2nd
edition, 2000
ARRIVING FOR THE FIRST TIME
- CULTURE SHOCK !
•
•
•
•
•
•
•
LANGUAGE
DRESS
ETIQUETTE
MOOD
LONELINESS – an outsider
THEIR NOTION OF TIME
DECISION-MAKING PROCESSES
CULTURE SHOCK!
What are the other culture’s …
– SYMBOLS
– HEROES
– RITUALS
– VALUES
– CUSTOMS
– COLORS
– TRADITIONS
– RELIGIONS
– SUPERSTITIONS
– DESIGN ISSUES
– HOLIDAYS
– LAWS
WHAT DO YOU NEED TO KNOW TO
EFFECTIVELY DEAL WITHIN A DIFFERENT
CULTURE?
• Adapt products, processes, and
services to local markets.
• Build relationships.
• Embrace the local culture.
• Employ locals.
• Help employees understand your
culture.
COMMUNICATIONS TIPS
• Be direct in low-context cultures.
– U.S. and Northern Europe
• Be less direct in high-context cultures.
– Japan, Latin America, and Saudi Arabia
• Always refer to months when writing and
how to write dates.
• Avoid references to weekend, eight-hour
day, dinner time and lunch time.
– Work, break, and lunch hours and what different meals
are called vary widely.
ASPECTS OF
COMMUNICATION
• Verbal
– Direct or indirect
– Style [Business or personal]
– Humor
• Nonverbal
– Written
– Gestures
– Style [Business or personal]
THE FORCES OF CULTURE:
LANGUAGE
• Communication using words and symbols with rules
for their assembly into sentences or their equivalent.
• Language plays a large role in the methods of
thinking.
• Non-verbal forms of communication [e.g., body
language, gestures, ...] and their successful
interpretation are often even more culturally
dependent.
MOST POPULAR LANGUAGES
• ENGLISH*, CHINESE MANDARIN
– Over 1,000,000,000 people
– English is the fastest-growing language
• SPANISH and PORTUGUESE
– Over 500,000,000 people
• RUSSIAN, BENGALI, ARABIC
– Over 200,000,000 people
COMMUNICATION TIPS
• Write at an appropriate level.
• Speak clearly, simply, and slowly.
• Make your counterpart feel comfortable with your
language—be helpful and empathetic.
• Use highly qualified native translators [written] and
interpreters [spoken].
– Understand levels of interpreter expertise
– Understand interpreter specialization
COMMUNICATING EFFECTIVELY
• Avoid all
–
–
–
–
–
–
metaphors [he's a bear],
clichés [every man for himself],
jargon [HACCP testing],
idioms [you're right on the right track],
and slang [humungous],
difficult or rarely used words and / or phrases and / or
meanings.
• Remember, literal translations often don't make sense.
NONVERBAL COMMUNICATION
• Facial expression
– Head shaking: agreement / disagreement
• Gestures
– Europe – men greeting by kissing on the cheek
three times.
– U.S. = ?
• Posture
– Sitting back in the chair: listening, not highly
interested
– Leaning forward in the chair: attentive and
interested
NONVERBAL COMMUNICATION
• Tone of voice: authority to empathy
• Dress: expensive = power
– Expensive: power
• Navy blue thin pin striped suit: authority / control
• Crying: sadness / joy
• Time
– Ladies: How long would you wait for a date?
– Men: How long will you wait for your date to get ready?
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 2B
CULTURAL ISSUES - 2
ALAN L. WHITEBREAD
MEETING AND GREETING
•
•
•
•
•
•
•
Making an initial contact
The first meeting VIDEO: Cinzano
Names
Titles / rank
Showing respect
Formal distance
Proper gifts and gift-giving
•
Be careful of improper gifts and gift treatment
CONVERSATION
• Proper topics
• Topics to avoid include
– ?
• The role of humor
• Be direct or not?
NEGOTIATIONS
• Typical negotiating tactics
–
–
–
–
Which style?
How is compromise viewed?
How do you overcome an impasse?
What is the normal bargaining process?
SOCIAL
• What is the normal role of
– women in business?
– the importance of respect?
– individuality?
• What is the importance of the person vs. the group?
•
What social barriers exist?
THE FORCES OF CULTURE:
THE FAMILY
• A related group of people that influences
and is influenced by the culture around it.
• The family is the primary method by
which culture is transmitted from one
generation to another.
– In early years, children primarily learn from
their parents.
• Cultural changes have changed the nature
of families.
– Review the history of women working outside
the home in the U.S.
THE FORCES OF CULTURE:
REFERENCE GROUPS
• Can be peer groups or role models
• Provide guidance for behavior that is not specifically
part of the cultural norm
• Very important to socially conspicuous behavior
– clothing styles
– country examples of attire are …
EATING AND ENTERTAINING
For Business vs. in the Home
Timeliness
Manners
Host expectations
Guest expectations
MANAGEMENT STYLE
Problem solving method
• Do they adapt to change?
•
Do they commonly work as a group?
• How do they view competition?
• How do they handle disagreements?
• What else?
BUSINESS MEETINGS
•
•
•
•
•
•
Timeliness
Structure
Duration
Breaks
Food and drink service
Presentation style
CULTURE: GIFT GIVING
• DEPENDS ON
–
–
–
–
Country
Local practices and superstitions
Nature of your business
Level of the contact
• e.g., the more important the individual, the nicer the gift
CULTURE: GIFT GIVING ERRORS
• KOREA
– Do not open your gift in private.
• CHINA
– Clocks are a symbol of bad luck.
– 4 is generally thought to be unlucky.
• MUSLIM NATIONS
– Liquor is usually forbidden.
• ALL SE ASIA COUNTRIES
– 13 is generally unlucky.
– Knives and scissors represent severing
relationships.
CULTURE: ENTERTAINMENT
• Chinese
– Entertainment ranks higher than gifts.
• Japanese
– Entertainment is far less important than gifts.
CULTURE: LITTLE THINGS
• BUSINESS CARDS
– 1 or 2 sides?
– You may show university degrees in Asia.
– How should one exchange and / or present one’s card?
