Module 1: Need and Importance of Trade Events for Business Development Masato Abe, PhD Private...

Module 1: Need and Importance of Trade Events for Business

Development

Masato Abe, PhDPrivate Sector and Development Section

Trade and Investment DivisionUnited Nations ESCAP

19 June 2012

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Objectives of my sessions

Present internationalization process Learn how to develop an export product Understand key challenges & tools in

marketing an export product Learn effective skills & techniques for

successful export promotion Understand the roles of key players Share knowledge & experience

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Outline A case study on internationalization A group exercise to develop an

export potential product A group exercise to develop export

customers Lectures on trade tends and other

issues

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ESCAP

United Nations Economic and Social Commission for Asia and the Pacific

Asia and the Pacific (AP) 58 regional members and associated members

plus 3 non AP members Including all 10 ASEAN member states

Policy advocacy and technical assistance for regional development

Headquarters in Bangkok Nine branches

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My background Merchant / farmer’s family Marketing, business administration &

economics Japanese / US business Sales, marketing, logistics &

procurement UN Asia-Pacific

Case Studyon

Internationalization

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A Case of the M Group of Japan

9

Ball guide postfor large sized press dies

DistributionCentre J

Supplier L

Cus

tom

ers

600km

Lao PDR Thailand

Japan

Viet Nam

DistributionCentre V

1 month by ocean

1200km

100km

Supplier T

5 days by air

Development ofCross-Border Supply Chains

Customers

DistributionCentre T

Customers

http://0.tqn.com/d/moving/1/0/3/5/truck_2.jpg



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Discussion What were challenges? Any good strategy? New development?

Group Exercise

How to develop a export product

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Stages in the process of export product identification(public sector’s perspectives)

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Entrepreneurship required

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Form groups Two to four people per group Same gender & similar age group if

possible

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Develop an export product Get a novel idea through

Knowledge & experience Copying & modifying something marketable

Three techniques1) Reviewing available resources2) “Negative keyword” method3) “Who x What x How” method

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1. Reviewing Available Resources (1)

Human resources Natural endowment Financial assets Tangible assets Human networks Yourself Others

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1. Reviewing Available Resources (2)

Human ResourcesExperience, educationcertificatesinterests &hobbies

NetworksSupporters,

family& friends

MoneyOwn capitalsgrants, loans

& salaries

AssetsBuildings,facilities,equipments & intellectual property

Entrepreneur

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Exercise Think any resources individually, including

resources available around your home town

Present them to your team members

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2. “Negative Keyword” Method

Expensive Inconvenient Lacking Late / slow Old / outdated Unstylish Confused Ugly Unsatisfactory Unreliable …

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Exercise Using the ‘negative keyword method,’

identify 3 to 5 products with export opportunity

Present them to your team members

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3. “Who x What x How” Method (1)

Examples

Customers Products / Services Channels & DistributionsX X

Femaleprofessionals

Stylish dressesHigh-end specialized shopat a prestigious location

X X

Middle agedcitizens

Healthy foodsRestaurant with low

calorie dishesX X

Pre-schoolchildren

ConversationalEnglish

Bilingual kindergartenX X

Who What How

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3. “Who x What x How” Method (2)

Who

What

How

Young mid-classprofessionals

Affordablesecondhand

cars

Online auctionw/ quality assurance

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Team Exercise Come up with 1 to 3 ideas for any line of

business for export, which your team may wish to run if you have opportunity

Use either or all three methods Reviewing available resources “Negative keyword” method “Who x What x How” method

Think twice why your team likes it (them) Write down your ideas as detailed as possible Discuss with team mates Choose one export product for further exercise

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Useful Techniques for new product developmenta. Market & Product Mix Analysisb. Mission Analysisc. SWOT Analysisd. 4Ps / 4Cs / 4Ase. 6W & 1H

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Useful techniques for new product developmenta. Market & Product (Service) Mix Analysisb. Mission Analysisc. SWOT Analysisd. 4Ps / 4Cs / 4Ase. 6W & 1H

