INTERNATIONAL MARKETING LECTURE

What is International Marketing?

Cateora, Gilly and Graham define international marketing as the performance of business
activities that direct the flow of a company’s goods and services to consumers or users in more than one
nation for a profit. In contrast to domestic marketing, the activities in international marketing take place
in more than one country, so the customers are found elsewhere, not only in the home market. Thus,
international marketers are faced with unique situations as they have more uncontrollable forces in the
macroenvironment to deal with. These forces include politics, culture, geography and infrastructure,
distribution, technology and competition which also vary from country to country. Risks are greater in
international marketing compared to domestic marketing.
Cateora, Gilly and Graham state that the primary obstacle to success in international marketing
is a person’s self-reference criterion (SRC) in making decisions. They define SRC as the unconscious
reference to one’s cultural values, experiences, beliefs and knowledge as bases for decisions.
SRC can cause misunderstanding between different cultures. As an example, SRC on the
concept of time varies worldwide. A Filipino has a flexible concept of time while an American strictly
observes it as it is a valuable and limited resource. Thus, an American will feel offended when someone
shows up later for an appointment. A Filipino, on the other hand, will be able to consider the reasons
why a person got delayed.

Domestic Versus International Marketing

Compared with domestic marketing, international marketing involves a bigger arena, more
complex needs and higher stakes. It is important that companies realize early on that foreign markets
comprise a lucrative portion of the total world market.
The fours Ps of marketing do not change from domestic to international marketing. However,
there are quite number of differences. For instance, in domestic marketing, you deal with one known
market; in international marketing, you deal with countries whose markets are diverse and unfamiliar.
Domestic marketing does not require much effort in contrast to international marketing wherein you
will operate and coordinate your business in different environments. Decisions must be made carefully
in order to optimize business opportunities in each market.
 Consumer – you will be serving a client who is not like you. The consumer is very different from
his or hers. Even in ASEAN member countries, there are meat lovers and vegetarians. For
example, in India, beef is unacceptable since Hinduism regards cows as sacred animals.
Therefore, McDonald’s which opened in India in 1996 had to change its menu. Its hamburger
patties are made from lamb meat instead of beef. Thus, cultural taboos are present in different
countries. What is forbidden in one country may be acceptable in another.
 Purchasing Power – historically, the US has been the main market of Philippine products and
investments. The purchasing power in this country is high. Should you discount the possibility
of trading with less developed countries?
 Product and Packaging – take for example McDonald’s. Only the Philippine chain of this
international fast food restaurant serves spaghetti. It started competing with the local Jollibee
stores when it decided to include Filipino dishes in its menu. In Japan, burgers are served as
teriyaki
 Currency – the foreign exchange is a system that enables a country to convert its currency into
that of another
  Payment Terms – in the Philippines, the mode of payment is either in cash or on credit. In some
cases, “in kind” will do, too. In international marketing, exports in particular, payments are
coursed through banks. The foreign customer opens an account with a local or a correspondent
bank in his/her homeland in favor of the exporter in his/her Philippine bank.
 Physical Distribution – what does longer haul mean? If the goods have to be produced before
they are brought to another country, the importer should consider the shipment time of the
good
 Language – English is perceived to be the most popular business language. In Europe, various
languages such as Spanish, French and German may be used as medium of transaction
depending on the country where the business is conducted.
 Communication – the current telecommunication technologies range from emails, to SMS.
Emails using networking and local area network installations have connected what seemed to
“unbridgeable “ gaps 20 years ago.

