Preparing Products For Export

Selecting and preparing a product for export requires not

only product knowledge but also knowledge of the unique

characteristics of each market being targeted. The market

research conducted (chapter 3) and the contacts made with

foreign representatives (chapter 4) should give the U.S.

company an idea of what products can be sold where. Before

the sale can occur, however, the company may need to modify

a particular product to satisfy buyer tastes or needs in

foreign markets.

The extent to which the company will modify products sold

in export markets is a key policy issue to be addressed by

management. Some exporters believe the domestic product can

be exported without significant changes. Others seek to

consciously develop uniform products that are acceptable in

all export markets.

If the company manufactures more than one product or offers

many models of a single product, it should start with the

one best suited to the targeted market. Ideally, the firm

chooses one or two products that fit the market without

major design or engineering modifications. Doing so is

possible when the U.S. company

*    deals with international customers with the same

demographic characteristics or with the same

specifications for manufactured goods,

*    supplies parts for U.S. goods that are exported to

foreign countries without modifications,

*    produces a unique product that is sold on the basis of

its status or foreign appeal, or

*    produces a product that has few or no distinguishing

features and that is sold almost exclusively on a

commodity or price basis.

PRODUCT PREPARATION CONSIDERATIONS

*    What foreign needs does the product satisfy?

*    Should the firm modify its domestic-market product for

sale abroad?

Should it develop a new product for the foreign market?

*    What product should the firm offer abroad?

*    What specific features -- design, color, size,

packaging, brand, warranty, and so on -- should the

product have?

*    What specific services are necessary abroad at the

presale and postsale stages?

*    Are the firm's service and repair facilities adequate?

PRODUCT ADAPTATION

To enter a foreign market successfully, a U.S. company may

have to modify its product to conform to government

regulations, geographic and climatic conditions, buyer

preferences, or standard of living. The company may also

need to modify its product to facilitate shipment or to

compensate for possible differences in engineering or

design standards.

Foreign government product regulations are common in

international trade and are expected to expand in the

future. These regulations can take the form of high tariffs

or of nontariff barriers, such as regulations or product

specifications. Governments impose these regulations to

*    protect domestic industries from foreign competition,

*    protect the health of their citizens,

*    force importers to comply with environmental controls,

*    ensure that importers meet local requirements for

electrical or measurement systems,

*    restrict the flow of goods originating in or having

components from certain countries, and

*    protect their citizens from cultural influences deemed

inappropriate.

It is often necessary for a company to adapt its product to

account for geographic and climatic conditions as well as

for availability of resources. Factors such as topography,

humidity, and energy costs can affect the performance of a

product or even define its use. The cost of petroleum

products along with a country's infrastructure, for

example, may indicate the demand for a company's

energy-consuming products.

Buyer preferences in a foreign market may also lead a U.S.

manufacturer to modify its product. Local customs, such as

religion or the use of leisure time, often determine

whether a product will sell. The sensory impact of a

product, such as taste or visual impact, may also be a

critical factor. The Japanese desire for beautiful

packaging, for example, has led many U.S. companies to

redesign cartons and packages specifically for this market.

A country's standard of living can also determine whether a

company needs to modify a product. The level of income, the

level of education, and the availability of energy are all

factors that help predict the acceptance of a product in a

foreign market. If a country's standard of living is lower

than that of the United States, a manufacturer may find a

market for less sophisticated product models that have

become obsolete in the United States. Certain

high-technology products are inappropriate in some

countries not only because of their cost, but also because

of their function. For example, a computerized industrial

washing machine might replace workers in a country where

employment is a high priority.  In addition, these products

may need a level of servicing that is unavailable in some

countries.

Market potential must be large enough to justify the direct

and indirect costs involved in product adaptation. The firm

should assess the costs to be incurred and the increased

revenues expected from adaptation (they may be difficult to

determine). The decision to adapt a product is based in

part on the degree of commitment to the specific foreign

market; two firms, one with short-term goals and the other

with long-term goals, may have different perspectives.

ENGINEERING AND REDESIGN

In addition to adaptations related to cultural and consumer

preference, the exporter should be aware that even

fundamental aspects of its products may require changing.

For example, electrical standards in many foreign countries

differ from U.S. electrical standards. It is not unusual to

find phases, cycles, or voltages (both in home and

commercial use) that would damage or impair the operating

efficiency of equipment designed for use in the United

States. These electrical standards sometimes vary even in

the same country. Knowing this requirement, the

manufacturer can determine whether a special motor must be

substituted or arrange for a different drive ratio to

achieve the desired operating revolutions per minute.

