INTERNATIONAL BUYING: AN EXPERIENTIAL EXERCISE Developments in Business Simulation & Experiential Exercises, Volume 13, 1986 233 INTERNATIONAL BUYING: AN EXPERIENTIAL EXERCISE Laura D. Jolly, Oklahoma State University Ann E. Fairhurst, Indiana University ABSTRACT An experiential exercise designed to teach retailing students international buying skills is described. Increased foreign buying activities make it important for educators to integrate international buying strategies into the curriculum. Student teams represented one of four retail firms and bought merchandise from other students posing as foreign manufacturers. Each team completed market research to determine the economic, political, and cultural climate of a foreign country as well as business customs that might affect negotiation. A situation analysis of the retail firm was also conducted. Buying decisions were made regarding open- to- buy, pricing, shipping, delivery, method of payment, and stock assortment. Teams negotiated with representatives of foreign manufacturing firms to achieve predetermined buying goals. INTRODUCTION An experiential exercise designed to teach retailing students buying on an international scale was developed. The objectives of the exercise were to 1) sensitize students to foreign buying customs, 2) familiarize students with import buying, and 3) develop decision-making skills relative to international buying. Apparel was chosen as the product since imports of textiles and apparel have doubled between 1980 and 1984. Imports have consumed 50 percent of the $100 billion American textile and apparel market [1:1. If the present trend continues, industry analysts predict that by 1990 almost all of the apparel market will have disappeared to overseas suppliers [2]. Other products are faced with growing imports as well. Given these facts, it is especially important that international buying skills be incorporated into the retailing curriculum. METHODOLOGY The exercise was used with undergraduate students enrolled in merchandise buying courses at two major universities. Class size averaged 50 students. Students were assigned to either a buying team or a manufacturing team. The composition of each team, team responsibilities, and the buying activity will be described. Buying Teams Each buying team consisted of three members, a Divisional Merchandise Manager, a Buyer, and an Assistant Buyer. Team members determined who would assume each role. Job descriptions were made available to assist the students in delegating team responsibilities. Each team was assigned one of four scenarios. The scenarios were as follows: 1) a department store seeking to purchase Oriental carpets in India, 2) a mass merchandiser seeking to purchase sweaters in the Philippines, 3) a specialty chain store seeking to purchase men’s oxford cloth shirts in Japan, and 4) a discount store seeking to purchase children’s wear in Hong Kong. Detailed information regarding each store, its target customer, and its past sales history was provided. Descriptions of the manufacturing firms were also provided. The descriptions included, product information, a price list, purchase quantity requirements, payment plans, delivery policies, customer loyalty, product standards, special services, and in some cases a resident buying office analysis. Teams were required to conduct a thorough country analysis, assess the economic and political environment and study business customs. Buying decisions were made regarding open-to-buy, dollar allocations to sizes, fabrics and colors, method of payment, shipping, delivery, and export prices. Manufacturing Teams Six manufacturing teams were formed, one each from India and the Philippines and two each from Japan and Hong Kong. Teams consisted of two students who assumed the role of manufacturers’ representatives. The manufacturing teams developed procedures for working with retail clients and developed policies on negotiable factors. The teams also conducted market research on the country they were representing to aid in more realistic role playing. The manufacturing firms were as follows: 1) Carosel Wear - Manila, Philippines, manufacturer of sweaters 2) Ghuman Export, Ltd. - Amritsar, Punjab, India, manufacturer of oriental carpet 3) Far East Traders - Japan, manufacturer of children’s clothing 4) Hong Kong Trading Co. - manufacturer of children’s clothing 5) Eastern Isle - Tokyo, Japan, manufacturer of men’s dress shirts 6) Oriental Traders - Hong Kong, manufacturer of men’s dress shirts Buying Activity Appointments were arranged between buying teams and manufacturing teams. Each team prepared for the appointment by establishing goals and objectives. For example, a buying team might have established pricing and delivery objectives with plans to negotiate on shipping. A manufacturing team on the other hand, might have set pricing and quantity targets with intentions to negotiate on delivery. Other negotiable factors were minimum order quantities, prices, colors, method of payment, delivery, shipment, product standards, and private labeling. At Developments in Business Simulation & Experiential Exercises, Volume 13, 1986 234 the conclusion of the negotiation session, a contract was signed between each buying and manufacturing team specifying the terms of the contract. ADMINISTRATION OF THE EXERCISE Preparation for this exercise began one week before it took place. Introductory material on foreign buying was presented in class prior to the assignment. Students were familiarized with the open-to-buy calculation procedure and with the negotiation process in general. A librarian was contacted for help in locating the best available sources of international market data. Materials found to be extremely helpful included: Business International Reports, and the Department of Commerce Publications, Overseas Business Reports and Foreign Economic Trends. Three class sessions (50 minutes each) were required for completion of the exercise: one to organize teams; one to negotiate contracts; and one to discuss outcomes. Time outside of class was necessary for team meetings and for market research. During the negotiations manufacturers were separated to allow for privacy and better role playing. Two rooms were needed to accommodate the teams. Following the negotiations, each team prepared a defense of their decisions and evaluated the outcomes of the negotiation process. Each team submitted for a grade market research findings, a situation analysis, and a statement summarizing their success in meeting predetermined objectives. EVALUATION AND