Why Companies Venture Reasons Into International Marketing

1. Internal reasons
a. To utilize the firm’s excess capacity
- If the domestic market cannot fully absorb the firm’s optimal production capacity,
selling the surplus production overseas will give the company an opportunity to
generate more profits. Many Japanese firms have to sell overseas as the Japanese
market is not able to absorb their optimal production capacities.
b. To take advantage of higher purchasing power in overseas markets
- When the domestic market experiences an economic recession and the consumer’s
purchasing power is greatly affected, a viable option is to find an overseas market that
can afford to purchase the firm’s product at a higher price. Most Filipino exporters
want to sell to Japanese importers as they are known to pay premium prices for high
quality products
c. To take advantage of the government’s export promotion drive
- Many governments encourage and support firms to become involved in international
marketing to generate foreign exchange. Government incentives may include financial,
technical and administrative assistance
d. To find other markets when the firm’s product experiences a decline in sales in the home
market
- If the firm experiences continuous sales decrease in the domestic or local market, it may
be forced to find an overseas market for its products to survive
e. To find other markets when stiff competition in the domestic or local market reduces the
firm’s sales
- If the competition in the foreign market is not too fierce, firms may engage in overseas
sales instead of concentrating in the home market. These firms probably cannot
withstand the competition posed by other local manufacturers or importers. However,
venturing into international marketing is a tough choice to make, since the firm may
lose its homegrown advantage.
f. To diversify the firm’s power base into different geographic locations
 - A firm may resort to this course of action to prevent its vulnerability in a specific
geographic base which may be experiencing political and economic instability. A global
firm may pull out from a restive or politically unstable country and transfer its
headquarters to a more peaceful location. By comparison, another firm may simply
withdraw from one foreign country to escape tax regulations and customs restrictions
and transfer to a more accommodating and liberal country.
2. External reasons
a. To take advantage of tax incentives and promotional packages offered by certain
countries to foreign investors
- Firms in developed countries may take advantage of incentives and promotional
packages offered by governments of developing countries to foreign investors
b. To take advantage of low labor and raw material costs in foreign countries
- Labor and raw material costs are inexpensive in developing countries. Thus, firms in
developed nations may set up assembly and manufacturing plants in these countries.
The Philippines, with its inexpensive labor and raw material costs is home to global
companies such as Texas Instruments and Analog Devices
c. To take advantage of access to new technologies in foreign countries
- A firm may have more opportunities to be exposed to new technologies in foreign
countries vis-à-vis in the home market
d. To take advantage of the government’s import promotion drive
- In Japan, firms are encouraged to import products to improve the country’s balance of
payments. As such, the Japanese government has establish import promotion offices
known as the Japanese External Trade Office (JETRO) worldwide.

Theories and Concepts in International Marketing

 Smith’s Theory of Absolute Advantage – a condition of absolute advantage exists when one
country (Country A) has a cost advantage over another country (Country B) in the production of
one product (it can be produced using fewer resources) while the second country (Country B)
has a cost advantage over the first (Country A) in producing a second product.
- It suggests that a country should export those goods and services for which it is more
productive than other countries and import those goods and services for which other
countries are more productive that it is.
 Ricardo’s Theory of Comparative Advantage – states that trade can be carried out even if one
country has absolute advantage in producing two products over another country. The theory
asserts that a country (Country A) that produces a certain product at a lower relative cost
advantage over another country (Country B) enjoys a comparative advantage. It thus contends
that a country should produce and export those goods and services it is relatively more
productive than other countries and import those goods and services for which other countries
are relatively more productive than it is.
 Neo-classical Trade Theory – explains that a country will export gods that are intensive in
production in its abundant factors and import goods intensive in its relatively scarce factors.
 Heckscher-Ohlin Trade Theory of Factor Proportions – explains why two countries trade goods
and services with each other that one condition for trade is that the countries differ with respect
to the availability of the factors of production.
  Leontief Validation of Heckscher-Ohlin Theory – he wanted to test the hypothesis that the U.S.
had a comparative advantage in the production of capital intensive goods and therefore should
export this type of product and import labor-intensive goods.

Balance of Payments
If a country’s payables cost more than what the country receives, then the country may
experience a balance of payment (BOP) deficit. The overall state of BOP has an effect on a country’s
trade policies. One policy which the Philippine government keeps on discussing and amending is its
investment policy. The Philippines is always deficit-ridden. One way of correcting this imbalance is to
encourage investments, another is to intensify the export of goods and services.

Why Trade Barriers?

The Philippines has its own share of protectionist measures against the influx of imported goods.
The following are some of the arguments for imposing trade barriers:
 Infant industry – in the 1950’s and 1960’s, most of the manufacturing industries in the
Philippines enjoyed protection in the sense that competing imported products were subjected
to high duties and taxes before they could enter the Philippine market. This was done to
encourage domestic consumption of locally manufactured products.
 Industrialization – it is argued that the more local companies there are, the more employment
opportunities for Filipinos will be. It follows, therefore, that most economic benefits such as the
encouragement of capital accumulation since money is kept at home, rising standards of living
and high wages will contribute to the overall upliftment of the economy.
 Conservation of natural resources – this refers to the wise use and management of valuable
natural resources such as timber, fish, topsoil, pastureland, minerals, forests, wildlife and
watershed areas. Products from and live specimens of endangered species of flora and fauna,
like the Philippine monkey-eating eagle, cannot be exported.
 National defense – import barriers would help the nation accumulate more crucial materials for
future economic or military welfare in the form of either stockpiles or emergency capacity to
produce.
 Dumping – is an international price discrimination practice in which an exporting firm
deliberately sells merchandise at a lower price in a foreign market than it charges in other
markets, specifically and usually its home market. There are two kinds of dumping: 91)
predatory which happens when the firm discriminates in favor of some foreign buyers
temporarily for the purpose of eliminating some competitors and of later raising its price when
the competition is trounced; and (2) persistent which goes on indefinitely. In other words, if a
country feels that its variable costs have already been covered with the sales in the domestic
market, then it can afford to sell the products outside the country at a lower price.
 Retaliation – as the term suggests, one country will impose tariff or any trade barrier if it feels
that the other country unduly puts tariffs on the former’s products

