4. Competing on Low Price is Difficult for US Exporters $50 Cost Disadvantage for US Exporters $70 Total $120 China Price $70 US Price $100 Freight Duties Inventory Travel +$20 Export Costs Conceptual: Export to China
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12. TARGET MARKET SELECTION WORKSHEET EVALUATION CRITERIA POTENTIAL SOUTHEAST ASIAN COUNTRY MARKETS (Evaluate Markets as High/Medium/Low in Attractiveness or Potential) Viet Nam Thailand Singapore Malaysia Indonesia Market Size & Growth Is the size of the potential market for your product/service large and growing? What is the impact of key market trends on the demand for your product in this country? Pricing & Margins Are pricing & margin levels favorable? Current Opportunities Do you have immediate opportunities in this market (inquiries, facilities of US customers)? Competition & Differentiators Is the competitive situation favorable? Do you offer a clear reason for customers to buy from you versus competitors? Business Climate Is the business climate favorable (tariffs, income, economic growth, currency, corruption, the availability of export financing, etc.)? Legal & Compliance Are there major legal or compliance barriers (e.g.; product safety, environmental, other regulatory, intellectual property protection)? Culture, Climate or Geography Are there major cultural, climate or geographic issues that might help or hinder sales? Showstoppers Are any of the above issues showstoppers that would prevent you from being successful in this market? — If yes, put an “ X” under that country, and don’t score . OVERALL EVALUATION
14. Working Session — Pursuing Your Company’s Priority Markets in Southeast Asia
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16. TARGET MARKET SELECTION WORKSHEET EVALUATION CRITERIA POTENTIAL SOUTHEAST ASIAN COUNTRY MARKETS (Evaluate Markets as High/Medium/Low in Attractiveness or Potential) Viet Nam Thailand Singapore Malaysia Indonesia Market Size & Growth Is the size of the potential market for your product/service large and growing? What is the impact of key market trends on the demand for your product in this country? Pricing & Margins Are pricing & margin levels favorable? Current Opportunities Do you have immediate opportunities in this market (inquiries, facilities of US customers)? Competition & Differentiators Is the competitive situation favorable? Do you offer a clear reason for customers to buy from you versus competitors? Business Climate Is the business climate favorable (tariffs, income, economic growth, currency, corruption, the availability of export financing, etc.)? Legal & Compliance Are there major legal or compliance barriers (e.g.; product safety, environmental, other regulatory, intellectual property protection)? Culture, Climate or Geography Are there major cultural, climate or geographic issues that might help or hinder sales? Showstoppers Are any of the above issues showstoppers that would prevent you from being successful in this market? — If yes, put an “ X” under that country, and don’t score . OVERALL EVALUATION
Late start/getting table groups settled – 6 Session objectives and agenda - 2 Differentiators intro and exercise instructions – 20 Exercise – 40 mins Partner evaluation – 20 Planning gaps – 5 ExporTech overview - 4 Total -97 (target: 90) ------------------------------------------------------------------------- Phrases to remember: Comp strategy 101 – bear with me as it is critical Differentiating – offering something competitors don’t or can’t Not unique you better be cheap This is critical, because as you grow globally, must displace competitors Delivered cost comparison Difficult for US exporters to compete on price alone US exporter may have low cost/price due to techno or currency (Euro), but if commodity, tough for US exporters to ship outside NA – must offer something different (other than price) In this case, a US exporter must offer a product/service with enough value that customers willing to pay $50 premium to cover freight, duty, taxes, travel, etc – or offer something that local competitors don’t have the skills to offer at all. Can’t offer same thing as competitors and expect them to pay more Successful exporters offer unique or superior products, services or capabilities Words/ equation / Timberline / make real 1 st question: What is my strategic advantage? Something about your product, service or capabilities that sets your apart from competition 2nd question: So what? What does it mean for the customer? Superior benefit vs competing solutions – faster, easier, better, cheaper Many of these benefits result in lower TCO for customer, even though price is higher 3 rd question: Some customers care about what you offer more than others?
