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Export Plan

(Export PlanA PRACTICAL GUIDE FOR COMPANIES AND PROFESSIONALS)

ÍNDICE

TABLE OF CONTENTS

(PLAN STRUCTURE 5)

(SECTIONS 6)

(EXPLANATORY NOTES 36)

(CASE STUDY 68)

INTRODUCTION

The purpose of the Export Plan is to prepare companies to enter the international market place or to better organize their existing international business activity. The plan will serve as step-by-step guide to lead the company through the process of exporting products and services to international markets.

The Plan is divided into six sections following a temporal sequence. Each section help to plan international business strategies and take effective export decisions. Companies, specially SMEs, that carefully use this guide will get the following benefits:

· Assessment of export potential and capabilities.

· Identify target markets.

· Choose the best market entry strategy.

· Selection of products more suitable for international markets.

· Better management of international business operations

· Evaluate the financial resources, sales goals and profits of the Plan

For each section, the Plan provides worksheets with corresponding explanatory text so that the user guide does not have difficulty developing and completing the Plan. It also offers a case study that serves as example to apply the methodology.

( STAGE I INTERNATIONAL DIAGNOSTIC STAGE VI ECONOMIC PLAN STAGE II MARKET SELECTION STAGE III MARKET ENTRY METHODS STAGE IV INTERNATIONAL OFFER STAGE V INTERNATIONAL PROMOTION STRATEGY INTERNATIONAL BUSINESS PLAN: STAGES )

EXPORT PLAN STRUCTURE

SECTION 1:BACKGROUND ANALYSIS

1.1Internal analysis (company)

1.2External analysis (industry)

1.3International SWOT analysis

1.4Preliminary assessment

SECTION 2:MARKET SELECTION

2.1Concentration vs. Diversification

2.2Best trade areas

2.3Target market identification

2.4Selection of target market

SECTION 3:MARKET ENTRY

3.1Market entry strategies

3.2Choosing a method of market entry

3.3Selection of clients, distributors and partners

3.4Negotiating conditions

SECTION 4:PRODUCT AND PRICE STRATEGY

4.1Product and service selection for target market

4.2Standardization vs. adaptation

4.3Pricing strategy

4.4Terms and procedures

SECTION 5:COMMUNICATION STRATEGY

5.1Brand

5.2 Positioning in target market

5.3Communication tools

5.4Communication budget

SECTION 6: BUSINESS PLAN

6.1Sales forecast

6.2International overhead expenses

6.3Projected income statement

(SECTIONS)

(DIAGNÓSTICO DE INTERNACIONALIZACIÓN)

(INTERNAL ANALYSIS (COMPANY)EXTERNAL ANALYSIS (INDUSTRY)INTERNATIONAL SWOT ANALYSISPRELIMINARY ASSESSMENT SECTION IBACKGROUND ANALYSIS)

º

Plan development Section I: Background Anaysis

1.1. Internal Analysis (company)

Classify the following competitive capacities of your company for international expansion; indicate those considered as strengths (insert "S") or as weaknesses (insert "W"). In the case where they are not affected significantly (insert "-"). With regards to the selected capacities add two other strengths and weaknesses of the company that are important for its international activity.

COMPETITIVE CAPACITIES

S,W or (-)

Geographical location of the company

Available production capacity

Level of technology

Financial resources for current capital

Financial resources for foreign investments

Foreign market information

Commercial network and contacts abroad

International experience of human resources

Knowledge of languages

Corporate and brand image

Motivation towards going international

Decision making

Plan development Section I: Background Analysis

1.2 External Analysis (industry)

Classify the following factors of international and industry environment by selecting the factors which have a positive impact – opportunities, mark “O” – or negative impact – threats mark “T”. In the case where there is no significant effect mark

("-"). Also add two other opportunities and threats of great importance for the international activity of the company.

ENVIRONMENTAL AND SECTOR FACTORS

O,T or (-)

Reduction of barriers (custom tariffs, quotas) to international trade

Technical barriers to international trade

Economic integration of countries (EU, NAFTA, ASEAN, MERCOSUR)

Use of Internet for international business

Improvement of the transport systems

Level of maturity of the internal market

Appearance of emerging markets as manufacturers

Appearance of emerging markets as consumers

Concentration of the ownership of the companies

Increasing power of retail

Appearance of new products

Changes in consumer behaviour

Plan development Section I: Background Analysis

1.3International SWOT Analysis

Classify by order of importance for your company the first three strengths, weaknesses, opportunities and threats that you have identified on the worksheets 1.1 and 1.2.

