Competing in the global marketplace An Overseas Trade Services case study

0
40

Page 1: Introduction

Overseas Trade Services 3 Image 1

The Overseas Trade Services (OTS) network is a partnership between the major Government departments involved in exporting and promoting British industry abroad. The key partners are: the Department of Trade and Industry, Foreign & Commonwealth Office, Scottish Trade International, the Welsh Office Industry Department, the Industrial Development Board of Northern Ireland and the Business Links established throughout England. The aim of the Overseas Trade Services is to help UK firms compete successfully overseas.

OTS services can help exporters make the most of their business opportunities in around 130 countries. Of these, the top 80 export markets are where most of our resources are concentrated. The services are available to UK manufacturers of goods or providers of services, and to other UK companies whose exporting will clearly benefit the UK:

  • Dedicated market support in the UK including advice and information services for initial market research.
  • Professional help from Export Promoters who are experienced exporters in their own right, seconded to the DTI from industry.
  • Information on individual methods of doing business in the country concerned, including details of opportunities and promotional activities.
  • Help with meeting language and cultural requirements. Help too with bringing key contacts to the UK.
  • Help with marketing a UK company overseas including grants for visiting, marketing research and exhibiting. Support too for companies pursuing major projects.
  • Services for research tailored to a company’s needs provided by the FCO Diplomatic posts. Posts can also provide on the ground help when that company visits the market. This can include business briefings and local promotional support.
  • Access to the Export Market Information Centre at the DTI. This library holds an extensive range of publications and statistics relating to businesses worldwide. It may be accessed in person, by telephone, fax or e-mail.
  • Provision of a wide range of publications on individual countries and sectors designed to help companies build up a picture of overseas markets. A full list of these publications are given in the OTS Export Publications catalogue.

Page 2: Globalisation

Overseas Trade Services 3 Diagram 3

Many companies first enter an overseas market by chance - they may receive a single foreign order and then decide to follow it up. They may then realise that trading overseas will help them to achieve growth, particularly if the market is mature. At the start, businesses simply may be using up their surplus capacity, but over a period of time, trading overseas may help to provide:

  • higher earnings - margins in many markets overseas exceed those in the home market.
  • the ability to spread risks – while sales in the home market may be in decline, those in export markets may be booming.
  • the benefits of economies of scale - producing over larger production runs helps to cut unit costs.
  • a competitive edge – organisations develop expertise which provides them with an edge on competitors in terms of design, packaging product trends, market recognition as well as in other areas of marketing.

Many people believe that the international business environment is going through a period of fundamental change. This has been called global shift. The argument is that we are moving away from national economic systems towards a system where national markets are merging into one huge global marketplace and as we move in this direction, the tastes and preferences of consumers from different nations will begin to merge. For example, it is probably as easy to find a McDonald's restaurant in London, Moscow and Tokyo as it is in New York. How many of you regularly drink Coca-Cola, have a Sony Walkman or wear Levis?

Two factors have been cited as the major influences in the trend towards the globalisation of markets. These are:

  1. Dramatic developments in communications as well as information and transportation technologies. Global communications have been revolutionised by developments in television and the global brand, satellite and fibre-optic technologies. These allow the microprocessor to encode, transmit and decode vast amounts of information across electronic highways. At the same time the development of superfreighters and containerisation systems have simplified the transportation of goods. The speed and ease with which international operations take place today have made the globe shrink.
  2. A decline in barriers to the free flow of goods, services and capital. The General Agreement on Tariffs and Trade (GATT) was set up in 1947 to set out trading rules, to resolve disputes between countries and to create freer trade by cutting down barriers. In 1994 on the completion of the eighth round of talks to reduce barriers to trade, GATT was replaced by the WTO (World Trade Organisation). There are currently 131 member countries in the World Trade Organisation, accounting for over 90% of world trade.

The effects are two fold:

  1. In addition to domestic competition, British businesses today have to compete with more cost-effective foreign competitors.
  2. The movement towards freer trade opens up many opportunities for organisations to export overseas as well as to engage in activities in other countries.

Page 3: The changing nature of world trade

Overseas Trade Services 3 Image 3

As well as the movement towards globalisation, there have been massive changes in international markets over recent years. Until recently the world economy did not really exist. The Soviet Union and its East European satellites opted out because of communism. So did China. India closed its doors to international trade on a large scale. The same was true of many other countries. Altogether, more than half the world's population was outside the market economy. Today many of these countries, totalling 3 billion people, are trying to return. They are doing so at different speeds, faced by diverse problems and with differing chances of success.

