Marketing/ International Marketing term paper 18149

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Measuring a potential business venture has many aspects

which the international manager must be aware of in order to

convey the correct information back to the decision makers.

Being ignorant to any of the aspects can lead to a false

representation of the project, and hence an uninformed

decision being passed. In order for a business to survive it

must grow. For growth to be optimal, management must first

be able to identify the most attractive prospective leads. The

country as a whole, specifically geography, government, and

financial aspects must be looked at in order to yield the best

possible picture of the market a company wishes to enter.

Concentration should be placed on gathering reliable facts

that are backed up by more than one source. It is to be hoped

that after creating "a picture" of the market, management's

analysis of the potential business venture and plan of action

will be structured as to avoid losses and to find the most

profitable scenarios. The success of the multinational

corporation lies on the shoulders of it's management.

International management and organization-design expert

Henry Mintzenberg says every CEO has three essential

duties: direct supervision, development of the organization's

strategy, and management of the organization's boundary

conditions. Top management's responsibility at and beyond

the organization's boundaries is largely a communication

responsibility; however, no commonly accepted model exists

for decision, execution, and assessment of communication

opportunities. Within even some of the largest and most

venerable organizations, the process used is haphazard and

inconsistent. The Wyatt Company's survey of communications

professionals showed that just 58.1 percent agreed that their

organization's communication objectives are linked to

business objectives, and 83.3 percent reported that their

organizations conduct no formal review of return on

communications investment. CEOs must establish and

reinforce an organization's image in public by viewing each

target public as a client; by doing research, looking at trends,

and talking to experts, a CEO focuses on selling what the

client wants to buy.1 Finding a country to conduct business in

can be a very easy task depending on if the organization's top

management follows the advice of Mr. Mintzenberg. The way

a company normally discovers where to conduct research is

through leads on potential operations from outside sources.

The selection of which leads to investigate becomes the

difficult task. After sifting through the leads and finding the

right ones to investigate management must formulate an

international marketing plan. This further helps management

in locating potential markets for their products. The first step

is to use secondary research to find out what the sales

potential is in a given market. Asking the questions of need,

demand, and support gives one a starting point for research.

If we were a company that sold pants we might want to ask

the following questions. Is there a need for pants? Is it cold

enough there to wear pants? Do people that demand the

pants have money? These are the questions that one should

ask of potential markets. Table 1-located at the end of the

paper-shows the statistics that are needed for a general

market picture. After gathering the information from the

secondary research, the picture of a potential market

becomes more evident. However, to make the picture clearer,

one must conduct primary research. This research outlines

the specifics of the potential market that directly pertain to the

product. Robert Douglas' book, Penetrating the International

Market, addresses the issue of locating potential markets in

greater detail.2 [mg1] After finding a lead that contains

profitable markets it is necessary to analyze the venture as a

whole. The decisions of companies must be based on the

facts of reliable sources on all investments. To gather the

information needed for investment projects, management

must organize a competent feasibility team. The members of

this team should be comprised of employees of the company,

this is so that the knowledge will stay within the company. If

the resources are not available for an employee conducted

study then outside consultants may be used, it may also be

beneficial to use a combination of the two. The first step in

conducting a study is to design it by using project objectives

as the base. During the second step the team must be staffed

with people that have the ability to solve problems in any

situation. In the third step the team should be properly placed

and instructed. In the fourth and final step the product of the

feasibility study should be properly communicated to the

decision-making management.3 Table 2-located at the end of

the paper-shows a general timeline that a company follows

through the progression of a feasibility study. The design of a

feasibility study first assumes that a company possesses the

skills and resources necessary to be competitive in the market

under analysis. Management must know the limits of its

operations abroad. The operating margin for the expense of

establishing and starting operations abroad should be easily

recoverable within a reasonable time period. The design

should also include the management's goals, which comes

down from the investors of the company. The goals of

management should be to acquire specific knowledge of the

partner, in a joint venture situation, as well as the financial

aspects, and the business-environment. The currency of the

host country along with the political situation, and the

economy are finer points of detail that the study must cover

when analyzing the business-environment.4 In a less formal

sense the design of the study should cover relevant material

so that when viewing the final report decision-makers will

know with what they are becoming involved. Staffing a

feasibility study is of major importance. Not only must the

members be competent in communication and understanding,

but the management selecting the team must be confident in

the abilities of each individual. Communication in international

affairs plays a great role for the fact that different languages

spoken and unspoken are involved. The communication

through a translator let alone person-to person

communication can be vastly misconstrued.5 The individual's

communication skills should be top-notch in order to be

selected for the team. The members of the team should also

be aware of the cultural factors that play a role in

communication. Cultural interpretation and adaptation are a

prerequisite to the comparative understanding of national and

international management practices.6 For example, during

contract negotiations with a Japanese company there are

times of long pronounced silence on the part of the Japanese.