Order

STRENGTHS

WEAKNESSES

1

2

3

Order

OPPORTUNITIES

THREATS

1

2

3

Plan development Section I: Background Anaysis

1.4Preliminary Assessment

From the analysis made on the previous worksheets indicate the five most important aspects that your company has to take into account in order to carry out this e process of internationalization.

1

2

3

4

5

(CONCENTRATION VS. DIVERSIFICATION BEST TRADE AREASTARGET MARKET IDENTIFICATIONSELECTIO OF TARGET MARKET SECTION IIMARKET SELECTION)

( STAGE 1 STAGE V STAGE II STAGE III STAGE VI MARKET SELECTION STAGE IV )

Plan development Section II: Market Selection


Choose the concentration (C) or diversification (D) alternative for the markets which correspond to the characteristics of the company/product. If you find that the characteristics favour the concentration alternative: note “C” in the left column and in contrary those which favour the diversification alternative: note “D” in the right column.

CONCENTRATION

DIVERSIFICATION

The potential number of clients in each market is high

The potential number of clients in each market is limited

The “key” markets are stable with sustained demand

The key markets are very cyclical with changing demand

Markets shared by a large number of competitors

Markets dominated by a limited number of competitors

Sale is based in factors different to price

Sale is fundamentally achieved by price

The product cycle is long

The product cycle is short

The consumer is loyal to the usual supplier

The consumer is not loyal to the usual supplier

Product requires a complex and costly adaptation

The product is standard in all different markets

Selling demands investments in promotion/publicity

Selling does not demand investments in promotion/publicity

Administrative and follow up costs of sales are high

The costs of administrative and follow up of sales are reduced

Sales are repetitive to final client

The product is not repetitive selling to the client

DIAGNOSTIC


2.2Best Trade Areas

In order to classify the countries, the following criteria is necessary; choose two countries which you consider the most important for your company noting an “X” in the left column. Transform the group of countries into subgroups based on the characteristics of the chosen criteria. If in the previous sheet the diagnostic is of concentration choose five countries which belong to one of these groups, if it is of diversification, choose ten countries. List them in alphabetical order.

CRITERIA

LIMITATION OF THE GROUP

Geographically

Level of development

Economic growth

Buying/consumption habits

Language

LIST OF COUNTRIES IN ALPHABETICAL ORDER

1.

5.

7.

10.

2.

6.

8.

4.

8.

9.


2.3Target Market Identification

Evaluate each of the chosen countries on the previous sheet in agreement with the following criteria. Note a maximum of 5 points to the most favourable and a minimum of 1 point to the least favourable. If necessary add up to three criteria more which you consider the most relevant for your company.

COUNTRIES

PRESELECTION CRITERIA

1

2

3

4

5

6

7

8

9

10

Geographic proximity

Cultural proximity

Cuantitative restrictions on imports

Cualitative restrictions on imports

Information availability

Economic situation (growth perspectives)

Financial situation (risk of unpayment)

Previous experience (volume of company´s country exports)

Potential demand(volume of imports)

Valuation of your company´s country

TOTAL


2.4 Selection of Target Markets

Select the country which has obtained the top score (for a concentration strategy) or three countries (for a diversification strategy), that would be the regions or cities which offer the greatest potential to trade your products.

COUNTRIES/MARKETS

REGIONS/CITIES

1.

2.

3.

(MARKET ENTRY STRATEGIESCHOOSING A METHOD OF MARKET ENTRY SELECTION OF CLIENTS, DISTRIBUTORS AND PARTNERS NEGOTIATING CONDITIONSSECTION IIIMARKET ENTRY )

Plan development Section III: Market Entry

3.1Market Entry Srategies

Choose between the following market entry methods that your company could employ to sell your products in the chosen market in worksheet 2.4.

