BSBMKG606B - Manage International Marketing Program by Precision Group (Australia)

Introduction (continued)

This manual is broken up into five (5) sections. They are: Element 1

Formulate International Marketing Objectives

Element 2

Determine International Marketing Approach

Element 3

Determine Operational Structures

Element 4

Manage International Marketing Performance

Element 5

Evaluate and Improve International Marketing Performance

There are activities throughout this workbook. These require the Learners to think about their experience or reactions, or to try and complete some research through reading or accessing the Internet. The activities will also help Learners towards completing the Assessment Task by assisting them to think about issues involved in the Assessment Tasks. Learners will then be asked to complete an Assessment Pack for this unit of competency. The information contained in this workbook will assist them. These tasks can be completed as they work through the workbook, rather than leaving it all to be completed at the end of their study. Finally, at the end of this workbook you will find a list of useful resources that you may use for further information. You will need to have access to an Internet terminal. Throughout the text, there are references to websites for further information and for some activities. This unit contributes the attainment of National Certificates. Exporting is the marketing and direct sale of domestically-produced goods in another country. Anyone with a product or service can export, or at least attempt to export. But international marketing is not the same as domestic marketing. Those who ignore this fact do so at their own peril. Exporting is a traditional and well-established method of reaching foreign markets. But success is far from guaranteed. At the best of times exporting can be a complex and challenging process. As successful as you may be at reaching your consumers or clients, you must be aware that your international audience will frequently have different tastes, needs, and customs. Good marketing strategies help the exporter understand and address these potential differences.

BSBMKG606Bâ&#x20AC;&#x201A; Manage International Marketing Programs Trainer Manualâ&#x20AC;&#x201A; ÂŠ Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

Setting the Goals What are ‘Appropriate Opportunities’? Marketing is defined as: “Marketing is the activity set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” Charles W Lamb, Joseph F Hair, Carl McDaniel Business & Economics 2008 Marketing opportunities are attractive arenas of relevant marketing action in which a particular organisation is likely to enjoy a superior and competitive advantage. To take advantage of marketing opportunities, the organisation must be able to service the business of the opportunity. That means that the organisation must be able to meet the demands as they would in the local market and manage the implications of dealing with the circumstances of delivering a product or service in a foreign or global market. Opportunities may be in the form of: • New Concepts These are completely new products that have been developed through innovation and which can sometimes create new markets. This is often in response to consumer feedback. • Additions to Existing Product Lines This is when new products are created to supplement established product lines. For example, a range of cars may have a newer small model introduced or a line of carbonated drinks have an additional flavour added. It is intended to serve consumers who require different sizes or flavours. • Modifications of Existing Products Existing products may be modified to meet consumer needs, such as improved performance. New markets may include: • E-commerce • Export markets • Segments of the market not currently penetrated. Regardless of where an organisation markets its goods and services, the definition of marketing still applies. What changes is the scope because it is broadened when the organisation chooses to sell across international boundaries. There are many other dimensions which the organisation has to consider. ‘English’ as a language is an example. The language of the targeted market may be different. Translation is not the only challenge, the culture and the way they conduct their business is also an issue which must be taken into account.

BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

However, all ideas must be researched extensively before a final decision is made. Senior executives, marketing professionals, and often stakeholders will gather to consider information and make the decision. As with any organisational undertaking, goals and objectives must be set to ensure that the project stays ‘on track’ and is able to be measured. Establishing such goals or objectives is challenging in any market but more so when moving into the global sphere due to the variables – many unknown.

Matching the Opportunity to the Organisation “Opportunities emerge from a complex pattern of changing conditions – they come into existence at a point in time because of the juxtaposition of conditions (needs, solutions, business models) which did not previously exist.” Joseph C. Picken Ph.D. Most opportunities are not about new ideas, but rather improving what the organisation already provides. Opportunities often emerge from changing conditions. The opportunities are recognised by individuals who have frameworks developed from experience that provide a learned basis for ‘connecting the dots’ into concepts for developing new business. To be successful, an opportunity must be evaluated: • Who are the target consumers? • What are the needs of that consumer that our offering would be satisfying? • Does this consumer group realise that they have a need? • How important is it to the consumer to have that need met? • Who is the competition or what are the alternatives for the consumer? • What is our competitive advantage? • Can we meet these needs? The best place to start is by taking a fresh look at the function of the organisation: • “What products or services does it offer?” • “Why is it unique and what value does it offer consumers?” • “What are its current strengths and weaknesses – remember to consider the individual departments and their capabilities. This includes human resources and the ability to adapt culturally, financial, technological, and operational resources.” • “How will these capabilities affect its ability to compete in a foreign market?”

BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

Any

marketing

opportunity

investigation

means

assessing

the

organisation

investigating such expansion for their capability and resources to meet supply in the new market. This critical analysis of the organisation’s abilities must be carried out regularly and first without referring to a particular market. The organisation must compare its strengths and weaknesses in to a specific market during the subsequent selection of an export market phase. A situational analysis can be completed using the SWOT or Porter’s 5 Forces Model.

SWOT (Strengths, Weaknesses, Opportunities, and Threats) A SWOT analysis consists of the following two (2) activities: • An assessment of the organisation’s internal strengths and weaknesses • An assessment of the opportunities and threats posed by its external environment.

Assessing the Internal Environment The internal scan of the organisation involves identification of its strengths and weaknesses, i.e those aspects that help or hinder accomplishment of the organisation’s mission and fulfilment of its goals with respect to: • People (human resources) • Properties (buildings, equipments, and other facilities) • Processes (such as production, packing, despatch, etc.) • Products (what is sold).

Assessing the External Environment External scanning explores the environment outside the organisation to identify opportunities and threats it faces. This involves: • Events, trends, and forces in the Social, Technological, Economical, Environmental, and Political areas (STEEP); these would include Codes of Practice, policies and guidelines, regulations, and relevant legislation • Identifying the shifts in the needs of customers and potential clients • Identification of competitors and collaborators. After assessing these internal and external factors of an organisation, a SWOT Analysis is sketched.

BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

SWOT The SWOT analysis is very subjective and should always be focused upon a segment of the market. This will enable you to ask ‘What are the Critical Success Factors (CSFs) that are essential to the decision-making process of the buyer in that segment?’ Weight the CSFs so that you can separate those drivers that are most important. Complete the strengths and weaknesses from the customer’s point of view including their view in relation to the competition. This will allow you to match key CSFs to opportunities. Then rank those opportunities that are most profitable or sustainable. Finally, factor in the impact of threats. Once your SWOT is completed, dovetail it with the rest of your strategic thinking. Some basic rules to remember: • Be realistic about the strengths and weaknesses of the organisation • It should distinguish between where the organisation is today and where it could be in the future • It should always be specific – avoiding grey areas • Always apply SWOT in relation to the competition, i.e. are we better than or worse than the competition? • Keep the SWOT short and simple, avoid complexity and over analysis • SWOT is subjective.

BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

Porter’s 5 Forces Analysis Porter’s 5 Forces model is an excellent situational analysing tool to analyse a particular environment of an organisation. It would be useful to help discover: 1. Competitive Rivalry 2. Power of Suppliers 3. Power of Buyers 4. Threats of Substitutes 5. Threat of New Entrants. These five (5) main factors are key factors that influence industry performance, hence it is common sense and practical to find out about these factors before you enter the industry. 1. Competitive Rivalry

A starting point to analysing the industry is to look at competitive rivalry. If entry to an industry is easy then competitive rivalry will likely to be high. If it is easy for customers to move to substitute products, for example, from Coke to water, then again rivalry will be high. Generally, competitive rivalry will be high if: • There is little differentiation between the products sold between customers • Competitors are approximately the same size of each other • If the competitors all have similar strategies • It is costly to leave the industry hence they fight to just stay in (exit barriers).

2. Power of Suppliers

Suppliers are also essential for the success of an organisation. Raw materials are needed to complete the finished product of the organisation. Suppliers do have power. This power comes from: • If they are the only supplier or one (1) of a few suppliers who supply that particular raw material • If it is costly for the organisation to move from one (1) supplier to another (known also as switching cost) • If there is no other substitute for their product.

3. Power of Buyers

Buyers or customers can exert influence and control over an industry in certain circumstances. This happens when: • There is little differentiation over the product and substitutes can be found easily • Customers are sensitive to price • Switching to another product is not costly.

BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

When you have this information, it is time to move on to defining the reasons that we are contemplating exporting as a business activity. Asking the following questions can assist in this analysis: • “Why do we want to export?” • “How do we intend to benefit?” • “What will success look like in this model?” Used well, there are no simple answers, but the responses provide important information. An organisation must have a clear objective of why it wishes to undertake the challenge of exporting. It also helps establish the degree to which exporting influences the organisational direction and strategy. In some cases, exporting may play an important yet secondary role based on the objectives of the organisation. In other instances, an organisation may find that its future is built upon exporting and this element of the business will become the primary focus. These decisions are simplified by conducting thorough market research. It is essential that all opportunities be investigated to sustain the organisation as competitive but with a reduced risk. The investigation is completed using a Market Opportunity Analysis (MOA). The MOA will allow the effectiveness and success probability to be evaluated. There are four main (4) steps: 1. Gather Information

Organisational vision, mission and goals, business plan and any other strategic documents related to marketing and development of opportunities. Think about them and summarise the key points to enable objectives to be established for this initiative.

2. Conduct your Research

Assess the ideas and find the gap between what your marketing strategy is accomplishing and what you want to accomplish.

3. Talk to the Stakeholders

Listen to their ideas and concerns and prioritise the results.

4. Evaluate the Information and Opinions

Make a decision.

MOA is an effective tool used to determine the probability of success in the growing market through determining: • If the opportunity can be managed to benefit the organisation’s target market(s) • If cost-effective media and other channels to reach the target market can be used • If the organisation is internally capable of delivering what’s expected by consumers • The effect on the organisation’s financial Return on Investment (ROI).

BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

Researching Potential New Markets Organisations intending to enter international markets must be aware that developing foreign markets implies numerous investments for them, and in time, effort and resources such as organisational, human, financial, and commercial. The organisation must also be very aware that their investment will not be repaid before the mid- or long-term. If the organisation attends to the detail and are fully aware of the necessary commitment and resources for their success in foreign markets, they can fix themselves realistic targets. Market research is critical to the decision-making process in developing an international marketing plan. The research will reveal the market or markets that offer the best opportunities for investment. It will reveal the political, legal and regulatory, financial, cultural, competitive, consumer, and marketing challenges that an organisation may face as it considers exporting to a particular destination. Without market research, an organisation is guessing at the best place to take its products or services. Market research used well can be used as insurance or as an effective tool to determine consumer needs and to obtain information on market potential. When used correctly it can minimise the risk of failure. However, it must be remembered that market research is not an exact science – considerable experience and insight is necessary to interpret data and see the opportunities. Once the needs have been understood and it is clear that there is a market, some means is required of measuring the size of demand, usage habits, attitudes to products and the likelihood of up-take of the new product. Quantitative research is the answer to this. Quantitative research asks a specific, narrow question, and collects numerical data from participants to answer the question. A relatively large number of structured interviews are required to provide a robust and statistically valid result. Such quantitative research studies tend to be conducted either by telephone or online. The questions to be asked initially in relation to concept testing should include: • Clarity and Purpose Can the concept be clearly understood by potential users? Can potential users be persuaded of the benefits of the product? • Demand What are the needs of the potential users and how does the product meet this need? • Behaviour of Buyers How long, how frequently, and for what specific purpose do users buy existing products? • Gaps in the Market How satisfied are users with existing products and what prevents them moving to the new product? What user needs are not being met? • Appropriate Price for the New Product Is the price reasonable in light of the concept’s perceived benefits? BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

• Purchase Intent How likely are potential users to buy the product? And then, because the organisation is investigating global markets the questions continue by conducting research on the selected markets.

Targeting the Countries It is likely that the organisation will have already targeted countries they consider appropriate as potential markets for their international marketing activity. Each must be examined individually to prioritise their efforts. The first step is to do a relative assessment of the market potential in each country so you can compare them. You want to estimate the number or amount of your product that could be sold in each country and then do a quantitative comparison of the countries. Market potential is the number of potential sales of a product in a given global market. This has to be calculated on the basis that there is no competition and everyone who wanted to buy the product did so. While this is an ideal situation, it is also a necessary one as the first step in assessing the market and comparing countries. A relative assessment requires that the same criteria are used for each country so the numbers calculated for each will not be precise. Base the market potential on not only on the current situation but also on the future market potential, even though you may have to put some conditions on it. For example, there may be a very big market potential for Australian product in Cuba because American companies are not allowed to trade with them at this time. This situation could change, so be prepared. • Global Research Sources Obtaining information on the market potential of a list of countries sounds like a daunting task, but it is easier than you may think. Much of the information you require can be obtained through the Australian Government: • The Department of Foreign Affairs and Trade (DFAT) continually monitor the effects of political changes on Australian businesses and maintains up-to-date Travel Advisories. www.dfat.gov.au • Smartraveller provides travel information and allows you to register overseas travel with them. www.smartraveller.gov.au • Export Finance and Insurance Corporation’s (EFIC) ‘Export Finance Navigator’ provides information on credit insurance including details of providers of this service and Political Risk Insurance. www.efic.gov.au

BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

• Austrade is an invaluable aid to global marketing. Specifically see their country profiles for information about ‘Doing Business’, ‘Business Etiquette’, and ‘Visiting the Market’. www.austrade.gov.au • ASIO Business Liaison Unit (BLU) to specifically provide an interface between Australian business and the Australian intelligence community providing timely ASIO information on matters which could affect the security of Australian exporters’ staff and assets in offshore locations. You can register overseas business activity here. This register has been set up to help protect Australian assets and personnel operating overseas and allows Australian companies to record the locations of their overseas staff, facilities, and emergency contact details through a secure website. www.blu.asio.gov.au • Australian Quarantine Information Service (AQIS) manages quarantine controls at our borders to minimise the risk of exotic pests and diseases entering the country. AQIS also provides information on overseas export markets. www.daff.gov.au/aqis • Contact your bank for advice on foreign exchange risks. • Offline Local Market Research Sources can also yield abundant quantities of information. Local resources include the local library, the local Chamber of Commerce, local phone book, and yellow pages will all have information that will help you define your target market and provide insights into trends. • Targeted Market Sources of Information could include government agencies, import / export businesses, and many of the sources listed here under the ‘local’ category.

Prioritising the Country Using the information that has been gathered, decisions will now be able to be made regarding: • The country or countries • Cultural groupings • Geographical groupings • Online virtual communities • Political groupings • Trade groupings. Information must be collected regarding the group where the greatest market potential exists within the targeted country. The information may not be sufficient to build a strategy and plan on, but will certainly provide strong indicators for progress and establish objectives. This research will provide a much better insight into the potential international market. BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

Some countries may stand out as obvious markets to target and others as not worth the effort. Discard the latter at this point and concentrate only on the ones with positive potential. If the same criteria were used for the preliminary analysis, the results should be accurate enough to do an assessment of the potential in each country enabling prioritisation of the countries in order of their market potential. Selecting the most useful marketing approaches for international markets requires careful analysis of the market research. This will lead to useful decisions regarding the nature of a market and potential consumers: • “Why would they buy this product or service?” • “How much would they pay for it?” • “What changes, if any, do we need to make in order to appeal to consumers?” • “What is the best marketing vehicle to reach buyers?” The answers will assist in forming the market entry approaches. These are the things an organisation does to get its product or service into the target market. Research may identify the sales and distribution channels typically used by similar organisations in the target market. How can these channels be accessed and successfully incorporated into the market entry? What types of messages will speak clearly to the target audience? Which marketing techniques work, which ones do not, and why? What type of product positioning or messages about the service will establish the strongest foothold?

PEST Analysis A good place to start is by conducting a PEST Analysis to scan the macro-environment of the international model you have selected. The organisation’s marketing environment is made up of: 1. Internal environment staff (or internal consumers), office technology, wages and finance, etc. 2. Micro-environment e.g. our external consumers, agents and distributors, suppliers, our competitors, etc. 3. Macro-environment • Political Factors - The political arena has a huge influence upon the regulation of organisations, and the spending power of consumers and other organisations. • Economic Factors - Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. • Social Factors - The social and cultural influences in an organisation vary from country to country. It is very important that such factors are considered.

BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

Additional specific questions that would be asked for an International PEST Analysis, include: • How easy will it be to move from purely domestic to international marketing? • Would your organisation benefit from inward foreign investment? • What is the nature of competition within each individual market, and how will companies from other nations compete when you meet with them head-to-head in unfamiliar countries? • Many other factors that are specific to your organisation or industry. Political • Is there any historical relationship between countries that would benefit or hinder international marketing? • What is the influence of communities or unions for trading? E.g. The European Union and its authority over European laws and regulation. • What kind of international and domestic laws will your organisation encounter? • What is the nature of politics in the country that you are targeting, and what is their view on encouraging foreign competition from overseas? Economic • What is the level of new industrial growth? E.g. China is experiencing terrific industrial growth. • What is the impact of currency fluctuations on exchange rates, and do your home market and your new international market - share a common currency? E.g. Polish companies trading in Ireland will use Euros, but in the UK would use pounds sterling • There are of course the usual economic indicators that one needs to be aware of such as inflation, Gross Domestic Product (GDP), levels of employment, national income, the predisposition of consumers to spend savings or to use credit, as well as many others. Social • Culture, religion, and society are of huge importance. • What are the cultural norms for doing business? E.g. is there a form of barter? • Will cultural norms impact upon your ability to trade overseas? E.g. Putonghua is very difficult for many Western people to learn. Technology • Do copyright, intellectual property laws, or patents protect technology in other countries? E.g. China and Jordan do not always respect international patents. • Does your technology conform to local laws? E.g. electrical items that run on non-domestic currents could be dangerous.

BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

• Are technologies at different stages in the Product Life Cycle (PLC) in various countries? E.g. versions / releases of software. Once you have completed the PEST Analysis, you can move to the next step. This involves evaluating your market entry process to gauge which international market or markets offer the best opportunities for the products or services to succeed. This is a five (5) step process: 1. Country Identification

Here an overview of potential new markets is made looking for simple matches like sharing a similar heritage, language, culture, political ideology or religion. At this point it is very early days and potential export markets could be included or discarded for any number of reasons.

2. Preliminary Screening

The next step is to seriously consider those remaining by scoring, weighting, and ranking of each country based upon macro-economic factors such as currency stability, exchange rates, level of domestic consumption, and so on. This information will provide the basis to start calculating the market entry costs. Some countries such as China require that some fraction of the organisation entering the market is owned domestically - this would need to be taken into account. There are some nations that are experiencing political instability and any organisation entering such a market would need to be rewarded for the risk that they would take. A final shorter list is created so that indepth screening can begin.

3. Indepth Screening

The final list would all be considered feasible for market entry. So it is vital that detailed information on the target market is obtained to allow marketing accurate decision-making. This deals with micro-economic factors, and local conditions such as commencing marketing research in relation to the marketing mix.

Questions at this stage could include: • “What prices can be charged in the nation?” • “How does one distribute a product or service such as ours in the country?” • “How should we communicate with are target segments in the nation?” • “How does our product or service need to be adapted for the nation?”

This information will form the basis of the segmentation, targeting, and positioning decisions. One could also take into account the value of the nation’s market, any tariffs or quotas in operation, and similar opportunities or threats to new entrants.

BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

4. Final Selection

The managers would consider the organisational strategic goals and look for a match in the countries that have been selected. The organisation could look at close competitors or similar domestic companies that have already entered the market to get firmer costs in relation to market entry. They could also look at other countries that the organisation has entered to see if there are any similarities, or learning that can be used to assist with decision-making in this instance. A final scoring, ranking, and weighting can be undertaken based upon more focused criteria. After this the marketing manager should probably try to visit the final handful of nations remaining on the final list.

5. Direct Experience

Personal experience is important. Where possible the marketing manager should travel to selected nations to understand the culture and business practices of each. On a first impressions basis one can ascertain in what ways the nation is similar or dissimilar to the domestic market of the organisation or others in which they already trade. Be careful that you do not allow your own perceptions and experience taint your learning and judgement. Try to be flexible and experimental in new countries.

The information regarding the ability of the organisation to deliver has been completed along with the research and decisions on potential markets to target. The objectives must now be established to ensure that what the organisation is seeking are aligned with organisational goals and that the organisation will be able to meet appropriate timelines when establishing the new global markets.

Establishing Measurable International Marketing Objectives The establishment of strategic international marketing objectives is really trying to answer the question: Where do we want to be and when? There are five (5) categories to be considered when developing these objectives: 1. Finance 2. Sales and Marketing 3. Operations 4. Human Resources 5. Community. Specific measurements should be chosen for each category and the objective written to reflect what is intended to be achieved:

BSBMKG606Bâ&#x20AC;&#x201A; Manage International Marketing Programs Trainer Manualâ&#x20AC;&#x201A; ÂŠ Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

