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CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online/Distance Learning Course SECTION 11A LEGAL SYSTEMS AND ISSUES AROUND THE WORLD ALAN L. WHITEBREAD BUSINESS ETHICS Ethics and morals Business practices Corporate governance Responsibility Personal Social ETHICS CUSTOMARY LAW NATIONS Communal and customary laws Mongolia Parts of Africa ? SOME LEGAL ISSUES IN CHINA Formal antitrust law does not exist. Manufacturer rebates may be paid directly to consumers, but not sales people. All commissions must be on the books otherwise they are likely to be treated as kickbacks or bribes. LEVELS OF INFLUENCE: DOMESTIC Home country laws that affect marketing activities a ban on the import or export of specific products drugs, endangered species, fire arms, counterfeit goods, certain agricultural products, or to and from specific countries Cuba, North Korea, Iran, and Iraq and / or using specific practices Foreign Corrupt Practices Act FCPA LEVELS OF INFLUENCE: FOREIGN Host country laws that limit some practices, products and / or trading partners. Japan store size Korea advertising by foreign firms Germany some forms of direct marketing LEVELS OF INFLUENCE: INTERNATIONAL Agreements made between and among nations that create a legal environment specific to trade among those countries treaties GATT agreements EU agreements such as the Maastrich Treaty, NAFTA, APPLICATION OF U.S. LAWS AROUND THE WORLD Antitrust Laws Cartels or a Monopoly US DOJ Antitrust Guidelines may be found at /atr/public/guidelines/internat.htm National Security Laws Import restrictions Export restrictions Anti-boycott Laws Cuba Foreign Corrupt Practices Act CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online/Distance Learning Course SECTION 11B LEGAL AGREEMENTS AND ISSUES AROUND THE WORLD ALAN L. WHITEBREAD DISTRIBUTION AGREEMENTS BASIC REQUIREMENTS Parties Appointment Territory Products Limits Term Termination DISTRIBUTION AGREEMENTS TERRITORY: EXCLUSIVITY Some statement is virtually required. Indonesia allows only one distributor. So what do you do? Some countries imply exclusivity unless the contract specifies differently. Exclusivity is not allowed. DISTRIBUTION AGREEMENTS BASIC REQUIREMENTS Products and / or Services All, extensive, or limited product accessibility Suppliers rights Resellers rights Distributors, dealers, wholesalers, retailers, jobbers, various types of representatives, DISTRIBUTION AGREEMENTS OBLIGATIONS CLAUSE The part of an agreement or contract that specifies what each party will do. Examples? DISTRIBUTION AGREEMENTS BASIC REQUIREMENTS Prices What, how long, revising New products How do you handle these? Payment terms Where? When? How? Is the agreement assignable? If yes, why? DISTRIBUTION AGREEMENTS BASIC REQUIREMENTS Performance requirements Initial goals Subsequent targets Remedial measures Force majeure These clauses cover natural disasters or “Acts of God“, war, or the failure of third parties-such as suppliers and subcontractors-to perform their obligations to the contracting party. Force majeure clauses are intended to excuse a party only if the failure to perform could not be avoided by the exercise of due care by that party. DISTRIBUTION AGREEMENTS BASIC REQUIREMENTS Performance requirements Initial goals Subsequent targets Remedial measures Processes Ordering Shipping Detail responsibilities of the parties Government filings or approval Which party is responsible? DISTRIBUTION AGREEMENTS BASIC REQUIREMENTS Warranty and claims processing Intellectual property rights Termination With or without cause Special circumstances DISTRIBUTION AGREEMENTS TERMINATION CLAUSE A legal clause that specifies duties and obligations if any of each party at once a contract is concluded or ended. This is an especially risky area! Consult an international legal attorney first. TERMINATION Varies greatly by country Belgium = normal costs + goodwill “Agent” acting on behalf of the company “Distributor” acting independently with the right to promote and sell the companys products DISTRIBUTION AGREEMENTS BASIC REQUIREMENTS Post-termination rights Dispute resolution Jurisdiction Arbitration Legal action DISTRIBUTION AGREEMENTS ARBITRATION CLAUSE This contract clause describes the process of resolving a