Avoiding and Managing Common Mistakes and Problems Chapter 7 Avoiding and Managing Common Mistakes and Problems

Common Pitfalls Companies that try to trade internationally make 4 mistakes: 1) costing – the landed cost is after all transportation and other costs involved 2) standards – different countries have different standards in terms of manufacturing and producing

Continued… 3) marketing – exporting companies must research before 4) infrastructure – internal transportation, human and material resources

Potential Costing Errors Costing – many companies make the mistake of determining the actual cost (forget to include exchange, transportation, etc…) 1st step in pricing a product is convert to the currency of the country you are doing business in Hard currency – widely accepted, can be easily converted Soft currency – fluctuate a lot and are not stable

Continued… To protect against this currency risk, many companies purchase the foreign currency at the time the order is placed Letter of credit – this is used when a company wants to make sure that the company they are doing business with has enough money to pay them

Transportation The five factors you must take into account are: A) agent and shipping company B) shipment method C) weight of the goods D) size or volume of the goods E) distance of the final destination

Problems with Standards Another common mistake businesses make when the enter foreign markets is to assume all countries use the same standards Different electrical standards is one example (electrical appliances do not work in some countries) Ethical standards

Realistic Marketing The problems that come up with marketing are: A) calculating the size and how the market is composed wrong B) lack of research in branding, packaging and timing C) not understanding the culture and customs

Infrastructure and Services Infrastructure – the public systems, services, roads, health- care etc… Example looking at Kenya

Example The infrastructure of Kenya: A) Transportation – traffic moves on the left hand side of the road, two major airports B) Communication – more than 50 internet service providers C) Utilities – types of sockets they use D) Health – malaria not high in many areas, some hospitals E) Financial – developed banking system, etc…