In This Chapter
Many successful exporters first started selling internationally by responding to an inquiry from a foreign firm. Thousands of U.S. firms receive such requests annually, but most firms do not become successful exporters. Generally, successful firms make it a priority to create systems to properly respond to inquiries, conduct research on foreign customers, differentiate between domestic and international sales, and build positive relationships with partners.
Most, but not all, foreign letters, faxes, or e-mails of inquiry are in English. Your firm may look to certain service providers (such as banks or freight forwarders) for assistance in translating a letter of inquiry in a foreign language. Colleges and universities are also excellent sources for translation services. Most large cities have commercial translators who are hired for a fee.
A foreign firm will typically request product specifications, information, and a price. Some inquiries will come directly from the end user, whereas other inquiries will come from distributors and agents who wish to sell the product in their market. A few foreign firms may already be familiar with your product and may wish to place an order immediately.
Regardless of the form such inquiries take; your firm should establish a policy to deal with them. Here are a few suggestions:
There are many ways for a U.S. firm to research a foreign company before conducting any formal business. Your company can save time and money by using the following resources:
Companies should be aware of basic business practices that are essential to successful international selling. Because cultures vary, there is no single business code. The following basic practices transcend culture barriers, though, and will help your company conduct business overseas.
Once you have established a relationship with an overseas customer, representative, or distributor, it is important to work on building and maintaining that relationship. Common courtesy should dictate business activity. By following the points outlined in this chapter, your firm can present itself well. Beyond these points, you should keep in mind that a foreign contact should be treated and served as well as a domestic contact. For example, your company should keep customers and contacts notified of all changes, including changes in price, personnel, address, and phone numbers.
Because of distance, a contact can “age” quickly and cease to be useful unless communication is maintained. If your firm cannot afford frequent travel, you may use fax, e-mail, and telephone to keep the working relationship active and up to date.
Quality, price, and service are three factors critical to the success of any export sales effort. Quality and price are addressed in earlier chapters. Service, which is addressed here, should be an integral part of any company’s export strategy from the start. Properly handled, service can be a foundation for growth. Ignored or left to chance, it can cause an export effort to fail.
Service is the prompt delivery of the product. It is courteous sales personnel. It is a user or service manual modified to meet your customer’s needs. It is ready access to a service facility. It is knowledgeable, cost-effective maintenance, repair, or replacement. Service is location. Service is dealer support.
Service varies by the product type, the quality of the product, the price of the product, and the distribution channel used. For certain export products—such as food products, some consumer goods, and commercial disposables—service ends once distribution channels, quality criteria, and return policies have been identified.
However, the characteristics of consumer durables and some consumables demand that service be available after the purchase is completed. For such products, service is a feature expected by the consumer. In fact, foreign buyers of industrial goods typically place service at the forefront of the criteria they evaluate when making a decision about a purchase.
All foreign markets are sophisticated, and each has its own expectations of suppliers and vendors. U.S. manufacturers or distributors must therefore ensure that their service performance is comparable to that of the predominant competitors in the market. This level of performance is an important determinant in ensuring a competitive position, especially if the other factors of product quality, price, promotion, and delivery appeal to the buyer.
You may decide, as part of your exporting strategy, not to provide after-sales service. Your company may determine that its export objective is the single or multiple opportunistic entries into export markets. Although this approach may work in the short term, your subsequent product offerings will be less successful as buyers recall the failure to provide expected levels of service. As a result, market development and sales expenditures may result in one-time sales.
Service is an important factor in the initial export sale and ongoing success of products in foreign markets. Your firm has many options for the delivery of service to foreign buyers.
REQUIRING THE BUYER TO RETURN THE PRODUCT
A high-cost option—and the most inconvenient for the foreign retail, wholesale, commercial, or industrial buyer—is for the product to be returned to the manufacturing or distribution facility in the United States for service or repair. The buyer incurs a high cost and loses the use of the product for an extended period, while you must incur the export cost of the same product a second time to return it. Fortunately, there are practical, cost-effective alternatives to this approach.
USING A LOCAL PARTNER
For goods sold at retail outlets, a preferred service option is to identify and use local service facilities. Although this approach requires upfront expenses to identify and train the staff for local service outlets, the costs are more than repaid in the long run.
