Global Marketing Lite: Sharing the Burden and Opportunity

By Scott Goddin, director, U.S. Export Assistance Center, and James (J.P.) Sleeger, intern, Portland U.S. Export Assistance Center

Strategic planning: think locally, act globally
The international appetite for U.S.-designed software applications of all forms and in all industries exceeds that of the U.S. market. However, entry into international markets, particularly in the Asia-Pacific region, remains challenging, potentially expensive and without guarantee of success. Such challenges include product localization, business partnering, legal concerns and cross-cultural collaboration and project management.

Smaller companies can significantly reduce their risk, however, by adopting a sound strategy backed by proper research and opportunity assessment by region or country. The challenge is finding internal resources to provide such research and analysis, or absorbing the expense of an outside consultant. A larger company would traditionally develop and implement such a strategy by placing key executives on a planning team, or hiring an outside consultant. To mirror this approach on a less costly basis, smaller and midsize firms in the Portland area have taken advantage of the resources and capabilities offered by the Masters in International Management (MIM) graduate program at Portland State University. This program involves students in a real-life problem-solving activity with potential bottom-line results.

After five terms of case-based instruction, simulation, seminars, course work and a field study in Asia, MIM students (often mid-career professionals themselves) undertake a real-world problem-solving project, in lieu of a traditional thesis. The International Business Research Project (IBRP) provides students the opportunity to apply knowledge and skills gained through the program and helps companies address pressing international business challenges that limited time and resources have prevented them from tackling. IBRP can put academic and theoretical knowledge to work in a real-life situation.

For example, IBRP can assist in the development of an international marketing plan involving market-entry strategies, market research, partner and alliance opportunity assessment, sales planning and logistics. Individuals and teams work on a project basis with a representative of the sponsoring company to add skills and augment the firm’s resources. Projects are usually undertaken by a team of 3 to 4 students, generally last for 8 to 12 weeks, and represent 200–300 hours of teamwork. The results are produced in a written report and presentation before company representatives. Through IBRP, smaller companies can take cost-effective advantage of third-party expertise in the development of a global business and marketing plan tailored to their needs.

Identifying and using intermediaries: less pain, more gain
Success in global markets depends increasingly on how companies position themselves in their market niche and, most critically, on the human capital they are able to engage in the effort. Some companies may already have the necessary information needed to export, but may not have all the resources (manpower, knowledge, time and so forth) to follow through. For them, indirect export options may become practical.

The principal advantage of indirect exporting is that it provides an avenue for the company to access foreign markets without investing large amounts of time and money in the export process itself. Additionally, companies that deal with indirect exports are usually dealing with other companies that have years of export experience and networks of contacts that may provide quicker access to international markets than if the effort was taken alone.

Export management companies (EMCs) can act as offsite export departments, representing your company’s product, for example, along with products of other companies, to prospective overseas purchasers. The management company looks for business on behalf of your company and takes care of all aspects of the export transaction. Hiring an EMC is often a viable option for smaller companies that lack the expertise and resources to break into international markets on their own. EMCs often use your company’s letterhead, negotiate export contracts and provide after-sales support. EMCs typically operate on a commission basis, although some of them work on retainer and others take title to the goods they sell, thereby making a profit on the markup.

Typical EMC functions include the following:

• Conducting market research to determine the best foreign markets for your products
  
• Attending trade shows and promoting your products overseas
  
• Assessing proper distribution channels
  
• Locating foreign representatives and/or distributors
  
• Arranging export financing
  
• Handling export logistics, such as preparing invoices, arranging insurance and customs documentation and so on

Small businesses often report that intermediaries find them, typically at trade fairs and through trade journals where such companies’ products are advertised. Consequently, it can often pay to get the word out that you are interested in exporting. The National Association of Export Companies (NEXCO) and the local U.S. Export Assistance Center of the U.S. Department of Commerce are two resources that can assist in identifying local intermediaries.

Value-added resellers (VARs) are another option. For more specialized applications in the electronics industry, VARs can provide the best of both worlds, often combining hardware and software into workable computer systems so as to increase the value of all individual components. They may also contribute to product training and support. VARs are usually better for smaller businesses. This is because they themselves are usually smaller businesses and therefore understand the needs of smaller businesses—such as the high value of each additional client. In contrast to larger distributors, VARs are less likely to have minimum-purchase requirements that may be too large for (a market niche or) smaller businesses to bear.

