Going Global

"Made in [ ? ]" -- Should Country of Origin Be Part of Your Export Marketing Strategy?

Under the heading "Web Site Branding: Go Global or Stay Local?", the Global Small Business Blog recently provided a link to an interesting article by the same name found at ClickZ Network.  The ClickZ article by Martin Lindstrom explores the pros and cons of highlighting a product's country of origin on a company's web page as part of its branding strategy.

It's a point worth considering and its importance, of course, goes far beyond web site design.  There are many ways that country of origin can be used as a key attribute in marketing a product.  Beyond the obvious method of using a more prominent "Made In . . . " tag on the product labeling, one might use colors and a design which promote the product manufacturer's home country, ranging from subtle incorporation of country colors to the more explicit display of the country's flag as part of the packaging design.  The ultimate example of this latter approach might be the Swiss Army brand for which the entire trade dress is the Swiss flag.   Another avenue is to leave descriptions or directions in the original language -- for example a box of Italian pasta might maintain descriptions of the product in Italian beyond just the product name.  Going down this road, one must be mindful of labeling requirements of the target market (for example the FDA in the U.S. would still require the Italian pasta to have its ingredients spelled out in English), as well as the potential trade off between being user friendly and promoting the panache of a foreign brand.

One can think of quite a few examples where country of origin has been a key part of successfully branding a product.   The ClickZ article highlights Swiss chocolate as an entire industry that  has created a brand -- the same could be said for watches.  "German engineering" and what it implies in the way of a value proposition is an express part of marketing for BMW and Mercedes.  Italian design houses for fashion and furniture use it successfully.  Similarly certain foods from France, one of the current examples being sea salt -- or better, fleur de sel.

At times a product can appear to be branded by country of origin, but the reality is that the impact is benign.  One example that comes to mind is Fiji water, one of the many fashionable imported bottled waters for which people pay a premium.   But if you delve a little deeper into why people buy the water, I think its not because they want to drink water from Fiji, but because it comes in a unique square bottle with a colorful label imprinted on the inside back so it sparkles through the water creating an appealing look of tropical refreshment.   Give it the name of any other complementary tropical location and I think it would have sold just as well.

There also can be a downside of relying on country of origin as part of the branding strategy, usually associated with a change in political perceptions of the exporting country.  The ClickZ article cites Sun Top orange juice which was a Danish orange juice brand enjoying a great deal of success in the Middle East only to see its market crater in the wake of the prophet Muhammad cartoon scandal which originated with a Danish newspaper.  Here in the U.S., the anti-French campaign in the wake of France's opposition to the U.S.'s position on invading Iraq is an example which initially reached such silly proportions that some people were even targeting products that had nothing to do with France such as French's mustard -- and I think most French products have weathered the storm as public opinion on the war itself has shifted.  Nonetheless, it's a good illustrations of the vicissitudes that can impact a branding strategy.

To determine whether country of origin branding would add value to your marketing strategy, Lindstrom suggests asking the question: "If someone had to choose between two identical [including price] products,one of them being yours, would its nationality encourage or discourage the person to select your brand?"   His conclusion is that unless it has a positive impact, don't.  I think the bottom line here is that this decision is like every other marketing decision -- the test is not what you think about your product, but how your customer perceives its value.   Once again, when you reduce the issue to the ultimate question, export marketing is not much different than marketing at home.

Ben Bernanke on the Benefits of Globalization

As regular readers know, I am an unabashed proponent of the benefits of the global integration of markets and the "flattening" of the commercial world.  These benefits run from the mundane to the altruistic . . . from expanding markets and growth opportunities for small American companies and their employees to providing a platform for developing countries to pull their population out of poverty and laying a foundation for a more interconnected and therefor peaceful world.   My position isn't based on some ideological mandate, but rather on my direct experience of these benefits while traveling the globe on the front lines of international business.

Of course not everyone views globalization this way, although I am struck how rooted in ideology at least the loudest anti-globalization voices are.  It is also interesting (and I think a sign of the "true believer" nature of their positions) how people opposed to globalization as a matter of principle can differ 180 degrees on the critical underpinnings of their arguments.   