AMERICAN CULTURE
•
•
•
•
•
•
•
Value
Language
Myth
Custom
Ritual
Law
Materialistic
•
•
•
•
•
•
•
Personal freedom
English
Santa Claus
Daily bath
Star Spangled Banner
Consumer protection
Diamond engagement
rings
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 3A
ORGANIZATION ISSUES AND EXPORTER CHECKLIST
ALAN L. WHITEBREAD
SECTION 3
• This section is divided into two parts and each one
has a set of lecture slides.
– This first lecture examines international
business organization and readiness issues.
– The second lecture focuses on keys to
success in international business including
negotiations, sources of export assistance,
and key checks you need to make about
every prospect and customer.
ORGANIZATIONAL GOALS
• The key is to find a structure which allows the
organization to profitably respond to market
differences and dynamics.
– A market difference is something that is not the same as
in another market.
– A market dynamic is something that drives the market.
• Provide examples of market differences and dynamics.
ORGANIZATIONAL GOALS
• TRADE-OFF
– the value of centralization comes from
• knowledge
• planning
• co-ordination
– the value of decentralization comes from
• maximize response flexibility for a local situation
• possibly lose some coordination, implementation, and control
ORGANIZATIONAL STRUCTURE
• Organizational structure is a function of the situation.
• Multinationals generally use a simple, flat organization
structure with few levels of management.
GLOBAL ORGANIZATION STRUCTURES
•
•
•
•
•
•
INTERNATIONAL
GEOGRAPHIC / AREA
PRODUCT
FUNCTIONAL
MARKET / CUSTOMER
COMPLEX
INTERNATIONAL STRUCTURE
CEO or VP
Marketing
U.S.
Central and
South
America
Canada
Europe,
Africa, &
Middle East
Export
Asia
Pacific
Functional areas exist in areas that are large enough to
support them.
ADVANTAGES
DISADVANTAGES
-…
-…
-…
-…
-…
-…
1 - Fill in three advantages and three disadvantages of this structure.
2 – Modify this structure, do the analysis again and compare the
results.
Copyright A. Whitebread, 2001-2007.
GEOGRAPHIC STRUCTURE
VP
M A R K E T IN G
PRODUC T
MANAGER
GROUP 1
PRODUC T
MANAGER
GROUP 2
ADVANTAGES
-SIMPLE STRUCTURE
-LOW COST OF SALES AND
ADMINISTRATION
-DIRECT INTERACTION
EASTERN
S A LES
MANAGER
W ESTERN
S A LES
MANAGER
M A R K E T IN G
COMMUN .
MANAGER
DISADVANTAGES
-NO SPECIALIZATION
-CONTROLLING HOW THE
SALES FORCE SPENDS ITS TIME
-FRACTURED FEEDBACK
-COMPLETE PRODUCTS
KNOWLEDGE REQUIREMENT
Copyright A. Whitebread, 2001-2007.
PRODUCT STRUCTURE
VP
MARKETING
PRODUCT
MANAGER
GROUP 1
PRODUCT
MANAGER
GROUP n
ADVANTAGES
-DRIVEN BY PRODUCT
PURCHASES
-SPECIALIZED KNOWLEDGE
FOR SPECIALIZED PRODUCTS
-HELPS PRODUCTION
SCHEDULING
Copyright A. Whitebread, 2001-2007.
SALES
MANAGER
GROUP 1
SALES
MANAGER
GROUP n
MARKETING
COMMUN.
MANAGER
DISADVANTAGES
-DUPLICATION OF EFFORT
-HIGHER ADMIN. COSTS
-COORDINATION NEEDS
-MAJOR ACCOUNT
PROBLEM WITH MULTIPLE
PRODUCT LINE PURCHASES
FUNCTIONAL STRUCTURE
CEO
Marketing
and Sales
Operations
ADVANTAGES
Finance
and
Accounting
IT
Human
Resources
DISADVANTAGES
-…
-…
-…
-…
-…
-…
1 - Fill in three advantages and three disadvantages of this structure.
2 – Modify this structure, do the analysis again and compare the
results.
Copyright A. Whitebread, 2001-2007.
MARKET / CUSTOMER STRUCTURE
VP
M A R K E T IN G
PRODUC T
MANAGER
GROUP 1
PRODUC T
MANAGER
GROUP 2
N A T IO N A L
S A LES
MANAGER
N A T IO N A L
ACCOUNTS
ADVANTAGES
-DRIVEN BY CUSTOMER TYPE
-SALES MANAGEMENT
CONTROLS FIELD TIME
-IMPROVED FEEDBACK
Copyright A. Whitebread, 2001-2007.
M A JO R
ACCOUNTS
MANAGER
OEM
M A R K E T IN G
COMMUN .
MANAGER
F E D E R AL
G O V 'T .
DISADVANTAGES
-HIGHER SELLING AND
ADMINISTRATIVE COSTS
COMPLEX STRUCTURE - 1
VP
M A R K E T IN G
N A T IO N AL
S A L ES
MANAGER
D IR E C T
S A L ES
MANAGERS
RE S E LLER
S A LES
MANAGER
D IR E C T
M A R K E T IN G
MANAGER
TE LE SA LES
MANAGER
OUTSIDE SALES
ADVANTAGES
-DRIVEN BY CUSTOMER
TYPE
-SPECIALIZED SALES
SKILLS
-VERY DIFFICULT FOR
COMPETITVE ANALYSIS
Copyright A. Whitebread, 2001-2007.
GROUP
PRODUC T
MANAGEMENT
IN T E R N E T
S A LES
MANAGER
N A T IO N A L
ACCOUNTS
INSIDE SALES
ISSUES
-RECLASSIFICATION OF
ACCOUNTS
-WHO GETS THE
ACCOUNT FIRST?
-PRICE STRATEGY AND
IMPLEMENTATION
M A JO R
ACCOUNTS
MANAGER
OEM
M A R K E T IN G
COMMUN .
