Generic Strategies

- Export one standardized product to all markets (e.g. Japan TVS, Walkmans, hi-fi’s) (Model T strategy)

- Introduce product to home market, then begin to export as home market matures ( many U.S. products)

(( But note how this fuels criticism of LDC’s of dumping obsolete technology onto them ))

- Customize product for each export market (typical of many European exporters)

Exporting

STEP - SocialTechnological

EconomicPolitical factors

Competitive/comparative advantage conditioned by foreign exchange rate - level

- volatilityconditioned by demand conditions abroad

### SEGMENT THE MARKET ####

Product quality Product Features

Price

What mix will best fit a particular market?

Possible segmenting factors

- Geographically homogenous or regionally diverse?

- IncomeBut note that segmenting by average GDP per capita leaves out

- high income individuals in countries with skeweddistributions

- emerging middle class in India, China, etc.

- Demography- age distribution-birth rate/ family formation-language-religion/culture- urban/rural

- Consumer tastesqualitycolourstyle

Segment by Use:

The same product may be used in quit different ways

e.g. Fertilizer

Ammonium nitrate is very good, very common fertilizer, widely used inagriculture in Manitoba and throughout the world.

Ammonium nitrate is also used in the mining industry.

Mix it with diesel oil and you have a much safer, much cheaper explosive than dynamite, but just as effective. This was what Timothy McVeigh used to blow up the Federal Building in Oklahoma City, andhas become a favourite with terrorists around the world.

Modify product to suit conditions-consumers preferences- patterns of use- physical conditions - humidity

-temperature- dust

e.g automobiles - desert radiators, oil radiator, air cleaner- a/c

Industrial Products:

Segment by level of sophistication- availability of skilled labour - operation

- maintenance

Note that in developing countries with high growth rates, level of investmentin infrastructure is higher than average:

electric powerairportsharboursroadswater & sewertelecommunications

Segment industrial products by natural resource base

- agriculture - what kind of crops? Livestock?

- mining - Shallow? Deep? Strip? Hard rock? Fluvial? Marine?

- forestry – Hardwood? Softwood? Plantation?- timber- pulp and paper

- fishery – pelagic, riverine/fresh water? Species? Seasonal?

Note that LDC’s are dual economies - traditional sector )- modern sector ) co-exist

(Process of development can be thought of as moving social structure and activity from the traditional sector to the modern sector. )

Differences between consumer markets and industrial markets:

Consumer product : use, eat, wear - no skill required to use it

Industrial product - operate and maintain it to produce something else- skill required to do this- often the skill itself is an exportable commodity -

service contracts for aircraft maintenance, IT functions- BOT contracts to introduce new technology

(build, operate, transfer)

Note too the role of management skills/style/sophistication in industrialmarkets - influence choice of technology,

- labour intensive vs. capital intensive methods

Costs of exporting- transportation- distribution- commissions- tariffs

will likely force you into a higher price segment than in your homemarket ( unless you are dumping surplus output)

Question: Is there enough demand at that price to make it pay?

Things to Consider:

1.What’s happening in similar countries - what trends in what direction?

2. What are prospects for deregulation/restructuring of markets?

3. What are host government policies and programme?- supportive of industrial markets?- restrictive for consumers?

- favour local mfrs?- favour local distributors?- cultural issues?

4. What is the position of potential competitors?- potential capacity constraints?- high market growth makes it easier to get a share

OK - we have a market segment with potentialwe have a competitive advantage to get in

Question: How? What entry strategy?

Answer: The 4 P’s !

Remember that the product will likely have to be specialized in some degree

Try to keep price competitive

Pay particular attention to distribution - channels as well as well as physicaldistribution

Remember that after sales service is an important part of promotionand is particularly critical to importers because they can easily feel isolated

Channels of Distribution

- will likely be more multi-layered and complex than domestic distribution - may have to use different kinds or types of channels than for domestic market

In developing countries there is often a limited choice of possible agents

It is vital to choose the right one - you’ll likely be stuck with him for several years!- Can be difficult to change agents

Note the importance of the channel of distribution as the channel for the reverseflow of information - that is your source of information about themarket.

Key issues: - Ownership of the goods at various stages of distribution - Control of the channel of distribution

Generic Strategies

- Export one standardized product to all markets (e.g. Japan TVS, Walkmans, hi-fi’s) (Model T strategy)

- Introduce product to home market, then begin to export as home market matures ( many U.S. products)

(( But note how this fuels criticism of LDC’s of dumping obsolete technology onto them ))

- Customize product for each export market (typical of many European exporters)

Factors that impede trade:

1. Natural factors - transport- distribution costs- promotion costs ( ads from home country will NOT work

translation is not good enough)- cultural factors - language

- social values- political system- traditional (local ) way of doing business

2. Government imposed factors:- quotas- financial restrictions- localization policies- tariffs

Concept of psychological distance

Enter first those markets which seem most similar to our home marketin terms of - language

- cultural similaritysimilar management styles

Experience breeds comfort!Ok we’ve handled that, we can now handle something a little

more complex

Advantages of a good agent:

1. Knows the market2. Has access to channels of distribution3. Has knowledge of, and contacts in, government4. May have knowledge of operations in one or more foreign markets5. May have knowledge of production capabilities in one or more products6. May be able to supply some capital.

Countertrade - various devices and techniques to get around paymentor currency problems, or as an instrument to force local

investmentand economic development

1. Barter2. Counter purchase or re-investment - often significant in the purchase of

military equipment3. Contract to purchase part or all of output4. Production sharing - e.g in mining or petroleum production- take

payment by receiving a share of physical output - assume risk of price volatility in commodity markets

5. Industrial offset - requirement for some portion of final product to be produced or assembled locally

6. Switching - like the above - but involves balancing benefits over three ormore countries

7. Unblocking funds for approved purposes - gives government control over use of foreign exchange