In This Chapter
Selecting and preparing your product for export require not only product knowledge but also knowledge of the unique characteristics of each target market. Market research and contacts with foreign partners, buyers, customers, and others should give your company an idea of what products can be sold and where. However, before the sale can occur, your company may need to modify a particular product to satisfy buyer tastes, needs in foreign markets, or legal requirements for the foreign destination.
The extent to which your company will be willing to modify products sold for export markets is a key policy issue to be addressed by management. Some exporters believe that their domestic products can be exported without significant changes. Others seek to consciously develop uniform products that are acceptable in all markets. It is very important to do research and to be sure of the right strategy to pursue. For example, you may need to redesign an electrical product to run on a different level of voltage for a particular destination, or you may need to redesign packaging to meet labeling standards or cultural preferences.
If your company manufactures more than one product or offers many models of a single product, you should start by exporting the one best suited to the targeted market. Ideally, your company may choose one or two products that fit the target market without major design or engineering modifications. Doing so works best when your company:
You must consider several issues when you are thinking of selling overseas, including the following:
To enter a foreign market successfully, your company may have to modify its product to conform to government regulations, geographic and climatic conditions, buyer preferences, or standards of living. Your company may also need to modify its product to facilitate shipment or to compensate for possible differences in engineering and design standards. Foreign government product regulations are common in international trade and are expected to expand in the future. These regulations can take the form of high tariffs, or they can be non-tariff barriers, such as industrial regulations or product specifications. Governments impose these regulations
Detailed information on regulations imposed by foreign countries is available from the Trade Information Center at (800) USA-TRADE (800-872-8723) or from your local Export Assistance Center. When a foreign government imposes particularly onerous or discriminatory barriers, your company may be able to obtain help from the U.S. government to press for their removal. Your firm should contact an Export Assistance Center or the Office of the U.S. Trade Representative (USTR). The USTR office can be contacted at (202) 395-3230 or at www.ustr.gov.
Buyer preferences in a foreign market may also lead you to modify your product. Local customs, such as religious practices or the use of leisure time, often determine whether a product is marketable. The sensory impression made by a product, such as taste or visual effect, may also be a critical factor. For example, Japanese consumers tend to prefer certain kinds of packaging, leading many U.S. companies to redesign cartons and packages that are destined for the Japanese market.
Market potential must be large enough to justify the direct and indirect costs involved in product adaptation. Your firm should assess the costs to be incurred and, though it may be difficult, should determine the increased revenues expected from adaptation. The decision to adapt a product is based partly on the degree of commitment to the specific foreign market; a firm with short-term goals will probably have a different perspective than a firm with long-term goals.
In addition to adaptations related to cultural and consumer preference, your company should be aware that even fundamental aspects of products may require changing. For example, electrical standards in many foreign countries differ from U.S. electrical standards. It’s not unusual to find phases, cycles, or voltages (for both residential and commercial use) that would damage or impair the operating efficiency of equipment designed for use in the United States. Electrical standards sometimes vary even within the same country. Knowing the requirements, the manufacturer can determine whether a special motor must be substituted or if a different drive ratio can be achieved to meet the desired operating revolutions per minute.
Similarly, many kinds of equipment must be engineered in the metric system for integration with other pieces of equipment or for compliance with the standards of a given country. The United States is virtually alone in its adherence to a non-metric system, and U.S. firms that compete successfully in the global market realize that conversion to metric measurement is an important detail in selling to overseas customers. Even instruction or maintenance manuals should take care to give dimensions in centimeters, weights in grams or kilos, and temperatures in degrees Celsius. Information on foreign standards and certification systems is available from the National Center for Standards and Certificates Information, National Institute of Standards and Technology, U.S. Department of Commerce, 100 Bureau Dr., M.S. 2150, Gaithersburg, MD 20899-2150. You may also contact the center by telephone at (301) 975-4040 or online at www.nist.gov.
Consumers are concerned with both the product itself and the product’s secondary features, such as packaging, warranties, and service. Branding and labeling products in foreign markets raise new considerations for your company, such as the following:
Another element of product preparation that your company should consider is the ease of installing the product overseas. If technicians or engineers are needed overseas to assist in installation, your company should minimize their time in the field if possible. To do so, your company may wish to preassemble or pretest the product before shipping or to provide training for local service providers through the Web, training seminars, or DVDs.
Your company may consider disassembling the product for shipment and reassembling it abroad. This method can save your firm shipping costs, but it may delay payment if the sale is contingent on an assembled product. Your company should be careful to provide all product information, such as training manuals, installation instructions (even relatively simple instructions), and parts lists, in the local language.
Your company should consider carefully the terms of a warranty on the product (and be very specific as to the warranty’s coverage), because the buyer will expect a specific level of performance and a guarantee that it will be achieved. Levels of expectation and rights for a warranty vary by country, depending on the country’s level of development, its competitive practices, the activism of consumer groups, the local standards of production quality, and other factors. Product service guarantees are important because customers overseas typically have service expectations as high or greater than those of U.S. customers.
FACT: Language and cultural factors have played an important role in the success or failure of many exporting efforts.
INSIGHT: Be careful to look into the meanings that your company’s (or product’s) name may have in other markets. You don’t want to discover too late that they are inappropriate in the local language or culture.
FACT: Freight charges are usually assessed by weight or volume.
INSIGHT: Consider shipping items unassembled to reduce delivery costs. Shipping unassembled goods also facilitates movement on narrow roads or through doorways and elevators. Remember, however, that while shipping your items unassembled can save your firm shipping costs, it could delay payment if the sale is contingent on receipt of an assembled product.
See Also: Case Study
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