dispute or a grievance outside of the court system by presenting it to an impartial third party or panel for a decision that may or may not be binding. ARBITRATION VS. LITIGATION ARBITRATION Jurisdiction chosen by the parties Arbitrator decisions are usually final Confidential Arbitrators are usually experts More time effective May be cost effective LITIGATION Law determines jurisdiction Appeals are common Usually public information Judges are not subject experts May take years May be very expensive DISTRIBUTION AGREEMENTS Beware of local country law It can invalidate some or all of the contract. The reseller should agree to comply with all local and country law including obtaining required licenses. U.S ANTITRUST LAWS Unless exempt from regulation, a U.S. company may be subject to fines if it allows a distributor to sell in one EU country and prohibits it from selling in another EU country. How do you handle that situation? GOVERNMENT APPROVAL Japan Licensing agreements must be approved by the Japanese Fair Trade Commission. South Korea Software distribution agreements of 1 or more years must be approved by their Fair Trade Commission. What do you do? AGENTS ENTRY POINT CHARMING EXPATRIATES To leave ones country and reside in another CAN BE VERY COSTLY CAN BE A DISASTER MAY BE CRITICAL TO SUCCESS ARE ALWAYS A QUESTION CERTIFIED GLOBAL BUSINESS PROFESSIONAL Online/Distance Learning Course SECTION 12A INTERNATIONAL PRODUCT AND SERVICE DECISIONS ALAN L. WHITEBREAD INTERNATIONAL PRODUCT PLANNING Which products should be supplied for which markets? What product modifications must be made for this specific market segment? How should we enter the market? PRODUCT PLANNING OBJECTIVES Key product objectives: Business definition Product offering Product lines Variety within the product line Marketing mix 4Ps LOCAL, NATIONAL, REGIONAL and GLOBAL PRODUCTS LOCAL offered in a portion of a national market NATIONAL offered in a single national market INTERNATIONAL offered in multinational / regional markets GLOBAL offered in the global market multi-regional Brand Name Quality Level Packaging Design Features Delivery Installation Warranty After- Sale Service Actual / Branded Product likely to see in a store Augmented Product store product plus services Core Product most basic offering Credit Terms Manuals THE THREE LEVEL PRODUCT CONCEPT Brand Name Quality Level Packaging Design Features Credit Terms Installation Warranty After- Sale Service 3-BRANDED What you see in the store 4-AUGMENTED PRODUCT Attributes, benefits, or services used for competitive advantage 1-GENERIC CORE PRODUCT Serves the fundamental need or want. 2-EXPECTED Typical basic product 5-POTENTIAL PRODUCT Future: most advanced product Extended Warranty Advanced Features Delivery Updates THE EXPANDED PRODUCT CONCEPT PRODUCT ATTRIBUTES DESIGN FEATURES SPECIFICATIONS QUALITY STANDARDS PERFORMANCE STANDARDS STANDARDIZATION DECISION CRITERIA Nature of product Industrial goods are easier to standardize. Non-durables generally need more customization. Communications Needs Same Different Aggressive Growth Expansion Adaptation Same Different Products / Services Needs Extension Product changes or innovations Various flavors of Coca- Cola products All new approach Apple iPODTM Your examples ? New messages SUV, SUT, Simple roll-out Various packages of Campbells soups INTERNATIONAL BUSINESS: EXPANSION STRATEGY ALTERNATIVES A BRAND IS A NAME, TERM, SYMBOL, or ANY OTHER UNIQUE ELEMENT of a product that identifies one firms products and sets them apart from ALL competitive offerings. Beware of cultural, symbolic, and linguistic interpretations! See Interbrands Annual Ranking of The Best Global Brands. See /surveys.asp for more information. BRAND EQUITY THE VALUE OF THE BRAND TO THEIR CUSTOMERS AND AN ACQUIRER AN OFF BALANCE SHEET NUMBER. Altria PMI Kraft Foods$13B600% of book KKR RJR Nabisco$ 5.8B550% of book “The secret to our enduring brand lies in delivering an experience rather than just a collection of products and services.