Direct exports from your country to final client (DE)

Exports via the Internet – electronic commerce (EC)

Commercial agent in the foreign country (CA)

Importer and distributor in the foreign country (I/D)

Purchasing centres/Large retail chains

Trading companies (T/C)

Piggyback agreements with foreign manufacturers (PG)

Franchise agreements (FA)

Licence agreements (LA)

Establishment of a sales Branch(SB)

Establishment of a sales subsidiary (SS)

Establishment of a mixed company (MC)


3.2Choosing a method of Market Entry

From the following criteria select the form of entry; choose those which are considered the most relevant for your company, noting “X” in the left column. If you consider it necessary add three more criteria. Once you have chosen the criteria, value the four most favourable selected alternatives on the sheet 3.1, for each of the criteria. Give 5 points to the most favourable alternatives, 4 to the second most favourable, 2 to the third most favourable and 1 to the least favourable.

SELECTION CRITERIA

DE

EC

CA

I/D

Your company relies on a shortage of resources to access the foreign markets

In your sector it is difficult to find qualified sales workforce for international sales

Your product requires a foreign stock which your company does not wish to finance

You wish to reduce foreign intermediation margins as much as possible

The product requires demonstrations or a room of expositions for the clientele

The product requires a post sale service.

You wish to negotiate directly with the final client

You want to develop a brand policy in the foreign markets

You do not want to assume the risk of unpayment of a large number of clients

For your international strategy look for partnerships with reliable companies

TOTAL

DIAGNOSTIC


3.3Selection of Clients, Distributors and Partners

Depending on the form of entry chosen in sheet 3.2, describe the profile of the ideal client, agent, distributor, franchiser or qualified partner to sell your products within the chosen markets on sheet 2.4. Define the characteristics which appear the most and add up to three more, if required.

Chosen form of entry

Company size

Business culture

Product range

Solvency

International experience

Instalations

Commercial practices

Plan development Section III: Market Selection


Define the following conditions which determine your negotiation policy for the chosen market entry in sheet 3.2. Add and define up to three more conditions which may be necessary to negotiate.


Type of contract

Products

Selling targets

Exclusivity

Geographic area

Industrial property

(PRODUCT AND SERVICE SELECTION FOR TARGET MARKETSTANDARDIZATION VS. ADAPTATION PRICING STRATEGYTERMS AND PROCEDURESSECTION IVPRODUCT AND PRICE STRATEGY)

Plan development Section IV: Product and Price Strategy

4.1Product and Service Selection for Target Market

Out of the range of products which your company produces choose three which represent the greatest volume of business in the domestic market, if the product range is very diverse select strategic units of the product. For the three selected strategic products/units evaluate the following factors with a maximum of five points (very favourable) and a minimum of one point (least favourable) in order to sell these products in the chosen country in sheet 2.4. Add up to three factors more if you consider it necessary.

Product/SU 1

Product/SU 2

Product/SU 3

PRODUCT

1

PRODUCT

2

PRODUCT

3

Production capacity

Commercial margin in the domestic market

Commercial experience

Integration of new technologies/designs

Adaptation cost to the habits of the country of destination

Adaptation cost to the consumer habits of country of destination

Transport costs

Differentiated advantages in relation to final offer

Price advantages in relation to the final offer

Strategic product


4.2Standardization vs. Adaptation

Indicate the product’s attributes which are standard (S) and those which have to be adapted (A) in order to sell the chosen product/SU on the previous sheet, in the selected foreign market in sheet 2.4. If necessary add up to three more attributes which may be necessary to adapt. Describe what the adaptation consists of.

ATRIBUTES

S

A

DESCRIPTION OF THE ADAPTATION

Components

Quality

Design

Packaging

Packing

Etiquette

Brand

Client Service


4.3Pricing Strategy

Determine the break down of prices for the chosen market in sheet 2.4 for the strategy which has the highest potential of sales. Specify a fixed % which corresponds to the margin.

Target Market

Strategic Product

Price elements

%

Amount

Cumulative

Cost price

Commercial Margin

Transport and insurance costs

Customs tariffs and custom charges/costs

Import/distribution margin

Retail margin

Miscellaneous charges

Final selling price

EXPORT PLAN

6

Global Marketing Strategies. All rights reserved.


4.4Terms and Procedures

Prepare a business offer for a client in the chosen market in sheet 2.4. Include any specifications for each of the elements that make up the commercial offer.

