Sales and Distribution Management

MBAM 562

UNIT FIVE: INTERNATIONAL SALES

MANAGEMENT

12/10/2018 1
5.1 Introduction
• Sales management has increasingly taken on
international dimensions. The multinationals and other
companies with foreign production and marketing
operations look to sales management to implement sales-
related marketing polices in each national market.
• In companies with sophisticated exporting operations,
sales management obtains overseas distributors and
dealers, maintains relationships with these distributive
networks, and monitors continuing changes in marketing
conditions and needs in national markets.
• Now a days the international marketing is occupying a
prominent role in the world economy. In addition to that
more specialization is very needed, in this aspect
12/10/2018 2
international sales management is very essential. For
example, the manufacturing of electronic equipments is
specialization in Japan, china. In the software industries
is dominated by the USA. In china, is producing
varieties of models and according country's economy.
• Some sales managers feel that selling abroad is
impossibly difficult, but most who try it see that, although
it is ‘different’, it is no more demanding than selling in the
home market. Success depends largely on the attitude and
approach of the firm and the personal qualities of the
salespeople – not every salesperson is suited to such a task
from the point of view of understanding and empathy
with the foreign market concerned.
• While it is hoped that this chapter will contribute to the
12/10/2018 3
development of the personal qualities necessary for
successful salesmanship, specifically on those aspects of
international selling with which a firm either exporting or
contemplating it should be familiar.
• Each year companies that have never been involved in
selling abroad join the important, and often highly
profitable, league of exporters or licensors and some
establish joint ventures or subsidiary companies in
overseas countries .
5.2 Economic factors
• 5. 2. 1 Balance Of Payments:-Goods passing from one
country to another have to be paid for; trading between
countries thus involves the creation of debts between
countries. Over a period of, say, one year, a country will
12/10/2018 4
add up how much it has paid or still owes for goods
imported from foreign countries. In the same way, the
country will add up how much has been paid or is still
owed from overseas countries for goods exported to
them. When the amount exported exceeds the amount
imported the country is said to have a favorable
balance of trade or a trade surplus. If the importation of
goods exceeds exports, then the country is said to have
an adverse balance of trade or a trade deficit. Payments
for physical goods are not the only items involved in
international trade. Debts also arise between countries
from services performed by one country for another.
Because one cannot actually see such services they are
referred to as invisible exports or imports.
12/10/2018 5
• For example, Britain supplies insurance services for
other countries and premiums payments due from those
countries are received in Britain. Payment for shipping
services, income from tourism, banking services and
interest payments from international loans are other
examples of invisibles. If a country finds itself in deficit,
it can do one of two things to put matters right
1. Reduce expenditure on imported foreign goods, reduce
expenditure overseas on such items as defense and foreign aid
and attempt to discourage its citizens from travelling
overseas to stop money being spent abroad.
2. Sell more goods and services overseas to increase foreign
revenue. It can encourage foreign tourists in the country to
spend money or it can encourage foreign investment that will
provide
12/10/2018 income. 6
5.2.2 UK share of International Trade
• Britain’s share of exports by the main manufacturing
nations has declined dramatically since the end of the
Second World War (1939-44). At the same time, some
major competitors such as Japan and Germany have
increased their share. The problems to which this has
given rise are compounded when one examines our
import record. On the import side there has been a trend
comprising two related factors:
• The tendency for real imports per unit of real gross
domestic product to increase; and
• The rising share of manufactured goods accounted for
by imports.
12/10/2018 7
5.2.3 European union :-
• The European Union was at first called the Common
Market, and indeed reference is still made to this title. The
Common Market was legally established on 25 March 1957
by the signing of the Treaty of Rome between the
governments of France, West Germany, Italy, the
Netherlands, Belgium and Luxembourg. Since then, the
ranks of Europeans have been swelled by the accession of
Ireland, Denmark, Greece, Spain, Portugal and the United
Kingdom, to be joined later by the former East Germany, The
initial objective of the treaty was to remove all restrictions
on the free movement of goods and services and
individuals within the EU by removing taxation
differentials, frontier controls and other forms of
restriction.
12/10/2018 8
5.2.3 World Trade Organization (WTO)
• The World Trade Organization, (the successor to the
General Agreement on Tariffs and Trade –GATT) which
came into being on January 1, 1995, is the only
international organization dealing with rules of trade
between nations. At its heart are the WTO agreements,
negotiated and signed by the bulk of the world’s trading
nations and ratified in their parliaments. The goal is to
help producers of goods and services, exports, and
importers conduct their business. The WTO Secretariat is
based in Geneva, Switzerland. As on April 7. 2007
census had 150 member countries.
• Perhaps one of the most important developments of the
last few years has been a steady but widespread trend
12/10/2018 9
 towards protectionism. The greater part of world trade is
subject to the General Agreement on Tariffs and Trade
(GATT). This is a complex agreement, but its most
important features can be summarized in four
fundamental principles:
Principles:-
1. Non-discrimination: each member country agrees
that any tariff concession or trade advantage granted to
one country, whether or not a member of GATT, shall be
granted to all member countries.
2. Consultation: member countries are required to meet
under GATT auspices to discuss any trade problems that
may arise.

