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Expanding your overseas markets.

I think we would all agree that associations in the past have not paid much attention to international events or opportunities. And yet it's increasingly essential that associations be more proactive in getting their members to recognize the threats facing U.S. business.

It's true that some associations have recently begun to take on more international activities and services. But for most associations, international development is still low on the agenda.

A look at the United States' international economic position today is revealing. It sheds insight on what trade and professional associations can do to help U.S. companies compete globally.

The state of affairs

Frankly, I'm disappointed in the performance of U.S. companies in recent years. We have lost many key markets to foreign competitors through blindness and ineptness. I blame associations for part of our trouble. Why didn't associations alert member companies to the fact that we were losing economic power relative to other countries? What were your annual meetings all about? Why did the U.S. automobile industry wake up only 10 years after the Japanese began making competitive inroads -- I thought there was an automobile association.

I hear you protesting that it wasn't so much associations not talking as member companies not listening. Harley Davidson, for example, had 95 percent of the American motorcycle market. When they saw Honda motorcycles, they said, "Those are toys. We don't make toys; we make big bikes." Now they have only 5-7 percent of the nation's motorcycle market. And today's Hondas are as large and powerful as the Harley Davidsons.

But there must be a way to get messages across about foreign competition, and associations should think about that. It requires more than seminars and speakers at conferences. It involves study tours and trips. Corporate executives should travel to other countries to see what's happening.

Ninety-two percent of our firms don't sell anything abroad. Of the 8 percent that do, a mere 100 of them account for 50 percent of our exports. We still are not an export-oriented country.

Our share of world trade was 25 percent in the 1950s; now it's 14 percent. Germany exports 71 percent of its production, Japan 40 percent. We export 10 percent of our production.

Germany and Japan know what it means to speak other languages, know other cultures, and operate in other countries. We don't. The strange paradox is that we are the original melting pot. We all came from somewhere else but have lost our international character.

General Electric just bought a factory in Hungary. But they can't find a Hungarian-American to run it. They want someone who speaks Hungarian well, and we have lots of Hungarian-Americans. But they didn't get into management and marketing. We have a reservoir of languages and cultures here. Why shouldn't we have a competitive advantage in other countries?

We've lost the consumer electronics, camera, watch, and fax machine industries already. We are in danger of losing automobiles, computers, printers, musical instruments, and so forth. Many of our goods are not considered among the best available. Americans prefer to buy Japanese cars and Swedish and German machinery.

We are the world's largest debtor nation. There are nations that have a higher debt per person, but for total debt, we owe the most. We cannot support the wage level people had in the 1970s. Our illiteracy is high and our skills are low. Our incomes are only larger because of two-income families. Real incomes today, per person, are lower than they were in 1970 in terms of purchasing power.

Why not do something about this? I'm not saying the situation is hopeless; I just want your to raise some flags in your own association about turning the tide around before it's too late.

A question of commitment

There are reasons we are not more effective at international trade. Many U.S. companies see exports as a way to dispose of surplus production rather than as a market opportunity. For example, if I make 100,000 widgets and I can sell only 70,000 here, I will look for a broker who can dump another 30,000 abroad. That is not taking a sound view of an opportunity to build up a trade position in another country.

Many U.S. companies also have a take-it-or-leave-it attitude toward foreign markets. We say, "This machine is for you, France," and they look at it--it's all in inches and feet, while they use the metric system. They say, "Can you change it to metric? Can you write the instructions in French?" Our reply is, "Take it or leave it."

We do have some excellent companies that are not guilty of that, and who have made those changes, but a lot of our companies feel they worked hard enough to create the original product, so they're not going to start modifying It.

U.S. companies also fail to study foreign markets carefully. Let me cite an example. When we want to enter France, we send one executive over to talk to a few people and write a report in two weeks as to whether the firm's product can sell in France. When the Japanese want to know if they can sell a product here, they send seven or eight people who stay for six months, talk to everyone they can find in the industry, and really learn not only whether they should enter the market, but how to enter it. It's a very different way of examining a foreign investment opportunity.

The problem is that it is harder for Americans to work abroad than domestically. We have to search far and wide for capable executives who love to work abroad. We need people who can handle surprises, are sensitive to cultural differences, and so on.

There are three reasons associations should internationalize. One is to avoid becoming irrelevant to members by failing to deal with the issues they are facing, which include competition with foreign firms. A second reason is to expand membership size and revenue. Recruiting foreign as well as domestic members will expand the association's influence and power in its domestic and foreing arenas. Finally, internationalizing provides more variety of services and higher membership satisfaction.