They state that the negotiations, (will take a little longer,( and

(this is quite difficult.( From the American perspective one

would become frustrated at the slow pace of the negotiations.

From the Japanese point of view the negotiations are

proceeding quite well. Differences such as the one illustrated

must be kept in mind at all times while communicating to any

foreign counterpart.7 The placement of the team is dependent

upon the profession of the individual. The accountants

obviously speak and gather their information from the

counterpart's accounting offices, and so on. Concerning

placement, their daily schedule should allow time for team

meetings. During the meetings, progress and the experiences

of each member should be shared. This sharing of information

can bring the team closer together and also allow the

supervisor to measure progress and disseminate any

changes in plans.8 As the importance of correct

understanding of the translator and the foreign counterpart

are during communication, the final communication of the

study should be understood by the top decision-makers.

When these four steps are taken while conducting a study the

measure of feasibility will become more accurate.

Understanding the importance of proper analyzation of

ventures can be seen with the following example of the Patras

Cement Company, SA.9 Yankee Cement Company Inc. of

Denver Colorado needed to approve an expansion of it's

subsidiary, Yankee International SA of Switzerland. The

expansion was to build a 500,000-ton cement plant in

conjunction with Titan Cement Co. SA of Athens. The plant

would reach full production capacity within two years after the

beginning of construction. Estimates by both Titan and

Yankee showed that total capital needed for the Patras

operation was US$15 million. The equipment manufacturer,

F.L. Smidth of Copenhagen would finance 40 percent of

capital expenditures, and another 20 percent would be

financed through the National Investment Bank for Industrial

Development, SA. The remaining 60 percent of Patras shares

would be equity, of which 75 percent of shares would be

owned by Yankee, and 25 percent of Patras shares would be

owned by Titan. The international division manager of

Yankee, Bob Walbecker, dealt with the Manourpoulos family,

who were the owners of Titan. After establishing the

connection with Titan, Mr. Walbecker continued to establish

good rapport between his division and Titan. Ten days after

preliminary negotiations between the two parties Mr.

Walbecker was assembling a feasibility team in Denver, which

was Yankees' domestic headquarters. The team consisted of

a market analyst, an accountant, a geologist, a civil engineer,

and Mr. Walbecker, who managed the study. For each

American there was a Greek counterpart that translated and

disclosed all information known to Titan. After four years from

the start of the study Yankee expected that personnel within

the subsidiary would be able to handle any further

developments. Preparing for the in country phase of the study

is perhaps more important than the actual time spent in the

country conducting research. Before departing for Athens with

his team, Mr. Walbecker prepared an outline for each day's

activities for the entire study period. He also had the

individuals make a list, which contained a bank, an

accounting firm, a lawyer, an equipment supplier, the

embassy, the ministry, as well as industry source phone and

cable numbers. Another important point that was covered was

that Mr. Walbecker made maps available to the team of the

location, and showed documentary films discussing the

political and economical situation of the country as well. Shots

and medical supplies were also made available and taken

with the team. Language was also a concern to the accuracy

of the study. Based on this fact personnel were required to

attend classes on the language even if they had some prior

knowledge. After sufficiently preparing the personnel for the

trip, Mr. Walbecker departed with the team for Athens. For the

first four days the team was allowed to orient themselves to

their surroundings. There are several reasons why the team

was given this time to relax. First, they had to recover from the

long flight. Physical and mental stamina were at a low-point

when the team left the plane. Secondly, the change in

surroundings has an effect on the emotions of a person.

Third, it allows for the creation of a team from a group of

individuals. A sense of camaraderie can be established during

this free time. By the beginning of the week the team was

eager and ready to start work on the study. Using the

list and each individuals daily schedule the team was sent

about to gather information. From each on the

prepared list each member was expected to gain at least two

additional s. While meeting with s the team was

asked to differentiate between opinion and fact. This is

because misinformation gathered by inexperienced people is

very abundant. Fortunately for Walbecker the team he had

assembled was able to distinguish between relevant and

irrelevant material. During the study the team was also

required to take notes every day. They were also encouraged

to go outside of the metropolitan area in order to gain a better

feeling of the country and it's people. Upon return of the team

from Athens, Walbecker concluded the following: the rate of

return would be 16 percent, the partners had good integrity

and intentions, the political situation was not extremely stable,

the ownership option was good for other projects if the Patras

investment was slow, and there were no technical or market

developments evident to slow down progress in construction.

From these findings Walbecker had to persuade the Board to

agree to the venture. He concentrated on the soundness of

the venture, the reliability of the partners, and the advantages

of Greece. Using market analyses and forecasts, an audit of

Titan's financial affairs, the geological report, plant layout and

consolidated capital estimates, and a business-environment

report, which covered the political situation, the economy,

partner evaluation, and an outlook on the country's

currency-the Drachma-Mr. Walbecker was prepared to start

finalizing the report. Concluding the report were the financial

details on the US$4.5 million equity needed by Yankee.

Before giving a formalized presentation to the Board and

other important associates, Mr. Walbecker had informal

discussions over breakfast with the three top executives at

Yankee about the project. The reason for this was not only to

give the executives a briefing about the information that was

gathered, but also to get an idea as to result of the vote on

the project. After the formal presentation, the Board was given

one month to decide on accepting or rejecting the project. At

the conclusion of one month's time from the formal

presentation the Board's vote revealed the acceptance of the

project. This example should have revealed the importance of

the site selection, gathering, and transmission processes

used in conducting a feasibility study. The main point of

conducting a feasibility study is to find the intricate details

which are necessary to make the right choice for expansion.

The example presented above is just one particular situation.

In trying to maintain brevity, the paper could not possibly

include all of the suggested actions that management should

take in every situation. Management must be able to adjust

and plan a course of action to find the details of their

particular situation that are essentials to making a viable

decision. As an overall idea in dealing with foreign

counterparts one should be objective in judgment and

abundant in knowledge of the person's/people's backgrounds.

Knowledge is a valuable resource when expanding

operations. Conducting venture analysis is one way in which

a company can perceive how the investment will contribute to

future operations. Table 1: List of statistics that portray the

market situation. Essential Market Statistics: 1. Population by

language, religion, ethnic groups 2. Population by age,

income, major occupations 3. Population by regions and

centers-with growth rates 4. Number of households and rate

of creation 5. Percentage of households with car, radio,

refrigerator, TV set, washing machine, running water,

electricity. 6. Per capita disposable income (per capita

national income less taxes and savings) broken down by

region 7. Personal and household consumption pattern;

changes over ten years. 8. Government purchases of goods

and services, broken down by product groupings and buying

agency. 9. Type, number, and purchasing of state enterprises

10. Imports, and exports, by product and by origin or

destination 11. Statistics on market for your product (internal

production plus imports less exports) * Source: Penetrating

the International Market, p.27-8. Table 2: Diagram showing

the timing of project events over a 12 month period. Months

Actions 0 Project received by outside party 1 2 3 Preliminary

evaluation by company completed 4 5 Initial screening in

country completed 6 Decisions to conduct study, employ

intelligence service 7 Departure of study team for country 8 9

Completion of field work 10 11 Completion of Report 12

decision by Board on acceptable terms * Source:

Multinational Management, Venture Analysis. p.58. 1

McGrath, John J. Sell Your CEO! Vital Speeches of the Day.

vol. 61-14. May 1, 1995: 444-7. 2 Stuart, Robert Douglas.

Penetrating the International Market. American Management

Association. New York 1965: 25-39. 3 Haner, F.T.

Multinational Management. Merrill. Columbus, Ohio 1973:

43-58. 4 Ewing, John S. and Meissner, Frank. International

Business Management; Readings and Cases. Wadsworth.

Belmont, California. 1964: 146-70. 5 Robinson, Richard D.

International Management. Holt, Reinhart and Winston. New

York. 1967: 71-85. 6 Morden, Tony. International Culture and

Management. Management Decision. vol. 33-2. 1995:16-21. 7

Harris, Philip R. and Moran, Robert T. Managing Cultural

Differences. Gulf. Houston, Texas. 1979: 12-24. 8

Fayerweather, John. International Business Management; A

Conceptual Framework. McGraw-Hill. New York. 1969: 51-64.

9 Haner, F.T. Multinational Management. Merill. Columbus,

Ohio. 1973: 60-64. [mg1] 1 M. Broich

Word Count: 2687

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