Operational Sales Management - The Nature of the Sales Environment - Essay Example

? OPERATIONAL SALES MANAGEMENT-THE NATURE OF SALES ENVIRONMENT 0 Introduction The dawn of every New Year awakens with more companies venturing into international trade. Companies venturing abroad typically join the league of licensors or exporters, while others form subsidiary companies or joint venture in overseas companies (Jobber and Lancaster, 2009). Many goods in global markets today are imports from foreign markets and more companies have devoted much of their energy towards increasing exports. Successive governments continue to exhort and threaten, as well as, promise to convince local businesses to venture into international markets and export more. Support for international selling is based on the significance of exportation for economic growth and survival (Cool and Goddard, 2006). The United Kingdom is not self-sustaining in the sense that much of its food and raw materials are imported from abroad. In turn, the United Kingdom must encourage the business community to export more in order to achieve balanced trade and earn foreign currency to pay for imported commodities. Conversely, many business executives in the United Kingdom have remained adamant and apprehensive to sell overseas despite government’s exhortations. The mystique surrounding international selling has often been blamed for such apprehension (Jobber and Lancaster, 2009). Therefore, this paper aims to dispel some of the mystery surrounding international selling by examining various aspects of international selling. 2.0 Aspects of International Selling Selling overseas is not only relevant to national economic growth but also benefits individual companies. The decision to sell overseas is made by individual companies intending to reap the benefits of international trade. First, product differentiation in terms of design and quality allows companies to enter international markets (McCall and Stone, 2013). For instance, the United Kingdom is well known for its luxury Range Rover car brands while Germany is known for its luxury BMW car brands. Therefore, automobile companies in the United Kingdom sell Land Rover models overseas and import BMW from Germany for local markets. Second, the 2008 economic recession, followed by the Euro Zone crisis has impacted negatively on consumers’ purchasing power (Jobber and Lancaster, 2009). By selling overseas, local companies become less susceptible to impacts of economic recession in local markets and also counter market fluctuations. For instance, players in the tourism industry can promote London Towers as an attraction site for tourists from international markets. In essence, international selling enables firms to take advantage of disposable income held by expanding middle-class populations in emerging markets, such as China and India (Cateora, Graham and Ghauri, 2006). Third, technically obsolete products in developed countries may still be technically appropriate in developing countries. For instance, analogue cameras and desktop computers have been replaced by advanced digital cameras and portable computers respectively. However, analogue cameras and desktop computers are still appropriate in developing countries. Technology firm still having stock of these products can dispose them to global markets, where demand is still high (Jobber and Lancaster, 2009). The benefits of international selling are dependent on various aspects that are discussed in the proceeding sections. 2.1 Economic Factors Higher interest rates, inflation, unsettled financial markets, consumer debt levels and other economic factors adversely affect consumer demand for products and services. Economic factors may also force business entities to change the product mix they sell (McCall and Stone, 2013). Certain commodities are volatile and subject to regular fluctuations emanating from shifting domestic and international demands, competition, labour costs, government regulations, market speculation and other factors. Significant and rapid fluctuations in commodity prices may have a direct bearing on profit margins and sales. Overall, economic factors affect business operations and results, as well as, administrative and general expenses (Jobber and Lancaster, 2009). Governments employ a number of techniques to regulate international trade transactions. Government economic policies, for instance, either encourage or discourage international trade. Sound economic policies, such as formation of trading blocs, free trade agreements and free trade zones create conducive and friendly environment for conducting business (Gillespie, Jeannet and Hennessey, 2010). On the other hand, protectionist measure and other trade barriers limit international businesses from venturing into local markets (Ingram, LaForge and Schwepker, 2009). In view of these issues, it is important for businesses planning to sell abroad to consider the economic system adopted by a foreign country. Economic systems determine the success of any business since some economic systems prefer collective goals to individual goals, and vice versa (Jobber and Lancaster, 2009). Such tendency implies that economic systems adopted by governments may promote one form of business and prohibit other forms of business (Berkowitz et al., 2007). Most jurisdictions around the globe have adopted a mixed market economy where government imposes minimal regulations on business operations. In socialist economic systems, however, the government imposes stringent regulations on the operations of business entities. Much as various forms of market economies