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Market & Product Mix Analysis Sale promotion

New market penetration

New product/service development

New Business

Present products/services Present MarketX

New Products/Services New MarketX

New Products/Services Present MarketX

Present Products/Services New MarketX

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Exercise Conduct the Market & Product Mix Analysis

based on the export product which your team is developing

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Useful techniques for export product developmenta. Market & Product (Service) Mix Analysisb. Mission Analysisc. SWOT Analysisd. 4Ps / 4Cs / 4Ase. 6W & 1H

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Mission analysisIdentify the key tasks of your export firm

QuestionsWhat is the mission of a automobile sale dealer? What is its most important task?

What is its most productive activity?

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Team ExerciseIdentify the key mission & task of your export firm

Pick the most critical activity

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Useful Techniques for Turnaround Management1. Mission Analysis2. Market & Product (Service) Mix Analysis3. SWOT Analysis4. 4Ps / 4Cs / 4As5. 6W & 1H

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SWOT Analysis (1) Probably the most popular technique for turnaround management

Positive Negative

Internal(Strength) (Weakness)

External(Opportunity) (Threat)

X X X X

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SWOT Analysis: A Case (1)Positive Negative

Internal(Strength)- Low cost

- Good after-service

(Weakness)- Little customer

base

External

(Opportunity)- Growing market

(aging, beauty conscious)

- Unsatisfactory products / services

(Threat)- Dominance by market leaders

Hair piece (wig for men) sales through Internet with excellent after services

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Group work Conduct the SWOT analysis for your firm /

product

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4Ps, 4Cs and 4As 4Ps

Product, Pricing, Placement (or distribution) and Promotion

4Cs Consumer, Cost, Convenience and

Communication 4As

Acceptance, Availability, Awareness and Affordability

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Exercise Choose one of 4Cs, 4Ps and 4As; then,

detail out your firm’s export business

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6W & 1H Who: Customers What: Products / services Why: Value added Where: Country, city, area, shop By whom: Employees When: Business hours / seasons How: Channels & distributions;

trade process; Internet; price & sales terms;

volume

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Exercise Detail out your firm’s export business

using 6W&1H

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Group presentation Present your group’s product and its

business plan

Evaluate other teams’ products

Give feedback to other teams’ presentations

Group Exercise:Customer

development

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Objectives of customer development Develop products (and services) for export Gain new customers/intermediaries in

neighbouring, regional & global markets Strengthen relationship with existing

customers/intermediaries Increase the amount of exports Achieve the above objectives effectively

and efficiently Cost vs. benefit

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Major challenges Unknown market Lack of network Internationalization process Different culture Intensified competition Poor management skills Lack of financing

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Competitiveness enhancement QDC

Quality Delivery Cost (price)

Cost saving Productivity up (input vs. output) Flexibility up New idea / new market

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Trade promotion tools Develop or refine products (& services) for export

by communicating with potential customers Gain new customers/intermediaries in

neighbouring, regional, and global markets Strengthen relationship with existing customers

and intermediaries Increase the amount of exports Achieve the above objectives effectively and

efficiently

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Various trade promotion tools:Cost and target

High

Cost

Low

Salesperson

Advertisement(Newspaper,

magazine, journal, directories, TV, radio)

Direct mail(Mail, email, telephone)

Internet(Homepage/portal)

WideTarget customersNarrow

Trade fair/mission

Source: Modified from Japan Finance Corporation (2008)

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Key Topics for Export Promotions Objectives of export promotions Players Products (and/or services) for export Markets Export operations Customer development Trade fair Budgeting Evaluation Others

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Key Players Exporting firms (e.g. manufacturers, distributors

& vendors; exhibitors) Business associations (e.g. chambers of

commerce and industry) Promotion event organizers & consultants (e.g.

trade fair organizers) Governments & their export promotion agencies

(e.g. JETRO; DEP of Thailand) Both home & host Foreign market intelligence Financial/technical support

