TOPIC EIGHT SALES SETTING.
INTERNATIONAL SELLING APPROACH
Companies contemplating entering overseas markets will need to develop specialist knowledge and expertise in these areas. Some sales managers feel that selling abroad is impossibly difficult, but most who try it see that, although it is ‘different’, it is no more demanding than selling in the home market.
Success depends largely on the attitude and approach of the firm and the personal qualities of the salespeople – not every salesperson is suited to such a task from the point of view of understanding and empathy with the foreign market concerned. While it is hoped that this text will contribute to the development of the personal qualities necessary for successful salesmanship, the chapter concentrates specifically on those aspects of international selling with which a firm either exporting or contemplating it should be familiar.
One study found evidence to support the hypothesis that there are four identifiable stages in a firm’s internationalization. The four stages are:
1. Non exporters,
2. Export intenders,
3. Exporters, and
4. Regular exporters.
KEY ENVIRONMENTAL FACTORS TO CONSIDER IN INTERNATIONAL SELLING
Social
Cultural
Religion
Legal
Economic
Political
Technological
Concept of balance of payment.
International trade.
WTO
General Agreement on Tariffs and Trade (GATT).
INTERNATIONAL SELLING AT COMPANY LEVEL
The fact that national economic prosperity depends on selling overseas is not without relevance to individual companies. There are, however, a number of more pressing reasons why companies benefit from selling overseas:
1. Trade due to non-availability of a particular product:
2. Trade due to international differences in competitive costs:
3. Trade due to product differentiation
We have looked at three broad reasons why individual firms become involved in selling overseas, but there are other more situation specific reasons:
(a) To become less vulnerable to the effects of economic recession, particularly in the home market, and to counter market fluctuations.
(b) Loss of domestic market share due to increased competition.
(c) To take advantage of faster rates of growth in demand in other markets.
(d) To dispose of surplus or to take up excess capacity in production.
(e) Loss of domestic market share due to product obsolescence.
(f) To achieve the benefits of long production runs and to gain economies of scale
(g) The firm has special expertise or knowledge of producing a product that is not available in a foreign market.
(h) Simply the existence of potential demand backed by purchasing power, which is probably the strongest incentive of all.
ORGANISATION FOR INTERNATIONAL SELLING
Organisation to implement international sales operations can be complex. Decisions must be made on arranging the interface between manufacturing and sales and in delegating responsibility for international operations. Each problem can have alternative solutions and an optimal decision must be tailored for each firm.
Some companies are so deeply involved in international trade that it forms the majority of sales turnover, while others are simply content to supply export orders. A distinction is made between multinational marketing, international marketing and exporting and each is now considered:
1. Multinational marketing
Relates to companies whose business interests, manufacturing plants and offices are spread throughout the world. Although their strategic headquarters might be in an original country, multinationals operate independently at national levels. Multinationals produce and market goods within the countries they have chosen to develop. Examples of multinationals are Shell, Ford, Coca-Cola, Microsoft and McDonald’s. To be successful multinationals need to understand their competences and weaknesses. The Microsoft case history examines this company’s bright and dark side.
2. International marketing covers companies that have made a strategic decision to enter foreign markets, have made appropriate organizational changes and marketing mix adaptations.
3. Exporting is at the simple end of the scale and the term is applied to companies that regard exporting as a peripheral activity, whose turnover from exporting is less than 20 per cent.
ETHICAL AND LEGAL ISSUES IN SELLING
LEGAL ISSUES IN SELLING
Consumer protection by the law is very much a twentieth-century phenomenon. Before that the prevailing attitude can be described by the phrase caveat emptor – let the buyer beware. Much of the legislation has been drawn up since 1970 when there was recognition that sellers may have an unfair advantage compared with consumers when entering into a contract of sale. The major laws controlling selling activity in Britain include the following:
• Weights and Measures Acts 1878, 1963, 1979
• Sale of Goods Acts 1893, 1979
• Resale Prices Acts 1964, 1976
• Restrictive Trade Practices Acts 1956, 1968, 1976
• Misrepresentation Act 1967
• Trade Descriptions Acts 1968, 1972
• Unsolicited Goods and Services Acts 1971, 1975
• Supply of Goods (Implied Terms) Acts 1973, 1982
• Fair Trading Act 1973
• Hire Purchase Act 1973
• Consumer Credit Act 1974
• Unfair Contract Terms Act 1977
• Consumer Safety Act 1978
• Consumer Protection Act 1987.
