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Chapter: Business Science - International Business Management - Production, Marketing, Financial and Human Resource Management of Global Business

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Challenges in Product Development

The cost of manufacturing, distributing and marketing the product. The actual physical location of production plants.

CHALLENGES IN PRODUCT DEVELOPMENT:

 

The cost of manufacturing, distributing and marketing the product.

 

The actual physical location of production plants.

 

Currency Exchange Rates - US export companies are benefiting from a relatively low US Dollar price during the 2010s. Most hearing aid companies, however, these are based in Europe and therefore the high value of the Swiss Franc and the Euro relative to other currencies must be considered. This make imports into the United States from these

 

countries expensive, but exports from the US relatively cheap to other nations. This has to do not just with demand for a particular product, but also with macroeconomic demand for national currencies, which affects inflation and, by extension, pricing. Currency fluctuations also make it very difficult for companies to make long-term decisions – such as building large factories in global markets. For example, the costs of production may be cheap today, but they could be expensive in the future, impacting upon the price that a manufacturer is forced to charge.

 

The price that the international consumer is willing to pay for the product.

 

The manufacturer’s business objectives. For example, large international companies such as Starbucks may be willing to operate at a loss in some locations because they need a local presence to maintain their economies of scale, as well as their reputation as a global player. Some hearing aid manufacturers act similarly in order to become “world players.”

 

 

The price that competitors in international markets are already charging. Business environment factors such as government policy and taxation.

 

National Market Size – A company will often attempt to use the potential volume of sales to estimate the price at which it will need to market a product to break even. For larger countries with the potential for more sales, this price may be set lower; for smaller countries, the price may be higher.

 

Cultural Differences – One of the more complicated factors in international pricing is cultural variation among companies. Cultural variations that affect pricing can take many forms, most of which have to do with how members of certain cultures perceive the value

 

of certain products, which in turn affects how much they are willing to pay for them. Some cultures do not value amplification products and they are seen with significant stigma. Thus, hearing aid prices can be greatly affected depending upon whether a manufacturer’s device is large and obvious or invisible.

 

Regulations – When setting prices in other countries, companies must research all national regulations relevant to their product, as many countries set price ceilings as well as price floors on certain products. Others require Value Added Tax (VAT) and other taxes that must be considered during the pricing decisions.

 

NINE STEPS TO AN INTERNATIONAL MARKETING STRATEGY:

 

As technology breaks down geographic and cultural communication barriers, even small businesses can often tap into the global marketplace. If you think your business is too small to pursue international business opportunities, think again. Get a jump on those opportunities by following the 9 steps outlined below.

 

Research

 

Unless you spend excessive amounts of time in foreign countries or soak up knowledge like a Jeopardy Champion, you’re probably not able to make an informed decision about a global strategy without doing your homework first. Start with the low-hanging fruit: talk to your coworkers, peers, family and friends. Find out what you can about countries and markets with the greatest potential. Read relevant print and Web publications voraciously (I prefer e-marketer, Economist, Wall Street Journal and Yahoo! for general business and market research). Compile information about various opportunities and determine which markets have the greatest overall potential (in case you’ve been hiding in a cave, here’s an emerging and growth market cheat sheet for you: China, India, South America, Russia and The Middle East).

 

Build

 

Most small to medium-sized businesses do not have the resources on staff to undertake a global market strategy. Assuming there are sufficient opportunities abroad, it’s time to determine how to develop appropriate resources (i.e. in-country sales and support, logistics and fulfillment). In the build vs. buy decision, many companies prefer to minimize financial risk by partnering with companies that have extensive experience within the target market to provide those resources. While partnering minimizes risk, there are drawbacks, such as lack of direct management oversight. Those negatives can be alleviated by hiring employees who have the education, experience and native language skills relevant to your target market. International students are excellent resources: they are educated, affordable, multi-lingual and usually have some relevant work experience. The potential downside is that you’ll probably have to navigate through a bushel of red tape in order to secure work visas.

 

Partner:

 

While your core business and marketing team may already be in place, there are a variety of reasons to explore additional partnerships. Companies specializing in marketing, logistics and customer service are excellent additions to the growing team. Partners within the target market may have relationships with your potential customers that can be leveraged for business development. For instance, we’ve partnered with a homeland security and business consultancy, Eminent Logic, to help penetrate into the Middle Eastern markets. In return, we introduce them to local companies we know that can further their business objectives.

 

Network:

 

Alternative business development strategies include attending, sponsoring, and participating in industry networking events and conferences. Look into joining industry associations that have a footprint in your target markets, or that are native to the target market. Web-based networking groups (e.g. LinkedIn) can also help expand your network.

 

Market:

 

Now that you’ve built out your infrastructure, trained and deployed a team, and modified your offering and marketing collateral, you’re ready to turn on the fire hose. Two of the most effective forms of outreach are search engine and email marketing. Internet access is everywhere, which means everyone has access to search engines and email. The best way to build a house list of potential customers in your target market is to optimize your international Web site for search engines and offer visitors an incentive to provide their email address. Once you’ve got their permission to contact them regularly, build a relationship and convert site visitors and email subscribers into customers.

 

Travel:

 

Over time, cold leads will become hot, and those hot leads will want face-to-face meetings. Its decision time: are you ready to invest in a global travel expense account? If so, be prepared to reel in the business, as most of the world works on a handshake and face time is critical. Turn your business trips into tax-deductible vacations and see the world while you’re at it.

 

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