MANAGER
GOVERNMENT
OUTSIDE SALES
DISADVANTAGES
-REQUIRES A LOT OF
COORDINATION
-INFORMATION IS
WIDELY DISSEMINATED
-HEAVY LOAD ON
MARKETING
COMMUNICATION
COMPLEX STRUCTURE - 2
VP
M A R K E T IN G
N A T IO N AL
S A L ES
MANAGER
D IR E C T
S A L ES
MANAGERS
R E S E L L ER
S A L ES
MANAGER
D IR E C T
M A R K E T IN G
MANAGER
T E L E SA L ES
MANAGER
GROUP
PRODUC T
MANAGEMENT
IN T E R N E T
S A L ES
MANAGER
M A JO R
ACCOUNTS
MANAGER
N A T IO N AL
ACCOUNTS
OEM
M A R K E T IN G
COMMUN .
MANAGER
GOVERNMENT
THIS BECOMES EVEN MORE
COMPLEX WITH
-MANUFACTURER’S REPRESENTATIVES
-CUSTOMER SERVICES
-TECHNICAL SALES SUPPORT
-INTERNATIONAL SALES AND SUPPORT
WHERE DO YOU THINK CUSTOMER SERVICES SHOULD REPORT?
Copyright A. Whitebread, 2001-2007.
THE VALUE OF EXPORTING
•
•
•
•
•
Higher revenues, AUP’s, and profits
Increased volume
Potentially lower AUC
Potential tax advantages
May extend product life cycles
WHY DON’T MORE FIRMS EXPORT?
• They are preoccupied with domestic issues / content
with domestic business.
• International misconceptions
– Fear of the unknown
– Horror stories because of lack of knowledge.
•
•
•
•
I lost money.
I did not get quick results.
It costs too much.
…
INTERNATIONAL ORGANIZATION:
REQUIRED COMPETENCIES
• Knowledge of economic geography markets,
segments, and customers
• Knowledge of industry and competitive forces
• Knowledge of the country and region
INTERNATIONAL CORPORATE
CULTURE
• An multi-national corporation [MNC]
knows changing its culture is an
important part of improving its global
competitiveness.
• MNC Managers accept and embrace the
mission, thus forming a corporate culture.
• Changing the culture of an organization
can be a long and difficult process.
EXPORTER’S CHECKLIST:
THE FIRM
• Why does the firm want to pursue exports?
• Is senior management committed to a multi-year effort
to succeed in international business?
– Including travel, trade shows, samples,
different collateral, IP protection, …, ?
• What are management’s expectations for the export
effort?
– Are they reasonable [size and time]?
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 3B
KEYS TO SUCCESS AND HANDLING INQUIRIES
ALAN L. WHITEBREAD
KEYS TO SUCCESS:
KNOWLEDGE
•
•
•
•
Language, customs, lifestyles, culture, …
Control with limited flexibility
Meeting standards and regulations
Competence in international trade
KEYS TO SUCCESS:
COMMITMENTS AND GOALS
•
•
•
•
The long-term commitment of senior management
A realistic set of goals
A logical and defendable marketing plan
Always protect all your intellectual property
KEYS TO SUCCESS:
BUSINESS RELATIONSHIPS
• Be patient—it takes time to establish yourself, develop
trust, and build relationships.
• Be very careful selecting international resellers and /
or representatives.
KEYS TO SUCCESS:
MARKETING AND SALES
• FOCUS - do not chase every opportunity.
• Build programs that provide resellers with the support
tools to do a great job.
• Communicate with your customers in the language of
their preference – frequently!
• Seek expert advise and assistance—especially in the
specialized fields of
– contract law, IP, packaging and labeling,
documentation, language, …
KEYS TO SUCCESS:
INTERNATIONAL
NEGOTIATIONS
Secular-rational values
[modern, rational, non-religious]
Western Europe
Eastern Europe
Self-expression
values
Survival values
U.S.
Australia
Canada
South America
The longer the arrow, the
greater the difference in
values.
Africa
Middle East
Traditional values
[religion, prior behavior]
KEYS TO SUCCESS:
PRINCIPLES OF NEGOTIATIONS
• Conflicts of interests are likely.
– Why?
• All parties are seeking resolution.
– Why?
• Seek an acceptable solution for all.
– Do not seek the best solution for one.
– Why?
KEYS TO SUCCESS:
NEGOTIATION PERSPECTIVES
1.
2.
3.
4.
5.
6.
7.
Detail the situation by likely scenarios.
Develop and rank alternative outcomes.
Determine the rules of the game.
What process do we want to use?
What type[s] of interaction do we want?
What tactics will be employed?
How will power be used?
KEYS TO SUCCESS:
NEGOTIATION TYPES
•
•
•
•
•
Heavy-handed
Collaborative
Sharing
Accommodating
Competitive
COMPETITIVE NEGOTIATION
Competitive negotiation is composed of three major
areas.
•Characteristics involve how the negotiation is to proceed.
•Tactics are the tools you use to accomplish you goals.
•Expressions are ways of expressing your desires
CHARACTERISTICS
[Control is key, type of behavior to be used, how to
force concessions, …]
TACTICS
[Bluffs, promises, rewards, threats, …]
EXPRESSIONS
[Using words to deliver strong messages, …]
COMPETITIVE NEGOTIATION
•
That is not the response we
need. You will have to do
better if we are to continue
doing business with you.
•
There does not appear to be
a quick solution to this
issue, so accept our offer
this time and we will accept
yours the next time.
•
This is a large amount of
business that will help drive
your costs down. We
should see more of that
reflected in our price.
• How do you effectively
respond to each of these?
WHY ARE THESE STATEMENTS NOT
TRUE FOR AN AMERICAN BUSINESS?
• We can sell our products to anyone we want,
anywhere in the world.
• We know our customers and how to contact them.
That is all that the law requires.
• We only sell our products domestically so export laws
do not apply.
WHY ARE THESE STATEMENTS NOT
TRUE FOR AN AMERICAN BUSINESS?
• We sell to many countries around the world so we are
exempt from U.S. export control laws.
• Once our buyer pays us we do not have to be
concerned about what they do with the product.
WHY ARE THESE STATEMENTS NOT
TRUE FOR AN AMERICAN BUSINESS?
• 3PL’s do our international shipping so they [not us]
are responsible for any violations.
• We do not make anything dangerous so the Export
Administration Regulations do not apply.