THE CONTRACT
All this activity is centered upon the contract entered into when a seller agrees to part with a good or provide a service in exchange for monetary payment. A contract is made when a deal is agreed. This can be accomplished verbally or in writing. Once an offer has been accepted a contract is formed and is legally binding.
TERMS AND CONDITIONS
As the name suggests, terms and conditions state the circumstances under which the buyer is prepared to purchase and the seller is prepared to sell. They define the limit of responsibility for both buyer and seller. Thus both buyer and seller are at liberty to state their terms and conditions. Usually the buyer will state them on the back of the order form and the seller will do so on the reverse of the quotation form. Often a note is typed on the front of the form in red ink: ‘Your attention is drawn to our standard terms and conditions on the reverse of this order.’ Typical clauses incorporated into the conditions of a purchase order include the following:
1. Only orders issued on the company’s printed order form and signed on behalf of the company will be respected.
2. Alterations to orders must be confirmed by official amendment and signed.
3. Delivery must be within the specified time period. The right to cancel is reserved for late delivery.
4. Faulty goods will be returned and expenses charged to the supplier.
5. All insurance of goods in transit shall be paid for by the supplier.
6. This order is subject to a cash discount of 2.5 per cent, unless otherwise arranged, for payment within 28 days of receipt. Any payment made is without prejudice to our rights if the goods supplied prove to be unsatisfactory or not in accordance with our agreed specification or sample.
7. Tools supplied by us for the execution of this order must not be used in the service of any other firm without permission.
FALSE DESCRIPTIONS
Unscrupulous salespeople may be tempted to mislead potential buyers through inaccurate statements about the product or service they are selling. In Britain a consumer is protected from such practice by the Trade Descriptions Act 1968. The Act covers descriptions of products, prices and services and includes both oral and written descriptions.
FAULTY GOODS
The principal protection for the buyer against the sale of faulty goods is to be found within the Sale of Goods Act 1979. This Act states that a product must correspond to its description and must be of merchantable quality, i.e. ‘fit for the purpose for which goods of that kind are commonly bought as it is reasonable to expect’. An example is a second-hand car that is found to be unroadworthy after purchase;
INERTIA SELLING
Inertia selling involves the sending of unsolicited goods or the provision of unsolicited services to people who, having received them, may feel an obligation to buy. For example, a book might be sent to people who would be told that they had been specially chosen to receive it. They would be asked to send money in payment or return the book within a given period, after which they would become liable for payment.
Non-payment and failure to return the good would result in letters demanding payment, sometimes in quite threatening terms.
EXCLUSION CLAUSES
Another practice that some sellers have employed in order to limit their liability is the use of an exclusion clause. For example, a restaurant or discotheque might display a sign stating that coats are left at the owner’s risk, or a dry cleaners might display a sign excluding themselves from blame should clothes be damaged
BUYING BY CREDIT
REGULATED AGREEMENTS,
Collusion between sellers In certain circumstances it may be in the sellers’ interests to collude with one another
in order to restrict supply, agree upon prices (price fixing) or share out the market in some mutually beneficial way
ETHICAL ISSUES
1. Bribery-This is the act of giving payments, gifts or other inducements to secure a sale. Such actions are thought to be unethical because they violate the principle of fairness in commercial negotiations.
2. Deception-A problem faced by many salespeople is the temptation to mislead the customer in order to secure an order. The deception may take the form of exaggeration, lying or withholding important information.
3. The hard sell-A criticism that is sometimes made of personal selling behavior is the use of high pressure (hard sell) sales tactics to secure a sale. Some car dealerships have been accused of such tactics to pressure customers into making hasty decisions on a complicated purchase that may involve expensive credit facilities.
4. Reciprocal buying-Reciprocal buying occurs when a customer agrees to buy from a supplier only if that supplier agrees to purchase something from the customer. This may be considered unethical if the action is unfair to other competing suppliers who may not agree to such an arrangement or not be in a position to buy from the customer.
5. Promotional inducements to the trade.
6. Slotting allowances-A slotting allowance is a fee paid by a manufacturer to a retailer in exchange for an agreement to place a product on the retailer’s shelves.
7. Pyramid selling-The primary purpose of pyramid selling schemes is to earn money through recruiting
other individuals