DISCUSSION The exercise created much enthusiasm on both campuses. For example, buyers from the stores were surprised at how closely the manufacturers followed the business customs of their respective countries. Several manufacturing teams also prepared company logos. An unexpected sense of competitiveness emerged between the manufacturers from Japan and Hong Kong as they competed for dollars from the same retailers. An additional manufacturer might be added in India and the Philippines to provide this same sense of competitiveness. Several other suggestions are offered to enhance the exercise. Prior to the exercise, a telelecture with a buyer who frequently buys foreign merchandise might be scheduled. This would pique student interest and provide additional momentum. During the exercise, it might be stressed that the manufacturers have the option of changing their advertised policies. It should also be stressed that the cost of shipping be considered when spending open-to-buy dollars. One team allocated all dollars to merchandise and then realized they would also be required to pay shipping fees and insurance. Finally, buying teams might be ranked by their ability to achieve pre-set goals. For example, which department store team received the best “deal” from the manufacturer of Oriental carpets? In summary, the exercise was successful in sensitizing students to foreign buying customs and familiarizing them with import buying. Equally important, they developed better decision making skills, gained a flavor for international trade, and had lots of fun in the process. REFERENCES [1] Klapper, Marvin. “To Survive Move Fast on Fashion.” Women’s Wear Daily, Vol. 150, No. 53, Sept. 16, 1985, p. 1. [21 “Textile and Apparel Imports A National Concern.” Washington, D.C.: American Textile Manufacturers Institute, Inc., August, 1985, p. 2. Table of Contents Volume 13, 1986 How to Use Microcomputers in Human Resource Management Courses What's My Line? An Exercise in Job Analysis, Description and Classification Relationships Between Team Cohesion Dimensions and Business Game Performance Four Factors Affecting Group Performance in Business Policy Simulations Enhancing Strategic Management Goal-Setting Skills in the Business Policy Course Using a Business Simulation in the Principles of Management Course - Learning Outcomes and Perceptions Personal Computers: Drexel's Experience Using Psychological Type to Enhance Negotiation Skills The Effects of Conflict Handling Styles on Negotiation Behavior: An Analysis of an Experiential Exercise An Experiential Test of Bargaining Decisions and Representation Self-Grading of Examination by Students, A Viable Alternative to Traditional Procedures Perceived Instructor Enthusiasm and Student Achievement An Experiential Approach to Teaching Subordinate-Oriented Communication Assessing the Effects of a Computerized Study Guide in Macroeconomic Principles: A Statistical Analysis A Sales Management Simulation for the PC an Integrative Tool for the Sales Management Course Teaching Re-evaluation of Salespersons Through the Use of a Simulation Game A Test of Student Performance and Attitudes and Performance Under Varying Game Conditions Developing and Testing Airways: A Marketing Simulation Experiential Learning Revisited: Some Thoughts on Designing More Adaptive Management Education Programs Developing the Competencies of Creativity and Accurate Self-Assessment Self-View and Norms: Some Longitudinal Laboratory Results Strategic Planning with an Experiential Case The ABSEL Research Consortium: Preliminary Steps and Position Papers An Analysis of ABSEL Conference papers (1974-1985) The Creation and Operation of a Data-base System for ABSEL Research Funding for a Research Consortium on Simulation and Experiential Learning Simulation - Indoctrination or Learning The Dilemma In Evaluating Classroom Innovations Personality Variables on Group Cohesion, Team Participation and Total Learning Justifications for and Problems in Developing and Using Computerized Experiential Activities Management Competency Models and the Life-Long Learning Project: What Role for ABSEL External Validity of Business Games Restructuring the University - An Experiential Exercise The Surrogate Class Exercise Images of Effectiveness: A Classroom Exercise The Algebran Industry: A Tutorial Framework Another Chance: A Multi-Leveled, Macro Business Game for Micro-Computers A Water Quality Management Simulation Game Acquisitions? Divestitures? Progress Report on a Conglomerate Game Enterprise: A Multi-Purpose Management Development Simulation Marketer: A Microcomputer Simulation in a High Tech Industry A Pedagogical Analysis of Alternative Tax Elections for Exploration Costs in the Mining Industry Using of Multiple Microcomputers Application Programs to Teach Fundamental Business Concepts and Practices Demonstrating the Role of Simulation in Strategic Operations Planning: A Case Study in Bank Check Processing Location Analysis The Subjective Side of the Decision Support System: A Pitfall for the Panacea A Group-Based Procedure for Revealing Judgmental Heuristics and Biases An Experiential Exercise in Bayesian Decision-Making Values for Selected Parameters in Physical Distribution Simulation and Games Computerized Business Management Simulations for Tyros The Management Decision Laboratory at New York University An Example: The Use of Management Games on Microcomputers by Computer Novices Enhancing Mainframe Simulation Via Microcomputers: Designing Decision Support Systems Integrating Personal Computers Into a Course as a Decision Support Tool A Decision Support System for Capital Funds Forecasting Performance and Attitudinal Affects of a Decision Support Package in a Business Game Using the Real World: Interviews with Woman Mangers The Cooperatively-Authored Student Handbook International Buying: An Experiential Exercise The Research/Teaching Interface: Turning a Pretest into an Experiential Exercise Building Microcomputer Business Simulations Simulation with Discrete and Continuous Mathematical Modeling An Interpolation Approach to Developing mathematical Functions for Business Simulations The Design of Simulation Models Using Thought Organizers The Assessment Center as a Teaching/Learning Device An Approach to Meeting the AACSB Guidelines for Introducing Skills and Personal Characteristics (SACs) Using an Interclass Simulating and Role-Playing Pedagogy Experiential Learning about the World of Work: A Program for Primary and Secondary School Educators Assessment of Relevant Personal Characteristics of Potential Entrepreneurs