Fail in foreign trade - Ten ways to waste money abroad: The ninth case: Let’s go to China – after all, everyone else is doing it

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Fail in foreign trade - Ten ways to waste money abroad: The ninth case: Let’s go to China – after all, everyone else is doing it

An article of InterGest, partner of ti communication

Altmeier makes windows. He makes good windows – the kind that really save energy and also look great. Altmeier also supports the local soccer club for the large city of Stemmelfeld, and he is a model entrepreneur for the entire region. He is innovative, environ­mentally friendly, a supporter of local business, creates jobs, and a great guy all around.

In late 2005, it happened that an ambitious politician from the Stemmelfeld district was able to attract a few potential investors for his district during a trip to China. He quickly found a group of Chinese people who were interested in acting as a delegation to Germany, in order to see for themselves what kinds of investments could be made in China or Germany as part of a cooperation.

When it came time to get ready for the visitors from China, Alt­meier was contacted. He would be introduced to the Chinese dele­gation, present his factory and his products, and represent German entrepreneurs as a whole. No one else seemed better suited, and no one could do it better.

In the days before the delegation’s visit, Altmeier polished his factory to a high shine and made everything look nice, even going so far as to display three Chinese flags. The delegation could come any time now.

When they finally arrived, everything went very fast. The Chi­nese visitors came, were in fact impressed by Altmeier’s factory, and immediately took over. Altmeier followed along behind the dele­gates, was asked to sit next to the head of the Chinese delegation, and a few “ganbei”s later Altmeier was inevitably invited to visit China. He simply needed to see for himself, they said, what amazing opportunities there were in China for his company. Investing in China would be the ideal approach for him.

Just three months later, Altmeier was in China, welcomed heartily by the members of the last delegation. He was taken everywhere, was shown the fast-growing industrial zones and was extremely impressed by the growth figures, which people could only dream of back in “good old Germany.”

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Fail in foreign trade - Ten ways to waste money abroad: The eighth case: Use a trade representative as your only sales distributor in the target country

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Fail in foreign trade - Ten ways to waste money abroad: The eighth case: Use a trade representative as your only sales distributor in the target country

An article of InterGest, partner of ti communication

Mr. Schmidt makes wonderful furniture out of rattan and woven materials. His company relies on true handcrafting and prides itself on being exclusively “made in Germany.” This quality standard is sacred to him – and above all, it justifies his fairly high prices; compared to the competition mainly from Indonesia, Mr. Schmidt’s products are more than twice as expensive.
Last year, Mr. Schmidt went to the furniture trade show in Paris and exhibited his valuable products there. He knows there is a large market for his products in France, and the South of France in particular promises to be a fantastic market.
The trade fair began, and Mr. Schmidt’s optimism was not in fact misplaced. Straight away, there were many interested retailers at his stand on the first day, admiring the great quality, professionally noting the excellent craftsmanship and showing a strong interest in buying. The interested parties also agreed that the prices were in the upper range, but that there was a strong enough target group in the target region of the southern coast.
However, Mr. Schmidt now faced a dilemma: he had a large number of potential customers who wanted to purchase relatively small quantities. There was a furniture store in Cannes that wanted to take a couple of armchairs – preferably on commission – and another one in St. Tropez that was interested in two sofas.
Just as Mr. Schmidt’s mood was slowly starting to darken, M. Dujardin appeared at the exhibition stand and declared that he had the ultimate concept for him to ensure business success in France. M. Dujardin said that he was a successful importer of high-quality garden furniture, and that Schmidt’s woven furniture would round out his product portfolio perfectly.

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Fail in foreign trade - Ten ways to waste money abroad: The seventh case: Put your sales force in charge of international sales

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Fail in foreign trade - Ten ways to waste money abroad: The seventh case: Put your sales force in charge of international sales

An article of InterGest, partner of ti communication

Oh, how beautiful it is in Switzerland! The mountains are im­pressive, the chocolate is divine, and Swiss German has a sympathe­tic sound to it. And that’s not all – the citizens of this Alpine nation also have plenty of money and are enthusiastic consumers. So what could be more natural for a company in Southern Ger­many to conquer at least German-speaking Switzerland, and to sell the universally beloved products made by Pfleiderer GmbH there as well?

