International Marketing Plan

The International Business Plan Overview Introduction (brief company information) Country Analysis Economic Analysis Market Audit and Competitive Market Analysis International Business Plan

The International Business Planning Process Corporate Policy Business Mission - Purpose - Business Domain - Major Objectives Business Philosophy - Values - Norms - Rules of Behavior Country & Economic Analysis Potential Market Assessment - Market Size and Potential - Market Selection Procedure - Key Success Factors

The International Business Planning Process Basic Strategic Decisions Determination of Competitive Position - Internal Analysis - Competitor Analysis - Core Competencies SWOT Analysis Development Strategy - Cost leader - Differentiation - Concentration Competitive Strategy - Leader - Challenger - Follower - Specialist Product - Segment Selection - Target Customer Segments - Product Positioning

The International Business Planning Process Market Entry Strategy : - Market Entry Mode - Market Entry Timing Marketing Mix Decisions Product Price Promotion Placement

The International Business Plan Country Analysis I. Geographical Setting II. Relevant history III. Social Institutions: family, education, political and legal system, social organizations IV. Religion and aesthetics V. Living Conditions: diet, housing, clothing, recreation, social security, health care VI. Language (s)

The International Business Plan Economic Analysis I. Population: total and distribution of population II. Economic statistics and activity: GNP/GDP, PPP, distribution of wealth, resources, transportation, communication systems, working conditions, foreign investment, int’ trade stats, trade restrictions, labor force, inflation III. Developments in science & technology IV. Channels of distribution (Macro-analysis): Retailers, Wholesale middlemen, import/export agents, warehousing, penetration of urban and rural markets V. Media: Availability of media, costs, agency assistance, coverage of media, % population reached by media

The International Business Plan Market Audit I. The product Evaluation of the product’s USP Major problems of product acceptance II. The market Market size and evolution Consumer buying habits Existent competitor’s products Marketing Mix typically used III. Government intervention in the marketplace IV. SWOT Analysis

The International Business Plan I. Marketing Plan 1. Marketing objectives 2. Product adaptations/modifications 3. Promotion mix 4. International distribution 5. Local channels of distribution 6. Price determination 7. Terms of sale 8. Methods of payment

The International Business Plan II. Pro forma financial statements and budget 1. Marketing budget 2. Pro forma annual profit & loss statement III. Resource Requirements 1. Financial Resources 2. Human resources 3. Production Capacity

Methods of Payments 1. Cash in Advance : Most desirable method for the exporter : Importer pays cash in advance->exporter releases goods : Max risk to importer 2. Documentary Letter of Credit (sight L/C or Time L/C) 3. Drafts for Collection(sight draft or time draft) 4. Open Account : Most desirable method for the importer : Exprter ships w/o full pyment->imprter pays when get the goods : Max risk to exporter

Export/Import Financing Service that allows exporter to be assured of payment and importer to be assured of product Banks offer financing intermediary service Letter-of-Credit (L/C): bank guarantee of payment to exporter “bought” by the corresponding importer Draft or Bill-of-Exchange: instructions to bank to pay at a certain time based on certain documentation Carriers move product from A to B Bill-of-Lading issued to exporter by the carrier: is a 1) receipt, 2) a contract, and 3) a document of title issued to the exporter by the carrier EXPORT AND IMPORT FINANCING A) Mechanisms for financing exports and imports have evolved over the centuries in response to a problem that can be particularly acute in international trade: the lack of trust that exists when one must put faith in a stranger. Lack of Trust B) Firms engaged in international trade face a problem - they have to trust someone who may be very difficult to track down if they default on an obligation. C) Due to the lack of trust, each party to an international transaction has a different set of preference regarding the configuration of the transaction. Figures 12.1 and 12.2 show the preferences for two firms - a US exporter and a French importer. D) The problems arising from a lack of trust between exporters and importers can be solved by using a third party who is trusted by both - normally a reputable bank. Figure 12.3 illustrates this Teaching Tip: A menu of resources available on the Internet that deal with financing exports and other international finance issues is available at {http://dylee.keel.econ.ship.edu/intntl/intfin/fin-hom.htm}. Letter of Credit E) A letter of credit, abbreviated as L/C, stands at the center of international commercial transactions. Issued by a bank at the request of an importer, the letter of credit states the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents. Draft F) A draft, sometimes referred to as a bill of exchange, is the instrument normally used in international commerce for payment. A draft is simply an order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time. A sight draft is payable on presentation to the drawee while a time draft allows for a delay in payment - normally 30, 60, 90, or 120 days. Bill of Lading G) The bill of lading is issued to the exporter by the common carrier transporting the merchandise. It serves three purposes: it is a receipt, a contract, and a document of title. A Typical International Transaction H) The entire process for conducting an export transaction is summarized in Figure 12.4.

