PREPARING PRODUCTS FOR EXPORT
Selecting and preparing a product for export requires not
only product knowledge but also knowledge of the unique
characteristics of each market being targeted. The market
research conducted (chapter 3) and the contacts made with
foreign representatives (chapter 4) should give the U.S.
company an idea of what products can be sold where. Before
the sale can occur, however, the company may need to modify
a particular product to satisfy buyer tastes or needs in
foreign markets.
The extent to which the company will modify products sold
in export markets is a key policy issue to be addressed by
management. Some exporters believe the domestic product can
be exported without significant changes. Others seek to
consciously develop uniform products that are acceptable in
all export markets.
If the company manufactures more than one product or offers
many models of a single product, it should start with the
one best suited to the targeted market. Ideally, the firm
chooses one or two products that fit the market without
major design or engineering modifications. Doing so is
possible when the U.S. company
- deals with international customers with the same
demographic characteristics or with the same
specifications for manufactured goods,
- supplies parts for U.S. goods that are exported to
foreign countries without modifications,
- produces a unique product that is sold on the basis of
its status or foreign appeal, or
- produces a product that has few or no distinguishing
features and that is sold almost exclusively on a
commodity or price basis.
PRODUCT PREPARATION CONSIDERATIONS
- What foreign needs does the product satisfy?
- Should the firm modify its domestic-market product for
sale abroad?
Should it develop a new product for the foreign market?
- What product should the firm offer abroad?
- What specific features -- design, color, size,
packaging, brand, warranty, and so on -- should the
product have?
- What specific services are necessary abroad at the
presale and postsale stages?
- Are the firm's service and repair facilities adequate?
PRODUCT ADAPTATION
To enter a foreign market successfully, a U.S. company may
have to modify its product to conform to government
regulations, geographic and climatic conditions, buyer
preferences, or standard of living. The company may also
need to modify its product to facilitate shipment or to
compensate for possible differences in engineering or
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 of nontariff barriers, such as regulations or product
specifications. Governments impose these regulations to
- protect domestic industries from foreign competition,
- protect the health of their citizens,
- force importers to comply with environmental controls,
- ensure that importers meet local requirements for
electrical or measurement systems,
- restrict the flow of goods originating in or having
components from certain countries, and
- protect their citizens from cultural influences deemed
inappropriate.
It is often necessary for a company to adapt its product to
account for geographic and climatic conditions as well as
for availability of resources. Factors such as topography,
humidity, and energy costs can affect the performance of a
product or even define its use. The cost of petroleum
products along with a country's infrastructure, for
example, may indicate the demand for a company's
energy-consuming products.
Buyer preferences in a foreign market may also lead a U.S.
manufacturer to modify its product. Local customs, such as
religion or the use of leisure time, often determine
whether a product will sell. The sensory impact of a
product, such as taste or visual impact, may also be a
critical factor. The Japanese desire for beautiful
packaging, for example, has led many U.S. companies to
redesign cartons and packages specifically for this market.
A country's standard of living can also determine whether a
company needs to modify a product. The level of income, the
level of education, and the availability of energy are all
factors that help predict the acceptance of a product in a
foreign market. If a country's standard of living is lower
than that of the United States, a manufacturer may find a
market for less sophisticated product models that have
become obsolete in the United States. Certain
high-technology products are inappropriate in some
countries not only because of their cost, but also because
of their function. For example, a computerized industrial
washing machine might replace workers in a country where
employment is a high priority. In addition, these products
may need a level of servicing that is unavailable in some
countries.
Market potential must be large enough to justify the direct
and indirect costs involved in product adaptation. The firm
should assess the costs to be incurred and the increased
revenues expected from adaptation (they may be difficult to
determine). The decision to adapt a product is based in
part on the degree of commitment to the specific foreign
market; two firms, one with short-term goals and the other
with long-term goals, may have different perspectives.
ENGINEERING AND REDESIGN
In addition to adaptations related to cultural and consumer
preference, the exporter should be aware that even
fundamental aspects of its products may require changing.