May sound like competitive strategy 101…bear with me, and then I will make it real and concrete with examples A little oversimplified…but basically.. Differentiating – offering something competitors don’t or can’t “ If you’re not unique, you better be cheap.” (Eureka Ranch) If you want to grow in global markets, you will generally have to displace existing suppliers…or if your product is unique or new to the world, you will need to convince a customer to buy something totally new…so must give them a reason to buy from ---------------------------------------------- Lower total cost for customer is one form of greater customer benefit. Don’t discuss concept of strategic advantages yet – here just introduce differentiation Additional background: Greater customer benefit must be at a price where the customer sees it as better overall value – benefit/price ratio is better value than competitor. Strategic advantage + benefit + cost to deliver benefit (economics) + target customer that cares
Difficult for US exporters to compete on price, because usually don’t have low costs Delivered cost comparison . Exporters face two cost disadvantages: Higher costs of international sales, including transportation, logistics (freight, inventory), sales & marketing costs Higher costs of manufacturing in the U.S. when compared to lower cost countries When competing against China, U.S. made products can be at a 30-50% or higher cost disadvantage – particularly in commodity products (our China study). Same could be true for Mexico, Brazil, other low cost countries. And we don’t just face competition from China and LCCs in US, but in China and elsewhere Bottom line: Difficult …to compete …on price alone US exporter may have lower cost of it is a totally different technology….and we may be low cost due to currency in Europe…but if commodity, tough for US exporters outside of north america – must offer something different In this case, a US exporter must offer a product/service with enough value that customers willing to pay $50 premium to cover freight, duty, taxes, travel, etc – or offer something that local competitors don’t have the skills to offer at all. Can’t offer same thing as competitors and expect them to pay more ------------------- Fine print: If the product is a commodity, where everyone has virtually the same design and manufacturing processes, then China would win. However, if a US company has a specialized or unique process or a niche strategy, those can result in cost advantages – which would allow a US company to offer a lower price. This is the only way a US company could win on cost. While this is technically low price vs differentiation, it is really differentiation because you are doing something different - offering a different process or a different approach to delivering the customer benefit. (Example of unique process that resulted in low cost position (and quality premium) - Corning LCD glass) Something you could say in the session: “Even if some of you are competing on price, it is probably because you do something different – unique process, or specialized skills so Low cost countries cannot effectively compete, or niche strategy Niche: can provide: 1) low cost position or 2) no/few competitors – difficult to displace or not worth it to try; 3) product or service advantage related to better serving customer needs
Most important page of the day To succeed globally, successful exporters offer superior customer benefit (vs competing solutions) Put another way, must offer unique or superior products, services, capabilities (may allow you to charge premium) Different words: differentiators / value prop – all about reason to buy from you versus competitors Equation – here is how it works: Strat Adv + Cust Benefit + Who Cares (Target customer) 1 st question: what is my strategic advantage? Something about your product, service or capabilities that sets your apart from competition 2nd question: So what? What does it mean for the customer? Superior benefit vs competing solutions – faster, easier, better, cheaper Many of these benefits result in lower TCO for customer, even though product price is higher 3 rd question: Some customers care about what you offer more than others? Timberline examples Make it Real with additional examples
Dental implant Background: Imtec, Oklahoma company that makes mini dental implant. International represents 40% of sales, serve 85 countries, 25% annual growth in exports, grew from 5 -> 260 emps in 15 years, purchased by Imtec few years ago. Patented mini dental implant that can be used to stabilize dentures. Can be inserted with a relatively painless procedure that can be performed by a general dentist (as opposed to an oral surgeon) requiring only a mild anesthesia. Strategic Advantage : unique, patented product design (1 st to market) Superior Customer Benefit : greater patient comfort and reduced costs versus traditional and competing implants (because design allows for simpler, less painful procedure with general dentist) Target Customers that Care : -- Patient (end-user): denture wearers who want confidence that their teeth will not shift, and don’t have to go through expensive painful surgery to get it. (and dentists that can offer a lower cost and less painful option to denture wearers) -- General dentist (channel): dentists that want to offer a lower cost and less painful option for denture wearers, and want to gain new opportunities for (presumable) high margin procedures Source of Example : successful exporter from 2006 study Stress Indicators Background : SmartBolts indicate whether a joint is loose or tight with a clearly visible indicator that gradually darkens from bright red when loose to near black as the fastener is tightened. SmartBolts are custom engineered for a range of applications. Big application is electrical busways. Strategic Advantage : patented product design Superior Customer Benefit : reduction of maintenance time and cost. Smartbolts allow for visual inspection of tightness from several feet away, so maintenance people can focus only on loose bolts. In a typical two week maintenance cycle, on an installation of 1000 fasteners, SmartBolts® can reduce maintenance time by 80% and costs by up to 50% Target Customers that Care : In general anyone that has a large number of bolts used in critical applications where they must be tight. More specifically, visual inspection of fasteners is particularly valuable in working conditions where there may be safety hazards, such as elevated structures and areas exposed to hazardous materials. Source of Example : ExporTech Client Examples notes continued on page 21, due to lack of space
Pick one product for the exercise – one with greatest export potential, highest volume Coach people in front of room?