Can the Philippines afford to retaliate against its trading partners?

Types of Trade Barriers
1. Tariff barriers – a tariff is a tax or duty imposed on imported goods. It aims t protect the
domestic market and to raise government revenues
2. Non-tariff barriers – quotas - these refers to restrictions imposed by a government on the
amount, number of pieces, or weight of goods or services that may be traded within a given
period.
3. Monetary barriers – trade can be limited if the government uses various forms of monetary
barriers which are actually exchange control restrictions such as blocked currency, differential
exchange rates and government approval to secure foreign exchange.
4. Embargoes – a trade embargo is refusal to sell to a specific country. Embargoes restrict all trade
with a nation for political purposes. The U.S. has been known for imposing trade embargoes on
countries with whom it has a dispute such as Cuba, Iran and Iraq.
5. Boycotts – these refer to the refusal to buy goods from a certain country. Although
governments can declare embargoes, boycotts can be voluntary actions or movements that may
not need government authorization or involvement.

Customs and Administrative Entry Procedures

Customs and administrative entry procedures that can limit trade include the following:
1. Valuation system – officials enforce their own valuation process on imported goods which
usually puts higher value on imported goods and make them more expensive than local goods
2. Anti-dumping practices – is used as a reason to value imported goods higher, so that they will be
sold at a price higher than that of domestic goods.
3. Tariff classification – imported goods may be classified in such a way that they will fall into a
high tariff category
4. Documentation requirements – unnecessary papers or documents may be required to make
importation difficult
5. Fees – various payments are charged for different services that will surely boost the price of
imported goods

Standards – these can include standards to protect the health and safety of consumers and to ensure
product quality. As an example, Philippine mangoes exported to Australia have to undergo vapor heat
treatment which exposes mangoes to very high temperatures. This profess is supposed to free the
mangoes from fruit flies. However, exposure to extreme heat can also damage the natural quality of the
fruit.

Government Participation in Trade

The government’s involvement in trade can be gleaned from the following:
 Procurement policies – in the purchase of goods and other supplies, the government patronizes
local products instead of imported ones
 Countervailing duties – the government taxes imported goods which have been given exporting
subsidies by their respective countries. This is done to protect locally produced goods
 Export subsidies – the government provides export incentives and credits to exporters
 Domestic assistance program – the government assist domestic firms so that their products may
become more competitive against imported brands.
Easing World Trade Restrictions
 World Trade Organization
The World Trade Organization, based in Geneva, Switzerland was established on January 1,
1995. It succeeded the General Agreement on Tariffs and Trade (GATT) which was the interim world
trade body since 1948. With 253 member countries, the WTO is the only global organization dealing
with the rules of trade between or among nations. It is a member-driven organization as all
decisions are made by member governments. All WTO rules are the outcome of negotiations among
members. These rules help exporters and importers conduct free trade. The WTO basic function is
to serve as a multilateral trading system. This trading system consists of WTO agreements
negotiated, signed and ratifies by a large majority of the world’s trading nations.
 Free Trade Area - the members remove all trade barriers among themselves, but their
respective
Barriers to the non-member countries are not dictated by their membership. In short, they can
impose their own tariffs on non-member countries.
Example : ASEAN Free Trade Area
Brunei Darrusalam Myanmar
Cambodia Philippines
Indonesia Singapore
Lao PDR Thailand
Malaysia Vietnam
Southern African Custom Union
South Africa
Botswana
Namibia
Lesotho
Swaziland
Common Market:
The European Union (EU)
Austria Latvia
Belgium Lithuania
Bulgaria Luxembourg
Croatia Malta
Cyprus Netherlands
Czech Republic Poland
Denmark Portugal
Estonia Romania
Finland Slovakia
France Slovenia
Germany Spain
Greece Sweden
Hungary United Kingdom
Ireland Italy
The Central American Common Market
 Costa Rica Guatemala Honduras
El Salvador Nicaragua
 International Monetary Fund
The International Monetary Fund (IMF) was conceived in July 1944 in the U.S. when
Delegates from 44 governments agreed on a framework on economic cooperation. This
international institution allows currencies to be exchanged freely and easily between member
countries. Also, it oversees the international monetary system and promotes both the
elimination of exchange restrictions relating to trade in goods and services and the stability of
exchange rates.
IMF Activities – surveillance, technical assistance and lending
1. Surveillance – refers to the monitoring of economic and financial developments and policies
in member countries at the global level. The IMF also gives policy advice to its members.
For example, the IMF commended Mexico for good economic management but advised the
country to reform its tax system, energy sector, labor market and judicial system to be able
to compete globally.
2. Technical assistance – the IMF provides the governments and central banks of its member
countries with technical assistance and training in the countries areas of expertise. For
example, the IMF helped the Baltic States, Russia, and the former Soviet countries set up
treasury systems for their central banks as part of their transition from centrally planned to
market-based economic systems after the disintegration of the Soviet Union.
3. Lending – the IMF lends to member countries with balance of payments problems. This
pursues the two-pronged goal of providing temporary financing and supporting policies that
will correct these kinds of problems. For example, the IMF loaned money to South Korea
during the Asian financial crisis in 1997 and the country paid its loans after rebuilding its
reserves.