Mr. Pfleiderer Junior is the third generation of his family to ma­nufacture high-quality fitted kitchens near Lake Constance, on the Swiss border. His kitchens – high quality from German producers – are very popular but expensive, which makes them practically per­fect for the Swiss market. Until now, no major sales activities had been geared toward Switzerland but the fact could not be ignored that more and more Swiss consumers wanted Pfleiderer kitchens and were beginning to travel to Germany and order the kitchens there. It was a lucrative business with strong growth potential.

Mr. Pfleiderer decided to get down to brass tacks, and he ima­gined supplying all of Switzerland with his high-quality kitchens in the immediate future. He already had a tax representative in the country, because he needed one for his kitchen installation activi­ties. The next step, namely founding his own Swiss branch, could therefore be done fairly easy by the same local tax advisor.

For cost reasons, Mr. Pfleiderer decided not to have a showroom at first; instead, sales would take place through local trade fairs and exhibitions, as well as a direct sales approach he had designed himself according to the “Vorwerk” model, which he used very successfully in Germany. His skilled, well-trained salespeople just had to gain access to the potential customer’s house or apartment, and then they could build a virtual kitchen for the amazed customer on the spot, using his proprietary computer simulation program. Once they had gotten that far, an order was usually within reach. Another advantage was that, thanks to fairly high profit mar­gins, he was able to live well on just a few orders. Now he planned to transfer this approach to Switzerland, and there was no reason to expect anything less than a complete success.

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Fail in foreign trade - Ten ways to waste money abroad: The fifth case: Set a maximum limit of one year for entering an international market (six months are even better)

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Fail in foreign trade - Ten ways to waste money abroad: The fifth case: Set a maximum limit of one year for entering an international market  (six months are even better)

An article of InterGest, partner of ti communication

Mr. A is a specialist in cold meat and sausage products and his factory in the heart of Germany is famous for its wonderful ham. Now in its second generation, his company markets meat speciali­ties throughout the whole of Germany.

Every time he goes shopping in his local supermarket, Mr. A asks himself why it is that imported products are so successful here and wonders if he might also succeed in selling his products abroad.

If the Italians are so successful with their Parma ham and you can find Spanish Serrano in just about every refrigerated shelf in Germany, why shouldn‘t it be possible to sell German ham in London? Mr. A calls his team together and outlines his idea of investing in the British market – after all, as everybody knows, the British still have a thing or two to learn when it comes to matters of international cuisine. His employees think the idea is good and everyone agrees to put the plan into action as quickly as possible.

Indeed, work commences the very next day. A market study is drawn up to assess the competition, a team flies out to London to conduct test purchases and sample the products already on offer. Logistics are also considered, potential profit margins assessed, and the packaging modified to fall in line with British tastes. In short, everything is geared towards assured success.

Mr. A is extremely motivated. He has meanwhile set up a sales office, so that his customers will not have to import the products from Germany and has already begun organising tastings in the most important supermarkets with the aid of his new employee in England. People react positively to the samples and his first listings are as good as in the bag.

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Fail in foreign trade - Ten ways to waste money abroad: The fourth case: Work out your budget on a beer mat

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Fail in foreign trade - Ten ways to waste money abroad: The fourth  case: Work out your budget on a beer mat
An article of InterGest, partner of ti communication
 
Mr. F is a businessman from head to toe. He runs a successful business in the third generation and manufactures welding equip­ment and accessories for shipbuilding. Of course, he is also suffe­ring from the heavy competition from Asia that German shipyards have to endure. What he needs are preventive measures, to counter the constant changes that the market is currently subjected to.
It is against this background that Mr. F decides to offer his products at precisely the place where ships are not only being built now but will also be in the future, namely South Korea, home to the largest shipyard in the world, Hyundai Heavy Industries Co, Ltd.
Clearly, South Korea is not exactly around the corner, and it is a 12-hour flight to Incheon. You need to book early because there are only three flights a day from Frankfurt and they are rather expensive. Indeed, Mr. F has heard that South Korea is an expensive place all round, but this isn‘t enough to put him off.
So he decides to go over there and take a look. A flight in the business class costs 4,000 euros, plus hotel costs of 300 euros exclu­ding breakfast, and then there is also dinner to think about. Mr. F. bites the bullet and pays up. He flies out to Incheon, spends three days sizing up the situation and then continues to Ulsan.
 