True Lemon and Lime Elevator Pitch on Slide: Company sells dehydrated lemon and lime crystals to restaurants and consumers who want the taste of real fruit and the convenience of a powder. Unlike real fruit, we have a four year dry shelf life and no water weight to ship. Unlike competitors, we use no artificial ingredients or preservatives Strategic Advantage: difficult to replicate manufacturing process that allows for real fruit, no artificial ingredients, and 4 year shelf-life Superior Customer Benefit: Real fruit taste with no artificial ingredients and preservatives (health), with the convenience and shelf-life of a powder. Target Customers that Care : Restaurants that want to offer real fruit taste with the convenience of a powder; consumers that want to increase their consumption of water without adding artificial ingredients or preservatives to it. Source of Example : ExporTech client Catheters/Stents Elevator Pitch on Slide : We sell temporary stents to urologists who want a catheter alternative that provides patients with a no-bag option and allows them to urinate naturally. Unlike the Foley Catheter, our stent is less painful, more hygienic because it does not drain to an external bag, and easy for physicians to insert. Strategic Advantage: unique design Superior Customer Benefit : Because it allows patients to urinate without a bag and Foley catheter, it is less painful, more hygienic, easy for physicians to insert Target Customers that Care : Users and physicians that want an alternative to the Foley catheter and bag. -- Interesting example of a target customer that REALLY cares : the company discovered that muslim patients are interested in this product because a person with a catheter is not allowed to enter a mosque, as that would be considered unclean Source of Example: ExporTech Client
Tell them to pick a product – one with largest export potential, highest volume or margin Encourage them to go deeper. The answer is not “our reputation.” If they say its “our quality,” ask is it quantifiable? How would a new customer know your quality is better? Don’t your competitors say the same thing? The answer is probably not customer service. What do they mean by customer service? If it means shorter lead time, OK. But if it means we are nice on the phone, forget it. Ask, who might you validate this with? Leadership team Sales force Current customers, distributors After exercise, have each company read theirs aloud. If you are skilled and confident, give them coaching in real time. The most difficult area is to get clear about the benefit. Refer back to slide 14 and all of the examples.
Late start/getting table groups settled – 6 Session objectives and agenda - 2 Differentiators intro and exercise instructions – 20 Exercise – 40 mins Partner evaluation – 20 Planning gaps – 5 ExporTech overview - 4 Total -97 (target: 90) ------------------------------------------------------------------------- Phrases to remember: Comp strategy 101 – bear with me as it is critical Differentiating – offering something competitors don’t or can’t Not unique you better be cheap This is critical, because as you grow globally, must displace competitors Delivered cost comparison Difficult for US exporters to compete on price alone US exporter may have low cost/price due to techno or currency (Euro), but if commodity, tough for US exporters to ship outside NA – must offer something different (other than price) In this case, a US exporter must offer a product/service with enough value that customers willing to pay $50 premium to cover freight, duty, taxes, travel, etc – or offer something that local competitors don’t have the skills to offer at all. Can’t offer same thing as competitors and expect them to pay more Successful exporters offer unique or superior products, services or capabilities Words/ equation / Timberline / make real 1 st question: What is my strategic advantage? Something about your product, service or capabilities that sets your apart from competition 2nd question: So what? What does it mean for the customer? Superior benefit vs competing solutions – faster, easier, better, cheaper Many of these benefits result in lower TCO for customer, even though price is higher 3 rd question: Some customers care about what you offer more than others?
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