Entry Modes in International Marketing

Different modes may be used by a company to enter foreign markets. These are franchising,
licensing, manufacturing, management contracts and exporting.
1. Franchising – a continuing relationship in which the franchisor provides a licensed privilege to
the franchisee to do business and offers assistance in organizing, training, merchandising,
marketing and managing in return for monetary consideration. Franchising is a form of business
by which the owner (franchisor) of a product, service or method obtains distribution through
affiliated dealers (franchisees). This method of distributing products and services is ideal for
people who want to expand their business but do not want to manage it themselves. By
franchising instead of undertaking a regular expansion, the franchisor may expand his/her
business in a shorter period of time.
Advantages Disadvantages
Possibly easier to finance Onerous reporting requirement
Access to quality training & ongoing support Supplies or materials may be more expensive
Established concept with reduced risk of failure Possible exaggeration of advantages by
franchisor
Access to extensive advertising Franchisor may saturate franchisor’s territory
Access to lower cost and possibly centralized Cost of franchise and other fees may reduce
buying franchisee’s profit margins
 Few start – up problems Inflexibility due to restrictions imposed by
franchisor
Use of well-known trademark or trade name Termination policies of franchisor afford little
security
The father of Philippine franchising, Samie Lim, started the franchise industry in the Philippines.
He is the franchisor of living room essentials store La-Z-Boy Gallery and the franchisee of Canadian
Tourism and Hospitality Institute. He also inspired the formation of the Philippine Franchise Association.