Exporting a product into commercial or industrial markets may dictate a different approach. For the many U.S. companies that sell through distributors, selection of a representative to serve a region, a nation, or a market should be based not only on the distributing company’s ability to sell effectively but also on its ability and willingness to service the product. Assessing that ability to provide service requires that you ask questions about existing service facilities; about the types, models, and age of existing service equipment; about training practices for service personnel; and about the firm’s experience in servicing similar products.
If the selected export distribution channel is a joint venture or other partnership arrangement, the overseas partner may have a service or repair capability in the markets to be penetrated. Your firm’s negotiations and agreements with its partner should include explicit provisions for repairs, maintenance, and warranty service. The cost of providing this service should be negotiated into the agreement.
If the product being exported is to be sold directly to end users, service and timely performance are critical to success. The nature of the product may require delivery of on-site service to the buyer within a very specific time period. You must be prepared to negotiate such issues. On-site service may be available from service organizations in the buyer’s country, or your company may have to send personnel to the site to provide service. The sales contract should anticipate a reasonable level of on-site service and should include the associated costs. Existing performance and service history can serve as a guide for estimating service and warranty requirements on export sales. This practice is accepted by small and large exporters alike.
If your export activity in a particular region grows to a considerable level, it may become cost-effective for your company to establish its own branch or subsidiary operation in the foreign market. The branch or subsidiary may be a one-person operation or a more extensive facility staffed with sales, administrative, service, and other personnel, most of whom are local nationals. This high-cost option enables you to ensure sales and service quality, provided that personnel are trained in sales, products, and service on an ongoing basis. A benefit of this option is the control it gives you and the ability to serve multiple markets in a single region.
If you have neither partners nor joint venture arrangements in a foreign market, you must be prepared to accept return of merchandise that the foreign buyer refuses to take. This situation is not likely to occur in cash-in-advance or confirmed letter of credit transactions. However, in an open-account or documentary collection transaction, the buyer is in a position to refuse delivery of the goods and suffer no financial harm. If you cannot find another buyer in that market or if you elect not to abandon the goods, you will be faced with the fees and charges associated with returning the goods to the United States. Your freight forwarder can be of great assistance in this process should the need arise and can quote you a price to return the goods.
Service is an important part of many types of representative agreements. For better or worse, the quality of service in a country or region affects your company’s reputation there.
It is imperative that agreements with a representative be specific about the form of the repair or service facility, the number of people on the staff, inspection provisions, training programs, and payment of costs associated with maintaining a suitable facility. The depth or breadth of a warranty in a given country or region should be tied to the service facility that you have access to in that market. It is important to promise only what you can deliver.
Another part of the representative agreement may detail the training you will provide to your foreign representative. Such detail may include how often training will be provided, who must be trained, where training will be provided, and which party will absorb travel and per diem costs.
Foreign buyers of U.S.-manufactured products typically have limited contact with the manufacturer or its personnel. The Foreign Service facility is one of the major contact points between you and the buyer. To a great extent, your reputation is made by the overseas service facility.
Each foreign market offers a unique opportunity for your company. Care and attention to the development of in-country sales and distribution capabilities are paramount. Delivery of after-sales service is critical to the short- and long-term success of your company’s efforts in any market.
Senior personnel from your company should commit to a program of regular travel to each foreign market to meet with representatives, clients, and others who are important to the success of your firm in that market. Among those people would be the commercial officer at the Commercial Service’s post and representatives of the American Chamber of Commerce and the local chamber of commerce or business association.
The benefits of such a program are twofold. First, executive management learns more about the foreign marketplace and the foreign service facility’s capabilities. Second, your customer will appreciate the attention and understand the importance of the foreign market in your company’s long-term plans. As a result, such visits will help you build a continuing productive relationship with your overseas clients.
FACT: Rather than engage in direct marketing, most small exporters simply take orders from abroad.
INSIGHT: Be prepared. Establish a policy to deal with inquiries from abroad:
FACT: Properly handled, service can be a foundation for growth. Ignored or left to chance, it can cause an export to fail.
INSIGHT: You have many options for handling your after-sales service: