Environmental Technologies Industries
||Environmental Technologies Industries
|Malaysia Environmental Export Market Plan|
|Chapter 9 - Positioning Your Company in the Market|
Evaluating Your Export Readiness
Before the current economic crisis in many Southeast Asian countries, sustained double-digit economic growth fueled by direct foreign investment and export demand created a growing middle class that insists on environmental improvement. Governments have responded with increased spending and regulation, which resulted in the development of environmental markets in Asia. However, U.S. companies have been slow to penetrate these markets. According to the U.S.-Asia Environmental Partnership, U.S. environmental companies (excluding instrument manufacturers) earn, on average, less than 8 percent of their revenues by exporting to overseas markets, hardly impressive for the world's most sophisticated and experienced environmental product and service providers.
The best time to think about exporting is probably when your business is doing fairly well. In a perfect world, that would be when to begin aligning the necessary strategic and tactical resources. Nevertheless, many U.S. companies, including many environmental firms, have set their sights on foreign markets only after their domestic fortunes declined. Simply needing to export does not necessarily imply that a business is ready to do so. Slow sales and shrinking profits may be no easier to remedy in the international marketplace than they are in domestic markets. Global opportunity can quickly turn to “globaloney” if the product, company, and personnel are not prepared to face the difficulties of overseas trade. Certainly, much of the problem lies in the often exasperating intricacies of unfamiliar environmental markets. However, many of the problems have come when firms attempted to enter foreign markets without first doing the serious research and analysis that, if omitted, will sooner or later be thrust upon them by the marketplace.
This section is divided into three areas and provides general information for businesses considering exporting. The first area will help you determine if your current products are ready for export and what changes, if any, you must make to them. The second area covers the export readiness of your personnel and how to train employees properly. The third area deals with the export readiness of your company, including the financial resources you will need to become a successful exporter.
Are Your Current Products Exportable?
An important indication of a product's potential in the export market is its domestic success. If your product has sold well in a wide domestic market it can probably be successful in markets abroad with similar needs. However, just because your products are selling well in the United States does not mean that they will sell without adaptations in foreign markets. They will probably require at least minor modifications, such as packaging translated into the local language. More complicated changes, such as redesign of certain technical features to meet local product standards, will probably also be necessary. Unlike most consumer goods, environmental products and services are often “communication-intensive” in that the buyer is not going to simply pull the product off the palette, plug it in, and then order six thousand more just like it. As is often the case with U.S. customers, quite a bit of pre-sale hand holding and post-sale therapy will probably be very important to the deal. This is particularly true in countries or industries where industrial or public sector environmental managers are relatively unsophisticated buyers.
Even if the sales of your product are declining in the U.S. market, sizable export markets may well exist. This is especially true if your product has historically done well but your market share has been degraded by more advanced products. Export opportunities may still exist because the demand for new products in some other countries often lags behind U.S. demand. Less developed countries do not always require leading edge technology and may instead need products that are older, less expensive, and less sophisticated. You must judge the export readiness of your products through the eyes of the foreign customer. Your “old” technology may be exactly what a foreign market needs. However, this is by no means a foregone conclusion in the environmental arena and must be evaluated.
Consider whether the products will require adaptation in each of the following areas. Examine what actions, if any, your company should take to improve your competitive situation overseas. The following questions address critical issues regarding your products that you must confront before you make a final decision to export.
1. Do you offer unique features?
You present an intrinsic risk to Asian buyers. Why should they take this risk?
2. What are your current competitive advantages and disadvantages?
Your current U.S. competitors will enter your export markets sooner or later.
3. What is your product's projected life cycle?
Obsolete products may find initial success but will not sell for long in foreign markets.
4. Look hard at your quality history.
Repairing defective products will be extremely expensive.
5. Can you deliver?
Failure to deliver is the most frequent complaint about U.S. exporters.
6. What kind of warranty program can you offer?
You cannot afford to send technicians around the world.
7. Is your product adaptable to the metric system?
Know your product*s application. If it does not fit, neither will the sale.
8. Does your product need post-sale technical support?
Leave one customer hanging and you can forget about the others, too.
9. Can you deliver spare parts and components?
They are often requested on an emergency air freight basis.
Not all of your products may be exportable now. This happens often with new exporters. Do not waste time attempting to make every product attractive to overseas markets. Concentrate on the products with the most immediate export potential. You can work on the other products after you have established your primary products in the markets of your choice.
If you have discovered certain characteristics of your potential exports that may cause problems in foreign markets, take immediate steps to correct them. Determine how and when they will be corrected. Set deadlines and establish a follow-up system to ensure that all corrections are made. You should to be sure that your products will make an excellent first impression.
Existing companies in your new export markets will not be pleased that you have entered their domain. They will fight you at every turn. Do not give them an easy opening with problems in product quality or post-sale support. You can be certain that they will call them to the attention of your potential customers.
Are Your Personnel Trained to Export?
Once you have decided which products to export, ask if you have the staff to execute your marketing program. Be realistic. Closely examine the issues outlined in the list below. If your company has never before exported, do not expect your employees to learn exporting on the job. They will need thorough training to ensure that export transactions are handled competently.
The staff must be able to respond quickly to export inquiries and process orders efficiently. Most of the principles of domestic marketing are used in exporting, along with others, such as language, culture, and distance to markets. The following list of business functions will help you gain a clearer picture of where you may need to improve or modify human resources to successfully carry out export transactions.
International market planning, forecasting, and promotional programs will be new to your employees.
Patterns of customer contact, trade show attendance, presentation, and travel will be unfamiliar.
3. Export administration
Processing of inquiries, quotes, and export documentation must be efficient.
Payment terms, letters of credit, credit, and nonpayment insurance must be established if applicable.
You may need to adjust invoicing, collection, deposits, financial records, and document handling.
You must be ready not only to produce but to prepare for overseas shipment.
You may need to move the product via unfamiliar carriers.
8. Advertising-sales promotion
Preparation of brochures, flyers, and public relations materials may require new expertise.
Export contracts, agreements, and freight forwarding will require a new area of legal expertise.
Note: Export training is continuous. Circumstances and opportunities in international trade change constantly. Once you have provided your key employees with the initial training they need to launch your export marketing program, you should provide training updates. Such training is an excellent investment.
If you decide to launch your export marketing program with current personnel, you should arrange export training immediately. If possible, training should be in the evenings or on weekends so that it will not disrupt your domestic operations. An alternative is to have an export consultant train your personnel on site, where company information is readily available.
You may decide to hire a new employee to administer your export marketing program. If you do, be aware that there are two basic kinds of export experience:
- Corporate experience. These executives are accustomed to making major policy decisions. They are not familiar with the details of exporting. If yours is a small company and you expect the new employee to wear many hats, a person with this type of experience may not be the best choice.
- Small company experience. These people are accustomed to taking care of the routine tasks that will play a major role in determining the success or failure of your export marketing program. They may never have been involved in policy-making. This type of executive should perform well in a smaller company.
Is Your Company Ready to Export?
Exporters must have a customer response system that can provide almost immediate replies to requests for such things as price quotations, product specifications, credit terms, and delivery dates. Everyone in your organization who is involved in an export transaction must know exactly what to do.
Indecision and delays are major enemies of U.S. exporters. You will gain a competitive advantage over many U.S. and foreign suppliers by always responding quickly to export inquiries, establishing firm delivery dates within your organization, and following up to be sure that shipments are ready for delivery on time to overseas customers.
Do you have excess production capacity that you could use to manufacture export products? If so, how many people would you have to hire for the extra work? Would it be more economical for you to pay your current employees overtime? If you are just starting to export, it is better to keep your investment in new equipment to a minimum.
How much money have you budgeted for your export marketing program, and for how long? You cannot realistically expect to earn a profit in the first year. You may have to wait two years or longer before you begin to see a return on your investment. This is not unusual in exporting, where lasting relationships often determine who gets the sale. It is absolutely essential that you make a firm commitment to export. Once you have become involved in foreign markets, it will be difficult to make necessary changes. The effort may not be worth it if your own lack of preparedness has you shooting yourself in the foot just as you begin.
Do not become impatient if you have problems in the initial stages. When you started selling your products in the United States, did everything go smoothly right from the start? The scale of your early export efforts is far less important than the quality you maintain. Provide adequate funding and give exporting a realistic chance to succeed. Remember, 95 percent of the world's population lives outside the United States. Think how many potential customers that would be for your products. Before deciding to export, you must find out what resources and funding will be needed in the following areas:
1. Office space
Export area facilities should be as good as those in the domestic division. Although your initial export efforts may be on a smallscale, do not relegate those activities to a converted utility closet.
2. International communications
The fax machine and internet and email systems (not to mention your long distance phone bill) will be pushed to new limits. International communication can be difficult enough. Do not hang up on yourself.
3. Technical support
Product reports, technical drawings, and design modifications must be ready.
4. Foreign travel
Personal relationships often decide who gets export orders. Pay close attention to those relationships and make sure your budget can maintain them.
5. Employee training
See the earlier discussion about employee training.
Translation and modification of brochures, flyers, ad copy, and public relations will require investment.
7. Production capacity
Quick delivery is essential to success in international trade.
Note: The above activities require funding. However, there is one more activity that does not cost money. That is creating enthusiasm for exporting within your organization. Emphasize to all employees that exporting will be a profitable undertaking that will increase their incomes and give them greater job security.
Ten Common Exporter Mistakes1. Failure to develop an international marketing plan before beginning to export.
2. Insufficient commitment by top management to overcome the initial difficulties and financial requirements of exporting.
3. Insufficient care in selecting overseas distributors.
4. Chasing orders from around the world instead of establishing a basis for profitable operations and orderly growth.
5. Neglecting export business when domestic markets are healthy.
6. Failure to treat international distributors as well as their domestic counterparts.
7. Unwillingness to modify products to meet regulations or cultural preferences of other countries.
8. Failure to print services, sales, and warranty messages in locally understood languages.
9. Failure to consider using an export management company.
10. Failure to consider licensing or joint venture agreements.
Training can teach your employees how to handle the many facets of exporting. However, if your financial situation is weak, it will not matter how well you have prepared your personnel and products for export. Introducing your products into world markets will require a significant up-front investment. If your current financial situation is weak, delay your decision to export until you have accumulated enough money to be a long-term player in world markets.
You are now ready to proceed. The first step is to identify your potential export markets. Do not overwhelm yourself by trying to take on the entire world. Instead of trying to respond haphazardly to sporadic worldwide orders, maximize your potential export profitability by applying a step-by-step market research approach to methodically target your most lucrative export markets.
Once you have selected your export target markets, you will need export sales representatives. Select them carefully, because they will probably be beyond day-to-day supervision. As the only visible representatives of your company and your products, how they act is how you will be perceived; and how you are perceived will determine your export sales.
Once you have established your markets and your representatives, price your products for export and write your export marketing agreements. For your export transaction to be successful, it must, of course, benefit all parties.
You should be familiar with the laws that govern your export transactions to avoid the severe penalties and the costs of noncompliance. This research should be done before you turn a shipment over to your foreign freight forwarder, who is responsible for getting your products to customers. The better you understand the confusing shipping process (with its copious paperwork and the hectic job of coordinating transactions) and the more skilled your freight forwarder is, the more likely you are to turn a profit.
You must arrange satisfactory payment terms that will minimize the risks of dealing with unfamiliar parties. Use the resources available to help you complete your financial transactions advantageously. The most common reason companies fail as exporters is lack of a carefully prepared export marketing plan. Try to project accurate sales forecasts and budgets.
Prepare well and before you know it, you will be traveling overseas to visit your new export markets. Finally, become familiar with local customs so that you do not inadvertently offend your new-found business partners.