2. Licensing – entails only a part of the whole franchising aspect. A licensee may only get the
patent, trademark or manufacturing know-how of the mother company. Still, the licensee has
to pay royalties to the parent company.
The advantages of licensing are as follows:
 It requires little capital
 It is the quickest and easiest way to enter a foreign market
 It enables the firm to gain knowledge of and access to the local market
 It provides a means of entry when import restrictions forbid any other ways or when a country is
sensitive to foreign ownership
 It offers savings on tariff, transport and local production costs
However, licensing has certain drawbacks:
 The licensor may establish his/her own competitor
 It provides limited returns
 Problems of control on license may arise
3. Manufacturing – lumped into several categories, certain local companies are mostly concerned
with the manufacture of products. They serve as satellites or extensions of foreign mother
companies. These local firms can assume any of these forms:
- Assembly plant – the firm produces domestically all or most of the components of a
product, or the finished product itself, as in the case of the Philippine Car Development
Program
- Contract Manufacturing – the product is manufactured for the foreign market by a local
firm under contract with the international company’ the firm may also become the sales
or marketing subsidiary of the mother company. In effect, this is called international
subcontracting. An example is the set up of the export processing zones (EPZAs). These
are designated areas where investors are enticed with minimum tax requirements
- Joint venture – the firm has enough equity position to have a voice in management, but
not enough to completely dominate or control the venture
- Wholly owned plant – there is 100% local ownership of the international firm. In terms
of advantages, a company may engage in manufacturing if it wants to capitalize on low
cost labor, avoid high import taxes, reduce high cost of transportation to market, gain
access to raw materials and /or gain entry into other markets. The major disadvantage
of manufacturing is that it involves larger risks and investments.
4. Management Contracts – here, production is irrelevant to the mother companies. They merely
supply management know-how to a foreign company that is willing to supply the capital to
them. The local firm, on the other hand, exports management services. Today, there is a
growing number of computer literates as well as a proliferation of computer schools. One big
 dollar earner for the Philippines is the export of encoding services. Developed countries do not
have the luxury of time as manual encoding jobs are concerned, so they farm out this work to
service providers in the Philippines. Encoding jobs may vary from preparing the voter’s list of a
country to completing the entries in a telephone directory.
American cartoon magazines are illustrated by Filipino artists in the Philippines and
other Asian countries. There are abstractors who, by the nature of their job, summarize
and digest reading materials such as books and magazines. They country earns dollars
from these services. For instance, there is a shortage of competent designers in Japan.
One marketing opportunity for any interested Filipino is to put up a local design
company mainly for Japanese clients.
The advantage of management contracts is that local companies providing
services do not need to risk setting up operations in countries where the foreign clients
are based.
5. Exporting – refers to the marketing of goods and services produced in one country into another
country. It allows a company to enter foreign markets with a minimum change in product lines,
company organization, investment, or company mission. Exporting offers several modes of
entry for entities, namely (1) as producer-exporter, (2) as exporter-trader, (3) as selling agent,
(4) as buying agent, and (5) as subcontractor
The advantages and constraints of exporting are tabulated below:
Advantages Constraints
Enhances domestic competitiveness Develops new promotional materials
Increases sales and profits Subordinates short-term profits to long-
term gains
Gains global market share Incurs added administrative costs
Exploits corporate technology and know- Allocates personnel for travel
how
Extends the sales potential of existing Waits longer for payments
products
Stabilizes seasonal market fluctuations Modifies product of packaging
Enhances potential for corporate Applies for additional financing
expansion
Sells excess production capacity Obtains special export licenses
Gains information about foreign
competition

International Trade Terms

Trading with other countries cuts across political and national boundaries. Inevitably, as an
exporter, you need to deal with people of different cultures, customs and traditions. What may be true
to Filipinos and the Philippines may not be applicable at all to the citizens of other countries.
To facilitate better understanding among countries, the International Chamber of Commerce
(ICC) provided a set of international rules for the interpretation of the most commonly used terms of
delivery in foreign trade. Thus, the uncertainties and arbitrariness of interpretations of such terms in
different countries are avoided or, at least, minimized to a considerable degree.
 The International Rules for the Interpretation of Trade Terms (Incoterms or International
Commercial Terms) came into being in 1936. According to the International Chamber of Commerce, the
number of Incoterms has been reduced from 13 to 11.
The rules for any mode or modes of transportation can be used irrespective of the mode of
transport selected and the number of mode of transport employed:
1. Ex-works (EXW) Factory – the seller is responsible for the goods only inside/within the factory
premises. The responsibility for the goods is transferred to the buyer once he/she picks it up
from the seller’s factory. The seller is not responsible for loading the goods on a ship, in an
airline, etc., or for nay kind of transport
2. Free Carrier (FCA) – the arrangement between the seller and the buyer is just like Free On Board
Port of Shipment. However, this term can be used for any mode of transport.
3. Carriage Paid To (CPT), named place or port of destination. This term is used for air or ocean
containerized and roll-on/roll-off shipments
4. Carriage and Insurance Paid to (CIP), named place or port of destination. This term is used for
air or ocean containerized and roll-on/roll-off shipments.
5. Delivered At Terminal (DAT) – this term means that the seller has already delivered, when the
goods – once unloaded from the arriving means of transport – are placed at the disposal of the
buyer at the named terminal at the named port or place of destination. Terminal includes a
place, whether covered not, such as a quay, warehouse, container yard road, rail, or air cargo
terminal. The seller bears all risks involved in bringing the goods to and unloading them at the
named port or place of destination.
6. Delivered At Place (DAP) – this term means that the seller has already delivered, when the
goods are placed at the disposal of the buyer on the arriving means of transport ready for
unloading at the named place of destination. The seller bears all risks involved in bringing the
goods to the named place.
7. Delivered Duty Paid (DDP) – named place of destination, this term is used for any mode of
transportation
8. Free Alongside Ship (FAS) – named ocean port of shipment. This can only be used for LCL (less
than container load) shipments. It cannot be used for containerized shipments
9. Free On Board vessel (FOB) – named ocean port of shipment. This term is used for ocean
shipments only where it is important that the goods pass the ship’s rail
10. Cost and Freight (CFR) – named ocean port of destination. This term is used for ocean
shipments that are not containerized
11. Cost, Insurance and Freight (CIF) – named ocean port of destination. This term is used for ocean
shipments that are not containerized

