FOREIGN COOPERATIVE SELLING

The Webb-Pomerene Act permits manufacturers to combine for the sale of their products abroad. Therefore, cooperative sales organizations have been formed under this act and have proved most successful. This is particularly true in heavy chemicals, lumber, and other products where standard quality is inherent in the product itself. On the other hand, highly fabricated articles involving varying degrees of workmanship (and, therefore, varying degrees of quality in the products of different factories) do not lend themselves to this form of sales organization. Some units of this kind, however, are based upon allocation of sales territories between members; more frequently they are formed for the purpose of fixing export prices and preventing competitive selling overseas. In some instances they have run afoul of foreign antidumping laws. Other units have been formed for the purpose of cooperative selling through a single sales organization in each country. Their theory is to allocate orders either in rotation or by some other means acceptable to all the member manufacturers at home. Then, of course, there is the European cartel arrangement, in which United States manufacturers may be members, and which functions along the same general line.

Chapter IV.-COMPETITION

EVALUATING COMPETITION IN FOREIGN MARKET

The manager of the foreign sales department of any manufacturing concern, the directors of which contemplate entry into a foreign market, is confronted with the major problem of first persuading his directorate that the venture is one which should not be entered into lightly, and that the effort should not only be carefully planned but should be a continuing one in accordance with a definite policy and extended over some reasonable period of time. Hasty conclusions of an adverse nature are frequently arrived at by directorates inexperienced in difficulties attendant upon entry into any foreign market, and it is only by following the procedure recommended above that a foreign export business can be built up in such a way that it will develop into a permanent asset to the company-that is, a profitbearing investment from the point of view of the stockholders.

Assuming, for instance, that Australia is the country selected, the first picture which should be obtained is an overall one indicating the history of the United States manufacturers' participation in this market during the last few years.

LOGICAL SEQUENCE OF ANALYSIS OF COMPETITION

The next step in the process is to determine what place by classification your products have in the present schedule of imports. It is suggested that a close study of the Australian customs import statistics be made with a view to finding out which of your foreign competitors are now securing the available import business. A concurrent survey should also be made with a view to finding out what the domestic manufacturing resources are, actual and anticipated.

Assuming that the foregoing recommended analysis indicates that there is a place for your products in this market, the next step is to determine whether entry should be attempted on a price or a quality basis, or both.

PRICE POLICY

It should be remembered by the export manager, and continually impressed by him on his directorate, that competition in any foreign market is a free-for-all fight for the available business, and neither your competitors nor your customers have the slightest interest whatsoever in maintaining a high standard of living in the United States, their objective being simply to obtain the greatest quantity of highestquality goods which they can buy at the lowest possible price. Such being the case, it is seldom if ever possible to maintain a continuing business by means of the fixed-price or one-price policy, and, while it is possible to issue a foreign price list, the discount should be made variable up to some given maximum, and in certain commodities the

final price to the customer may often be left in the hands of your own direct representative on the spot, or in the hands of a trusted agent. Where the two foregoing arrangements are not practicable, an arrangement should be set up between the agent and the principal whereby all business, say in excess of $1,000, should be referred back by cable to the home office, together with adequate details of the competition to be met, and the onus for accepting or rejecting the business should be placed on the home office.

STANDARD PRICES

All of the foregoing means that for many products no policy of a standard price in a foreign market will hold good. Prices of many products may vary from country to country, and may again vary as between sales areas within each country according to the intensity of the competition. However, at no time should you lose sight of the fact that it is not good business to quote a more favorable price to one customer within a sales area than to another, wherever this can be avoided. This is particularly true of standardized or trademarked goods, for which a wide market is expected. Such practices tend to lower the total price structure and eventually bring the business operations dangerously close to the no-profit line. Standardized or trade-marked goods should, therefore, be sold on a uniform price basis within each market or sales area, and the agency or sales contract should contain provisions for cancelation of the franchise in case goods sold in a low-price market find their way into high-price markets.

PRICE FACTOR IN NEW MARKETS

On entering a new market it is frequently desirable, and in fact necessary in certain commodities, to do so on a price basis, especially if the competition to be faced is exceptionally strong. While trade and newspaper advertising has its place as an asset in securing penetration, nothing is quite so effective as a selected list of highly satisfied customers who will recommend your product without equivocation. whenever the agent or local representative refers a prospect to them for a statement of experience.

BUYING HABITS

Another factor which should be borne in mind by the foreign-sales manager, and all the members of his department corresponding with foreign agencies, is that buyers in foreign countries are extremely reluctant and slow to change their buying habits, and it is far easier to adapt your customs to theirs than to endeavor to educate them in American domestic-market methods of doing business.

A POLICY ON COMPETITION

Summarizing the foregoing remarks, the following policy is recommended:

First of all, the foreign-sales manager should persuade his own directorate that foreign trade is desirable, and that a good stable export business is an asset to the company.