WHY ARE THESE STATEMENTS NOT
TRUE FOR AN AMERICAN BUSINESS?
• We keep the necessary important records for our
business. The government does not care about minor
details.
• We do not pay bribes to foreign officials so FCPA does
not apply; but we provide almost any entertainment
they want when they are here.
SPECIAL NOTICE!
• As an American business, you have a legally required
obligation to know your customer, and potentially who
your customer sells it to, plus how the product will be
used!
EXPORT ASSISTANCE
•
US DEPARTMENT OF COMMERCE
– US Foreign and Commercial Service
• Product / Service / Industry Specialists
• Country Desk Officers
– Collect data regarding regulations, tariffs, business practices,
economic and political developments, market size and growth
and trade data
• Country Service Posts / Commercial Service Offices
– Foreign U.S. DOC offices that can provide business
assistance.
• Bureau of Industry and Security
– Mission: Advance U.S. national security, foreign policy, and
economic objectives by ensuring an effective export control
and treaty compliance system and promoting continued U.S.
strategic technology leadership.
– See http://www.bis.doc.gov
• National Institute of Standards and Technology [NIST]
– Manufacturing Extension Program
– See http://www.mep.nist.gov/about-mep/overview.html
• National Oceanographic and Atmospheric Administration [NOAA]
EXPORT ASSISTANCE
• US DEPARTMENT OF COMMERCE
– International Trade Administration
• Mission: to create prosperity by
strengthening the competitiveness of
U.S. industry, promoting trade and
investment, and ensuring fair trade and
compliance with trade laws and
agreements.
• See http://www.trade.gov/index.asp
• SBA’s SBDC International Trade Centers [ITC] and U.S.
Export Assistance Centers [USEAC]
– A resource listing may be found at
http://www.sba.gov/gopher/BusinessDevelopment/International-Trade/Guide-ToExporting/trad14.txt
– http://www.sba.gov/oit/export/useac.html
EXPORT ASSISTANCE
• World Trade Centers [WTC]
– bring businesses and government agencies together to
increase foreign trade.
– It is an information hub for
• market research, WTCA OnLine matchmaker, trade shows
& exhibit space, business services, trade education,
group trade missions, and WTC clubs.
– See http://world.wtca.org/portal/site/wtcaonline
• State government agencies
• Local trade associations
EXPORT ASSISTANCE
• US DEPARTMENT OF AGRICULTURE
– Agriculture commodity & marketing programs
•
•
•
•
•
Dairy
Grain & Feed
Tobacco, Cotton, & Seed
Forest Products
http://www.fas.usda.gov/outreach/Matrix.pdf
EXPORT ASSISTANCE
•
•
•
•
•
•
US DEPARTMENT OF COMMERCE
US DEPARTMENT OF AGRICULTURE
US DEPARTMENT OF STATE
US DEPARTMENT OF THE TREASURY
US AID
OVERSEAS PRIVATE INVESTMENT CORPORATION
[OPIC]
• EXIMBANK
EXPORT ADMINISTRATION
REGULATIONS [EAR]
• The EAR is the complete set of rules and regulations
that control what can be exported, to whom, and what
documents are required for compliance.
EXPORT ADMINISTRATION
REGULATIONS [EAR]
U.S DEPARTMENT OF COMMERCE
-Bureau of Industry and Security [BIS] controls EAR
including “dual-use” items.
-The Census Bureau controls the balance of the
export process, i.e. SED’s, etc.
-U.S. Patent and Trademark Office
U.S. TREASURY DEPARTMENT
-Office of Foreign Assets Control [OFAC] oversees
embargo and sanction lists – OFAC regulations.
EXPORT ADMINISTRATION
REGULATIONS [EAR]
U.S. STATE DEPARTMENT
-Directorate of Defense Trade Controls (DDTC)
controls defense articles, defense services, and
related technical data including most space related
agencies – ITAR
OTHER U.S. GOVERNMENT AUTHORITIES
-U.S. DEPARTMENT OF HOMELAND SECURITY.
-Customs and Border Protection [CBP]
-U.S. DEPARTMENT OF ENERGY
-NUCLEAR REGULATORY COMMISSION
BUREAU OF INDUSTRY AND SECURITY
Export Administration Regulations [EAR] – Part 734
• Items subject to the EAR include all
–
–
–
–
Items moving into or through the U.S., and
U.S. origin items, parts, and components, and
In quantities exceeding de minimus levels, and
Certain items produced outside the U.S. using U.S.
origin technology.
• Items excluded from the EAR are exclusively
controlled by other U.S. departments or agencies.
• The complete export regulations administration
database may be found at
– http://www.access.gpo.gov/bis/ear/ear_data.html
BUREAU OF INDUSTRY AND SECURITY
Dual-Use Product
• A dual-use product is any item that may have both
commercial and military or proliferation applications.
• Purely commercial items without an obvious military
use are also subject to the EAR due to potential
alternative uses.
BUREAU OF INDUSTRY AND SECURITY
Export Administration Regulations
[EAR]
• KNOWING VIOLATIONS
– Corporation - A fine of up to the greater of $50,000 or
five times the value of the exports for each violation.
– Individual - A fine of up to the greater of $50,000 or five
times the value of the exports or imprisonment for up to
five years, or both, for each violation.
• WILLFUL VIOLATIONS
– Corporation - A fine of up to the greater of $1,000,000 or
five times the value of the exports for each violation.
– Individual - A fine of up to $250,000 or imprisonment for
up to ten years, or both, for each violation.
BUREAU OF INDUSTRY AND SECURITY
Export Administration Regulations
[EAR]
• ADMINISTRATIVE SANCTIONS
• Denial of export privileges [Denied Persons List]
– See http://www.bis.doc.gov/DPL/Default.shtm for more
details
– The exclusion from practice; and / or
– The imposition of a fine of up to $12,000 for each
violation, except that the fine for violations involving
items controlled for national security reasons is up to
$120,000 for each violation.
BUREAU OF INDUSTRY AND SECURITY
Office of Antiboycott Compliance
• U.S. companies receive requests to engage in
activities that further or support the boycott of Israel
or blacklisted companies.