Market Entry, Marketing, and Sales
Introduction to Asian Markets
Marketing and selling U.S. environmental products and services in Asia is intensive but very doable. The marketing and sales process varies depending on the type of product, target customer, and target geographic area. In general, however, U.S. companies have to be patient, have staying power, and find partners with whom a trusting relationship can be built. The marketing and sales plan that is most effective will include the following components:
- Identifying value proposition
- Identifying target customer
- Identifying geographic markets
- Identifying channels to the target customer
- Estimating sales cycles and final cost of sales
- Developing sales, revenue, and cash flow forecasts and benchmarks
- Investigating and executing partnership agreements, joint ventures, and/or acquisitions to begin initial sales
In some form or another, all companies entering new overseas markets go through this process. The steps above will be interconnected--the company will initiate steps and then modify them as new information arrives from subsequent steps. It is critical, however, that independent market homework be as complete as possible before you seek partners. Inevitably you will end up across the table from your partner discussing terms. If you have not done your homework, your bargaining position is much weaker--and the partner knows that. Even if your estimates are way off, at least your partner will have to explain why your estimates of potential sales are too high or low, which will result in a better understanding of the business issues at hand.
Because partnerships are key to the marketing and sale of environmental products in Asia, the following section describes the types of partners and the advantages and disadvantages of each. The option of going into an Asian market, establishing your business, developing your sales staff, and finding supply sources is difficult and not recommended here, especially for companies in the environmental market.
Also, there is not much discussion here of advertising or public relations. Selling environmental products and services is a business-to-business (or business-to-government) process that requires building relationships. The purchase of environmental products or services is heavily scrutinized because of their contribution to the cost side of business without any tangible upside, that is, a commensurate contribution to revenue. To purchase pollution control products, whether for air, water, or solid hazardous waste pollution control, the prospective Asian buyer will probably balance the risk of noncompliance against the price of the environmental product or service. Specifically, the cost for noncompliance is a function of (1) being noncompliant, (2) the likelihood of being caught, and (3) the probable fine or penalty, plus the cost of shutdown if a cease and desist order is enforced.
If the pollution control product also minimizes waste in a region where there are waste disposal costs, these avoided costs are a benefit. This is not an easy equation to pin down, because the buyers may have nothing more than an intuitive notion about such risks, costs, and benefits. However, if the annualized price of the pollution control product is higher than the anticipated benefit--intuitive or not--then the chance of a sale is very low, or the sales cycle is very long. On the other hand, if the benefit of the product is greater than annualized pollution control costs, you may have the buyer's interest. But do you have a sale? Probably not, unless you have found partners, developed relationships, built customer trust, demonstrated your product, dealt with regulators, and handled legal export details.
Asian Partners Are the Way to Marketing and Sales
You heard that health and safety regulations were being more strictly enforced in Malaysia. Several worker safety problems have hit the press related to handling hazardous waste. Your company has a lightweight tyvek suit that is tear resistant--great for hazardous waste handling. You find out that the current hazardous waste suits in use in Malaysia are a less expensive, lower quality Chinese brand. You know that your suits can handle multiple-day use, whereas the Chinese suits are for one-time use only. You know that your suits are 50 percent higher in cost but last four times as long, reducing replacement costs and material disposal costs.
How do you break into the Malaysian market? How do you contact prospective customers? How do you make your pitch? There is only one way. You need partners. You need partners who understand the local conditions, know the customer base, and can understand your product and relate its benefits. Tyvek suit sales require close attention to competitive prices, periodic time with customers and retail outlets, and knowing where projects are that require hazardous waste protection. The sales cycle is short--maybe a month for the first order and even shorter for the next order, depending on the volume of use and the performance of the product. The product price is low; the product technology and, more importantly, benefits are easily understood; the sales discussion is simple and short; and the risk to the customer of trying the product is relatively low. If the expensive U.S. tyvek suits don't work, the Malaysian customers go back to the Chinese suits. In this case, with this type of product, significant intensive pre- and after-sales service is not required. The appropriate partner is a distributor or agent whose job is basically account maintenance.
The depth and type of partnership you develop should match the level of sales and after-sales effort required. For U.S. companies it is key to analyze what type of focused product-services portfolios have the most potential in Asian markets and then decide on the sales and marketing effort required to maintain satisfied and repeat customers. As a rule of thumb, whatever customer service-sales effort is required for domestic customers can be doubled for Asian customers. With that sales effort information, the appropriate Malaysian business partnership can be determined.
Types of Partnerships
There are basically four types of partnerships that are used to gain entry into new markets by all businesses, not just environmental companies. The four types vary by degree of commitment, up-front investment, and technology protection.
Use of Local Agents and Distributors
Agent or distributor arrangements, in which the foreign manufacturer or exporter appoints a local company or individual to promote and sell its products, are commonly used by newcomers entering the country's markets. Agents and distributors’ firms can range in size from small (with fewer than 25 employees handling a few specialized products for a limited number of manufacturers) to large trading companies (which handle a wide variety of products and suppliers). Most agents and distributors offer a full range of services. Marketing is their usual responsibility; they suggest market strategies, arrange exhibits, and promote the product through the most effective means. They may agree to negotiate sales, assist in getting quotations and financing, and advise on compliance with import regulations and permit requirements. Often they direct the movement and storage of the product. The scope of the agent's or distributor's responsibilities should be spelled out precisely in the contract. It is imperative to tailor the contract to your specific product or service, to your company, and to the particular markets.
Advantages: Using an established distribution channel for imports will mean that the importer has complied with import permit requirements and is familiar with customs requirements. Furthermore, the representative knows the market, culture, and language of the local target market. Finally, no laws impede the termination of an agent or distributor contract should either party decide to end it. However, contracts typically specify that 30 days’ notice must be given to cancel the agreement.
Distributors and agents make it unnecessary to create your own marketing and distribution structure. They know local needs and customs and are often aware of opportunities before bids are announced. They know the ins and outs of bidding and can monitor and promote smaller sales, maintain spare parts inventories, provide after-sales services, and market to both wholesalers and retailers.
Disadvantages: The representative will usually take a fee, a commission on sales, or both. Problems can arise unless a well-planned, comprehensive contract is signed at the start of the relationship. For example, will you expect your representative to participate in trade shows? To which market is your representative allowed to sell? How much marketing or sales support--such as training and materials--will you supply? Which costs are to be borne by the representative and which by you? What will constitute unsatisfactory performance? For the agent or distributor relationship to succeed, not only must the duties and liabilities of both parties be clearly defined in the beginning, but the parties must understand each other's changing situations and, possibly, adjust the terms of their agreement accordingly.
Establish a Representative Office
This option is better for products needing heavy after-sales service and cultivation of close relationships with clients--for example--sophisticated water treatment equipment, emission controls equipment, and consulting services.
Advantages: Such an office pays off for products needing heavy after-sales service and cultivation of close relationships with clients, which is the case for sophisticated environmental products but not necessarily for the less sophisticated environmental products. Industrial wastewater treatment equipment that must be modified for each customer is a sophisticated product that is difficult to sell through an agent. Also, the life of the product is important: If the product is high risk for the customer, the branch office shows commitment to that service, which makes customers more comfortable.
Disadvantages: Branch offices are more of a commitment and entail heavy exposure to red tape and high costs for setting up the office and hiring staff. They are also ineligible for Foreign Capital Inducement Act tax incentives and cannot directly engage in manufacturing or financial services, and they still depend on local agents or distributors.
Negotiate a Joint Venture with a Local Company
The solution is best for high-tech products that must be modified for sale in a local market, that are in growing international demand, and that are protected by intellectual property laws. Typically, U.S. environmental companies have brought technologies to the joint venture while the Asian partner provided the marketing expertise. Joint ventures differ in the degree of control each partner has; it is typically a function of the initial equity or the value of the technology. In some countries the amount of foreign ownership in the joint venture is limited to a minority share.
Advantages: Joint ventures give access to local markets and local distribution through a known company, which means instant credibility. They do not require any setup costs and minimize time spent at the lower ends of the local market learning curve. They also enable exporters to take advantage of a partner's technology and customer base without having to acquire the company.