Completely absorbed by the notion of doing business here, he sets up a company with the aid of an international service provider, and rents an apartment for the German technician, who will work here as an expat. He is a welding expert and also has good know­ledge of sales and marketing.
The first product presentations are actually successful and the plan reaches the execution stage. The technician is given a new em­ployment contract, with bonuses for working abroad, and moves to Ulsan. The equipment is modified to South Korean requirements, the entire process is set in motion, and the costs in the monthly reports begin climbing at a remarkable speed.
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Fail in foreign trade - Ten ways to waste money abroad: The third case: Transfer your local marketing and business communication activities into the target country

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Fail in foreign trade - Ten ways to waste money abroad: The third case: Transfer your local marketing and business communication activities into the  target country

An article of InterGest, partner of ti communication

Do you like to travel? Have you ever switched on the TV in your hotel room while visiting another country, just to relieve the bo­redom of the room and to have something on in the background while you are brushing your teeth? Isn‘t it interesting to see how familiar products are advertised quite differently there to the way we are used to at home?

Well, that is something that Mr. M from G obviously never noti­ced, either because his room doesn‘t have a television, or because he just sticks to watching DW-TV, where he is of course not going to find any local advertising.

And it is against this background that Mr. M, a supplier of IT services, takes the decision to offer his products in a neighbouring country, unaware that there may first be a few things to consider. After all, as this neighbouring country is Austria, Mr. M is of the opinion that he can use the same communication materials as he uses for the German domestic market. And why not? The language in Austria is German, and the standard of living there is more or less the same.

So no sooner said than done, Mr. M opens up a representative office in Vienna, sends one of his German employees, who is familiar with Austria, over to look after it, and initiates the marketing process, pulling out all the stops in the process. Of course, with a representative office, it isn‘t necessary to set up a separate company in Austria, all you need is a liaison office and you can run everything, including invoicing, through the German GmbH.

So now Mr. M really goes to town with his communication. He inserts advertisements, focuses on specialist journals, and even attaches stickers to his German leaflets with the address in Austria. He does everything that could possibly be done to achieve his goal, but the one thing that fails to materialise is success. For some reason, nobody wants to know about Mr. M and his company, even though it says ‚Made in Germany‘, and as the whole world knows, quality work from Germany is what everybody wants. So what‘s up with the Austrians?

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Fail in foreign trade - Ten ways to waste money abroad: The second case: Regard foreign market development as a secondary activity

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Fail in foreign trade - Ten ways to waste money abroad: The second case:  Regard foreign market development as a secondary activity

An article of InterGest, partner of ti communication

This method of tapping into a market is sadly another favourite, and its failure is guaranteed. Another practical example will illustrate why: Mr. E from F makes fire-fighting systems for laboratories and other sensitive buildings. His systems employ the best technology in the world, and Mr. E., himself an engineer, is justifiably proud of his development.

Indeed, he is so caught up in his pride that he becomes convinced that the whole world has just been waiting for his products and that all he will have to do is present them and they will automatically be snapped up from under his nose. No need for any active sales support, all he has to do is gear up for full production capacity and effective distribution. As Mr. E has little regard for doing business in small steps, and has read Donald Trump‘s ‚Think Big‘, he sets up seven sales subsidiaries simultaneously: in France, Hong Kong, the UK, the USA, Spain, Hungary and China. I emphasise: simultaneously! You would think that developing just one new market would bind up enough resources and require a considerable time investment. But then this is a problem that you don‘t have when your product is as ingenious as the one that Mr. E is selling.

So let‘s take a trip into the big wide world. The subsidiaries have been set up and the search is now on for sales personnel. Service providers all over the world are assigned the task of finding the right people, who will be trained at lightning speed at the parent company.

But will it work? Is it really possible to develop seven countries at the same time in the space of only one year and then be successful?

Well, actually, the answer is yes, but only if your company happens to be listed on the stock exchange and your resources are virtually unlimited. But if this is not the case, then this strategy of globalisation is pretty well doomed from the start.

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