A process of foreign market definition and product delivery

Thursday, August 3, 2006 16:47
Posted in category The Big Picture

Sample comparison of a US, Chinese and Taiwanese market

The process of foreign market definition and product delivery is actually straightforward. I should note that I came to this particular implementation as a self-defense – more a survival – mechanism in the face of headquarters displeasure over the “inability” to move domestically designed product overseas. It works, in part, because I survived to tell the story, and I took it into the consulting sphere. The key is describing the US domestic market characteristics as well as the target offshore market(s). I repeatedly found that it was not enough to describe how a foreign market functioned as the US side – the group that produced the content and controlled rollout and availability – could not easily, if at all, see the delta between the foreign and US market. This process broke the reflex to see a foreign market as a smaller mirror of the US market, that the foreign market had unique needs in content, timing, delivery and service.

General buying and budget characteristics

Capture the general buying and budget characteristics of each regional market including the US so that the differences to the ever pervasive but invisible domestic market can be clearly contrasted. About a dozen questions will quickly identify these specific regional differences, and once identified, independent timelines can be established to insure the appropriate resources are allocated in time to respond to the needs of each region:

  • General revenue breakdown by calendar quarter for both software and hardware
  • Major buying months (and why)
  • Normal credit terms for payment and anticipated payment dates
  • Fiscal years for government and for private industry
  • Billing dates for support and maintenance and dates when these anticipated revenues will be received
  • Major budget preparation cycle (When it starts and when it’s completed)
  • Mid-year budgets revisions (and when)
  • Major holiday periods and their impact on business

This is such a simple step yet I found it consistently omitted by many peers. Just knowing when the specific fiscal year ends is useful as it derails the US manager’s expectation of a uniform “hockey stick” 4th calendar quarter revenue delivery. It proved useful to present to US management as justification for getting resources that are “out of chronology” to the US market.

Cultural buying characteristics and technology horizons

Capture the cultural buying characteristics and technology horizons of each regional market and, again, the US market for comparison. This second step is considerably more intensive than capturing purchasing/budgetary data but I found it indispensable in accurately (a) defining local market tools, techniques and product content, and (b) aiding home office to implement it. Product drivers and “cultural markers” were selected based upon the unique buying cycle for the product under consideration.

We defined key factor sets unique to both the selling and buying regions, the combination of which will define a “relationship set” between seller and buyer. We then ranked the perceived value or importance of each factor through the cultural lens of each party. This relationship set will show inconsistencies, voids and overlaps between the factor set of each party. The differences, and many of the unspoken assumptions, between domestic and offshore requirements become immediately apparent.

US product development processes, advertising, and marketing campaigns are mapped against these foreign buying needs. The voids offer a logical basis to decide which domestic products and selling approaches are inappropriate to the offshore region, to identify needs to address missed opportunities, and to define new products tailored to the region.

Common relationship sets are:

  • Business Success Factors: The success factors unique to the businesses of the selling and buying regions. Governmental factors may be included where state regulation or intervention exists in the market.
  • Sales and Performance Attributes: The sales and performance attributes defining the end-user buying criteria of the selling and buying regions, plus key engineering criteria that drives design delivered to the end-user.
  • Indigenous Technology Base: The technology base of the selling and buying regions. Most valuable where the offshore seller is contemplating local manufacture or needs to understand the ancillary technologies/industries that promote the sale of the seller’s product.
  • Indigenous Service Base: As many firms don’t understand the service structure of their own country much less the services of the buying country, analysis of the service base is valuable in defining new product opportunities and appropriate marketing and advertising themes.

By this time, readers find examples useful. The results of these relationship sets benefit by display in Rose or Spider graphs (also here) for easy understanding. Here are examples contrasting three relationship sets for the very different needs of two “Chinese” automotive markets in the mid-1990s, the PRC and Taiwan, cast against the US domestic vehicle market. In each case, the first spider chart is the US baseline values. Scrolling down, the second spider maps China against the US while the third maps Taiwan against the US:

The US technology envelope vastly exceeded Chinese needs (which were then focused on ‘primary propulsion’ factors) but more narrowly exceeded Taiwanese needs (which more represented the Asian interest in a well appointed mobile ‘living room’). Things become much more interesting in the spiders for performance/sales and business success which show significant divergence in focus and interests, all of which affect the features on offer and the working relationship between US and “Chinese” partners.

Part of the predictions at the time were that the Chinese market would grow to match the Taiwanese market which had benefited by much higher GNP growth, greater individual consumer spending and heightened consumer awareness of automotive products on offer. (I found it interesting that an early Toyota joint venture in Taiwan dissolved in part as the Japanese would not accede to Taiwanese demands for greater technology sharing. One assumes that their later reticence had to do with desiring not to alienate China.) Another part of the predictions were that the US technology on offer was vast overkill for the needs of the Chinese market, i.e., the US was in the process of giving China what we had as opposed to what they immediately needed.

The inconsistencies and voids between domestic and offshore requirements become instantly apparent. There is now a logical basis to decide which domestic products and approaches are inappropriate to the offshore region and to identify missing, and define new, products tailored to the region. Without this step, there was always a penchant to try to shoehorn the current US products, advertising, and marketing campaigns in by default.

It is understandable that some readers will think pigs have taken wing at this point; they are not far off as we are talking about the beginnings of integrating an internationalist mindset into the principal’s marketing and development structure. Phases that follow educate the principal’s internal organization so that everyone really understands what is required, why it is required, and when it is required. A positive outcome of the process leads to the development new products, modification of existing products, and the creation of serducts (combinations of services and products that that are effective “new” offerings at low cost and lead-time) targeted to individual national, ethnic, or linguistic groups.

Gordon Housworth
Intellectual Capital Group LLC

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