Importance of Export in the Philippine Setting: The Government and the Private Sector
The government through the Department of Trade and Industry (DTI), strives to make exporting
a crucial part of the country’s economic growth.

Profile of Filipino Exports

Compose of more than 7,100 islands, the Philippines has three major islands: Luzon, Visayas and
Mindanao. Luzon is composed of the Ilocos Region, Cagayan Valley, Central Luzon, CALABARZON,
MIMAROPA, Bicol Region, Cordillera Administrative Region (CAR) and the National Capital Region (NCR).
Visayas comprises of Western Visayas, Central Visayas and Eastern Visayas. Mindanao is composed of
Zamboanga Peninsula, Northern Mindanao, Davao Region, SOCCSKSARGEN, CARAGA and Autonomous
Region in Muslim Mindanao (ARMM)

Listed below are some of the important products per region:

REGION PRODUCTS
CAR Vegetables
Mineral reserves such as gold, copper, silver and
zinc
Non-metallic metals such as sand, gravel and
sulfur
Region I Agro-industrial products such as boneless bangus
and tobacco
Region II Agricultural products
Region III Rice, corn, sugar, furniture
NCR Electronics, gifts and houseware, furniture
Region IVA Rice, coconut, sugarcane
Region IVB Marble, minerals
Region V Abaca, pili nuts, sinamay, rice copra
Region VI Mangoes, bamboo furniture, rice, sugar, crabs,
prawns
Region VII Fashion accessories, mangoes, furniture, corn
Region VIII Handicrafts, metallic and nonmetallic minerals,
mats
Region IX Minerals such as gold, bentonite clay, zeolite
Region X Canned and bottled sardines
Region XI Fruits, orchids, pearls, mining, forestry,
commercial fishing (milkfish, tilapia, shrimp, crab
and catfish), rice, corn, banana, coconut, abaca,
ramie, coffee, root crops
Region XII Rice, corn, coconut, pineapple, asparagus,
cassava, pineapple, sugarcane, rubber, tuna,
octopus, shrimps, fish products, coconut oil, cube
flowers, gifts, houseware
Region XIII Rice, corn, coconut, banana, rubber, oil palm,
calamansi, prawns, milkfish, crabs, seaweeds,
mango

Modes of Venturing Into The Export Business

Entry Mode 1. Producer – exporter
 You produce the goods. Thus, you should have a factory or plant to manufacture the products
you are going to export
  You carry the inventory and thus need various warehouse facilities for storing and keeping the
basic goods
 You promote the product. You need to attend trade fairs and join selling missions to do this,
uou should also send brochure and samples to effect sales
 You contact and negotiate with the buyer. Since you directly sell to a foreign buyer, you should
build relationship with him/her. The buyer, in some cases, provides technical assistance in
design and quality
 You package and ship the goods to the buyer for secured shipment purposes
 You are paid on the agreed amount of sales

Entry Mode 2: Exporter – Trader

 You buy from the producer or supplier directly; you do not manufacture. Once you get the
pieces of merchandise, you are responsible for them
 You carry the inventory, therefore, you contract for various types of goods and take possession
and title to them
 You promote the products yourself
 You contact and negotiate with the buyer
 You package and ship the goods to the buyer
 Your buyer pays you directly
 Sometimes, you provide materials, working capital and technology to your supplier

Entry Mode 3: Subcontractor

 You must meet the producer’s (contractor’s) requirements. The name of the game in export is
volume which most often is not met by even seasoned exporters. Thus, they turn to smaller
firms which will produce for them either the whole or partial quantity
 Your contractor gives you assistance in the form of raw materials, design, quality specifications,
technology or sometimes, the working capital