• Compliance with such requests may be prohibited by
the Export Administration Regulations [EAR] and may
be reportable to the Department of Commerce.
•
See
http://www.bis.doc.gov/complianceandenforcement/antiboy
cottcompliance.htm for more details
BUREAU OF INDUSTRY AND SECURITY
Red Flag Indicators - 1
• The customer or its address is similar to one of
the parties found on the US DOC’s Denied
Person’s List [DPL].
• The product's capabilities do not fit the buyer's
line of business.
• Routine installation, training, or maintenance
services are declined by the customer.
• Level of product sophistication far greater than
usual in the intended country.
BUREAU OF INDUSTRY AND SECURITY
Red Flag Indicators - 2
• A freight forwarding firm is listed as the
product's final destination.
• When questioned, the buyer is evasive and
especially unclear about whether the purchased
product is for domestic use, for export, or for reexport.
• Cash only transactions.
• See
http://www.bis.doc.gov/complianceandenforcement/redflagindicators.ht
m
for more examples.
BUREAU OF INDUSTRY AND SECURITY
Entity List
• The Export Administration Regulations [EAR]
provide that the Bureau of Industry and Security
may inform exporters, individually or through
amendment to the EAR, that a license is
required for exports or reexports to certain
entities. This is known as the Entities List.
• These end users have been determined to
present an unacceptable risk of diversion to
developing weapons of mass destruction or the
missiles used to deliver those weapons.
• http://www.bis.doc.gov/Entities/Default.htm
BUREAU OF INDUSTRY AND SECURITY
Unverified List
• The Unverified List includes names and countries of
foreign persons who in the past were parties to a
transaction with respect to which BIS could not
conduct a pre-license check (“PLC”) or a postshipment verification (“PSV”) for reasons outside of
the U.S. Government’s control. Any transaction to
which a listed person is a party will be deemed by BIS
to raise a “red flag” with respect to such transaction
within the meaning of the guidance set forth in
Supplement No. 3 to 15 C.F.R. Part 732. The “red flag”
applies to the person on the Unverified List regardless
of where the person is located in the country included
on the list.
•
http://www.bis.doc.gov/enforcement/unverifiedlist/unverified_parties.html
OFFICE OF FOREIGN ASSETS CONTROL [OFAC]
Sanctions Program and Country Summaries
• Sanctions Program and Country Summaries
• Balkans
Overview of Sanctions
Guidelines and Information
• Burma (Myanmar)
Overview of Sanctions
Guidelines and Information
• Cuba
Overview of Sanctions
•
http://www.treasury.gov/offices/enforcement/ofac/programs/
U. S. DEPARTMENT OF STATE
List of Debarred Parties
• Persons or entities with which no American person or
entity can conduct business.
•
http://www.pmddtc.state.gov/compliance/debar.html
•
http://www.state.gov/index.htm is for all DOS items.
•
One of several lists that are combined as the Excluded
Parties List System [EPLS] at www.epls.gov by GSA.
THE SALES CYCLE AND
PROSPECT FUNNEL
MARKETING
DEPARTMENT LEADS
VS. COLD CALLS
PROSPECT
EFFECTIVENESS
APPROACH & QUALIFY
NEEDS &
VALUE
FAB
REAL, FALSE, STALLS
PRESENT
DEMONSTRATE
QUALIFIED !
HANDLE OBJECTIONS
HOT PROSPECT
TRIAL & ACTUAL CLOSE
COGNITIVE DISSONANCE
CLOSE
CUSTOMER
FOLLOW-UP
CONTINUING CUSTOMER
Copyright A. Whitebread, 2001-2007.
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 4A
ECONOMIC GEOGRAPHY - 1
ALAN L. WHITEBREAD
ECONOMIC ENVIRONMENT
• Economic potential
– Markets in every region of the world are potential
targets for most firms.
• Need to find people and / or firms willing and able to buy
• Understand the purchasing power of developed vs.
underdeveloped nations
• It is a selection process.
• The extent of development in a nation or region is
especially important.
ECONOMIC ENVIRONMENT
• Economic analysis
– There is a tremendous amount of statistics, charts,
graphs, reports, etc. are available
• www.cia.gov
• www.census.gov
• U.S. Department of Commerce Country Commercial
Guides may be found at
– http://www.buyusa.gov/home/export.html
• Most governments
• International organizations
– UN
– World and regional development banks
– Many, many more good sources of information
UNCTAD
• United Nations Conference on Trade and Development
[UNCTAD] – Trade Analysis and Information System
[TRAINS]
• TRAINS based on UN Tariff and Market Access database
[UN TARMAC] at http://www.unctad-trains.org
– Imports, tariffs, para-tariffs and non-tariff measures at the
national tariff level At the detailed commodity level of the
national tariff [HS 6-digit minimum]
– Approximately 119 member nations
• COMTRADE [UN Statistics Division] - World Integrated
Trade Solution [WIT]S is the name of the software that
integrates information from [ http://wits.worldbank.org/wits ]
– Exports and imports by detailed commodity code and
partner country with values in USD
– Started in 1962, approximately 130 nations
UNCTAD
• WTO maintains
– Integrated Database [IDB]
– Consolidated Tariff Schedule [CTS]
– MFN applied, preferential and bound tariffs at the national
level, imports in value and quantity
ECONOMIC DRIVERS
• Key elements of world trade are
– Capital flows
• Volume of capital movements
– >$100,000,000,000 per year on the London Exchange
– Productivity growth
• Output continues to grow faster than employment in
developed countries.
– What do each of these mean for global employment?
ECONOMIC DRIVERS
• Key elements of world trade
– Use of natural resources
• Selling a country’s resources
– What are the short term and long term implications?
• U.S. buying [not using its] resources
– What are the long term implications?
– Concentration of income
• Developed countries have a disproportionate [and
proportionately growing] share of total wealth
• What is your most likely world scenario 30-50 years in the
future?
COMPARING COUNTRIES
• What are the bases for comparison?
• What are the key factors in the comparison?
• How will a decision be made?
INCOME GAPS
Annual
per
capita
income
Developed nations per capita income
The difference
in 2050 is more
than twice the
amount in 2005.