exist across the globe, free market economy has proven to be more effective (Cool and Goddard, 2006). In relation to market economies, it is important to note that economic conditions of any country are not static but, fluctuate regularly. Venturing into overseas markets, therefore, requires business entities to get acquainted with the economic stability of the country they intend to sell their products (Jobber and Lancaster, 2009). One of the major determinants of economic stability is inflation, which results from the overall rise in consumer prices without matching rise in productivity. Governments sometimes lack the capacity to control inflation rate through monetary policy and may even heighten inflation rate by printing local currency in excess (Cateora, Graham and Ghauri, 2006). Another determinant of economic stability is the relative value between two currencies. A shift in currency relationship may either cost less or more to do business, depending on the direction of the shift (McCall and Stone, 2013). For instance, when the currency of a foreign country devalues relative to local currency, local businesses benefit by selling internationally. Rapid and dramatic fluctuation of currency values makes it difficult for businesses to plan (Jobber and Lancaster, 2009). In the same vein, exchange rate forms another economic factor that affects international selling. International selling requires conversion of money from international to local currency. Hard currency facilitates ease of conversion while soft currency makes conversion very difficult (Cool and Goddard, 2006). 2.2 Cultural Factors Culture dictates people’s way of life by reproducing from one generation to the next. Citizens who adhere to cultural norms are rewarded while those who do not are punished in accordance with the dictates of the culture governing them (Jobber and Lancaster, 2009). Society is not static but rather continues to evolve; hence, culture is reproduced in new forms as society evolves. The rewarding and punishing principle of culture is a crucial component of international selling. In essence, a person’s culture affects his/her perception of certain products, consumption patterns and meanings attached to specific products (Donardson, 2007). Successful international selling requires salespersons overseas to comprehend cultural dictates of potential buyers in overseas markets. An understanding of overseas culture functions ensures that sales strategies and approaches are consistent with overseas culture. Salespersons overseas must also understand the value systems that govern foreign markets, which entail gaining knowledge of overseas cultural factors (Ingram, LaForge and Schwepker, 2009). Towards that end, culture can fundamentally affect a society’s economic activities and likewise, economic activities affect a society’s culture. Hence, an in-depth understanding of overseas culture greatly enhances the success of international selling (Jobber and Lancaster, 2009). Culture is usually characterised by acceptable norms with regards to customs, behaviour and values defining a specific society. Successful international selling entails incorporating socio-cultural factors, such as behaviours, values, religion, customs, language and education into sales programmes (Cool and Goddard, 2006). Culture encompasses both material and abstract elements. The former element includes consumptions patterns and technology within a society. The latter element includes attitudes, values, religion and ideas. Abstract elements of culture are learned behaviour patterns transmitted from generation to generation (Jobber and Lancaster, 2009). Sales managers and salespersons carry the responsibility of understanding how a given overseas society organises its economic activities, coupled with technologies utilised by that society in order to achieve success in international selling (Donardson, 2007). For example, a company specialising in production of microelectronic farming machinery will find it very difficult to sell its products to overseas societies still practicing primitive agricultural activities. Understanding overseas culture requires sales person to relate to a variety of cultures even when they do not comprehend elements of that culture in detail (Jobber and Lancaster, 2009). The proceeding section analyses some of the elements of culture. Religion: religious values and teachings influence consumers’ behaviour and attitudes towards products and services. Religious differences in overseas markets are important in making adaptations for overseas products and selling operations (Jobber and Lancaster, 2009). For instance, Muslim faithful belief that everything stems from the will of God and any change contravenes Allah’s wishes. For example, a media company intending to diversify into Islamic markets must adapt its programmes to local content that is sensitive to Islamic teaching. Language: language is another critical element of culture, especially when translating product names to local languages. Branding a product with a standardised English name may either sound offensive in local dialect or may sound ambiguous when pronounced in local dialect. Such errors often result into failed products. For example, selling Rolls-Royce Silver Shadow as Silver Mist to German consumers would have been very unfortunate since “mist” in Germany translates to rubbish/manure/dirt (Jobber and Lancaster, 2009). Social Organisation: social organisation differs from one culture to the next. While some cultures organise themselves in a nuclear family system, other cultures organises themselves around