CLIENT:

PRODUCT

· Denomination

· Quality

· Origin

QUANTITY

· Consumption unit

· Minimum order

· Total units (minimum order)

· Weight (tons)

PRICE

- Unit

- Total

DELIVERY CONDITIONS

- Incoterm and place of delivery

- Delivery date

CONDITIONS OF PAYMENT

- Means of payment

· Date of payment

OTHER CONDITIONS OF THE OFFER

· Certificates

· Validity of the offer

(BRANDPOSITIONING IN TARGET MARKETCOMMUNICATION TOOLSCOMMUNICATION BUDGETSECTION VCOMMUNICATION STRATEGY)

ECTION

Plan development Section V: Communication Strategy

5.1Brand

Formulate a new brand for your products in foreign markets. Compare it with the brand incorporated in the domestic market, evaluating both to a maximum value of 5 points and to a minimum of 1 point, for each of the following factors. Add three more factors if you consider it necessary.

Domestic market brand

Foreign market brand

EVALUATION OF THE BRAND

DOMESTIC BRAND

FOREIGN BRAND

Ability to pronounce in other languages

Ability to remember

Aplicable to all the products in the same line

Without negative meanings

Valid for all markets

TOTAL

DIAGNOSTIC:

If the foreign brand exceeds 7 points or more than the domestic brand, it is advisable to introduce a new brand for foreign markets.


5.2Positioning inTarget Market

Among the following positioning strategies, which international markets do you consider the most suitable for your products?

Positioning based on the characteristics of the product/service

Positioning based on the benefits of the product/service

Positioning based on the usage/applications of the product

Positioning based on the segmentation of users

Positioning based on the relation between quality/price

Positioning at the level of the competition

Draw up a promotional message that effectively communicates the chosen positioning.

Your language

In English


5.3Communication Tools

Evaluate the most suitable communication tools, from a maximum of 5 points to a minimum of 1 point, in order to increase awareness of your product in the foreign markets. If you consider it necessary add up to a maximum of three extra tools.

Communication Tools

Valuation

Promotional documentation (catalogues and brochures)

Web site (adapting the web sheet)

Promotional video

Fairs and exhibitions

Media advertisements

Advertisements in specialized magazines

Advertisements on the radio

Outdoor advertising ( billboards)

Point of sale promotion

Sponsorship of events (sporting, business)

Seminars, conferences


5.4Communication Budget

Choose the criteria which is considered the most suitable to fix the price for the communication budget of your company in foreign markets. Add other criteria if you consider it necessary.

What can the company afford

Percentage of sales from the previous year.

Percentage of target sales for the next year

Comparison with the competition

Based on the chosen criteria establish a promotion budget for year 1 of the international sales plan.

Communication budget year 1

Distribute the budget between the five most valuable promotion tools in the previous sheet.

Promotion Tools

Budget

TOTAL

(SALES FORECASTINTERNATIONAL OVERHEAD EXPENSESPROJECTED INCOME STATEMENTSECTION VI BUSINESS PLAN)

Plan development Section VI: Business Plan

6.1Sales Forecast

Establish target sales for each of the selected target markets in sheet 2.4 and for the rest of the foreign markets, in the following three years. Calculate the percentage of interanual growth.

Market

Year1

%

Year 2

%

Year 3

%

Other markets

Total foreign sales

Calculate the percentage of sales in the foreign markets as a percentage of the total turnover of the company

Year 1

Year 2

Year 3

Export/total sales



Develop the provisional operating account of the company in the foreign markets for year 1 of the plan, according to the following model.

Year 1

FOREIGN SALES

GROSS MARGIN

STRUCTURE COSTS

- Salaries and social costs of exporting

- Suppliers and communications

- Teams and office equipement

- External advisors

- Structure costs

SALES COSTS

- Commercial trips

- Commission

- Discounts

- Buying of information

- Communication costs (promotion and publicity)

- Other sales costs

OPERATING BALANCE


6.3 Business Plan

Develop a sales provision, margins and operating costs for the first three years of the plan.

Year 1

Year 2

Year 3

FOREIGN SALES

GROSS MARGIN

COSTS STRUCTURE

SALES COSTS

OPERATING BALANCE

(EXPLANATORY NOTES)

(SECTION IBACKGROUND ANALYSIS)

(INTERNAL ANALYSIS (COMPANY))

(EXTERNAL ANALYSIS (INDUSTRY))

(INTERNATIONAL SWOT ANALYSIS)

(PRELIMINARY ASSESSMENT)

Explanatory Notes Section I: Background Analysis

1.1.Internal analysis (company)

In order to make the most of your company’s strengths and improve your weaknesses, the internationalisation plan begins with an analysis of the competitive capacities of the company in relation to the foreign markets in order to achieve profit maximisation.