“ - Harley-Davidson Annual Report, 2003 BRAND STRATEGY Standardization of brand names One corporate brand world-wide Coca-cola, Perrier, Kodak Modified brand names for each regional market Tide - Ariel Family brand world-wide Levi-Strauss, 3M GLOBAL BRAND DISADVANTAGES Bad news travels fast. You can not afford bad news. One products problems can reflect on other products and damage the brand. Local brand loyalties may be hard to overcome. FIVE KEY BRAND DECISIONS Selection Brand No brand Generic Sponsor Manu- facturer Brand Private Label Brand Joint License Name Individual Brand Family Brand Separate Family Brands Position Reposition -brand OR -competitor Maintain current position Strategy Line Extension Brand Extension Multibrands New brands Cobrands BRAND DECISIONS Selection Brand No brand Generic Should the product have a brand name? Go through the brand name selection process. See goals on the next slide. Should all products be branded? What about sand and play sand? BRAND NAME SELECTION The brand name should Be distinctive not found in any language Be easy to pronounce, recognize, and remember Lack poor foreign language meanings Project a positive image or characteristic Suggest product benefits Suggest product qualities Be timeless enduring Be versatile for expansion purposes If you do three or four of the above, you have likely done a good job. BRAND DECISIONS Sponsor Manu- facturer Brand Private Label Brand Joint License Who owns the brand name? If it is a joint brand usually two entities there are special considerations. Licensing a brand is a common practice and can be a source of significant royalties. BRAND DECISIONS Name Individual Brand Family Brand Separate Family Brands Should I have a brand name for an individual product? Should I have a brand name for a set of product lines? Should product line have separate brand names? BRAND DECISIONS Strategy Line Extension Brand Extension Multibrands New brands Cobrands Should I have a product line or brand name and then a surname to help identify the products? Are the product families so different they would benefit from multiple brand names? Is the product line so different it requires a new brand name? Cobrands usually two companies own have special considerations. BRAND DECISIONS Position Reposition -brand -competitor Maintain current position Is there something significant to be gained by repositioning the brand? Repositioning a competitor is risky and can be expensive. Is maintaining the current position the best strategy? See Positioning in Section 7. ADDITIONAL BRAND DECISIONS PRODUCT SAFETY PRODUCT SPECIFICATIONS PRODUCT LIABILITY PRODUCT WARNINGS WARRANTIES TYPE OF WARRANTY What do each of the following mean in the U. S.? Limited lifetime Lifetime Extended warranty Free from manufacturers defects Merchantability and fitness of use PACKAGING AND LABELING More asterisks indicates increased importance. FUNCTIONPACKAGELABEL Selling * Competitive advantages * Product safety * Identify contents * Describe the product * Promote the product * Differentiation Recognition Company life long employment is common Large-Scale Retail Store Law Restrict construction of Wal-Mart type stores 2003 Wal-Mart acquisition in Japan Numerous resellers inflate consumer prices. Automobile makers affiliated parts makers Independent parts makers Repair parts makers Automobile makers WholesalersSpecial agents Dealers Sub-dealers Cooperative sales firms 2nd-level wholesalers Retailers Large users Gasoline stations Auto repair shops End users 1 2 3 4, 3 5 1 2 3 1 2 2 4 4 Channels are usually described as having so many steps or levels. The large numbers indicate the step number at that level for the indicated color. The number of levels equals the number of steps + 1. So if a channel has five steps it could also accurately be described as having six levels. 2 3 3 1 2 COMPLEX DISTRIBUTION CHANNELS: JAPAN TYPES OF RESELLERS Outside Sales Entities -Independently owned firms -Never take Title to the goods -Help negotiate business arrangements -Be careful of payments ! Resellers or Merchant Wholesalers -Take Title to Goods -Independently owned -Fairly standard arrangements Distributor - Wholesaler Dealer Retailer Jobber Exporter Export Trading Company and more Export Broker Export Management Co. Manufacturers Rep Freelance Sales Person and more CHANNEL ROLES Size; and The nature of the sample, premium, or prize. SALES PROMOTION Sales promotion is used to Stimulate customers to sample or make the first purchase of a product; Increase consumer use; Increase product availability; and