          
          
                      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.
          