Developing nations per capita income
2000
2025
What are the implications of this projection?
2050
COMPARING COUNTRIES
Malaysia Indonesia Singapor
e
Population [millions]
22.6
231.3
4.5
62.3
$680 $24,740
$1,970
GDP / capita
$3,640
GDP [$billions]
82.264 157.284
Computers / 100
people
Thailand
13
SOURCES: World Bank, World Health Organization, International
Telecommunications Union, and the International Road Federation,
CIA WorldFactbook 2002
1
111.330 122.731
51
3
COMPARING COUNTRIES
Malaysia Indonesia Singapor
e
Population [millions]
GDP / capita
Mobile phones / 100
people
KWH per capita
Cars / 1000 people
Thailand
22.6
231.3
4.5
62.3
3,640
680
24,740
1,970
31
3
72
12
2,474
345
6,641
1,352
147
12
122
27
SOURCES: World Bank, World Health Organization, International
Telecommunications Union, and the International Road Federation, CIA
WorldFactbook 2002
SUBJECTIVE COMPARISONS
• When you are analyzing non-numeric data you have
several different issues to consider.
– A fixed point of reference is critical.
– Non-numeric data is hard to compare.
– You must develop a meaningful scale.
SUBJECTIVE COMPARISONS:
How would you compare these?
Describe
the level of
technology
Egypt
Mexico
?
?
Netherland
s
?
Describe
?
?
?
the culture
? Select from: primitive, simple, moderate, advanced
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 4B
ECONOMIC GEOGRAPHY - 2
ALAN L. WHITEBREAD
COUNTRY ECONOMIC STRUCTURE:
Combining two scales
INDUSTRIALIZED
INDUSTRIALIZING
G8
$35,000+
PER CAPITA
INCOME
INDIA
$19,999
MEXICO
RAW MATERIAL
EXPORTING
SUBSISTENCE
BRUNEI - OIL
$11,999
COSTA RICA - BANANAS
AFGHANISTAN
$5,00
0
ETHIOPIA
$100
The World Bank scale can be found at Data & Statistics: Country Classification at
http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20420458~menuPK:64
133156~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html
SUBSISTENCE ECONOMIES
AFGHANISTAN
ETHIOPIA
PEOPLE =
INCOME =
LIVING CONDITIONS =
INFRASTRUCTURE =
VALUE-ADDED CAPABILITIES =
STAGE OF
DEVELOPMENT
PER CAPITA
INCOME
It is common for
lesser developed
nations to be in very
G8 different positions on G8
different scales.
INDIA
BRAZIL
MEXICO
MEXICO
BRUNEI - OIL
CHINA
COSTA RICA BANANAS
INDONESIA
AFGHANISTAN
CHAD
ETHIOPIA
INDIA
PURCHASING POWER PARITY (PPP)
• CONCEPT
– The exchange rate should approximate a rate that
equalizes the price of an identical basket of goods and
services in different nations.
PURCHASING POWER PARITY (PPP)
• THE WAY IT WORKS
– A McDonald’s Big MacTM is produced in about 120
countries.
– The Big Mac PPP is the exchange rate that would have a
hamburger cost the same in every country.
– Comparing these prices with actual rates tends to signal
if a currency is undervalued or overvalued.
• Purchasing Power Parity
– Divide the local price by the American price.
COMMUNICATIONS INFRASTRUCTURE
• Telephone Companies
• Internet Service Providers
• Cable Systems
• Satellite Systems
UTILITIES INFRASTRUTURE
• Energy
• Water
• Sewer
• Environmental
– Garbage / landfill
– Recycling
UN WORLD POPULATION PROJECTIONS
U.S. Census Bureau, international Data Base, April 2005 version
11,000,000
10,000,000
Medium
9,000,000
o
8,000,000
High
Low
o
7,000,000
o
20
00
20
05
20
10
20
15
20
20
20
25
20
30
20
35
20
40
20
45
20
50
6,000,000
o
Why are they different?
What does each scenario imply
on a global basis?
to your firm?
POPULATION PYRAMIDS
http://www.census.gov/ipc/www/idbpyr.html
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 5A
GLOBAL STRATEGY, PLANNING, AND PROGRAMS
ALAN L. WHITEBREAD
COMPETITIVE ANALYSIS & STRATEGY
•
•
•
•
•
Industry Analysis
National Competitive Advantages
Competitive Advantage & Strategic Models
Strategic Positions
Role of Competitive Innovation
PORTER’S FIVE FORCES MODEL:
Industry Analysis
What is the
threat of
significant new
entrants?
What is the
bargaining
power of your
key suppliers?
What is the
amount of rivalry
among existing
competitors?
What is the
threat of
substitute
products and/or
services?
See Michael E. Porter, Competitive Strategy, New York Free Press, 1980, for
more information.
What is the
bargaining
power of your
key customers?
DIMENSIONS OF GLOBAL
COMPETITION
• Success in global markets is determined by your
ability to establish competitive advantages
– On a regional or national level
– On an industry level
– And on a firm level
• You must clearly understand
– Competitive forces in the industry and
– Your firm’s position within an industry
NATIONAL COMPETITIVE ADVANTAGE
All forces interact in various ways in different situations.
STRATEGY,
STRUCTURE,
AND RIVALRY
In country
FACTORS THAT
AFFECT THE
BUSINESS
The nation’s
position in
factors of
production.
DEMAND
FUNCTIONS AND
CHARACTERISTICS
In country
RELATED AND
SUPPORTING
INDUSTRIES
In country
COUNTRY-SPECIFIC ADVANTAGES
INCLUDE
• COST ADVANTAGE
– Due to materials or supply chain advantages
• LABOR ADVANTAGE
– Especially in underdeveloped nations
• SHIPPING HUB
– Netherlands for Europe
• INFRASTRUCTURE
– Especially industrialized nations
• RELATED / SUPPORTING INDUSTRIES
• COUNTRY-OF-ORIGIN
– May be significant
COUNTRY-SPECIFIC ADVANTAGES:
DEMAND CONDITIONS
• Important domestic-market demand components
include
– Size of domestic demand
– Composition of domestic demand
– The forces behind, and pattern of, domestic demand
growth
– How will domestic customers pull the products into
foreign markets?