A question of method

In internationalizing, your members face the following major decisions: Should we go abroad? If so, which countries should we enter? Most of our companies go to Great Britain because of the English language. But is Great Britain the best market for their product or service? How do you measure market potential? What can you do to help your members know how to size up the foreign market opportunities for their products and services? What are the laws and customs of the countries, and how will they affect performance?

There are some insightful films you might show at some of your meetings. Going International, a San Francisco firm, makes videotapes to promote cultural sensitivity. I remember a film on Saudi Arabia. It shows an American coming off of a plane, and he greets the Sheik by saying "Hi Sheik," which is not appropriate. Then he says "How's your wife?" Now there are two problems. The Sheik has a lot of wives, so he doesn't know which one the American is asking about, and second, you don't ask about family in that culture. Then in the Sheik's tent, the representative sits down opposite the Sheik with his shoes off and his soles facing the Sheik; you don't do that in Saudi Arabia. Such films illustrate the more glaring errors people can commit in another country.

Who are the main competitors, suppliers, and so forth in that country? What is the best way to enter the market there: licensing, joint venture, wholly owned subsidiary, or management contract? How can your members' companies identify reliable foreign partners? Does your association offer a list of foreign businesspeople your members can contact for information and alliance?

Many of these services are offered by the U.S. Commerce Department. The Commerce Department has plenty of information, and you can hold workshops in connection with the department. For example. The Commerce Department can find out who the hardware wholesalers are in Germany or in Denmark or anywhere else. Its data can be tailored to your needs. So you don't have to create data, but you can make your members aware of its availability.

Other questions to ask and answer when moving into international markets are the following: What changes should the company make in its products and marketing programs? Does the firm need to change its packaging, product features, advertising, and so forth? The world seems at times to be a global village where products are universal. But many products and services require adaptation as well.

When you members go abroad, they should be ready to adapt product, package, price, and promotion as necessary. One example that sticks in my mind is the Barbie Doll. The doll was created by Mattel and sold in 60 nations in the world, unadapted. Barbie looked the same everywhere she was marketed. But in Japan the doll would not sell.

Mattel asked its Japanese partner why the product was not selling in Japan while it sold well everywhere else. The Japanese partner replied that she didn't look Japanese. The partner asked Mattel for money to change her face and the packaging and advertising. Mattel said no.

For two years there was no progress; then Mattel finally agreed to the change. The Japanese partner changed the doll's face and so forth. Sales shot up. So you can't answer in theory whether a product needs changes. You have to experiment in real markets.

Obviously your members will need answers to their international questions, and they will come to you to get them. I would like to share this list of possibilities with you:

* Develop international data about some foreign markets. If you are the hardware association, find out how many hardware wholesalers there are in other countries, how much hardware is purchased by consumers, and so forth.

* Research and publish on international topics. Your domestic publications often have an international market. There is more sales potential than you may realize. There are probably foreign non-members interested in hearing about your publications and conferences.

* Develop international contacts for your members. Become a network builder so that when a member needs to meet someone in Bulgaria for whatever reason, you know one or two people in the same industry in Bulgaria.

* Bring international opportunities and threats to the attention of members. Prepare a white paper on what is facing the association members from the international point of view.

* Conduct international trade shows and trade missions. Organizing foreign trade missions is particularly important. Many missions go to the European Community nations. Start in Brussels and go through Western Europe. Japan and the Soviet Union are also popular trade mission destinations.

* Sponsor an export trading company. This is a little unusual, but if your members don't have the resources to learn individually about other nations' trade practices or set up their own contacts and distributors, your association can set up a trading company that handles the risk and the work.

* Operate an overseas office. Open an office in London or Brussels, for example, that works with governmental bodies on domestic and international issues. One of your functions as associations is to lobby internationally as well as domestically. Associations spend a lot of time trying to protect American industry through lobbying Congress rather than helping our industries meet competition and regulations abroad. Work with foreign associations on these issues as well.

Each of these activities contributes to internationalization and moves toward answering members' needs. Consider them as you structure your association's role in the world's emerging global village.

Philip Kotler is the S. C. Johnson & Son distinguished professor of international marketing at the Kellogg School of Management, Northwestern University, Evanston, Illinois.
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Title Annotation:includes related article; focus on international development
Author:Kotler, Philip
Publication:Association Management
Date:Jul 1, 1991
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