Letter of Credit Opens and issues L/C 4 Send documents 7 Advising or Confirming Bank Wire money 8.2 Opening or Issuing Bank 5 Advise or Confirm L/C Mk Shipment 6.1 6.2 Presents doc. 8.3 Pays money 3 Apply for L/C 8.1 Pays money Turn over doc. To importer to collect goods 8.4 Request L/C 1 2 Send Pro Forma Inv.

Letter of Credit Opens and issues L/C 4 Send documents 7 Advising or Confirming Bank Wire money 8.2 Opening or Issuing Bank 5 Advise or Confirm L/C Mk Shipment 6.1 6.2 Presents doc.(BOL) 8.3 Pays money 3 Apply for L/C 8.1 Pays money Turn over doc. To importer to collect goods 8.4 Request L/C 1 Pro-forma invoice refers to an invoice together with a quotation provided by a supplier prior to sale or shipment of an article, informing the buyer of the kinds and quantities of goods to be sent, their value, and important specifications (weight, size, and similar characteristics). 2 Send Pro Forma Inv.

Letter of Credit Opens and issues L/C 4 Send documents 7 Advising or Confirming Bank Wire money 8.2 Opening or Issuing Bank 5 Advise or Confirm L/C Mk Shipment 6.1 6.2 Presents doc. 8.3 Pays money 3 Apply for L/C 8.1 Pays money Turn over doc. To importer to collect goods 8.4 Request L/C 1 2 Send Pro Forma Inv.

Note: Letter of Credit Bank Charges Bank commission: 0.5% -2% or more w/ min fee Advising bank/confirming bank charges $200-300 or more Various forms of letter of credits 1. Advised v.s. Confirmed credit (2nd bank simply notify v.s add its guarantee of payment to exporter.) 2. Irrevocable credit v.s. Revocable credit( cannot v.s. can be cancelled prior to expiration w/o the consent of the parties) 3. Sight L/C and Time L/C(exporter gets paid v.s receives promise to pay at later date against presenting documents to the bank)

Drafts for Collection: Sight and Time A bill of exchange = A demand for payment The exporter retains title to the goods until importer pays when receives document:title of goods (sight draft) or sign to pay at later date (time draft) exporter ships goods-> sends all shipping document through his bank to the importer’s bank(importer’s bank release doc. (title of goods) to importer in exch. for final payment (documents against payment) or sign to pay at later date (documents against acceptance). Adv to exporter: less expensive than L/C risks to exporter: importer might not take the goods

Terms of Payment

Terms of the Sale Incoterms Ex-works – seller places goods at the disposal of the buyer at the time specified in the contract; buyer takes delivery at the premises of the seller and bears all risks and expenses from that point on. Delivery duty paid – seller agrees to deliver the goods to the buyer at the place he or she names in the country of import with all costs, including duties, paid. Incoterms apply to all modes of transportation. P.P. 11 For ex-works, the seller places goods at the disposal of the buyer at the time specified in the contract. The buyer takes delivery at the premises of the seller and bears all risks and expenses. For delivered duty paid, the seller agrees to deliver the goods to the buyer at a specific place the country of import, with all costs, including duties, paid. Several Incoterms apply to sea and inland waterway transportation: F.A.S. (free alongside ship) named port of destination: seller places goods alongside the vessel or other mode of transportation and pays all charges up to that point. F.O.B. (free on board): seller’s responsibility does not end until the goods have actually been placed aboard a ship. C.I.F. (cost, insurance, freight) named port of destination: risk of loss or damage to goods is transferred to the buyer once the goods have passed the ship's rail. C.F.R. (cost and freight): seller is not responsible at any point outside the factory. Price escalation occurs when these costs are added to the per-unit cost. The net effect of this add-on accumulating process is a total retail price of $50, 210, or 166 percent of the ex-works price. Experienced global marketers view price as a strategic variable that can achieve marketing and business objectives. Notes___________________________________________________________________________________________________________________________________________________________________________________________________________________

Freight Forwarder : Carriers->wholesaler of space, FF->Retailers : Help vessels’ owner fill up the space, Help shippers gets best rate, routing : FF are compensated in form of : brokerage (charged to vessel owners), fee (charged to shippers) : FF must be licensed by FMC (Federal Maritime Commission)