Disadvantages: They are an even heavier commitment than a branch office and entail even more exposure to red-tape. They allow for unintended technology transfer, plus potential infringement on design, patent, and technology rights, and any resulting enforcement problems. They have no legal status except contractual, so they are not protected under foreign investment law. U.S. partners are liable for Asian partners’ misdeeds and losses.
Five Ways to Help Your Local Agent--General Guides
1. Make frequent visits to support your agents. These visits help build the relationship without which no amount of marketing effort can succeed. Keep in mind that your competitors are also paying personal visits to their agents and customers. And invite your agent to your country to reciprocate his or her hospitality and familiarize him or her with your country and company.
2. Hold many demonstrations and exhibits of your products. For suppliers to manufacturers, the value of sales presentations at factories cannot be overemphasized. Factory engineers and managers are directly responsible for the purchase of equipment and machinery, and they have much influence over the decision to buy. This is so highly effective--and so cheap--a sales booster that it is irresponsible for an exporter to ignore it.
3. Increase the distribution of promotional brochures and technical data to potential buyers, libraries, and industry associations. When your agent makes personal sales calls, your potential customers will not be completely in the dark.
4. Improve follow-up on initial sales leads. Let your agent know you are backing him or her up with whatever it takes to pursue the lead. Make your agent proud to be associated with you. “All of our foreign partners know that they have the support of a large system behind them,” McDonald’s spokesman Brad Trask says, “The support system is available on request.”
5. Deliver on time. If you don't, you can believe that someone else will. Failure to deliver on time not only makes your agent lose face and thereby undermines your relationship, but it jeopardizes your sales. There is not much you can do to make ships go faster or airlines schedule more flights, but you can stockpile your products overseas to ensure that your agent has a steady supply. When you have to (and it is possible), forget the expense and airfreight the product for two-day delivery; the extra effort will go a long way in establishing and fortifying your reputation.
Acquisition of a Local Company
Acquisitions are the most committed form of partnership. This is the method traditionally chosen by larger U.S. firms that want more control of the local partner and of business development direction. Total acquisitions are not allowed in all countries; however, because multilateral lenders are requiring market reforms as a condition of issuing or rolling over debt (review current Korea concessions to IMF bailout plan), more countries are leaning toward greater acceptance of foreign ownership.
Advantages: Acquisitions give you a competitive edge in prompt service, customer commitment, and consulting aspects of a sale; suggest to your buyers that you have a permanent commitment to maintaining a presence in domestic markets; and promote an image of stability and long-term availability. Acquisition is a possible vehicle where manufacturing profits must stay in country. U.S. companies may be able to set up their own distribution systems. Illegal technology transfer is not as big a problem. Finally, acquisition allows for business development focus on the parent company's products and services.
Disadvantages: Acquisitions are a truly heavy commitment and entail the most exposure to red tape. The costs of setting up an office and hiring a workforce are high, and it may be difficult to build or lease facilities (foreigners are allowed to own land only in limited circumstances). Acquisitions are not terribly popular with some Asian governments, because they are seen as a threat to domestic firms and because profits leave the country. Finally, the lack of a local partner makes dealing with government, labor unions, and some industry groups problematic.
Cost and uncertainty of what is actually being bought. Due diligence on Asian companies in some markets is difficult; may have the necessary political connections today, but maybe not after next months elections. If operating philosophies and corporate cultures clash too dramatically, there can be walkouts or just low worker morale and productivity.
Keep your initial sales costs as low as possible--probably through direct sales--until you have established initial customers. For environmental products in particular, it is critical that there are some in-country examples of where the product or service is being used. People must talk to their own before they will buy--and the more expensive a product or service, the more time your perspective Asian customer will take investigating the claims of the product.
It's likely you will need to adapt your product to local requirements, laws, and certifications. Most of the time these modifications will be minimal, but in some cases they can be significant. Prepare yourself; be flexible. You must go overboard to service your orders immediately, and you must answer your faxes immediately. Above all your company must make a genuine commitment to export because otherwise your worst problems will come from within, not from abroad. This commitment must be made resource-wise in terms of labor and support with go, no-go milestones for pulling the plug if things go significantly worse than expected, or investing additional resources if revenue/profit targets are met or exceeded.
