The Necessity of Added Value as Prerequisite of International Trade (1)

Value is determined primarily by the customer. “Value” can be defined as features or functions that the customer is willing to pay for. Cultural variation means that value varies according to the consumer’s culture, personal perception, and own value system. In international business, an understanding of value – as defined by the culture in which a product or service is being offered – is prerequisite.

In goods and freight terms, expectations of timeliness and efficiency are likely to vary from country to country, as are quality requirements, which have weight and security implications. Shipping goods to international customers entails various value-added considerations: localised hard features (such as AC/DC adapters for compatibility with local power supplies); localised soft features (such as LCD panels that display in the local language), guarantees and warranties, packaging quality expectations (very high in some cultures e.g. Japan); and demand for availability of parts, consumables, replacement items, and accessories. Hence, volume and weight of goods is subject to market preferences and expectations. When shipping cost (distance) and degree of localisation have been estimated, close-to-market production may permit higher profit margins than distant production.

Depending on the buyer, there will also be values relating specifically to logistical processes: high-speed delivery, for example, will likely be a value for which customers are prepared to pay, particularly in business-to-business scenarios in which the customer is a manufacturer operating a just-in-time system. Similarly, well protected, unblemished, pre-packaged designer garments in ready-to-sell condition will be highly valued by prestige retailers, whose customers will both expect and pay for such conditions. This constitutes added logistics value from a business perspective.