For example, electrical standards in many foreign countries
differ from U.S. electrical standards. It is not unusual to
find phases, cycles, or voltages (both in home and
commercial use) that would damage or impair the operating
efficiency of equipment designed for use in the United
States. These electrical standards sometimes vary even in
the same country. Knowing this requirement, the
manufacturer can determine whether a special motor must be
substituted or arrange for a different drive ratio to
achieve 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 nonmetric system, and U.S. firms that
compete successfully in the global market have found metric
measurement to be 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 for Standards
and Technology, Administration Building, A629,
Gaithersburg, MD 20899; telephone 301-975-4040.
Since freight charges are usually assessed by weight or
volume (whichever provides the greater revenue for the
carrier), a company should give some consideration to
shipping an item unassembled to reduce delivery costs.
Shipping unassembled also facilitates movement on narrow
roads or through doorways and elevators.
BRANDING, LABELING, AND PACKAGING
Consumers are concerned with both the product itself and
the product's supplementary features, such as packaging,
warranties, and service. Branding and labeling of products
in foreign markets raise new considerations for the U.S.
company:
- Are international brand names important to promote and
distinguish a product? Conversely, should local brands
or private labels be employed to heighten local
interest?
- Are the colors used on labels and packages offensive
or attractive to the foreign buyer? In some countries,
certain colors are associated with death, national
flags, or other cultural factors.
- Can labels be produced in official or customary
languages if required by law or practice?
- Does information on product content and country of
origin have to be provided?
- Are weights and measures stated in the local unit?
- Must each item be labeled individually?
- Are local tastes and knowledge considered? A dry
cereal box picturing a U.S. athlete may not be as
attractive to overseas consumers as the picture of a
local sports hero.
A company may find that building international recognition
for a brand is expensive. Protection for brand names varies
from one country to another, and in some developing
countries, barriers to the use of foreign brands or
trademarks may exist. In other countries, piracy of a
company's brand names and counterfeiting of its products
are widespread. To protect its products and brand names, a
company must comply with local laws on patents, copyrights,
and trademarks. A U.S. firm may find it useful to obtain
the advice of local lawyers and consultants where
appropriate.
INSTALLATION
Another element of product preparation that a company
should consider is the ease of installing that product
overseas. If technicians or engineers are needed overseas
to assist in installation, the company should minimize
their time in the field if possible. To do so, the company
may wish to preassemble or pretest the product before
shipping.
Disassembling the product for shipment and reassembling
abroad may be considered by the company. This method can
save the firm shipping costs, but it may add to delay in
payment if the sale is contingent on an assembled product.
Even if trained personnel do not have to be sent, the
company should be careful to provide all product
information, such as training manuals, installation
instructions, and parts lists, in the local language.
WARRANTIES
The company should include a warranty on the product, since
the buyer expects a specific level of performance and a
guarantee that it will be achieved. Levels of expectation
for a warranty vary from country to country depending on
its level of development, competitive practices, the
activism of consumer groups, local standards of production
quality, and other similar factors.
A company may use warranties for advertising purposes to
distinguish its product from its competition. Strong
warranties may be required to break into a new market,
especially if the company is an unknown supplier. In some
cases, warranties may be instrumental in making the sale
and may be a major element of negotiation. In other cases,
however, warranties similar to those in the United States
are not expected. By providing an unnecessary warranty, the
company may raise the cost of the product higher than the
competitors' costs. When considering this point, exporters
should keep in mind that servicing warranties will probably
be more expensive and troublesome in foreign markets. It is
desirable to arrange warranty service locally with the
assistance of a representative or distributor.
SERVICING
Of special concern to foreign consumers is the service the
U.S. company provides for its product. Service after the
sale is critical for some products; generally, the more
complex the product technology, the greater the demand for
presale and postsale service. There is, therefore, pressure
in some firms to offer simpler, more robust products
overseas to reduce the need for maintenance and repairs.
U.S. exporters who rely on a foreign distributor or agent
to provide service backup must take steps to ensure an
adequate level of service. These steps include training,
periodically checking service quality, and monitoring
inventories of spare parts. See chapter 15 for more on
after-sales service.