extended families. When selling products, it is crucial to understand if buying decisions are made by a larger unit or by an individual. Sales managers and persons must understand cultural differences in social organization when selling to particular market segments in overseas population (Berkowitz et al., 2007). General cultural attitudes and values: global cultures have diverse attitudes and values attached to business and trade. For example, it is not uncommon to be late for appointment in Africa. In Britain, delays in answering correspondence usually indicate that the correspondence has been given a low priority. In Middle Eastern cultures, the concept of deadlines is unheard of and it symbolizes an insult. Other cultures put family first and business issues are handled after attending pressing family matters. Nevertheless, it is deemed ethically sound in western cultures to discuss business over dinner but Asian cultures consider such behaviour unacceptable and violation of hospitality etiquette. While western cultures value contracts as legal documents in business, Muslim culture values a man’s promise and word as binding as a signed contract (Jobber and Lancaster, 2009). 2.3 Legal and Ethical Issues in International Selling Legal provisions and their interpretations differ across countries. Whereas some countries emphasize the use of litigation systems and courts to adjudicate over business disputes, other countries put more emphasis on dialogue and alternate dispute resolution mechanisms in handling business disputes. Therefore, sales managers and salespersons must be aware of legal instruments and systems in overseas markets (Cateora, Graham and Ghauri, 2006). Legal systems are normally based on common law and statutory law. Common law adjudicates legal issues based on tradition and precedents while statutory law is based on written legislations and statutes that define legal rules. Many jurisdictions across the world use both systems to decide cases (Gillespie, Jeannet and Hennessey, 2010). International selling requires a clear understanding of local laws that govern business operations because ignorance can never be a viable defence against failure to comply with local commerce laws. Whenever a legal dispute arises in a foreign jurisdiction, it places a significant strain on multinationals (Jobber and Lancaster, 2009). Consequences of breaking local laws governing trade and commerce include multiple legal expenses and excruciatingly slow court proceedings. One of the legal aspects that needs special attention when selling products in international markets is protecting intellectual property rights (Cool and Goddard, 2006). Designs, products and trademarks registered in one country may not be protected under international law and therefore exposing the company to exploitation from other companies overseas (McCall and Stone, 2013). A business intending to sell its products overseas must seek legal advice on how to safeguard its property rights prior to venturing into such markets. Implications of breaking international law vary from one country to the other. Consequences of breaking international law may be very severe abroad than what companies are used to in their local jurisdictions. Therefore, understanding of international law must be matched with a legal analysis of ramifications for breaking international law (Cateora, Graham and Ghauri, 2006). Other aspects of law include formulating a business contract between the seller and overseas companies, terms and conditions between the seller and the buyer, and terms of trade that govern overseas trading (such as bills of lading, ex works, free on board, free alongside ship, cost, insurance and freight, and free delivered). Salespersons overseas should also guard themselves against false descriptions, faulty goods, inertia selling and collusion between sellers. Observing overseas laws to the latter and maintaining ethical behaviour ensures that salespersons gain customer trust that is crucial in developing and nurturing mutually beneficial seller-buyer relationships (Jobber and Lancaster, 2009). Salespersons overseas can partly create and maintain consumer trust by maintaining customer focus, reliability and competence. Willingness of salespersons to exercise fairness, maintain honesty and refrain from unethical actions is equally important in international selling (Jobber and Lancaster, 2009). Ethics distinguishes right from wrong and defines moral values and principles that govern behaviour (McCall and Stone, 2013). In selling, ethics entail moral values and principles that guide selling behaviour and sales management. Selling ethics cover various components, such as: deception, integrity, pyramid selling, high pressure sales tactics, use of promotional inducements, reciprocal buying and slotting allowances (Cool and Goddard, 2006) Salespersons are required to distinguish between ethicality and legality of selling practices. While laws reflect society’s standards and principles enforceable by courts of law, ethics reflect personal moral values and principles. Distinction between law and ethics are crucial especially where the two collide (Gillespie, Jeannet and Hennessey, 2010). For instance, it may be ethical and legal to sell genetically modified products in local markets but unethical and illegal to do so in some international markets. Ethical considerations are better understood from the perspective of cultural factors. In essence, culture defines acceptable code of behaviour and is therefore indicates what a society considers ethical or unethical (McCall and Stone, 2013). 