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Interviews conducted by members of the ECE, (Economic Committee of Europe) with enterprises engaged in third-market, cooperation have identified several areas in which problems occurred. Many of these problems are characteristic of the particular industrial sector in which the cooperation takes place and cannot be generalized to supply to other sectors.
When vehicles and machinery made under cooperation arrangements are launched on new markets, substantial modifications may have to be made in basic features. Such changes may be dictated by a lack of servicing facilities for the prescribed frequency of service for the standard model and an operating environment that is different from that prevailing in either of the partner’s home markets. Since acceptance of the product in question by the client depends upon the manufacturer successfully satisfying his specifications, the partners must closely coordinate their ordering procedures in such a way that these changed specifications are communicated in time to the manufacturing plants. If the producing enterprise has a long lead-time as a result of internal planning procedures, it may find it difficult to make the necessary changes in the standard model during the time available, to the detriment of its relations with clients in the third-market. Clearly, this is an area in which effective managerial techniques can prevent such problems from arising.
Rapid fluctuations in demand are characteristic of the market for many of the chemical products manufactured under east-west cooperation arrangement. In order to respond to such shifts in demand, the supplying enterprise must remain in close touch with the market, either directly or through its western partner, in order to adjust its production schedules to take these shifts into account. Otherwise it may find itself with large inventories of unsalable products while its partner may be in the difficult position of hastening to find an alternative market for the amounts no longer required by the target market.
In the turnkey-plant sector, partner enterprise often discover that they derive totally different results from using the same local subcontractors. According to several western plant contractors interviewed, while the eastern partner obtained complete satisfaction from local suppliers, the western partner found little cooperation, forthcoming long delivery delays, and other shortcomings. This difference usually arises in the case of developing countries in which the western firm has no experience and the eastern enterprise may have been active for many years. Obviously in such cases it is recommended that the western firm rely on its partners established links with local suppliers instead Of attempting to deal with them on its own.
Consumer goods made under cooperation arrangements and supplied to third markets often pass through a period of poor buyer acceptance, which is due to inappropriate or insufficient packaging. Since many branded consumer goods are distinguished from one another at the point of sale mainly by their packages, the key to the successful introduction of a new product in a third-market is correct assessment of consumer preferences. This assessment can best be carried out in the market-place by using up-to-date techniques for measuring buyer response to package shape, colour and presentation. Which partner should be responsible for conducting such testing, and who should pay for this costly exercise, should be decided well in advance of the decision to enter the market or to select the type of distribution network for the product in question.