The potential gains from this process are enormous. Trade and investment have the ability to revitalise the world economy and bring about a new period of growth. Already the Asian-Pacific is the world's most dynamic economic area. The development of Asian economies presents both a threat and a challenge. There are many activities which allow for mass production at low-cost (i.e. the production of computers, televisions, cars and electronics). There are also many benefits to be gained from the expansion of these markets.

Exporters stand to make many gains from the reconstruction of Eastern Europe. As these eastern European countries develop, their people will demand increasing numbers of goods and services as well as 'know-how' from other nations. For instance consumers from these countries will increasingly wish to purchase modern household equipment, construction and building materials and information technology. Another feature of change in world markets has been the development of huge internal markets which today include:

  • Single European Market (European Union/European Free Trade Association)
  • North American Free Trade Area (NAFTA)
  • Association of South East Asian Nations (ASEAN).

Never has international trade been quite so important for the survival of British companies. In this increasingly interdependent world, it has become an economic necessity. No country is self-sufficient and they are therefore dependent upon the imports of products from other countries. By exporting we can help to maintain our standard of living which, in turn, makes importing possible so that consumers have as wide a choice of goods and services as they want.

Page 4: International markets

Trading overseas recognises that people all over the world have different needs. Organisations have to accept that differences in values, customs, languages and currencies will mean that many products will only suit certain countries and that global markets really only exist for the very large producers.

Catering for such differences involves greater risk. This means that in developing products for different overseas markets, businesses have to be better prepared by engaging beforehand in careful planning and research. No organisation can hope to succeed unless unfamiliar elements are effectively catered for. By understanding all of these influences, businesses can make their products more relevant for each market they enter. So, what are these differences? Imagine some of the basic problems you might encounter if you wished to export hair dryers to a country in another part of the world.

Overseas Trade Services 3 Image 6

Trading overseas, therefore, involves much more than simply making goods or services available to people in other countries. It requires understanding some of the areas mentioned and many more. For example, there may be protocols to follow, such as diplomatic channels or negotiations between senior managers and directors. Another problem is that exporters often experience longer delays in receiving funds from their export trade than from home trade business. Catering for an overseas market and all of its demands will involve considerable organisation to cope with such differences. One useful way of identifying the key characteristics of overseas markets is
through a PEST analysis. PEST stands for:

  • Political and legal framework of the country
  • Economic systems
  • Social and cultural behaviour
  • Technological levels.

Page 5: The external environment

Overseas Trade Services 3 Diagram 2

Today British companies operate in a more complex and competitive external environment than ever before. Managers have to face the challenge of co-ordinating globally dispersed operations in countries with radically different trading conditions and cultures. They may well need some help.

Overseas Trade Services are run jointly between the Foreign and Commonwealth Office and the Department of Trade and Industry. The main objective is to provide British exporters with the best support service of any country in the world.

Overseas Trade Services are designed to provide practical help and advice for exporters of all types of services and goods. They provide access to over 200 offices worldwide whose staff include Foreign Office commercial staff and locally engaged market experts.

Page 6: Conclusion

Overseas Trade Services 3 Image 4

For many years different departments and agencies were offering business organisations various types of services. Businesses were faced with a bewildering range of advice which may have deterred some businesses from seeking help.

Access to Overseas Trade Services is available today through Business Links. Business Links were launched in July 1992 as a single point of access for business support services. Each Business Link represents a partnership between the key local enterprise support organisations, TECs, Chambers of Commerce, Enterprise Agencies and Local Authorities.

Their aim is to provide a range of services for businesses from start-up information and advice to innovation and technological services. The aim of this integration of services is to meet customer needs more effectively and to improve the competitiveness of local businesses. For example, imagine that your business is in a British town and that you are considering the possibility of exporting your products to another country. The single access point of contact would be the Business Link service who would then discuss with you what is required to implement your plans.

Overseas Trade Services 3 Image 5

About 70-80 Export Development Counsellors are being recruited by Business Links to offer specialist help and advice. They will work with their customers to plan and implement a suitable export strategy and develop international trade potential.

There are many other services, some of which are specifically tailored to the needs of particular groups of customers. The services are used extensively. For example, in 1996/7 OTS supported 10,500 participants in overseas trade fairs and 2,686 participants used the Outward Missions Service. The aim is to provide a comprehensive service at each stage of the export process, whether it is with the initial planning, research and development, the promotion of products, the appointment of agents or the development of further markets.

Overseas Trade Services | Competing in the global marketplace