12/10/2018 10
3. Tariff negotiation: the idea that originally inspired
GATT is that tariffs should be open to negotiation.
The hope was that these negotiations would be aimed
at reducing and eventually removing customs duties.
4. Trade liberalization: the overriding aim of the
WTO, from which the principles described derive, is a
continuing liberalization of world trade. With this aim
in import quotas and licensing requirements,
restrictions that nations have traditionally used to
limit volume and types of imports, are prohibited.
The idea being that temporary protection should be
afforded to each nation’s domestic industry exclusively
through the customs tariff.
12/10/2018 11
5.3 International selling at company level :- a number of
more pressing reasons why companies benefit from selling
overseas:
1. Trade due to non-availability of a particular product:
such trade is clearly beneficial when a country is able to
import a commodity it could not possibly produce itself.
For example, Britain imports rubber because it cannot be
grown here. It may be that a product or process is protected
by a patent and can only be produced if a firm purchases
the patent right or enters a licensing agreement.
2. Trade due to international differences in competitive
costs: the basis for international trade between countries
can be explained in terms of the economist David Ricardo’s
theory of comparative costs. The theory states that
12/10/2018 12
countries will gain if each exports products in which costs
of production are comparatively lower and imports
products in which costs of production are
comparatively higher. Although this principle is applied
mainly in connection with international trade, one can
see it in operation in all forms of production.
It is a similar concept to the benefit of division of labor, in
that benefits are to be gained not by persons doing what
they can do best, but by persons doing what they can do
relatively better than other people. The more productive
country would still benefit from specialization in those
goods it produces best, and should then import those
goods it is comparatively less good at producing.
3. Trade due to product differentiation: in many
12/10/2018 13
industries each firm’s product has some point of difference
that distinguishes it in some way from products
manufactured by other firms. Differentiation may be in
terms of quality, design or even an intangible difference
such as customers’ perceived image of the product. This
latter factor is in evidence in relation to cars, which
explains why Britain both imports cars from and exports
cars to other countries.
5.3.1 Culture factors in International Sales Management
• International sales management feels the direct impact of
many aspects of culture. Culture is defined as the way of
life of people and the whole complex of their learned
behavior patterns, attitudes, and material things.
Among the aspects of culture of relevance to sales
management
12/10/2018 are language, religion, values, law, education,
14
social organization, and politics. Organizational Culture is
the shared values, beliefs, norms, expectations and
assumptions that bind people and systems.
Culture gives people a sense of identity, facilitates,
commitments, initiate, communication. And provides a
basis for stability, control, and direction. These elements
help members to adapt and integrate internal and
external environments .
1. Aesthetics:-A non-material cultural factor which may
have an influence on the development of overseas markets
is aesthetics. This refers to a culture’s ideas concerning
good taste, together with an appreciation of forms. The
exporter must be aware of positive and negative aspects
of its designs, packaging, advertising, etc. The company
should be sensitive to local
12/10/2018 15
preferences and tastes and items such as company logos
should incorporate local preferences.
2. Religion:-Material culture and aesthetics are outward
manifestations of a culture and give an indication of how
consumers in a particular culture behave. The firm selling
overseas needs an understanding of why consumers behave
in that way. The religion practiced by a culture can give
insights into its members’ behavior.
• Firms entering overseas markets must bear this in mind
when introducing new products or services. A company
must therefore be aware of religious differences in its
foreign markets and be prepared to make adaptations
both in selling operations and the products themselves.