Make your embassy work for you. Your embassy's commercial service has many programs designed by experts for exporters, including seminars, workshops, market analyses, and introduction to prospective agents and partners. US-AEP has several programs and services including matching funds/grants for taking U.S. environmental technologies into Asia.
Privatization has served as the single most important market driver for Malaysia's environmental business. Budget burden is the driver for privatization. The factors that enable Malaysia to undertake privatization schemes are fairly compelling, but they are also unique to the country. Malaysia has the advantage of having high economic growth and serious commitment at the highest level of government.
Embarking on the region's pioneering effort has had its drawbacks, however, particularly in the implementation of unpopular policies such as imposing new fees on consumers without seeking public cooperation. The country's success or failure in undertaking these projects will provide valuable lessons for other emerging environmental markets in the region. US-AEP made the following observations:
Companies need good political connections, ideally with Malaysia's Government owned conglomerates including: Hicom, PNB, UEM, Sime Darby and Berjaya. Similar to Taiwan's Sinotech, these firms “do it all, like the U.S. in the 1950s.”
The Malaysian government has shown willingness to work with U.S. firms by relaxing regulations on business and trying to attract investment through lower tariffs.
The Malaysians see the U.S. as the leader in environmental technology, but the Germans and Japanese get the sales on the majority of equipment opportunities. Black & Veatch is seen as a smart U.S. firm that has the right approach in Kuala Lampur. They have a small office, staffed by Malaysians and are working on small projects within the IPPs for the power sector.
Malaysia's bidding structure is very open; they say, “give us your idea.” Federalism is still a major turf issue between the Central Government and the states. Each state wants to control its own domain; some states have more contract opportunities than others (some have none) while others have banded together to fight the Government. Companies wishing to “cash in” on privatization opportunities are often caught between the federal Government and state municipal authorities as they spar for control.
In solid waste, there is a two-year “rolling action plan” for privatization. Problem with EPU versus the states. The states are not willing to conform to the federal position, but the states have no expertise in project formulation even though they want control. “They engage in the blame game, everyone cries foul.” States own 5 percent share to counter any problems of loss of revenue.
Technology Protection--Be Wary of the Joint Venture
Another element of partner type selection involves technology protection. Difficult-to-duplicate technology or well-protected technology can use any type of partnership for distribution. However, the best technology is often simple, which leaves the developer of the technology very exposed. Horror stories are fairly common of technologies lifted from plans and remanufactured at much lower cost. The risks of unintended technology transfer for each of the partnership types are discussed below.
Distributors present the risk of illegal technology transfer. Distributors who have little vested interest in your continued success in Asia could pose a threat. In a distribution arrangement, very little technical information is passed between companies, keeping the risk of unintended technology transfer low. Outright acquisitions are a relatively low threat, because any illegal technology transfers can be met with unemployment or frozen assets. Joint ventures pose the highest risk for unintended technology transfer. In these, the product is usually complicated, requiring an exchange of detailed technological information to the Asian partner's sales force so that the product can be effectively explained to potential customers. Armed with detailed technological information, the joint venture partner can sell the technology or leave the partnership and develop the product on its own. While there are laws preventing such behavior--and there have been recent crackdowns in intellectual property violations in Asia--a wise firm will keep its technology physically as well as legally protected, especially in joint venture partnerships. If it cannot protect its technology physically, using a joint venture partnership should be carefully reviewed.
The Government is helping with land acquisition and soft loans. Given that there is no home grown expertise in the water supply arena, foreign investors are allowed at the federal and state level. Most projects are locally funded, but Malaysia is hoping that foreign participation will help provide global linkage and future ties for Malaysia exports. A newly established water fund, Lyonnaise Asia Water, will have $125 Million paid-up capital to help channel equity investments into water infrastructure projects. Partners include: Australia's Lend Lease Corp, America's All State Insurance Company, and Malaysia's Employee Provident Fund.