Entry Mode 4 : Selling Agent

 A producer appoints you, and you, therefore, act as the producer’s agent. You sell the
producer’s merchandise to importers
 You represent the interests of the product(s). you can be the representative of more than one
producer, provided that the goods are either non-competing or supplementary
 You market the product
 You assist the producer in the shipment
 You prepare the sales documentation in the producer’s name
 You are paid either a salary or a commission

Entry Mode 5: Buying Agent

 You are the importer’s representative. You reside in the exporter’s home country
 You source the product from local suppliers based on the buyer’s requirements and
specifications
 You negotiate the purchase of the product
 You check the product before shipment in the interest of the buyer and ensure on-time delivery
of the product
 You are paid a salary or a commission for services rendered to the importer

Many businesspersons say that among all these modes of entry into export, being an agent
requires the minimum in terms of financial outlay and investments. Can you be a buying agent and
a selling agent at the same time? The most cunning businesspersons would answer affirmatively,
but business ethics dictate that you should only be serving the interest of one entity.
As a start-up exporter, it will do you good to learn the ropes by working first in an export firm
before trying it on your own. Some begin as export merchandisers for buying offices, and if they are
lucky and gutsy enough, they may fund themselves establishing their own business office.

The Export Merchandiser

In starting your career in the export industry, you must first be able to learn the ropes of the
trade. There is no better way to do this than to be employed in a buying office or a trading company
as an export merchandiser.
What is an export merchandiser? A merchandiser, simply put, is a representative of the market.
He/she acts as a middleman or a link between a buyer and a seller or supplier. In this context, an
export merchandiser is defined as someone who links a buyer from one country to a seller or
supplier in another country.

The Export Merchandiser’s Roles

The roles of an export merchandiser are very important. He/she matches a buyer’s preferences
and specifications to a supplier’s capabilities. Moreover, he/she is the one who negotiates with the
buyers and sellers and assures that all orders are in accordance with the approved marketing plans
and in the manner that will ensure profitability for the company.

The Duties of an Export Merchandiser

If you are bent on becoming an export merchandiser, it is crucial to know your duties. Your
general functions and specific activities are presented as follows:
Functions Activities
Buyer sourcing, handling and assistance Undertakes a market research and prepares for
the buyer’s visit
Arranges for the buyer’s hotel
accommodations, transportation provision etc
Studies the buyer’s product preferences and
specifications
Supplier sourcing, identification and evaluation Visit factories or prospective suppliers to
broaden suppliers’ base
Evaluates suppliers in terms of product,
capacity, clientele, reliability, pricing, etc
Negotiates with vendors, if necessary,
concerning specifications, pricing, etc
 Negotiation Matches the buyer’s specifications and
supplier’s capabilities and presents these
options to the buyers
Initiates the counter sampling and alternative
product sourcing to meet the buyer’s
requirements
Prepares guidelines and terms that will later on
be applied to the negotiations and confirmation
of orders with the buyers and suppliers
Submits final quotations and samples for
approval and confirmation
Prepares a pro-forma invoice for the buyers
stating the specifications for the payments and
shipping terms
Prepares the P.O. to vendor upon the approval
of the buyer
Prepares the authorization to start the
production the moment the buyer gives his/her
approval
Orders follow-up Prepares a timetable during pre-production and
production stages
Conducts plant visits to follow up the status of
the production/order
Closely monitors the production process and
sends progress reports to the buyer
Establishes clear measures for equality control
and effects the same in inspecting all orders
placed during production and post-production
prior to loading of goods to the buyer
Ensures on-time delivery
Negotiates with buyers in case of any delay

The Market Research

Market research in itself is a discipline. You may have heard of surveys such as the Social
Weather Station (SWS), Dealer Pulse and Media Pulse. The U.S. has the Nielsen group for the same
purpose. Companies may conduct their own market research. In most cases, companies can hire the
expertise and services of external or independent research agencies.

Export Market Research

Export market research is designed for companies that require specialized information
concerning a particular product or industry in a specific market. Market research abroad is different
from a local market research. Culture is a factor to consider before entering and placing a product in a
diverse market.
Export market research aims to provide your company with customized, useful and practical
information that can help you assess accurately your business potential within the specified target
market. Researching on your target market is now easier. You can access sources of information right
on your desk via the computer. Government and private associations also provide information such as
industry and market studies on their websites.

Elements of Export Market Research

The structure of market research varies from market to market and from company to company.
There are four basic elements considered in making a market research report, namely the market
potential, product requirements, marketing practices and the buyer.