12/10/2018 16
3. Education :-Analyzing educational information for
relevant markets gives the firm an insight into the nature
and sophistication of consumers in different countries. In
some countries many people are not formally educated ,
although they may be educated in ways of culture.
• In marketing a new product in a foreign country, the firm
is itself trying to educate consumers in uses and benefits
of the product. The success of this sales communication
will be constrained by the general level of education within
the culture. If consumers are largely illiterate, then
company advertising, packaging and labeling will need to
be adapted. Complex products that need written
instructions may need to be modified into diagrams to meet
the educational level and skills of the particular culture.
12/10/2018 17
 4. Formulating Sales strategies at National level :- Most
MNCs allow local sales management considerable input into
national level decisions on planning, training, administration
and control. This reflects beliefs that success requires localized
selling operations. Where as everything decisions taken by the
head office. This method in which sales management policy
is stated influences the likely hood of transfer. Here
understands between the countries like parent country and host
country. Generally the fixation of price according conditions
of the parent country income sources. MNCs are not only
producing the goods in host country nations and allow the host
country peoples are appointed in these industries and to provide
training to those people in the head office level. Now some of
the MNCs are allow to invest the host country people with
permission of the concerned government(international
coalition)
12/10/2018 18
5. Language :-The language of a culture is important. For example, a
literal translation by someone not familiar with its deeper cultural
meaning may result in serious mistakes. If the brand name is
standardized world-wide in English it may be found to have an
unfavorable meaning in some countries, or not be pronounceable in
languages that lack certain letters of the alphabet. A famed example
of the former (and now denied by Rolls-Royce) is that the Rolls-
Royce Silver Shadow was nearly called Silver Mist which would
have been most unfortunate when selling to the German market. A
good example of the latter is Signal toothpaste which was called
Shield toothpaste.
6.Political factors:-Culture includes all activities that characterize
the behavior of particular communities such as legal, political and
economic factors. Nationalism and dealings with governments are
often considered to be a major problem facing firms selling
overseas. Most governments play either participating or
regulatory
12/10/2018
roles in their economies. 19
5.4 Influences on overseas selling activities
• The MNCs influence decisions made by their overseas
subsidiaries. Typically the head office focuses more upon
international sales planning, and sales training than
upon country-level sales planning, administration, and
control.
• There are several reasons for this emphasis: decision at
the international strategic planning level impact directly
upon the entire MNC. Decisions on the type of sales
organization like company sales force, distributors or both
are taken on first market entry and according to the
need of the people it will expand the sales .
• Many MNC subsidies, particularly in the automobile,
computer, and electronic industries, are units of integrated
12/10/2018 20
worldwide production systems, with operations in each country
making components for shipment and assembly elsewhere.
• Therefore, sales targets, being crucial elements in global
plans integrating group manufacturing capabilities and markets,
are under strong head office influence. Now the majority of
products are influenced on overseas selling. Where as the entire
marketing research also before producing any goods or services
taking into consideration of overseas forecasting.
• Recent research studies that some of the products not
encouraged in the parent country people where as the same
products more demand in host country. For example the two
wheelers of Bajaj (Bajaj boxer), this model was failed in
India, due to this is not suitable for Indian road ways where
as this model success in Ethiopia.

12/10/2018 21
5.5 Organization for international
• Organization to implement international sales operations
can be complex. Decisions must be made on arranging the
interface between manufacturing and sales and in
delegating responsibility for international operations.
Each problem can have alternative solutions and an optimal
decision must be tailored for each firm. Some companies
are so deeply involved in international trade that it forms
the majority of sales turnover, while others are simply
content to supply export orders. A distinction is made
between multinational marketing, international
marketing and exporting and each is now considered:
1. Multinational marketing relates to companies whose
business interests, manufacturing plants and offices are
spread
12/10/2018throughout the world. Although their strategic 22
 headquarters might be in an original country, multinationals
operate independently at national levels. Multinationals produce
and market goods within the countries they have chosen to develop.
Examples of multinationals are Shell, Ford, Coca-Cola, Microsoft
and McDonald’s. To be successful multinationals need to
understand their competences and weaknesses.
2. International marketing covers companies that have made a
strategic decision to enter foreign markets, have made appropriate
organizational changes and marketing mix adaptations.
3. Exporting is at the simple end of the scale and the term is
applied to companies that regard exporting as a peripheral activity,
whose turnover from exporting is less than 20 per cent. What ever the
form of organization for over seas selling, it is important that there
should be a senior manager charged with responsibility for
exporting who is able advice and influence the colleagues.