Expand into a new distribution channel / area. China: Coke has been there since the 1930s, Diet Coke was introduced in 2001 Coke to began the DASANI rollout in Europe 3/15/04. It later became a major problem due to clean water definitions in the UK. See the Internet for many more details. Consumer-Promotion Objectives Increase Short-Term Sales without hurting future sales Build Market Share Get Retailers to Add Products Provide Sales Force Support Build Long-term Consumer Relationships / Usage Point-of-Purchase POP Displays Premiums Price Packs Cash Refunds Coupons Samples Consumer-Promotion Tools Games Sweepstakes Contests Awards Advertising Specialties Be sure to get expert legal assistance with all promotion tools and especially with samples, contests, games, and sweepstakes. INTERNATIONAL CONSUMER PROMOTION Trade-Promotion Objectives Persuade Resellers to Carry a Brand Get a Brand Shelf Space Amount, Location Promote a Brand Push a Brand through a channel of distribution Specialty Advertising Items Contests Free Goods Buy-Back Guarantees Allowances Price-Offs Trade-Promotion Tools Payments Discounts Displays Premiums Be sure to get expert legal assistance with all promotion tools and especially with contests, free goods, premiums, buy-back guarantees, and any form of payments. INTERNATIONAL TRADE PROMOTION Resellers of all types Business-Promotion Objectives Generate Sales Leads Stimulate Short-term Purchases Reward Customers Motivate Customer Salespeople Business-Promotion Tools Special Programs Sales Contests Inventory Buy-Backs Advertising Allowances Discounts / Free Goods POP and Other Displays Conventions And Trade Shows Be sure to get expert legal assistance with all promotion tools and especially with rewarding customers, sales contests, or discounts which include free goods. INTERNATIONAL TRADE PROMOTION Business Customers Determine the Size Ranges of the Incentive Program Establish Conditions for Participation Get expert legal assistance for this. Monitor and Evaluate the Program Be sure you have good systems. Determine How to Roll-out and Distribute the Promotion Program. Determine the Program Duration Determine the Key Objectives of the Incentive 6 STEPS FOR DEVELOPING A SALES PROMOTION PROGRAM GLOBAL TRADE SHOWS They are massive Require extensive planning Logistics are critical Staffing and expense considerations Directories For additional information search the web for international trade shows and / or refer to the following. /meetings/Directory/tradesearchnfr.html /directory/government_and_trade/events/directories/ /index.html MEDIA ADVERTISING COLLATERAL DIRECT MARKETING EVENTS SALES AIDS INTERNET ADVERTISING PACKAGING IMPORTING AND EXPORTING ALAN L. WHITEBREAD AN OCEAN SHIPMENT TO THE U.S. For additional information see /xp/cgov/border_security/international_activities/csi/ Container Security Initiative CSI Participating Port Manifest goes to Homeland Security 24 hours before loading. U.S. Customs and Border Protection at participating port verify information and provide an OK to load. At sea, the manifest is sent to the U.S. Coast Guard. 96 hours before entering the U.S. the ship identifies itself and all crewmembers Coast Guard allows entry or intercepts ship far offshore Coast Guard inspects the ship. Customs verifies only U.S. bound containers are offloaded. Container is loaded onto a truck which passes through at least one detection device. EXPORT INTERMEDIARIES: ROLES AND RESPONSIBILITIES Freight forwarder Customs broker Export management company EMC Export trading company ETC At the beginning of a sale, they can provide the exporter with a quotation for Freight costs Port charges Insurance costs Freight forwarders fees And, if applicable Consular fees Cost of special documentation FREIGHT FORWARDER CUSTOMS BROKER /broker.html “ a Customs Broker prepares and files the necessary Customs entries, arranges for the payment of duties found due, takes steps to effect the release of the goods in Customs custody, and represents their clients in custody matters. ” EXPORT MANAGEMENT COMPANY (EMC) An EMC Performs the typical functions of an export or international sales department of a company. Develops personalized services promoting their clients products to international buyers and resellers. An EMC usually represents