Your country’s trade restrictions

In a free society, it is assumed that everyone can do anything he/she pleases. This is not exactly
true in the strictest sense of the word. People have to live by norms and accepted social behavior. It is
the same case with exports. One of the reasons for restricting export is to protect the environment.
The list of prohibited and regulated Philippine products that need government clearances before they
can be exported is available at the Philippine Registry Website. These products are listed either
endangered species or affected by environmental concerns. Thus, the export of Philippine corals, snake
skins or live specimens of endangered flora and fauna are either regulated or totally banned.
The most common documentary requirement in almost all trading nations is the Certificate of
Origin which certifies that the raw materials used in making the exported product are obtained from
that country.

Market Access
Tariffs and quotas are just some of the concerns you should consider in exporting. Apart from
that, you have to be familiar with other necessary requirements that the target market country may ask
for.

Market Size, Patterns and Growth

Part of the export market research is to study the market as a whole. The essential data can be
taken from annual trade statistics published by every country.
When you are interested in a particular country, a visit to a local embassy will be useful. But if
you are merely curious, then try dropping by the local offices of international agencies such as the
United Nations, Asian Development Bank or national government entities like the Bangko Sentral ng
Pilipinas and the National Economic Development Authority. The Internet is also a good source of data
on market size, patterns and growth.

Competition
Competition is part and parcel of any business venture even if you have already created your
own niche in the market. Exporting to other countries will definitely be competitive. There will always
be competitors or you may be the competitor in the particular industry of the country that you want to
export to.
For instance, penetrating the Japanese furniture industry is not only risky but also difficult.
Japan has a very strong domestic furniture industry and any exporter should be prepared to face the stiff
competition posed by local companies.
Price Structure
Pricing is one of the strategies you will use to market your product to your target buyers or
consumers. In an international setting, pricing is also necessary and may be varied. Priced is the only
area of the global marketing mix where policy can be changed quickly without heavy direct cost
implications. However, management must realize that constant fine-tuning of prices in overseas
markets should be avoided and that many problems are not best addressed by pricing action.

Export Requirements
Below is a checklist of the different aspects considered in export product research:
Category Specific Requirements
Product Color – technical specification
Taste – reason for use
Design and styling conditions of use
Materials – performance characteristics
Packaging and shipment Handling methods – storage conditions
Marketing requirements
Consumer pact Protective requirement (storage and handling
methods, in-store conditions
Information requirements (labelling regulations,
language, consumer, knowledge of the product)
Merchandising requirements (display, conditions,
size and shape requirements, local regulations)
Reactions to trade names, colors and symbols
Usage (dispensing requirements, home storage
conditions, reuse or disposal requirements)
Legal requirements (labelling, weights and
measures, materials)

Product
The product in itself really determines whether or not it is going to be accepted/bought by your
target market. In creating an acceptable product for the global market, it is important to examine what
contributes to the total product offer. You also have to look into the different aspects of your export
product research. Are avant-garde design accepted worldwide? Products may be well received and sell
in London but not in New York. In the same manner, Manilans compared to provincial folks, are more
open to modern ideas.

Packing for Shipment

Packing is one of the necessary elements in exporting. Mostly, packing is done through sea and
air freight. There are also other distribution systems by which you can transport or deliver goods such
as rail or road especially in the landlocked countries of Europe. Packed goods can be placed in crates or
containers. Other products require more protective packing and processed foods normally have shelf
life or expiration date to contend with

Dos and Don’ts of Designing Packs Worldwide

Color
France, Holland and Sweden Green is associated with cosmetics
France Red is masculine. To the rest of the world, blue
is masculine
Sweden Swedes do not like packaging that shows gold or
blue
Combination of white and blue, the colors of the
national flag, is best avoided
Ireland Green and orange should be used with care
Switzerland Yellow means cosmetics. Blue means textile
China White is the color of mourning and white-robed
figures in illustrations are counterproductive.
Red denotes happiness and profit. Blue and
white mean money
Other design elements
France Avoid illustrations showing liquor being poured
Spain Bikini clad girls should not appear in illustrations
Germany The use of superlative in packaging copy is
forbidden. “Mist” is the word for dung, the word
“gift” means poison
Designing Packs Worldwide
Sweden Consumers do not like giant packs. The brand
name must be pronounceable in Swedish
Switzerland The oval is an omen of death
Turkey A green triangle signifies a free sample
Europe generally Designs resembling the swastika (Nazi sign or
logo) are generally disliked