Financial institutions (e.g. commercial banks) Operational loans Export loans Foreign market intelligence

Target customers

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Products for Export Products for export

Agriculture, materials, consumer, industrial & services

Competitiveness of products Quality Delivery Cost

Product mix Firm level, sector base & provincial/national

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Group Exercise Identify a product (or line of products) for

export Discuss about target customers

Different customers for different products Agriculture Materials Light manufacturing Heavy manufacturing Consumer vs. b2b Others

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Target Markets Customers & market size Tariff & rules of origin Quality standards & regulations Competitors Local business practices

Channels & distribution

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Group Exercise

Identify a target market May use Market Analysis Tools

http://legacy.intracen.org/marketanalysis/Default.aspx

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Export Operations Pricing

Sales terms (e.g. minimum quantity/lot size) Transportation cost: FOB/CIF Profit Payment terms

Leadtime Logistics (ocean, tracking vs. air or multimodal) Export forwarders

Sales Email, fax, website, EDI Direct sales vs. channel sales Stocks & warehousing

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Group Exercise Discuss export operations for the selected

product which at least covers the following points CIF price Profit margin Leadtime How to take orders

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Three Major Export Promotion Events Trade missions

Small size Crucial support by hosts (e.g. government/business associations)

Short listed partners/buyers Market research focused Often government/business association driven

Buyer-seller meetings Middle size Proper market research needed, including sales activities Structured gathering Often business association/organizer driven

Trade fairs Large size Less marketing needed & more sale focused Loosen gathering; often open to public Often organizer driven

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High

Cost

Low

WideTarget CustomersNarrow

Cost vs. Coverage

Buyer-Seller Meetings

Trade Fairs

Trade Missions

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Cost Analysis

Number of Inquiries

Cost of Export Promotion Event

= $ per inquiry

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Trade Fair Focus

General (Hanover/Milan) or specialized (auto show) Organizers are typically responsible for:

Venue plus utilities/catering/security Stands/boards/furniture & decoration at common space Advertisements to attract participants/visitors/buyers (&

sellers) Magazines, journals, newspapers, billboards, website,

flyers, brochures, etc. Networking with Governments/business associations/mass

media Directory of exhibitors

Accommodation arrangement (e.g. official hotels) Arrangement with subcontractors for booth decollation

Associated technical conferences/shows Normally fee based

In Bangkok: $200-800/m2, perhaps plus registration fee/insurance for an international fair

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Standard Stands

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Trade Fair: Advantages For some products which are difficult to market

without providing the potential customers a chance to examine them or see the in action

“Waving the company flag” against competition; moral boosting of sales personnel & distributors

Fining an intermediary Networking with government officials & decision

makers Market research & collecting competitive

intelligence Reach a sizable number of sales prospects with a

reasonable cost

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Trade Fair: Disadvantages Expensive for firms looking only for one-

time or short-term sales Difficulty in choosing the appropriate trade

fairs Sizable workload for the participation

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Criteria for the Selection of Fair

Market Sector Size Reputation Quantity vs. quality Cost Media credentials

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Group Exercise Select a trade fair at the selected market

in 2013 perhaps using the following websites http://www.jetro.go.jp/en/database/j-messe/ http://www.fairguide.com/index.html

Go to the website of the selected fair, and summarize requirements for & offers to exhibitors

Decide space & booth size Refer to the floor plan Consider flows of visitors

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Budgeting for Exhibitors Participation fee (registration, space & furniture,

insurance) Booth decollation Numbers of staff & days Airfare & accommodation Promotional materials (in appropriate languages)

Brochures (both hard copy & softcopy on website) Catalogues with price schedule Posters/banners Samples & gifts Shows & DVDs

Preshow promotion Freight Communications & others

e.g. companions

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Public Support Home countries

JETRO’s financial support to SME exhibitors at international trade fairs

Host countries Thailand’s “Extra Night, Extra Smile”

Programme Development agencies

ESCAP’s financial support to the participants in the First GMS Trade Fair in Hanoi in 2003

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Group Exercise Budget your team’s participation in the

selected trade fair, considering public support if any

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Follow-up Activities Market research Emails/direct mails Visits Trade missions Inviting potential customers for site visit Participating in other trade fairs Open an office in the target market Others

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Evaluation 1

Number of Inquiries

Total Cost of the Fair

= $ per inquiry

Notes: 1) The smaller the more effective2) Inquiries made by potential customers at the fair and after the fair3) The number of business cards collected at the fair can be also used

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Evaluation 2

Onsite Sales at the Fair

Note: The higher the more effective


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Evaluation 3

Net Profit Made from 1-year Sales ofNew Customers after the Fair


Notes: 1) The higher the more effective 2) It could be seen as a very successful event if the result exceeds 1.

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Other Benefits of Trade Fairs Strengthening relationship with exiting

customers, business associations & other key players

Gaining market intelligence Customers Competitors Public regulations

Gaining new knowledge Technology Techniques Management

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Other Issues

Organizing trade missions, buyer-seller meetings and/or conferences back to back with trade fairs

Business development services needed Networking with local firms

Experts/consultants

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Key Points for Organizers Long-term planning

Ideally announce the fair more than 1.5 years before

Selection of right sectors Proper advertisements to attract right

people/agencies, as both exhibitors & buyers/visitors

Networking with Governments & business associations

Effective cost management Seek public sponsorships

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Framework for Export Promotion

Export Product Development(QDC, Sales Terms, Export Operations)

Trade Fairs / Trade Missions

Follow-up Activities(Marketing Research, Advertisements, Fairs, Brach Office)

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Final discussion Discuss the roles of governments &

business associations for export promotion

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For further inquiry, contact

Masato Abe, Ph.D.Economic Affairs OfficerPrivate Sector and Development SectionTrade and Investment DivisionUnited Nations ESCAPBangkok, [email protected]

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Drivers Growing Asia

NIEs & ASEAN Emerging markets (e.g. China & India)

Trade & FDI led development strategies The Western world as major markets

Globalization Regional integration (e.g. AEC 2015, SAARC, BIMSTEC)

Policy Liberalization & free trade agreements Including trade, investment, capital & finance, HR

Technological / system innovation Transportation and ICT

Global supply chains Increasing competition

Pressures for low cost & high quality production Low labour cost

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Drivers (continued) New management strategies & techniques

EDI, ERP, JIT, lean manufacturing, TCM, SCM, etc

Willingness to be internationalized

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Flying geese

Source: GRIPS

Catching-up process of industrialization of latecomer economies (Akamatsu 1962) from import to production and export from simple to more sophisticated product from advanced to developing countries

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Major sources of FDI inflows to ASEAN (Millions of dollars)

Region/Economy 1998-2000 average 2008-2010 average

AmountShare(%) Amount

Share (%)

United States 5,466 22.4 5,394 10.1

European Union 7,943 32.5 11,036 20.6

Japan 2,042 8.4 5,426 10.1

ASEAN 1,759 7.2 8,926 16.7

Australia -513 -2.1 1,109 2.1

New Zealand 49 0.2 91 0.2

China 74 0.3 2,834 5.3

Republic of Korea 194 0.8 2,279 4.3

India 71 0.3 1,319 2.5

Others 7,356 30.1 15,157 28.3

ASEAN+3 4,068 16.6 19,465 36.3

ASEAN+6 3,676 15.0 21,985 41.0

Average flows to ASEAN 24,441 53,572

Source: ESCAP (2012), based on ASEAN statistics

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Toyota’s global supply chains

Source: Toyota, 2012

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Comparison of national and global supply chains

.

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How SMEs fit into global supply chains

Source: UNIDO (2001)

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AEC 2015 The ASEAN Economic Community (AEC) Regional economic integration by 2015 for

ASEAN countries Free movement of goods, services,

investment, skilled labour and freer flow of capital

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AEC: Key objectives A single market and production base A competitive economic region A region of equitable economic

development A region fully integrated into the global

economy.

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AEC: Key characteristics Fair competition Consumer protection Intellectual Property Rights Infrastructure development Product and service standards

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AEC: Present status Completed 187 measures (67.5%) out of 277

measures by the end of 2011 Some measures due for implementation have not

been fully implemented Delays in ratification of signed ASEAN-wide agreements

and their alignment into national domestic laws as well as delays in implementation of specific initiatives

E.g., Measures for the free flow of service, transportation, cooperation in food, agriculture and forestry etc.

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CLMV countries in AEC 2015 Relatively less developed than the ASEAN 6

counties Special schedule for CLMV countries

mainly in the elimination of tariffs and non-tariff barriers) Completed most of the tasks for AEC 2015 with

some weaker links remained compared to other countries For example, intellectual property rights, SME

development and taxation ASEAN Integration (IAI) Work Plan 2 (2009-2015)

Human capital and institutional strengthening Slow implementation

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The impact of AEC Challenges

Intensified competition domestic and international players Access to credit, labour mobility, technology development,

market access and political risk More measures for promoting SMEs

A survey conducted by The University of the Thai Chamber of Commerce (2012) The majority of Thai SMEs did not understand the benefits and

challenges of regional integration Investment liberalisation, service liberalisation, reduction of non-

tariff barriers, rules of origins and single standards for Asean products

Lack of readiness on financial support, low development of human resources at both the management level and workers, low development of ICT, high production and labour costs, low support from government agencies, and a low level of logistics development

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Case of Myanmar Development of Industries with agriculture Enhancement of production and quality of industrial

products Increased production of new types of machinery and

equipment Creation of suitable conditions for industrialized state Human resource development Coordination among various agencies in economic and

social activities Integration of the business community into international

trade and globalized economy

Issues and challenges in

marketing products

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Firm typology

Export

Domestic/LocalMarket

HighTechLow

Tech

CottageEnterprises

SupportingEnterprises

DomesticMarket-oriented

Enterprises

Export-orientedEnterprises

Source: Uchikawa & Keola (2009)

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DiscussionWhat are the issues & obstacles

to improve the determinants of export competitiveness in your country?

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Determinants of export competitiveness Internal to enterprise

Contestable market power Capacity to respond effectively to competitors Capacity & flexibility to respond to changing

environment Capacity to create new market niches

External to enterprise Market access Access to resources Business related regulatory framework Supporting services

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Internal vs. External

- Market access- Access to resources

- Business related regulatory framework-Supporting services

- Contestable market power- Capacity to respond effectively to competitors

- Capacity & flexibility to respond to changing environment- Capacity to create new market niches

Enterprise

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Internal: Market power Branding Customer loyalty Distribution channels Pricing Quality …

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Internal: Capacity to respond effectively to competitors Substitutes for products & services Diversified product & service lines Low cost structure Flexibility …

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Internal: Capability & flexibility to respond to changing environment The availability of key resources Capacity for process & product innovation Flexible supply chains …

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Internal: Capability to create new market niches Marketing capability Culture of innovation Customer (or market) orientation …

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External: Access to resources People Skills, knowledge & technology Capitals Supplies Natural endowment …

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External: Regulatory framework The process of business registration &

licensing Taxation Competition Bankruptcy Property & intellectual property rights Trade & investment policy Customs procedures …

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External: Supporting services Physical infrastructure & logistics systems General & vocational education Training services Professional services, such as accounting

& legal advice Business incubation R&D & technology transfer… …

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Business Competitiveness Framework

- Market access- Access to resources

- Business related regulatory framework- Supporting services

- Contestable market power- Capacity to respond effectively to competitors

- Capacity & flexibility to respond to changing environment- Capacity to create new market niches

Enterprise

QDC (Quality, Delivery, Cost)

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Others: Access to Finance Own capitals Family, relatives, friends Commercial loans Public grants Public loans Collaterals

Land registration Micro loans Angles

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Session-end discussionShare any policy initiatives in

your country to improve export competitiveness

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Six areas for public interventions Pro-business legal & regulatory framework Supporting infrastructure Enhanced access to finance Entrepreneurship development Technology transfer & adaptation (plus

R&D) Business development services

Entrepreneur centred development strategy

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Special economic zones

Source: FIAS (2008)

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Advantages of special economic zones

Static advantages Dynamic advantages

Direct employment creation and income generation

Technology transfer

Export growth and export diversification Skill upgrading

Increase in foreign direct investment Local development

Increase in foreign exchange earnings Empowerment of women

Government revenue Indirect employment creation

Source: FIAS (2008).

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Transportation Cost: International Commercial Terms by ICC

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Cash Flow Management The biggest reason of corporate failure Time gap between receivables & payables

Sales CustomerPayment

Procurement Payment tosuppliers

Receivables

PayablesTime Gap

Operating funds needed

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Methods of financing

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Trade cycle Marketing/sales

Trade/credit information Negotiations

Production Warehousing Transportation Delivery

Trade finance instruments Debt financing Asset based financing Export factoring Leasing Open account Advance payment Raising capital Letter of credit

Facilitating payments Documentary collection Mitigating risks Export guarantee Export insurance Forfeiting Hedging

Trade cycle and trade finance instruments

Source: Authors’ compilation, based on ESCAP, 2005b.

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Terms of trade payment

Source: ESCAP, 2005b.

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Question Given the different financial instruments and

firm heterogeneity, how should policymakers address the financing needs of exporting firms in the Asia-Pacific region?

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What is Export Business Plan? Objectives

Detail out a business idea to workable actions Develop sales, supply & financial plans Mobilize financial support from the public and

commercial financial institutions Find any missing holes

Various users Entrepreneurs

Develop a concrete & executable plan Brush up ideas

Public & commercial financial institutions Evaluate feasibility for funding consideration Use it as a supporting document for grants/loans

Employees / suppliers Know a clear corporate direction

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What is the Export Business Plan? (continued) Resources mobilization

Finance HR

Three financial scenarios Conservative Most likely Ambitious

Part of the “Plan-Do-See” process

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Necessary Components Marketing Sales forecast Procurement Production Funding Others…

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Procurement Plan What: Materials, components,

labours, services Where: Suppliers & supply markets When: Leadtime How: Price & payment terms How much: Volume, quantity, duration

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Production Plan (if needed) What: Products & services Where: Factories & warehouses When: Leadtime How: Methods, technology,

machineries, equipments How much: Volume, quantity

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Funding Plan Funds needed for a start-up

Facilities & equipments (factories, warehouses, shops, machines, goods & automobiles)

Operating costs (supplies, salaries, rents, interests) – at least for 2-3 months

Funds raising Own capitals (ideally, more than 50% of total funds) Support from family, relatives, friends & others Public grants Public loans (normally collateral required) Commercial loans (collateral required) Others

Funds Needed & Funds Raising must be equal

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Income Forecast Two kinds of monthly income forecasts

(beginning & 1 year later) Details

Revenues (most likely) Costs of products / services if any Operating expenses

Salaries Rent for facilities Others (advertisements, utilities, etc.)

Interests (5%) / installments of loans, if any Net income

Tax (25%)

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A Simplified Export Business Plan Two-page business plan, widely used in Japan Two-part format

1. Business Proposal (first page) Line of business Location Start-up date Missions, objectives & business opportunity Background & experience Products & services Strength Challenges & weakness Customers, channels & distributions Suppliers (procurement)

2. Financial planning (second page) Capital requirement & funding plan Income forecast (beginning & 1 year later)

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A Good Export Business Plan Two parts of the business plan (business

proposal & financial plan) are consistent Funding plan can support both initial asset

investments & operating expenses (at least initial 2-3 months)

Make business in black in 1 year Make sure adequate provision for loan

installments

Module 1: Need and Importance of Trade Events for Business Development Masato Abe, PhD Private...

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