12/10/2018 23
 4. Pricing :-The most significant of which is the
potentially greater logistical problem of getting the goods
to their destination. This normally involves extra
packaging to withstand lengthy sea journeys, although with
containerization it is possible to rent a full or partial
container, so this is less of a problem for goods where
containerization is appropriate. Air freight is a quick
medium of transport, especially for goods that are
perishable, or where weight is low and value high in
relation to volume. Transport adds to costs and this must be
considered in relation to the price at which goods will be
charged when they reach their ultimate market. For this
reason many manufacturers tend to accept lower margins
for export orders so they will still be competitively priced.
12/10/2018 24
Quotations for export orders are sometimes a simple
ex-works price that does not include freight
charges to the end-customer. There is, therefore, an
incentive for an international company to make as
much profit as possible in a country with a low rate
of corporation tax. In fact, some countries offer
‘tax-free holidays’ for a specific period to
companies willing to set up manufacturing bases.

12/10/2018 25
 Global Human Resource Management
Introduction
The term human resource can be thought of as, “the
total knowledge skills, creative abilities, talents and
aptitudes of an organization’s work force, as well as the
values, attitudes and belief of the individuals involved”
Human Resource Management (HRM) is defined as
managing (planning ,organizing, directing and
controlling) the functions of employing, developing,
compensating and maintaining human resource
resulting in the creating and development of human
relations with a view to contribute proportionately (due
to them) to the organizational, individual and social
goals.
•Human Resource Management practices vary from country
to country due to variations in culture, government policies,
labor laws etc. Hence, the study of international HRM needs
an altogether different approach.
12/10/2018 26
 Global Recruitment