For example, Lou Dobbs in his anti-globalization book "Exporting America", argues that the only people benefiting from globalization are foreign countries which are taking advantage of what he sees as a conspiracy of greed driving American corporations to export jobs and to undermine the very existence of the American way of life.  (Before Mr. Dobbs made the transition from serious business analyst to sensationalist pundit, I suspect he would have had more interest in the non-conspiratorial nature of global economics and arcane notions such as supply and demand in integrated markets).  In stark contrast, Antonia Juhasz in her book "The Bush Agenda, Invading the World One Economy at a Time" ( a book which is at least better written and far better researched than Mr. Dobbs' -- and one that I would actually recommend if you want to hear an opposing, albeit controversial view of the subject), argues that the only country benefiting from globalization is America to the point that she believes that globalization itself is a conspiracy between the U.S. government and its large corporations to use global economics as an express arm of foreign policy enabling the U.S. to assert its hegemony on the world without having to resort to strictly military means.

So which is it?   Is America the big loser or the big winner in globalization?   It seems to depend on which bent of dogmatic protectionist you're trying to pitch to -- the angry right or the angry left.  When it comes to the debate over globalization, the two are very strange bedfellows united by an idea, the consequences of which they completely disagree about.

Which brings me to Ben Bernanke, the Chairman of the Federal Reserve Board.  One thing that separates the Fed chairman from most voices in Washington is he's not trying to play to people's emotions to win votes or viewers or readership.   Instead, he's trying to make sense of what is really going on in the world economy from the U.S.'s point of view.  And so I give his views of the impact of globalization far more objective weight than many of the other voices that are frequently shouting over this issue at a much higher volume.

In remarks made last Friday at the annual retreat of the Kansas City Federal Reserve Bank as reported on Yahoo News in an article by Tim Ahmann, Chairman Bernanke stated that "The scale and pace of the current episode (of globalization) is unprecedented.  Economic and technological changes are likely to shrink effective distances still further in coming years, creating the potential for continued improvements in productivity and living standards and for a reduction in global poverty."  This straightforward assessment is certainly consistent with my own observations.  As a cautionary note, however, Bernanke in his usual sober tones also warned that "further progress in global integration should not be taken for granted" and that progress could be set back by "social and political opposition" promoting a new protectionism.   

It seems that when politically motivated factions try and reverse natural evolutionary forces beyond our control, we tend to create unintended consequences with a far more viral impact than if we focused instead on sound policy meant to ameliorate the identifiable pockets of negative impact.   As with many hot button issues today, business can't afford to try and fly under the radar screen and hope no one mucks things up too badly.   Instead, we need to consistently and rationally explain the benefits of globalization both here and abroad.  Mr. Bernanke's remarks provide a good base from which to work.

(Note: The globalization model used as an illustration is from the Norwegian University of Science & Technology's globalization research programme).

Strategic Business Solutions in a Global Context

I imagine that the majority of people reading blogs listen to much of their music on an MP3 player -- and international travel makes them even more imperative.  When your week consists of a succession of 8 to 14 hour flights, the 14 or so CD limit imposed by some countries' import restrictions just doesn't cut it for a music library.  I started with a Creative Jukebox almost 10 years ago before the iPod was a twinkle in Steve Jobs' eye, and thanks to Apple's next generation improvements, I'm now burning my way through my second iPod.

So if you're like me in any of these respects, you may have noticed the headlines today regarding the settlement of the patent disputes between Apple and Creative -- for example "Apple to Pay $100 Million to Creative in Settlement" posted on Yahoo! news from Reuters.  There is of course a global dimension to this settlement -- Apple is based in the U.S. and Creative Technology, Ltd is a Singapore company.  The main competitors whom I am sure were anxiously monitoring this from the sidelines are South Korea's Samsung and Japan's Sony Corporation.

But what struck me most about this deal was not the $100 million that Apple will pay (enough to raise Creative's earnings this year by $0.85 per share), but something that relates directly to a passion of mine -- strategic business solutions to disputes mired in otherwise intractable litigation.   A key part of the settlement is that Creative will take part in the "Made for iPod" program, and begin manufacturing accessories expressly for Apple's product, extending greatly the market opportunity for its existing products and creating opportunity for new lines as well.  It seems investors got it -- Creative's shares rose 37% following the announcement of the settlement and I doubt most of that was brought on by the significant but fleeting one-time push from the settlement payment.

Apple secured another tie-in platform from which to support its already gaudy market share and freed itself up to focus on innovation without the constraint of tip-toeing around Creative's patents.  Creative gains Apple's support in going after a market that is greater than Creative's own MP3 players can command.  My only question is, why did it take potentially destructive suits and countersuits for these two companies to get talking about a win-win deal that furthers the strategic objectives of both companies?

(Note: The irresistable "Think Win-Win" poster was found on http://ameblo.jp/panda2103/  and originated with poster.net).

Foreign Customers -- Same or Different?

In an earlier post, I raised the question whether the information age has changed the rules of Ted Levitt's original orthodoxy of globalization, moving from a model where standardization should be the mantra to a global market place where all consumers unavoidably want it their way.  A recent post on Seth Godin's Blog (author of "Purple Cow" and many other inspirational business books) raises perhaps a middle ground in a post entitled "What People Want".  His first conclusion as to what people want is: "The same thing everyone else is having, but different."  Customers frequently want to know that they are getting a good value by some global standard, but they also want you to know that their needs are not identical to everyone else's (even though sometimes they are).

A number of other items on Seth's list of what people want will also ring true for anyone who has sold into export markets, including:

• A slightly lower price than anyone else;
• Access to the best customer service person in the shop, preferably the owner;
• Being treated better, but not too much better;
• Being noticed, but not too noticed.

In this high level view of the marketplace, it strikes me that people are not so different the world over.  Of course the challenge in entering any new market is how to determine critical data such as what is that difference that will make the difference in getting your product accepted, and what is the perceived price that you need to be a little bit lower than.  As usual, the devil is in the details.

Cultural Differences and Good Communication

Business people wishing to maximize their chance of success in pursuing an opportunity in a new foreign market should familiarize themselves with the cultural sensitivities of the country in which they intend to do business.  But the dynamics giving rise to this fundamental maxim of international business do not cease to operate after that first trip abroad.   The development of a successful relationship with one's foreign business contacts built on mutual trust continues with each phone conversation, letter and e-mail.

As noted in an earlier post, the process of developing these relationships "requires patience, a quality frequently in short supply in the fast paced world of the information economy, particularly for American business people used to closing the deal."  With this thought in mind, I was interested in a recent post on the excellent "Manage to Change" blog by Ann Michael entitled "Are American's Rude?"   The post quotes findings by Margaret Neale of the Stanford Graduate School of Business from an article in the Harvard Management Update to the effect that "the e-mail behavior of Americans, who tend to go immediately into the task, often is experienced by people from other cultures as rudeness . . . "

Dealing with these cultural nuances can at first seem overwhelming -- avoiding the unintended offense when we were merely intending business as usual.  Ms. Michael's post makes the excellent point, however, that avoiding these cultural faux pas may be less a matter of developing a new found cultural sensitivity than simply following the most basic tenet of effective communication -- i.e. "communication is not about us, it's about the audience!"  At least in this respect, a foreign audience is no different than an audience we might face at home -- usually what is important is not that we said something, but that it was understood as we intended.   It is critical to understand the perspective and needs of the audience and gear our communication to those expectations and needs if we are to achieve our business goals in any culture.

Hope Is Not a Strategy -- It's Time to Engage Cuba in Robust International Trade

When Fidel Castro underwent serious surgery two weeks ago, the U.S.'s policy toward Cuba was back on the front page.  What has been striking in the reactions is the degree to which they shed light on our long standing policy toward Cuba -- impose an economic boycott and hope something changes.  The hopes that things might change were on high alert with Castro's surgery and temporary disappearance from the public eye.  For a post discussing some of the reactions in the press and from public officials such as Senator Mel Martinez, see the article from the Miami Herald featured in a post on the always excellent The Latin Americanist blog.

In training sales and marketing people to develop actionable business development plans, one of our mantras was always "Hope is not a strategy."  I think the same should apply to U.S. policy toward Cuba.  We have been pursuing the economic embargo / isolation / punishment tact for 40 years with absolutely no results.  I think the more than four decades of failure explain why the tone of reactions to recent events sound only of hopes instead of action.

I have advocated elsewhere in this blog that robust international trade can produce the sorts of economic interdependencies and cultural integration that may be one of the greatest chances we have for peace to supplant chaos in the modern "flat" world we inhabit where one country can't avoid the impacts of problems on the other side of the globe to say nothing of problems a few miles off its shore.  Cuba is no exception -- indeed it may be the perfect place for a change in policy in this direction to work.

In the days of the delicate balance of power between the U.S. and the Soviet Union, it may have made political sense to isolate Cuba to contain the impact that a Soviet satellite state might have so near to our borders.   But the threat of Soviet missiles in Cuba is long gone and no longer relevant.  Indeed, our continued economic isolation of Cuba has impelled them into the arms of China in seeking a significant global trading partner, setting up the conditions for the Soviet threat to be replaced at some point by the Chinese threat as China continues its march toward being the world's "other" superpower.

Likewise, one can hardly argue that the one party communist regime that rules Cuba necessitates a policy of economic isolation.  In this limited respect, China is of course no different, and yet our policy from Nixon's historic visit to the extension of membership in the WTO and the granting of permanent normal trade relations has been one of affirmative economic engagement, seeking to create greater ties that might diffuse any threat that China might otherwise present.  For more discussion on this, see some of the excellent blogs on China such as the China Law Blog and the Angry Chinese Blogger. 

We are waiting and hoping for a democratic revolution in Cuba, but it seems clear that democracies only take root in countries that have developed a sufficient middle class such that there are enough people with sufficient stake in political outcomes to care and sufficient resources to take action.  By isolating Cuba economically for so many years, we have consistently denied the people the one avenue of robust economic activity that might have permitted the development of these necessary conditions for democracy.  And so the Cubans remain seemingly apathetic subjects of the communist dictatorship and we continue our policy of hoping that something might change.

China certainly appears to be a model as to how economic development and empowerment of a consumer class is creating pressure on its traditionally closed government to open up its policies in many areas.  With many fewer people to bring up into middle class status, the process could conceivably move much more quickly in a country such as Cuba.  It's time that the U.S. lifted the economic embargo and engaged Cuba in trade, providing its people the opportunity to develop a market and grow not only their economic freedom, but their political freedom along with it.

Downeast and Far East

I'm working my way back to Denver after 10 days of hiking and kayaking on the coast of Maine - a bit remote for high speed internet access and hence the lack of posts.  While I was there, however, I was looking for signs of global trade amid the coastal cliffs and lobster pots.  There were of course the ubiquitous large scale signs that are everywhere - we rented a Kia from Korea at the Hertz counter and used water shoes made in China.  I'm sure that there are small businesses using the internet to export Downeast items to the Far East as well, although one couldn't detect it.

Then hiking on a steep trail in Acadia National Park I realized that I was surrounded by one of the U.S.’s most robust and profitable exports, and its one that doesn’t leave the country to reach its foreign customers – namely tourism.  On the trail we shared a topo map with a couple from Italy, we shared a laugh with a family from Japan, waited to pass over a narrow ledge with a couple of young women from China, the parking lot was filled with cars with plates from Canada.  These international customers were consuming food, lodging, souvenirs, car, boat and bike rentals, and the products of countless other businesses on these sleepy Downeast islands.

 

Whether they thought about it or not, these merchants were intensely involved in global trade, and while they don’t need to worry about outbound shipping logistics, certainly the success that they meet with their customers can depend on their willingness and ability to adapt to the tastes, preferences and language of foreign consumers.  Going global without even leaving Downeast.