– Are you increasing your domestic sales?
COUNTRY-SPECIFIC ADVANTAGES:
RELATED & SUPPORTING INDUSTRIES
• AN ADVANTAGE WHEN THE FIRM’S HOME COUNTRY
/ MARKET HAS INTERNATIONALLY COMPETITIVE
INDUSTRIES
– Industries that are related to or in direct support;
– Suppliers providing inputs to downstream industries;
– That function so that contact and coordination gives
access to foreign markets; and / or
– Have clusters of geographic concentrations of
interconnected companies in a particular field
FIRM STRATEGY, STRUCTURE, AND
RIVALRY
• Differences in management styles, skill sets, and
strategic perspectives create advantages and
disadvantages.
• Domestic rivalry has a strong influence on competitive
advantage because it
– keeps an industry dynamic, and
– creates pressure on all firms to improve and innovate.
• The intensity of competition and quality of competitors
are important.
FIRM-SPECIFIC ADVANTAGES
•
•
•
•
•
•
•
•
INTELLECTUAL PROPERTY
KNOWLEDGE MANAGEMENT
BRAND EQUITY
CONTROL OF MATERIALS / COMPONENTS
DISTRIBUTION CONTROL
CAPACITY
TECHNOLOGY
HUMAN RESOURCES
OTHER FORCES
• GOVERNMENT
– Buyer of products and services
– Maker of policies on
•
•
•
•
•
•
Labor
Capital formation
Product standards
Environmental issues
Nature of competition
Tax
– How do various governments affect your organization?
COMPETITIVE ADVANTAGE OF THE FIRM:
PORTER’S THREE GENERIC STRATEGIES
COMPETITIVE ADVANTAGE
Customer Perceived Uniqueness
C
O
M
P
E
T
I
V
E
INDUSTRY
DIFFERENTIATION
OVERALL COST
LEADERSHIP
WIDE
Focus on differentiation
and perceived value
Hard to keep
long term
MARKET
SEGMENT
S
C
O
P
Low Cost Position
ONLY
NICHE
Understand segments and focus attack.
No direct battles with major competitors
THREE STRATEGIC POSITIONS
• VARIETY-BASED
– Engage in a limited number of activities related to
delivering a product.
• NEEDS-BASED
– Engage in a specific customer segment with a relatively
broad set of needs.
• ACCESS-BASED
– Uniquely or preferentially reach a specific market
[segment or sub-segment].
STRATEGIC PERSPECTIVES
• Advantage: there is less risk if several advantages exist.
• Gaps exist and present opportunities in competitive
offerings which are focused on specific market areas.
• Changing the rules: refuse to play by the rules set by
industry leaders-set your own rules [dangerous]!
• Collaboration: use know-how developed by other
companies to innovate quicker.
THE PRODUCT LIFE CYCLE OVERVIEW
Introduction
Growth
Maturity
TOTAL
S ALES
Country 1 +
Country 2
Country 1
Country 2
Country 1
In Decline
TIME
Manage the Marketing Mix (4P’s) – The marketing mix may be different in each
country or market and each stage of the product life cycle.
INTERNATIONAL MARKET TERMS
• Multinational
– Composed of any combination of regional and/or
country markets
• Regional
– Composed of multiple countries in a defined geographic
area
• Country
– A single country
INTERNATIONAL PRODUCT MARKETS
• Multinational
– Sell product[s] around the world or in multiple regions
with only cosmetic changes.
• Regional
– Sells product[s] to multiple countries in a defined
geographic area with only cosmetic changes.
• Country
– Sells product[s] throughout a country with few if any
changes.
• Local
– Sells a specific product for a defined locale.
IMPLEMENTING SUPERNATIONAL
PROGRAMS
• Coordination of market activities
–
–
–
–
Regional [multiple nations]
National
State equivalent
Local
• Provide acceptable levels of decision-making for
program flexibility and speed.
• Monitor progress
REQUIREMENTS FOR A GLOBAL
PROGRAM
• STANDARDS
– Company name, logo, and placement of these items
• Compare General Electric items around the globe
– A standard brand or trademark
• Usually with some modifications – see Coca-Cola and
McDonalds
– A leadership position
THE MANY DIMENSIONS OF MANAGING
WORLD MARKETING ACTIVITIES
MARKETING
PROGRAMS
SUPPLY CHAIN
OR
VALUE CHAIN
MANAGEMENT
OPERATIONS
MARKETING
MIX
SYSTEMS AND
TRANSACTIONS
LOGISTICS
MARKETING MIX
•
•
•
•
Which products?
Which channels of distribution?
What promotions?
What price structures?
SYSTEMS AND TRANSACTIONS
• What types of transactions?
– Purchase order, internet, verbal, …
– By each, or case, or pallet, or truck, …
• What terms of sale?
– Cash, check, credit card, letter of credit …
• How will they be supported?
• What systems are required?
MARKETING PROGRAMS
• What is the scope of each program?
• What is the timing of each program?
• What are the implementation changes due to the
defined area?
OPERATIONS
• Which manufacturing facilities will support this?
• What sourcing issues must be met?
• How do we link sales forecasts, manufacturing
schedules, and logistics functions for this product
[set]?
• How do we get enough product to our customers for
the product launch?
LOGISTICS
•
•
•
•
•
•
•
Is the supply steady or erratic?
What are the delivery requirements?
How much inventory?
Where should the inventory be located?
What are expected delivery times?
What does this do to our vendors?
What potential problems exist?