2.4 Pricing In some overseas cultures, bargaining over product prices is a common phenomenon. Bargaining is especially common in overseas cultures where retail stores are relatively small and therefore give buyers the opportunity to interact with sellers. Under such circumstances, international sellers may find it extremely hard to influence pricing at retail level (Cool and Goddard, 2006). When products are sold in incongruent markets, transfer pricing is common whereby products are diverted from cheaper markets to expensive markets (Jobber and Lancaster, 2009). For instance, men’s cologne may be cheap in France due to oversupply but expensive in China due to higher demand. In such a case, companies in France may opt to sell more men’s cologne in China than in France. Pricing in international selling assumes the same rationale as pricing in local selling but the former has additional factors that businesses must consider. To begin with, logistical challenges are the major factor that determines pricing of goods to be sold internationally. Freight considerations in terms of packaging, containerisation, mode of shipping, warehouse costs and transportation costs directly affects the final prices. Import considerations such as tariffs charged on goods entering foreign markets and quota restrictions also affect pricing functions. Purchasing alliances affects product prices but selling businesses should remain alive to the fact that such alliances do not last for long (Jobber and Lancaster, 2009). 3.0 Organization for International Selling Organisation to implement international selling can be complicated and thus require strategic decisions to develop an effective interface between sales and manufacturing. Strategic decisions are also needed in the delegation of responsibility for international trading. When deciding how to organise for international selling, direct and indirect techniques are considered. Ultimately, the choice of appropriate organisation depends on various factors including: nature of the product, proportion of total turnover attributed to overseas business and relative advantages/disadvantages of each form of organization. There is no magic bullet for organization but adaptability and flexibility are paramount (Jobber and Lancaster, 2009). Indirect techniques include use of distributors and agents who handle overseas trade on behalf of overseas companies. Organisations and individuals acting as liaison between sellers and buyers are referred to as intermediaries (Jobber and Lancaster, 2009). An agent is an individual or firm acting on behalf of overseas companies (Donardson, 2007). Agencies most common in international selling are independent actors that act on orders from overseas companies on a commission basis. Caution is required when choosing agents in order to appoint reputable agents with strong financial position. Distributors differ from agents in the sense that they actually buy and sell products while agents work for a commission. Distributors are individuals or local businesses familiar with local business structure, practices and socio-cultural factors (Jobber and Lancaster, 2009). Direct techniques include, first, forming subsidiary companies to act as manufacturing or selling organisation or both. Selling subsidiaries replaces distributors and agents and businesses employ their own staff to run the subsidiaries formed. Local taxation and legal regulations must be considered when setting up a subsidiary. Businesses may also form joint ventures to jointly manufacture and selling products. Joint ventures are common in construction, transport and high technology sectors. Companies may alternatively decide to sell directly to overseas markets. Such an action requires a business to establish contact with potential overseas customers without the help of intermediaries (Jobber and Lancaster, 2009). 4.0 Conclusion The significance of international trade to economic growth has stimulated governments to exhort local businesses to venture into global markets. International trade is not only beneficial to government but it also provides benefits to local businesses. International selling is governed by various factors and issues that businesses must consider before venturing into global markets. Economic factors such as market economies and economic regulations affect international selling. Other factors include overseas cultures, as well as, legal and ethical issues that govern international trade. Pricing is another component of international selling and it is affected by a number of factors, key of which are logistics and tariffs. The success of international selling depends on strategic organization, which facilitates the sale of products into international markets. Organisation can be achieved through direct or indirect methods. Reference List Berkowitz, E.N., Kerin, R.A., Harley, S.W. and Redelius, W., 2007. Marketing. Boston: McGraw-Hill. Cateora, P.R., Graham, J.L. and Ghauri, P.J., 2006. International marketing. Boston: McGraw-Hill, Cool, K. and Goddard, J.C., 2006. International business: theory and practice. 2nd ed. New York: M. E. Sharp. Donaldson, B., 2007. Sales management . 3rd ed. New York: Palgrave Macmillan. Gillespie, K., Jeannet, J. and Hennessey, D.H., 2010. Global marketing. 3rd ed. Mason: Cengage Learning. Ingram, T., LaForge, R. and Schwepker, C., 2009. Sales management. 7th ed. New York: M. E. Sharp. Jobber, D. and Lancaster, G., 2009. Selling and sales management. 8th ed. England: Pearson Education Limited. McCall, J.B., and Stone, M., 2013. International strategic marketing: a European perspective. New York: Routeledge. Read More