• Financial Objectives - Gross profit, operating profit, net profit, return on assets, return on investment, or any other that has meaning for the organisation • Sales and Marketing Objectives - Market share, sales growth rate, or sales volume • Operational Measures - Quality of products and services, cost reduction, productivity, or efficiency • Human Resources - Employee satisfaction, training, turnover, or benefits • Community Involvement - Environmental measures such as non-pollution of water and air, contributions to the community, or equal opportunity employment. The objectives must reflect and build toward achievement of the overall organisational goals. Before finalising your objectives, consult with other stakeholders to ensure that this is the case. When the objectives have been established, they must then be prioritised. Senior managers will usually prioritise in the order shown at the beginning of this section, but there is no obligation to do so. To decide an order appropriate to your organisation, consider that you are going to sell something to somebody. That is why you are in business. Consider Dick Smith Magnificent Australian Grown Food for a minute (http:// www.dicksmithfoods.com.au/). They make millions, but after reading their Mission, I would doubt that the financial objectives are the highest priority – necessity of course to meet the other needs, but not the highest priority. That is what the objectives are about – your organisation and as such must be specifically tailored to reflect those organisational goals. So prioritise the objectives according you the values of your organisation. Next you need to ensure a little balance. Do not allow all of your objectives to fall into the finance and marketing baskets. The depth of your organisation must also be included in the priority list. The objectives are part of the activities in which employees are involved to motivate them. The organisational goals and objectives focus the employees and give purpose to their contributions. If there is no priority objective relating to them and their care, then they could justifiably ask “What’s in it for me?” They can be alienated. Likewise, if senior management only concentrates on profit, neglecting care and benefit for employees, the whole organisation could become ruthless and fail overall in societal standards. By including objectives from all categories, the organisation becomes a responsible employer and member of the community. If you need more than one (1) objective in a category, add it. However, do not set too many because focus will be lost. It will be difficult to use the objectives in the day-to-day management. If the objectives cannot be memorised, you probably have too many! Keep the objective list short.

Element 1: Formulate International Marketing Objectives

Develop Key Performance Indicators Key Performance Indicators (KPIs) are a reduced set of measures or indicators that show the most important aspects of the object being measured. They help organisations understand how well they are performing in relation to their strategic goals and objectives. In the broadest sense, KPIs can be defined as providing the most important performance information that enables organisations or their stakeholders to understand whether the organisation is on track or not. KPIs serve to reduce the complex nature of organisational performance to a small number of key indicators in order to make performance more understandable and digestible for us. Developing the KPIs is probably something in which you have participated before. But when you are completing the KPI for an international project, it is even more demanding. We will look at how to develop KPIs for products, services, and overall. Then, they must be considered in terms of the country or international grouping which was discussed previously. KPIs must be developed that relate to each of: • Cultural groupings • Geographical groupings • Online virtual communities • Political groupings • Trade groupings. There are three (3) main reasons for establishing KPIs: • To Learn and Improve If we measure what is done, then mistakes can be minimised and processes improved. If the information taken from the measurements allow for better, more informed management decisions, the KPIs are the evidence which motivates change. However, they must be precise to be useful. • To Report Externally and Demonstrate Compliance Evidence is often required by external stakeholders to report and provide evidence. The Australian Taxation Office (ATO), lenders of money, and shareholders will all require financial reports. Other bodies, including teams if incentive programs are in place, may require performance reports, environmental reports, and so on. The KPIs must be written to enable the required information to be effectively gathered. • To Control and Monitor People In this case the measures provide guides or rules to enable provision of feedback to teams on performance. The aim is to eliminate variance and encourage standardisation and may be linked to rewards. If this is not done well, teams will often work to reward and not performance which misses the point of the KPI. Again, careful and precise wording can improve the culture and expectations. BSBMKG606B Manage International Marketing Programs Trainer Manual © Precision Group (Australia) Pty Ltd

Element 1: Formulate International Marketing Objectives

Organisations often set KPIs too broadly. As we said earlier, there should not be too many, so this can provide a challenge. Consider setting your KPIs in levels. The highest level relates directly to the strategic direction of the organisation. The next level would be related directly to a department providing the link to the ones set for attainment of the strategic objectives. This exercise could be repeated down-the-line as required, all the while building a ‘bridge’ or connection to the next level up and the overall organisational goals.

Using the Information Collected from KPIs Once the information is collected, it is still raw data. Until it has been analysed, it is of little value. There are different methods of analysis, and many of the criteria will require a specific method. Basically they will fall into one (1) of two (2) categories: • Qualitative Metrics This is when the information is non-numeric. It is often opinion or feelings and is useful for gaining information about what is important to consumers or stakeholders. • Quantitative Metrics These are related to the collection of information related to numbers. This is easier both to collect and analyse but can overlook that which is important to the users. Three (3) final points to remember about the development of KPIs include: 1. Make Them Able to be Used

If the metrics will not action step-by-step performance improvement, they will not be useful. The purpose is to put the idea of what is required into action. An example is when an organisation has a KPI in place to develop their current employees and promote from within but fills all top level vacancies from outside and does not establish training and mentoring programs for employees. The measures should demonstrate the need for intervention and action.