SUPPLY CHAIN
• Ad agencies
• PR firms
• Promotional firms
BUSINESS PLAN CONTENTS
• Executive Overview
• Marketing Opportunity
– USP, FABs
• Product Development
– Cost, time, risk analysis, other issues
• Go to Market Strategy
– Launch, Roll-out
• Detailed Financial Analysis
MARKETING
•
•
•
•
•
•
•
Customer Analysis: the need
Competitive Analysis
Company Analysis
Market segments and target markets
The Marketing Mix
Roll-out Plan
Summary of benefits
PRODUCT DEVELOPMENT
• Summary of issues
• Significant hurdles
• Remaining items
ROLL-OUT PLAN
• Detailed introduction to the market
– Possibly in stages
– Gantt chart[s]
• Department agreement
• Remaining special concerns
THE MARKETING BUDGET
Gantt Chart
CAMPAIGN TIMELINE: SMALLER COMPANY
Week Number
RESEARCH
Customer/Prospect Research
CAMPAIGN CREATION & MANAGEMENT
Brainstorming
Creation
Presentation to Top Execs
Meeting and Assignments
Ongoing Weekly Status Meetings
ADVERTISING: PRINT
Create Media Plan (Print and Online)
Buy Print Media
Design
Photography and/or illustration
Production
Copywriting and Review
Final Negatives, Insertion Orders
Ship Negatives and Orders to Publications
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
FINANCIAL ANALYSIS
• Comprehensive set of financials
– Statements
• Line item detail
• Possible stage evaluation and review
– Detailed capital requirements
– Human resources
– Project analysis
• DCF, IRR, ?
BUDGETING
• Top-down or bottom-up approach
–
–
–
–
–
Expected units
Expected revenues and sources
Avg. selling price, gross margin
Estimated average standard costs
Marketing expenses
• Line item detail by area
• Implementation
• Timing issues and other schedules
– Projected pre-tax income
CERTIFIED GLOBAL BUSINESS PROFESSIONAL
Online Course
SECTION 5B
GLOBAL STRATEGY, PLANNING, AND PROGRAMS
ALAN L. WHITEBREAD
U.S. LAW
• The Webb-Pomerene Act of 1918 allows U.S. firms to
join forces in export activities. These activities will not
be subject to the Sherman Act.
EXPORT PROMOTION
• International Partner Search [USDOC]
– The U.S. Commercial Service’s International Partner
Search will put our trade specialists in over 60 countries
to work finding you the most suitable strategic partners.
You provide your marketing materials and background
on your company. We use our strong network of
international contacts to interview potential partners
and provide you with a list of up to five pre-qualified
partners.
– http://www.export.gov/salesandmarketing/IPS.asp
EXPORT PROMOTION
• Gold Key Service [USDOC]
– Representatives of U.S. businesses planning to
visit a country to explore business / investment
prospects are encouraged to use the customtailored "Gold Key Service" provided by the U.S.
Embassy’s Commercial Section. This service
combines orientation briefings, introductions to
potential business partners, assistance in
developing a sound marketing strategy, and
effective follow-up. The service has a small fee.
Companies interested in this service are requested
to contact the U.S. Embassy's Commercial Section
well in advance of their arrival.
– http://www.export.gov/salesandmarketing/gold_key
.asp
HARMONIZED TARIFF SYSTEM [HTS]
IMPORTS
• The HTS assigns 6-digit codes for general categories.
All definitions must conform to the first 6-digit
framework.
• The harmonized code number is also used to assist
customs with duty assessments.
• It is helpful, and in some countries required, to have
the code included on the commercial invoice.
• FOR CLASSIFICATIONS AND RATES GO TO
http://www.usitc.gov/tata/hts/
DETERMINING AN HS CODE:
1 Liter Frozen Orange Juice in a Container
20
Chapter 20 - Preparations of vegetables, fruit, nuts or other
parts of plants
2009 Fruit juices (including grape must) and vegetable juices, not
fortified with vitamins or minerals, unfermented and not
containing added spirit, whether or not containing added
sugar or other sweetening matter:
Orange juice:
2009.11 Frozen:
2009110020 In containers each holding less than .946 liter
liters
2009110040 In containers each holding .946 liter or more but
not more than 3.785 liters . . . . . . . .liters
2009110060 In containers of more than 3.785 liters liters
SCHEDULE HTS
• All of the imports of the U.S. are based on the
Harmonized Tariff System [HTS] which is based
on the Harmonized Commodity Description and
Coding System (HS), administered by the World
Customs Organization in Brussels.
• The 4- and 6-digit HS product categories are
required. In advanced economies like the U.S.
they are also subdivided into 8-digit unique rate
lines and 10-digit non-legal statistical reporting
categories.
• Import codes are administered by the U.S.
International Trade Commission [USITC].
SCHEDULE B CODES
• Administered by the U.S. Bureau of the Census
• Schedule B export codes
– http://www.census.gov/foreign-trade/schedules/b
[browse]
• Schedule B numbers must be reported on the
Electronic Export Information [EEI] form in the U.S.
Customs and Border Patrol Automated Export System
[AES].
• For how to correctly complete an EEI form go to
– http://www.cbp.gov/xp/cgov/trade/automated/aes/
SHIPPER’S EXPORT DECLARATION
[SED] U.S. FORM 7525V
• This export form is required for
– any shipment covered under a "validated license“; or
– mail shipments over $500; or
– all other shipments valued over $2,500
– And for shipments to Puerto Rico, the U.S. Virgin
Islands, and former Pacific Trust Territories if they meet
any of the above conditions.
• It must be filed via AES Direct – a free service of
the U.S. Customs and Border Patrol.
• See
http://export.gov/logistics/eg_main_018121.asp
for additional export information!
SHIPPER’S EXPORT DECLARATION
[SED] U.S. FORM 7525V
• It is strongly recommended that you always include
the following statement on your SED or in your
Automated Export System [AES] document and all
physical copies.
– “The commodities, technology or
software were exported from the United
States in accordance with the Export
Administration Regulations. Diversion
contrary to U.S. laws is prohibited.”
THE RIGHT HS / SCHEDULE B
CODE
• It must be correct!
– Can be 6 to 10 digits
• IF IT IS WRONG
– MANY BAD THINGS CAN HAPPEN if the error
is discovered
-OUTBOUND
- INBOUND
- FINANCIAL INSTRUMENT
EXPORT COMMODITY CONTROL LIST
• 10 categories including
– Defense articles & services / national security
– Dangerous drugs and narcotics
– Endangered plants and wildlife
– Chemicals
– Radioactive materials
– Explosives
– and more!
• Export Administration Regulations are at
– http://www.access.gpo.gov/bis/ear/ear_data.html
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