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- Completing a successful transaction: Part 3 International Trade - April 11, 2017
- Negotiating And Planning To Win: Part 2 International Trade - April 5, 2017
- Launching A Profitable Transaction: Part 1 International Trade - March 28, 2017
Before you read this article, do read my previous articles so as to understand the logical flow in conducting international trade. For this article, I will touch on the planning and negotiating aspects of international trade.
Let’s say that you have a marketable and profitable product or service that will sell in sufficient volume, and you are now ready to commit your resources to the project. But before you do, ensure you do your due diligence to complete the following steps:
1.) Develop a market plan
2.) Prepare for negotiations
3.) Understand the tips and traps of culture
4.) Learn about communications
5.) Get ready to travel
The Market Plan
It is important to integrate the international market plan with the firm’s overall strategic business plan. Follow the following logical, step-by-step process to write your market plan:
- Sales of $XXX,XXX by the end of the second year
- Expansion into countries A and B by the end of the third year
2.) Specific tactics:
- Three direct mailings to each company or person on a specific list
- Radio advertising in two cities
- Segmenting the market (macro and micro levels)
3.) Schedule of activities:
- A list of trade shows indicating those that you will attend.
- Specific assignments of responsibility
4.) Budget for accomplishing the action plan
- Cost for marketing
- Cost for travelling
Unfortunately, one too many people wander into international negotiating situations with no plan of how to proceed. The first step in preparing for international negotiations is to develop a complete assessment of your firm’s capabilities. Analyze your strengths and weaknesses, particularly in terms of managerial skills, product delivery, technical abilities, and global resources.
Next, analyse your target – the company or country you intend to sell your product to. Keep in mind that the human and behavioural aspects of your negotiations will be vital. For example:
- Understand the country where you will be travelling.
- Know the culture, history, and political processes.
- Play particular attention to the importance of face-saving to the people of the country where you will be negotiating.
- What is the host government’s role in negotiations?
- How important are personal relations?
- How much time should you allow for negotiations?
- Be sure that the final agreement specifies terms for the cost, quality, and delivery of product.
After obtaining the initial quotations, the next step in any international business arrangement is to reach a sale contract with your overseas partner.
Negotiating is integral to international trade. In the highly competitive international market, a trader’s ability to offer reasonable terms to customers may mean the difference between winning and losing a sale.
The trader must have a list of alternatives ready. The following is a partial list of alternatives and conditions you may wish to consider during negotiations:
- Quantity price breaks (Don’t offer just one price)
- Discounts for cash deals or even down payments
- Offer counter-trade to those countries short on foreign exchange
- Product buyback
- Low-interest loans
- After-sales service
- Installment-based payment spread over several years
Let your banker, freight forwarder, or custom house broker review the final offer. A second pair of experienced eyes can save you money.
The best way to appreciate another culture is to “walk in the other person’s shoes”; that is, visit or live in the country and get a feel for the similarities and differences. Do your homework before you interact in a new country, and then get on with doing business.
I will list down the nine elements of business culture:
- Body Language
- Values and attitudes
- Law and legal environment
- Social organisation
Although nothing substitutes for personal contact when developing an international marketing structure, this may not always be possible. Therefore, the tone of initial written communication is critical. It often makes the difference between a profitable trade and a lost opportunity.
Your introductory letter, fax, or email most often can be written in your language, your potential buyer’s or seller’s language, or in English. With the exception of Latin America, English has become the language of international business, but most importantly, use simple words that keep the message clear and easy to understand.
From the beginning, establish your company’s favourable reputation and explain the relationship that you seek. Describe the product you wish to export or import. Propose a personal meeting and offer the prospect a visit to your firm during the person’s next visit to your country. Ask for a response to your letter.
Distrust across international borders can be a barrier to a successful import/export business. Therefore, visiting the country and the people who offer goods for your importation or the agents or distributors who market your export products is essential.
For my next article, I will cover the remaining common ground, that is, paying for the goods and physically moving them from one country to another.