2. The Definitions Must be Aligned

The KPIs and measures used must be understood by all of those to whom they apply. If they are not understood, they are not useful. This may require training and on-going discussion, but is essential to motivate employees to achieve.

3. Use only Strategic Metrics

It is a waste of time to take current objectives and simply re-write them, likewise using objectives that are similar to those used by other organisations because they seem popular is a mistake. Look to the organisational vision, mission, and objectives, and create what will lead to the success of each.

Element 1: Formulate International Marketing Objectives

Checking that Each KPI is Useful 1. Have we answered the question?

Is the information provided a real answer to the question? Are the indicators ‘black-and-white’ with no opportunity to interpret? Would the addition of percentages, colour coding, or grading help?

2. Was the Information Attained in a Cost-Effective Manner?

This is important. Organisations do not want to spend money collecting useless information. Ensure it is timely, relevant, and precise without incurring significant costs.

3. Does it Support Positive Behaviour?

If the measures encourage cheating (as could be the case if directly linked to incentives), undesirable behaviours could be an outcome. Consider carefully and reflect on the measure to avoid this pitfall.

4. Is the Information Received Appropriate to Those Who Require It?

There is usually no point in overloading supervisors with information that they are unable to use or do not need to achieve the objectives of their department. Likewise, executives should be able to access all information to make informed decisions, but need only to have certain information regularly sent to them. The Board of Directors will require broader groups of information than the team manager. Consider the distribution channels and access – are they useful?

5. Is the Frequency of Collection Appropriate?

The information that is collected must be timely but again, not collected and analysed for the sake of it. Reporting frequency can differ from measurement frequency. Cross-check both the reporting and measurement frequency to ensure they are aligned and that the required data is available.

6. Is the Format Used Appropriate?

When the data is received, is it easy to understand and compare? When the KPIs are designed, the way the final report looks must be stated. This could be in tables, narratives, numbers, or graphs.

Anything can be measured. The key is discovering what should be measured, how often, and who needs to know. Keep this in mind when developing KPIs.

Developing a Risk Management Strategy The risk management process identifies, analyses, and either accepts or mitigates uncertainty. Essentially, risk management occurs anytime an individual analyses and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given their investment objectives and risk tolerance. Inadequate risk management can result in severe consequences for organisations as well as individuals.

Element 1: Formulate International Marketing Objectives

Managing International Risk Once you have found and decided your marketing opportunity and established your objectives and KPIs, there is one (1) more process that must be completed. Risk management investigation is crucial for all projects, but even more so in a new market that functions differently to the local one. Obviously the greater the opportunity, the greater the risk. The first step is to gain the information that you will need to make your decision to either accept the risk or to find a way to manage if the worst happens. Earlier in this Element we discussed researching through the Australian Government Department of Foreign Affairs and Trade, and also Austrade. Again, these will be invaluable sources of information in determining potential risk. Your lawyers, insurers, bankers and accountants will also provide valuable insights into the foreign market you wish to enter. Choose these advisors carefully; selecting the right partners can be a big first step in mitigating your risk. Seek recommendations of others who have successfully exported to your chosen countries before.

Areas of Risk in International Trade The risks that exist in international trade can be divided into several major groups: Economic Risks • Insolvency of Purchaser – they are unable to pay creditors • Non-Acceptance by Purchaser – delivery is rejected • Concession in Economic Control – seizure by the government or other body • Protracted Default – failure to pay the outstanding amounts within the agreed term • Exchange Rate – fluctuations in the value of currency, interest rates, inflation rates, trade balance, degree of transparency in the conduct of leaders and administrators, general state of the economy, quality of governance • Economic Sovereignty – the power of national governments to make decisions independently of those made by other governments • Sovereign Risk – ability of the government to pay off the debts of its country. Political Risks • Political Upheaval – economic factors, natural disasters, civil disorder, or revolution • Trade embargos enforced by governments and the international community • Cancellation or non-renewal of export or import licences • Whether the local country complies with international law requirements – human rights, trade sanctions, recognition of personal property rights etc. • Exports prohibited under local laws

Element 1: Formulate International Marketing Objectives

• Imposition of an import ban after the delivery of the goods • Surrendering of political sovereignty – the exclusive right to have control over an area, to operate the government, enact laws, and regulate activities and commerce. Legal Risks • The differences between legal systems – common law systems as compared to civil law systems • Differences in contract law – are contracts and enforceable • Which laws will apply in disputes? • Patent registration and other intellectual property issues • Product liability laws and any implied consumer warranties • For exporters of services, occupational health and safety, and employment laws may apply • Access to courts and dispute resolution mechanisms – may not permit local litigation or place restrictions on the types of claims which can be made • Taxation and revenue laws • Negligence and misrepresentation laws • Legal protection for breach of contract or non-payment is low. Other Risks • Personnel and assets – organisational response in case of natural disaster, security, or unlawful seizure • Cultural differences - some cultures consider the payment of an incentive to help trading is absolutely lawful • Lack of knowledge of overseas markets • Language barriers • Inclination to corrupt business associates • Natural risk – various kinds of natural catastrophes, which cannot be controlled • Quarantine compliance risk – import restrictions on certain goods and services and you need to ensure that any proposed exports are permitted under the laws of the local country • Poor quality risk • Transportation and logistics risks.

Element 1: Formulate International Marketing Objectives

Managing Export Risks When you consider the potential risks, you can understand why the development of a risk management plan is essential. Developing a risk management plan is a systematic process involving consideration of all of the potential risks that could be encountered, what the consequence of each would be, and then making a decision to avoid or mitigate the risk. Mitigation is to moderate the force or intensity of the risk. As you develop your draft risk management analysis, keep it clear and simple. It will need to be understood by all employees who are involved in the exporting. There are seven (7) areas which must be researched to build a success plan: 1. Understand the setting in which the potential risks may occur 2. Identify and prioritise the risks 3. Assess the likelihood and potential consequences of the risks 4. Develop strategies to mitigate these risks 5. Monitor and review the outcomes making appropriate adjustments 6. Communicate and consult with all stakeholders 7. Review the risk management plan regularly and make appropriate adjustments. If the information is entered in a Matrix, it can be easily seen, understood, and reviewed by all stakeholders. This is recommended by Austrade and their example can be seen at their website www.austrade.gov.au. For those risks that have been selected to be mitigated, strategies must be developed. Some ideas for mitigation strategies could include: • Where there are differences in contract law always ensure contracts are binding and enforceable. It may be possible to use internationally recognised contracts which may mitigate some of the risk potential. • Payment default is an important consideration especially when you have the marketing and development costs as well as the product costs. Irrevocable Letters of Credit and pre-payment are a good idea. Your bank will be able to advise you on these. Be careful about offering credit terms to consumers. If you are going to offer credit, ensure that you are fully aware of the purchaser’s credit history, methods in that country for managing disputes, what legal remedies apply and have been advised as to dealing directly or using an intermediary. • Credit Insurance is usually available for six (6) months. They should also be able to provide advice on commercial and political information from overseas credit rating agencies and embassies.

Element 1: Formulate International Marketing Objectives

• Exporters who travel internationally should be well tutored in taking adequate and sensible security precautions at all times. They will need timely and accurate information on security issues. They should always be aware of cultural or religious restrictions. Not adhering to these rules could place you at significant personal risk, for example, importing and/or consumption of alcohol in some destinations. • On the foreign exchange market a ‘spot exchange rate’ refers to the current exchange rate. The ‘forward exchange rate’ refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date. • Hedging is a risk management strategy used to limit or offset the probability of losses from fluctuating commodities, currencies, or securities prices. This manages risk to a tolerable level. Hedging is a transfer of risk without buying insurance policies. Hedging instruments include: • Forwards / Futures - customised agreements between two (2) parties to fix the exchange rate for a future transaction. They are similar to the forward contract, but they are standardised and much more liquid. The idea behind forward contracts is that as the exchange rate is locked on both sides; both parties do not have to worry about fluctuations in the income and expenditure respectively. A forward exchange rate contract involves contracting to buy or sell a foreign currency at a future date at an agreed exchange rate. This completely eliminates currency risk. In the short-term, firms using forward contracts can make gains or losses from hedging. • Options - financial instruments that give the owner the right but not the obligation to buy or sell a specific foreign currency at a predetermined exchange rate. • Swaps - foreign currency contract whereby the buyer and seller exchange equal initial principal amounts of two (2) different currencies at the spot rate. • Before exporting, you need to be aware of what is and what is not allowed under the relevant quarantine laws of your export destination.