• Recruitment means the searching for prospective

candidates and stimulating them to apply for jobs.
Recruitment attracts a large number of qualified
applicants who desire to work in the company. The
recruitment information given by the global
companies helps the qualified candidates who are
willing to work to send their resume, along with a
letter expressing their desire to work..
• Thus, the accurate information provided by the global
company attracts the qualified and repels the unqualified
candidates.
• Thus, Recruitment helps the global company in
finding out potential candidates for actual or
anticipated in the company.
12/10/2018 27
 Sources of Global Recruitment
1. Parent Country Nationals
Parent country nationals are employees (of a company or
its subsidiaries located in various countries) who are the
citizens of the company’s headquarters are located.
Parent country nationals in international business normally
are managers, heads of subsidiary companies, technicians,
trouble-shooters and experts. They visit subsidiary
companies and operations
– To help them in carrying-out their operations
– To make sure that run smoothly
– To provide advice and control them
• However, sending parent country nationals involves cost
and cause ego and cultural problems
• Hence, the North American companies stopped sending the
parent country nationals to subsidiary companies operating in
other countries.
12/10/2018 28
2. Host Country Nationals
• Host country nationals are the employees of the
company’s subsidiary who are the citizens of the
country where the subsidiary is located.
• Employing host country nationals is advantageous
as;
 They are familiar with native culture.
 They are familiar with local business norms and
practices.
 They manage and motivate the local workers
efficiently.
 They are familiar with local bureaucrats, market
intermediaries and suppliers of inputs.
 Familiar with the taste and preference of the local
customers.
12/10/2018 29
However, there are certain disadvantages
associated with the host country nationals. These
include:
• They are not familiar with the objectives, goals
and strategies of the parent company.
• They are unaware of the needs of the
headquarters.
• They View the company only from the local
perspective rather than from the global
perspective.
• It would be difficult to train the host country
nationals due to variations in the views about
achievement, equity, the work ethic and
productivity of the host country nationals from
those of the parent country nationals.
12/10/2018 30
3. Third Country National
• For example, Mr. Yilma Geletu an Ethiopian citizen is
working for an American subsidiary in France. Mr. Yilma
geletuis called third country national. Third country
national is an employee of a company’s subsidiary
located in a country, which is not his home country.
• The software professionals of India who work in
American subsidiaries located in various countries of
Europe are called third country nationals.
The advantage of employing third country nationals
include:
• Less cost with required expertise, skill knowledge and
foreign language skills.
• Less risk of employing third national who speaks
English fluently.
• They have a cultural fit due to their work experience in
multicultural environment.
12/10/2018 31
However, the local government may impose conditions
and regulate in employing third country nationals.
Global Selection process:-
• Global business firms need people with higher order
skills, balanced emotions, ability to adjust to multi-cultural
recruitment, etc. Hence, the selection process of global
companies varies from that of a domestic company. Now,
we study the selection process of a global firm. Selection
process includes selection approach .
Global Selection Approach
• Selection policy is vital in global business as it deals with
the various types of people, jobs and placement. In fact,
selection policy contributes for the achievement of the
strategic goal of global business like ‘ thinking globally
and acting locally’, There are three types of approaches
followed in selection policies in global business viz the
ethnocentric approach, the polycentric approach and
the geocentric approach
12/10/2018 32
• The Ethnocentric Approach: under this approach, parent
country nationals are selected for all the key Management
jobs. This approach was widely followed by Procter and
Gamble, Philips, Toyota etc. Some of the international firms
follow this approach due to the following reasons.
• Non-availability of qualified personnel in host countries
particularly developing countries.
• To maintain a unified corporate culture. Japanese firms
mainly follow this reason . P&G also preferred this reason.
• To transfer the core competencies of the company when the
core competencies are held by the existing employees of parent
country nationals.
• In Ethiopia, the construction of roads are constructing by
CHINA and the more experienced and knowledge persons from
China.
12/10/2018 33
Suffers from the following disadvantages:
• When important positions of the subsidiaries are
filled with the parent country nationals, the staff
of the host country feels frustrated resulting in
low productivity.
• The subsidiary may fail to understand and
respond to the host country’s culture due to
‘cultural myopia’.
• P&G experienced a number of failures due to this
problem and subsequently started filling, senior
management positions by the host country
nationals (referred to as polycentric approach)
12/10/2018 34
• The polycentric Approach: Under this approach, the
positions including the senior management positions of
the subsidiaries are filled by the host country
nationals. The reasons for adopting this approach
include
• Host country nationals are familiar with the culture of
the country including business culture.
• Level of job satisfaction of the employees of the
subsidiaries can be enhanced.
• It is less expensive as the salary of host country nationals
is lower than that of country nationals in case of MNCs
of advanced countries.
• It reduces overall cost of staff of subsidiaries.
12/10/2018 35
• Geocentric Approach: Under this approach, the most
appropriate candidates are selected for jobs from any
part of the globe.
• Global firms follow this approach due to the following
reasons:
• To have the most appropriate human resources.
• To develop the people with multicultural and meet the
challenges of cultural diversity.
• To build multi skilling as a core competency and transfer
it to all the subsidiaries.
• To avoid the problems of cultural myopia and enhance
local responsiveness of the host country.

12/10/2018 36
• Though this approach seems to be superior to the
other two approaches, it also suffers from the
following limitations:
• Most of the countries insist that MNCs should
employ their citizens. MNCs are allowed to
employ foreign nationals only in the rarest cases.
• Implementation of this policy takes time as the
MNC has to train and develop the people in
multicultural.
• Implementation of this policy is also expensive.

