SDM-Ch 16 1

Chapter 16
International Sales & Distribution
Management
SDM-Ch 16 2
LEARNING OBJECTIVES
Understand differences with domestic markets
Choosing the markets
Economic, Legal & Cultural aspects of the
environment
Risks involved in International business
Entry strategies for international markets
Pricing, financial terms and payment methods
Information gathering about target markets
Differences in distribution channels and factors
influencing the choice
SDM-Ch 16 3
WHY GO INTERNATIONAL?
The WTO agreement has resulted in opening up of
new areas for freer trade (Textiles, Services &
Agricultural products)
China, Russia, India & the East European countries
have embraced free market policies resulting in huge
opening up of underserved populations.
Domestic competition has increased especially from
imports.
Outsourcing in manufacturing and services has
increased due to cost pressures & improvement in
infrastructure.
SDM-Ch 16 4
CHOOSING THE MARKET
Factors to be borne in mind while choosing markets:

Size of the market
Language & Culture of the market
Competition in the market
Proximity of the market
Political and Financial stability of the country
Ease of doing business
SDM-Ch 16 5
CULTURE & INTERNATIONAL
BUSINESS
Culture influences everything from taste &
preferences to consumption patterns and attitude to
foreigners.
Culture influences communication modes
Culture influences dress and behavior
Culture influences usage of a product
Language is very important in international business
to communicate effectively.

SDM-Ch 16 6
LEGAL ASPECTS OF INTERNATIONAL
BUSINESS
Laws vary from country to country there is no
international law
Important to know the local laws to do business on
investment, management, employment, marketing,
pricing, royalties, profit repatriation, taxation etc
Developed countries have stringent laws on safety,
pollution, intellectual property rights etc.
In times of disputes, which law will prevail this
needs to be spelt out in contracts

SDM-Ch 16 7
RISKS IN INTERNATIONAL BUSINESS
Two main risks in international business:

Political risks involve disruption of contracts
or payments due to sudden political changes,
expropriation of businesses etc

Commercial & Financial risks failure of the
buyer to pay due to bankruptcy or sudden
changes in the exchange availability or rate.
SDM-Ch 16 8
RISKS IN INTERNATIONAL BUSINESS
Risks can be insured with agencies like the export
credit guarantee corporation(ECGC) for a premium
based on the countrys risk.

Letters of credit may be guaranteed by international
banks located in major financial centers like London,
New York, Singapore etc.
SDM-Ch 16 9
TRADE BETWEEN COUNTRIES
Reasons for trade between countries include:

Non availability of a product or resource
Cost advantages in buying rather than making a
product locally
Differentiated products-Luxury products or better
designed products in the same category may be
available from different countries (cars, electronics,
textiles and garments etc)
SDM-Ch 16 10
INTERNATIONAL TRADE COMPANY
PERSPECTIVE
Companies may choose to sell internationally for the
reasons given below:
Limited growth in home market
Overseas markets offer large profitable opportunities
Excess capacity which cannot be absorbed locally
Cost advantage over international competitors
Mitigating risk of increased domestic competition
SDM-Ch 16 11
ENTRY STRATEGIES
Exporting through local agent
Exporting through foreign agent
Exporting to foreign importer / distributor
Setting up local office / representative
Licensing / Franchising
Setting up Joint ventures for distribution /
manufacture
Setting up wholly owned manufacturing facilities
SDM-Ch 16 12
ORGANIZING FOR INTERNATIONAL
SALES
Structure depends on volume of sales and nature of
the product.
In situations of low volumes, exporting through local
or foreign agents is cost effective
As volume grows and in complex products or large
value deals, using own sales personnel is preferable.
To be effective, it is preferable to have local
personnel in the sales force
SDM-Ch 16 13
DISTRIBUTION
Distribution is a vital aspect of marketing ensuring
availability of the product in the right quantity, at the
right time and right place.
More important in international markets due to
distance and transportation time.
Importers, manufacturers and retailers are
increasingly asking for Just in Time deliveries.
Distribution strategy varies from market to market
depending on size and local conditions.
Multiple channels may be used in countries.
SDM-Ch 16 14
DISTRIBUTION OPTIONS
Depends on the volume of the business
Positioning of the product
Infrastructure of distribution in the country
Local laws some countries insist on local
companies in the distribution business
Internet as a channel of sales and distribution
SDM-Ch 16 15
ROLE OF LOGISTICS
Very important aspect of international selling
Logistics can make up over 15% of the cost of the
product
Involves multiple modes of transport land, sea and
air
Considerable paperwork and formalities to be
completed in international trade
Logistics providers now offer complete one stop
solution including distribution, invoicing and collection
of payment
SDM-Ch 16 16
PROFILE OF AN INTERNATIONAL
SALES PERSON
Pleasant and amiable personality
Ability to adapt to foreign culture especially food,
drink etc
Conversant in one or more foreign languages
Ability to act independently and decisively
Ability to understand complexities of financing,
foreign exchange etc
Some local sales persons in the force will be useful to
overcome some barriers and leverage local networks
for business development
SDM-Ch 16 17
PRICING AND PAYMENT TERMS
Common pricing terms are:

Ex Works at the mfrs factory gate
FOT, FOR free on truck / rail loaded on truck/rail
FAS free along side at port next to ship
FOB free on board loaded on ship
C&F cost and freight inclusive of to destination
CIF cost, insurance and freight inclusive to
destination
SDM-Ch 16 18
PRICING AND PAYMENT TERMS
Payment terms can include:
Cash in advance
Cash on delivery cash against documents
Consignment basis payable after sale
Usance payment days after acceptance of
documents
Letter of credit
Long term credit financing for machinery / projects
Each method has risks for the buyer or seller. The LC
offers safety and comfort for both


SDM-Ch 16 19
CURRENCY OF PRICING
The US Dollar is the most widely used currency for
pricing international sales
Importers in some countries may prefer invoicing in
local currencies like Japanese Yen or Euro or Pound
Sterling, Singapore Dollars or UAE Dirhams Saudi
riyals etc.
This reduces the risk of exchange rate fluctuations for
the buyer
Exchange fluctuation is a major risk for sellers and
can be managed by hedging the currency.
SDM-Ch 16 20
PACKING AND SHIPPING
Packing is of two types:
Industrial packing bulk for protection during
shipping & transport
Consumer packing to enhance sales appeal
Packing could makeup up to 5% of product costs
Countries have laws or practices in packing which
must be understood and adhered to.
Packing depends on the product and must be
suitable for containerized shipping and mechanical
handling.
SDM-Ch 16 21
MARKET INTELLIGENCE
Secondary data is very easy to gather from various
publications, agencies like chambers of commerce,
trade bodies, embassies, trade shows, internet,
banks etc

Usually secondary data is sufficient to establish the
feasibility of the market.

Care must be taken to understand the data and the
measures used before drawing conclusions.
SDM-Ch 16 22
Key Learnings
Markets differ in culture, language, taste,
consumption patterns, economic strength, level of
development of market and distribution infrastructure
The main risks in international business are political
and commercial and financial
Currency fluctuation is major risk.
Risks can be mitigated by hedging or insuring
Legal aspects of a country must be understood well
before venturing in

SDM-Ch 16 23
Key Learnings
The organizing for international markets starts with
choosing the market, planning suitable entry
strategies, staffing with salespersons of appropriate
profile, pricing the products in an acceptable
currency, distributing the products based on the
market needs and infrastructure, in suitable packing
for efficient handling and consumer appeal.
Payment terms must be acceptable to buyer and
seller with minimum risk to both.
Secondary market data can be collected from various
sources before venturing into the market.