Similarly, many kinds of equipment must be engineered in

the metric system for integration with other pieces of

equipment or for compliance with the standards of a given

country. The United States is virtually alone in its

adherence to a nonmetric system, and U.S. firms that

compete successfully in the global market have found metric

measurement to be an important detail in selling to

overseas customers. Even instruction or maintenance manuals

should take care to give dimensions in centimeters, weights

in grams or kilos, and temperatures in degrees Celsius.

Information on foreign standards and certification systems

is available from the National Center for Standards and

Certificates Information, National Institute for Standards

and Technology, Administration Building, A629,

Gaithersburg, MD 20899; telephone 301-975-4040.

Since freight charges are usually assessed by weight or

volume (whichever provides the greater revenue for the

carrier), a company should give some consideration to

shipping an item unassembled to reduce delivery costs.

Shipping unassembled also facilitates movement on narrow

roads or through doorways and elevators.

BRANDING, LABELING, AND PACKAGING

Consumers are concerned with both the product itself and

the product's supplementary features, such as packaging,

warranties, and service.  Branding and labeling of products

in foreign markets raise new considerations for the U.S.

company:

*    Are international brand names important to promote and

distinguish a product? Conversely, should local brands

or private labels be employed to heighten local

interest?

*    Are the colors used on labels and packages offensive

or attractive to the foreign buyer? In some countries,

certain colors are associated with death, national

flags, or other cultural factors.

*    Can labels be produced in official or customary

languages if required by law or practice?

*    Does information on product content and country of

origin have to be provided?

*    Are weights and measures stated in the local unit?

*    Must each item be labeled individually?

*    Are local tastes and knowledge considered? A dry

cereal box picturing a U.S. athlete may not be as

attractive to overseas consumers as the picture of a

local sports hero.

A company may find that building international recognition

for a brand is expensive. Protection for brand names varies

from one country to another, and in some developing

countries, barriers to the use of foreign brands or

trademarks may exist. In other countries, piracy of a

company's brand names and counterfeiting of its products

are widespread.  To protect its products and brand names, a

company must comply with local laws on patents, copyrights,

and trademarks. A U.S. firm may find it useful to obtain

the advice of local lawyers and consultants where

appropriate.

INSTALLATION

Another element of product preparation that a company

should consider is the ease of installing that product

overseas. If technicians or engineers are needed overseas

to assist in installation, the company should minimize

their time in the field if possible. To do so, the company

may wish to preassemble or pretest the product before

shipping.

Disassembling the product for shipment and reassembling

abroad may be considered by the company. This method can

save the firm shipping costs, but it may add to delay in

payment if the sale is contingent on an assembled product.

Even if trained personnel do not have to be sent, the

company should be careful to provide all product

information, such as training manuals, installation

instructions, and parts lists, in the local language.

WARRANTIES

The company should include a warranty on the product, since

the buyer expects a specific level of performance and a

guarantee that it will be achieved. Levels of expectation

for a warranty vary from country to country depending on

its level of development, competitive practices, the

activism of consumer groups, local standards of production

quality, and other similar factors.

A company may use warranties for advertising purposes to

distinguish its product from its competition. Strong

warranties may be required to break into a new market,

especially if the company is an unknown supplier. In some

cases, warranties may be instrumental in making the  sale

and may be a major element of negotiation. In other cases,

however, warranties similar to those in the United States

are not expected. By providing an unnecessary warranty, the

company may raise the cost of the product higher than the

competitors' costs. When considering this point, exporters

should keep in mind that servicing warranties will probably

be more expensive and troublesome in foreign markets. It is

desirable to arrange warranty service locally with the

assistance of a representative or distributor.

SERVICING

Of special concern to foreign consumers is the service the

U.S. company provides for its product. Service after the

sale is critical for some products; generally, the more

complex the product technology, the greater the demand for

presale and postsale service. There is, therefore, pressure

in some firms to offer simpler, more robust products

overseas to reduce the need for maintenance and repairs.

U.S. exporters who rely on a foreign distributor or agent

to provide service backup must take steps to ensure an

adequate level of service. These steps include training,

periodically checking service quality, and monitoring

inventories of spare parts. See chapter 15 for more on

after-sales service.