12/10/2018 37
5.4 Liberalization, Globalization and Privatization
• Reasons for Implementing of Liberalization,
Privatization and Globalization
• Excess of consumption and expenditure over revenue
results in heaving government borrowings.
• Growing inefficiency in the use of resources
• Mismanagement of firms and economy
• Mounting losses of public sector enterprises
• Low foreign exchange reserves
• Burden of national debt
• Inflation

12/10/2018 38
Liberalization
• Liberalization refers to relation of previous government
restrictions usually in areas of social economic polices.
Thus, when government liberalizes trade it means it has
removed the tariff, subsidies and other restrictions on the
flow of goods and services the country. This is nothing but
free trade.
Privatization
• It refers to the transfer of assets or services functions
from public to private ownership or control and the
opening of the hitherto closed areas to private sector entry.
• Privatization can be achieved in many ways, franchising,
contraction and divesture. This offers both opportunities
and threats to the economy.
12/10/2018 39
We have to privatize in such manner that we made the
maximum opportunities while to the same time
minimizing the threats to the economy.
Conditions for Privatization:-
• Liberalization and de-regulation of the economy is an
essential pre-requite if privatization is to take off and
help realize higher productivity and profits.
• Capital markets should be sufficiently developed to be
able to absorb the disinvests public sector shares.
Arguments in favor of privatization
• Privatization will help reducing the burden on exchequer
• It helps the profit making public sector units to
modernize and diversity their business.
12/10/2018 40
• It helps in making profit sector units more
competitive.
• It will helps in improving the quality of decision
making of management because their decision
will made without any political interference.
• Privatization may help in reviving sick units
which have become a liability on public sector.
• Without government financial backing capital
market and international market will force
public sector to be efficient.

12/10/2018 41
Arguments against privatization
• Privatization will encourage growth monopoly power
in the hands of big business houses.
• It will result in greater disparity in income and wealth.
• Private enterprise may not show any interest in buying
shares of loss-making and sick enterprises.
• Privatization may result in lop-sided development of
industry in the country. For example, in Ethiopia, Addis
Abba is fully developed area, here, every one
concentration to start the business in this area is called
lop-sided development.
• No body concentration on the backward area. This leads
to developed area is more developed and backward area
is more under developed.
12/10/2018 42
• The limited resources of the private individuals cannot
meet some of the vital tasks like some service organizations
for example education, health, transportation etc. which alter
the very character of the economy.
• Private sector may not uphold the principles of social
justice and public welfare.
Globalization:-globalization means integrating the
domestic economy with the world economy.
• It process which draws countries out of their insulation and
makes them join rest of the world in its matches towards a
new world economic order.
• It involves increasing interaction among national
economic system, more integrated financial markets,
economic trade, higher factor mobility, free flow technology
and spread of knowledge through out the world.
12/10/2018 43
Cases of Globalization:-
• It is argues that globalization of under developed
countries with improve the allocate efficiency of
resources , reduce capital output ratio and increase
labor productivity, help to develop the expert spheres
and export culture, increases the inflow of capital,
updated technology, that gives a boost to the average
growth rate of the economy.
• It will helps to restructure the production and trade
pattern in a capital scarce, labor abundant economy in
favor of labor intensive goods and technologies.
• Foreign capital will be attracted technology with its
entry, up dated technology will also entry the
country.
12/10/2018 44
• With the entry of foreign competition and removal of
import tariff barriers, domestic industry will be subject to
price and quality improving effects in the domestic
economy.
• It is also believed that the efficiency of banking and
financial sectors will improve, as there will be
competition from foreign capital and foreign banks.
• It is believed that main effects of integration will be felt
in the industrial and related sectors. At result cheaper
and high quality consumer goods will be manufactured at
home.
• Besides employment opportunities would also go up.

12/10/2018 45
Cases against Globalization:-
• The globalization process is in essence a tremendous
redistribution of economic power at the world level
which will increasingly translate into a redistribution of
political power.
• One study reveals that the globalizing world the
economies of world are ironically moving away from
one another more than coming together.
• With the lighting speed which globalization is taking
place, at in increasing the pressure on economics for
structural and conceptual readjustment to breaking point?

12/10/2018 46
• It is becoming hard for the countries to ask their public
to go through the pains and uncertainties of
structural adjustment of the sake of benefits yet to
come.
• This system is not willing to be implemented by
advanced countries, why because, they are not
dominated to be by the poor countries.
• Conclusion :- Now a days, the Globalization is very
essential not only underdeveloped countries and also
developed countries, the main reason is nothing is
special everything is new. In future the world
development is very need, definitely we follow the
globalization concept.
12/10/2018
THANK YOU 47