Seven Rules For Selling Your Product - Advice from McDonald’s
1. Respect the Individuality of Each Market
The profit motive generally operates cross-culturally and the nationals of most countries, especially within a given region, will have much in common with one another. However, there will also be substantial differences, enough to cause a generic marketing program to fall flat on its face and even build ill-will in the process. You may have some success with this sort of one-size-fits-all approach, but you won't be able to build a solid operation or maximize profits this way. “Japan proves this point phenomenally,” says Steve Provost,
KFC’s vice president of International Public Affairs. “Our first three restaurants in Tokyo were modeled after our American restaurants, and all three failed within six months. Then we listened to our Japanese partner, who suggested we open smaller restaurants. We've never looked backed.” However, what works in Japan doesn't necessarily work in Korea. Korean tastes may be more similar to U.S. tastes than to Japanese or may differ in other ways.
2. Adapt Your Product to the Foreign Market
Markets are individual, and you may well need to tailor your products to suit individual needs. As the United States’ Big Three automakers have yet to learn, it's hard to sell a left-hand drive car in a right-hand country. Black may be a popular color in your country, but may also be seen as the color of death in your foreign market. One major U.S. computer manufacturer endured years of costly marketing miscalculations before it realized that the U.S. is only one third of its market, and that the other two thirds required somewhat different products as well as different approaches.
You can avoid this company's multi-million dollar mistakes by avoiding lazy and culturally biased thinking. A foreign country has official regulations and cultural preferences that differ from those of your own. Learn about these differences, respect them, and adapt your product accordingly. Often it won't even take that much thought, money, or effort. But the downside risk is huge.
3. Don't Get Greedy
Price your product to match the market you're entering. Don't try to take maximum profits your first year. Take the long term view. It's what your competitors are doing, and they're in it for the long haul. Koreans are very price conscious. When you're pricing your product, include in your calculations the demand for spare parts, components, and auxiliary equipment. Add-on profits from these sources can help keep the primary product price down and therefore more competitive.
4. Demand Quality
A poor quality product can ambush the best-laid marketing plans. Koreans may look at price first, but they also want value and won't buy junk no matter how cheap it is. And there's just too much competition to make it worth your while to put this adage to test. Whatever market you gain initially will rapidly fall apart if you have a casual attitude towards quality. And it is hard to come back from an initial quality based flop. On the other hand, a product with a justified reputation for high quality and good value creates its own potential for market and price. expansions.
5. Back Up Your Sales with Service
Some products demand more work than others - more sales effort, more after sales service, more handholding of the distributor, and more contact with the end user. The channel you select is crucial here. Paradoxically in this age of ubiquitous and lightening fast communications and saturation advertising, people rely more than ever on word of mouth to sort out the truth from hyperbole. Nothing will sink your product faster than a reputation for poor or nonexistent service and after sales service. Although Koreans see U.S. products as generally superior in quality and performance, they rate Japanese after sales service as vastly better. And guess whose products they buy.
Consider setting up your own service facility. If you're looking for a Korean agent to handle your product, look for one who has qualified maintenance people already familiar with your type of product or who can handle your service needs with a little judicious training. And make sure that this partner understands how important service and support are to you and to your future relationship with him.
6. Notice that Foreigners Speak A Different Language
Your sales, service, and warranty information may contain a wealth of information but if it's not in their language, you leave the foreign distributors, sales and service personnel, and consumers out in the cold. It's expensive to translate everything into the local language, but it's absolutely necessary and part of the cost of doing business.
7. Focus On Specific Geographic Areas and Markets
To avoid wasteful spending, focus your marketing efforts. A lack of focus means that you're wasting your money, time, and energies. A lack of specificity means that your foreign operations may get too big too fast. Not only does this cost more than the local business can justify or support, it also can translate into an impersonal attitude towards sales and service and the relationships you've worked so hard to build. Instead concentrate your time, money, and efforts on a specific market or region, and work on building the all important business relationships that will carry you over the many obstacles to successful export marketing.
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