There are, however, some disadvantages associated with VARs. They usually charge more than distributors and may be less likely to offer the discounts necessary to facilitate market entry. They may be less likely than distributors to be already familiar with the products. They also may be less financially stable and secure.

Success in software relies on (1) development (product fit, technology and quality), (2) marketing (communicating product quality and benefits), and (3) sales. At a minimum, a VAR must be able give input on (1) and provide for (2) and (3). Much comes down to the kind of product that is being marketed. Unlike EMCs, VARs will tend to be located in the foreign market and will need to be carefully identified and cultivated.

Resources for identifying VARs may include the following:

• Trade associations
  
• Your local U.S. Export Assistance Center
  
• The global network of the U.S. Commercial Service
  
• Prospecting at trade events and researching the overseas channels of structural hardware or software providers (IBM, Cisco, Microsoft, Java) that your product or application may complement or be integrated into

Piggyback marketing is an arrangement in which one manufacturer or service firm distributes a second firm’s product or service. The most common piggybacking situation is when a U.S. company has a contract with an overseas buyer to provide a variety of products or services. Often, the first company does not produce all of the products it is under contract to provide but turns to other U.S. companies for them. The second U.S. company thus piggybacks its products to the international market, generally without incurring the marketing and distribution costs associated with exporting. For example, a company specializing in tools for code writing and testing might want to offer (or represent) a software-based collaboration tool for another firm to enhance its own offering.

Saltire: from calculators to carpeting
For a case study of piggybacking, consider Saltire Software, an Oregon software company that has benefited dramatically from using the expertise of an outside sales partner. (See our previous Saltire Software profile.)

Saltire has found success domestically and internationally by building on its core values and expertise in mathematical technology to target market niches in embedded, packaged and educational application software markets. Saltire has entered those markets on its own terms by using a highly strategic approach to partnering.

Founded in 1989 and based in Beaverton, Saltire specializes in the development of software with high mathematical content. The firm has developed core technologies in constraint-based and symbolic geometry that have been deployed in products as diverse as mathematical calculators and floor-covering estimation packages. With an employee base of fewer than 10 people, Saltire focuses on core business strengths of mathematical technicality, software engineering and research and development. As necessary, Saltire partners strategically with companies to develop and distribute products that best leverage their specialized skills in science and mathematics.

Saltire remains dynamic in a number of markets by partnering with companies that enable it to leverage its expertise and sell internationally without losing its focus. For example, Saltire has been successful in a partnership with leading carpet retail-management software providers in the development of a commercial line of products that can be used to make an accurate estimate of the amount of material needed for a set of rooms. These products are available in professional and commercial applications.

Although these are proprietary products, significant effort would be required to market this niche application successfully. Saltire has partnered with a successful distributor of complementary software to license the global marketing rights for the products. Working with this partner, Saltire can focus on core activities while benefiting from the partner’s expertise in undertaking a global sales effort.

The resources are available
Exporting does not need to be as difficult as it may sound. If smaller companies are unsure of how to begin the export process, IBRP is an excellent start. Or if companies are afraid of resource constraints to a successful global marketing effort, indirect export alternatives can remedy the situation. Indirect exporting can be extremely successful, even for companies that deal with extremely specialized products. Global markets will be increasingly critical to the bottom line. Companies such as Saltire have figured out how to best approach these markets on their own terms for competitiveness and profitability. Resources and options abound to do this effectively.

About the authors
Scott Goddin has served as a U.S. trade negotiator working on Asian market access and standards issues for U.S. high-tech and communications companies and intellectual-property-rights issues in Korea, Taiwan and China. Goddin also has served in temporary assignments as a commercial attaché at American Embassies in Seoul, Taipei and Nairobi and has managed the Portland office supporting Oregon firms since 1997. You can learn more about export assistance at www.export.gov or contact Goddin directly at scott.goddin@mail.doc.gov.

James (J.P.) Sleeger, is an intern at the Portland U.S. Export Assistance Center and a recent graduate of the University of Puget Sound with a degree in foreign languages and international affairs.