Trade Development

Authority of Pakistan

PRODUCT IMPROVEMENT

In this Chapter you are going to look at the various ways of increasing export earnings. You could either market a greater volume or improve your products to earn more from the same volume of sales.  We use the term "product" in a broad sense to cover packaging and the product itself.

These are the major aspects of the problem:

Quality control

Standardisation

Product design

Packaging

Quality Control:

The quality must be right.... And it must be maintained.

            Inconsistent quality is often an important obstacle to the development of the export

trade of SMEs in developing countries.

Even when SMEs can turn out products of high quality, production is frequently inconsistent.  As some goods are of high quality and some are not, buyers are never sure of what they are going to get.  Quality may be generally good, but the product may vary from one lot to another in such aspects as colour or size.

The result is that importers are not as prepared to pay good prices for these products as they are for more consistent product from suppliers they can rely on.  Worse still, they may not buy them at all, and the goods remain unsold.

An individual exporter's products of poor or unreliable quality can damage the entire country's reputation as a supplier.  Even if your product is of high quality, you might suffer from this national reputation.

To cope with this problem, various workshop and seminars are conducted by E.P.B. to educate the exporters in quality control standards.  On certain items like rice and engineering goods pre-shipment inspection and standard certification procedures are mandatory - have programmes through their SME agencies to improve the quality of their export products.  These cover two areas:

· Education and information

· Pre-shipment quality control scheme

Education and scheme:

These programmes include worker training scheme and the provision of information on inspecting and testing procedures, and on quality standards.

Quality control schemes: These schemes may be compulsory or voluntary or a combination of both.  For example, a govermnent may have compulsory quality control checks for major export products but voluntary checks for other products.

Pre-shipment control can take the form of checks on consigmnents before shipment, or inspection and checks of goods during production.

These quality control checks can have different objectives.  They may seek to ensure that the products:

Meet the phytosanitary, safety and similar regulations of the importing and/or exporting country;

Meet the specifications set out in the sales contract;

Meet minimum quality requirements set by the exporting country.

Making a selling point of national quality : A country that has high standards for quality can make it a positive selling point.  Through publicity it can build up an awareness that the country's official quality control certificate is a guarantee of high standards.

Testing laboratories in some countries are run by government-owned pre-shipment testing laboratories.  In others testing is done by officially recognized private laboratories.

The need for standardization : Standardization-the establishment of agreed sets of specifications for specific products-is closely connected with quality control schemes.

Standards are very important in international trade.  Through the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC), the national standards bureaux of many countries have agreed on international standards for numerous products.

ISO has established a particularly important series of standards on quality systems, the ISO 9000, applicable both to manufacturing and services.  ISO 9000 is distinguished by the fact that the implementation of its standards can be audited and certified by third-party certification bodies.  Meeting these standards is increasingly essential to gaining entry into markets in developed countries.  TDAP has published a hand book on ISO 9000 which may be had for a detailed understanding of ISO 9000.

Similar standards exist within regional trade zones, such as the European Union.  The Unions has set up CEN( the European Committee for Standardization) and CENELEC ( the European Committee for Electrotechnical Standardization), two institutions dealing with standardization.

If a contract specifies that the goods are to correspond to a recognized standard, the buyer know exactly what to expect and the seller know what he or she is obligated to deliver.  This obviously simplifies buying and selling and prevents uncertainty and misunderstandings.

Standards for primary commodities: Standards exist at the international level within most commodity trades.  For primary commodities, international standards cover grading, storage, packaging and conservation during transport as well as sanitary and environmental issues.  An exporter of primary commodities who does not comply with these international standards must sell on the basis of samples.  Buyers will usually pay a comparatively low price for such products as they will consider the possibility that actual consignments may vary from the sample.

Standards for manufactures : Standards become even more necessary as a country exports more manufacture products.  Then, the international standards apply not only to the quality of materials, but also to many aspects of product design.  For example, if a consumer purchases a table lamp she wants to be certain that the lamp will receive her bulbs and that its plug fits into standard wall sockets.

            Establishing standards : For your products, there may already be standards on an industry wide, national or even international level.  To export, international standards should be the

most important to you. When there are no established standards, the process of

standardization must start within your company.  To obtain information on standardization

procedures, you should turn to Pakistan Standards Institute or Trade Development Authority.

            Production process : It is obvious that you must master the production process to ensure good quality for your products.  In some cases, the production process may be similar or identical to processes used in other countries.  You could infringe on an existing patent for such a process.  Under the World Trade Organization (WTO) on trade -Related Aspects of Intellectual Property Rights (TRIPS) and the Agreement on Trade-Related Investment Measures, the holder of the patent could take action against you and perhaps damage your company seriously.  You must therefore make sure that there is no patent or related legal protection in regard to your production process or the goods you intend to produce.  Your chamber of commerce will help you on this matter.  If a patent exists, you could think of producing goods under licence.  This means that you may use the production technology but that you must pay for it.

            Product design : Ensuring that products are up to standard in terms of quality and specifications is only part of what is needed to make them right for the market.  Products have to look right in the eyes of consumer and they have to function in the way the consumer wants to use them.  Numerous SMEs all over the world have learned this at great cost.  Two SMEs can make similar products - radios, say, or shoes or any other manufactured or even handicraft product - and they can be of the same high quality and sell at the same price.  Moreover, both SMEs can be equally efficient in their delivery, sales, practices and servicing.  Yet the product of one SME can be a great market success, while that of the other SME fails.

               The only difference may be in the appearance of the products.  Quite simply, the final consumers liked the look of one product and did not like the other.

            Appearance is also important for industrial goods : The way a product looks is obviously crucial for consumer goods.  It may be just as important for many industrial products.  The appearance of parts and components may be critical if they are to form part of the finished consumer product.  But even when an industrial buyer is purchasing a product for use by his company, he may very well be influenced by appearance, all other aspects of the product being acceptable.

Designing for export presents special problems: The problems of achieving good product design increase when one enters export markets.

One reason is that tastes vary from one country to another.  In some European countries such as France, for example, many consumers still prefer what Scandinavians would consider old-fashioned furniture, and the colours and styles of clothing that appeal to many Mexican men would be unattractive in Germany.

               Finding out about these differences in product requirements is obviously much more difficult if you are a long way from the market.

Export products often have to go through three or more stages of transport between the factory and the consumer, and at each stage they are likely to be subject to rough handling.  They may be exposed to sea water or dampness or insect infestation, and may pass through extremes of hot or cold.  After the product reaches the market, it may need further

protection when it goes through the various stages of distribution and even when it is in storage.

Packaging and sales promotion: The sales promotion ftmction of packaging is especially important for consumer products when they are exported in the packs which reach the final consumer.  Very often consumer obtain their first impression of a product when they see it on the store shelf, usually side by side with competing products.  In effect, the packaging must act as the exporter's salesman; it must make consumers feel that is the product they want, and not the others that are also on display.

Packaging has at least five major functions:

· Protecting the product against damage and spoilage;

· Easing handling and transport;

· Informing the buyer about the contents;

· Stimulating purchase of the product by the final consumer; and

· Making the product easier to use

You should consider these functions and look at the packaging of your product(s) and

reflect on what can be improved.