Some strengths which make international success possible are:

· Achieve sufficient production capacity or surplus in order to satisfy an increase of demand in foreign commercial activities.

· Availability of a suitable level of technology and quality which allows you to take on the emerging market successfully.

· Availability of the necessary flexibility to adapt the product to the needs of certain foreign markets.

· The most common weaknesses of exporting companies are:

· Lack of resources to finance the current capital of the international operations

· Lack of knowledge and information about foreign market resources and the way to create an international commercial network

· Incapability to attain the suitable human resources for the export tasks – in terms of experience, knowledge of foreign trade and languages.


1.2External Analysis (industry)

The external analysis leads to an identification of the economic, policies and social trends, which may affect the international evolution of the industry where the company plans to develop its activity.

Generally, companies do not have the capacity to influence in these trends; however one should know what they consist of:

· Negative trend: constitutes a threat; something companies have to confront.

· Positive trend: constitutes an opportunity to make the most of.

Below are some examples:

· Free trade: through the World Trade Organisation (WTO) and other international agreements the barriers to trade are been dismantled. Even though this creates a potential opportunity in increasing the accessibility to international markets for the exporter, this could also be a threat for other companies which are not capable to maintain a position in the domestic market and are increasingly more open to competition from foreign companies.

· Internet use: this is another factor which could affect the companies in many different ways. In some cases companies are using information technology to improve their operations in foreign markets. For example seeking importers through foreign trade searches, making offers onlinel or incorporating their products to marketplaces.

· Consolidation of emerging countries (South-East Asia, Latin-America, and North Africa): the penetration of products from these countries in the developed countries increases the level of competitiveness. Equally, the level of prosperity increases in these emerging countries, and so they are now priority target markets, especially in industrial and consumption products.


1.3International SWOT Analysis

The SWOT analysis is a very useful tool to identify the key factors in the foreign and domestic environment. It is vital for the company in indicating exactly what to take into account to design their internationa strategy. This is distinguished through Strengths (S), Weaknesses (W), Opportunities (O), and Threats (T).

· The threats are factors of the international environment that are out of control. They can affect the accomplishment of the objectives of the Plan.

· The opportunities are factors of the international environment that favour the achievement of company’s objectives.

· The strengths are internal factors of the company which will support the success of internationalisation.

· The weaknesses are also internal factors which put in danger the success of the plan, and therefore should be modified as soon as possible.

Explanatory Notes Section I: Backgroung Analysis

1.4Preliminary Assessment

Once the principal strengths, weaknesses, opportunities and threats are identified you must get some conclusions and at the same time describe actions you wish to proceed successfully with in the foreign markets. These conclusions are double-sided: for business strategy and resources.

Business strategy: the company should consider questions for example:

· Is it capable in completing the legal normative of the most demanding countries?

· Does it have the production volume to supply the large clients?

· Can it adapt the product and service to the needs of the different domestic markets?

· Can it sell its products internationally trough Internet?

Resources: the conclusions about the available resources should contain questions such as:

· Is it necessary to count on specialized personnel to sell abroad?

· Does the company have resources to finance the buying of primary materials, machines, etc, necessary for internationalisation?

· Is it necessary to promote the best brand/company image to sell abroad?

· Is the owner motivated to make the most of internationalisation?

(CONCENTRATION VS. DIVERSIFICATIONBEST TRADE AREASTARGET MARKET IDENTIFICATION SELECTION OF TARGET MARKET SECTION IIMARKET SELECTION)

Explanatory Notes Section II: Market Selection


Before initiating the process of market selection, the company should decide whether a concentration or a diversification strategy is better to approach the foreign markets.

* Concentration: a limited number of markets are selected to focus commercial efforts on them and achieve a certain level of penetration.

* Diversification: the company operates in a large number of markets. The growth strategy is based in selling to these and to achieve a high level of penetration in each one of them.

The number of markets which indicate a concentration or a diversification strategy depends on the size of the company and its international experience. For example if a SME with low experience selects 1 or 2 markets it has chosen the concentration strategy, while on the other hand a diversification strategy consists of the selection of over 3 markets.

The method on this sheet uses factors to define a strategy of concentration or diversification. For example:

· Concentration: If in the international selling process the consumer is loyal to the supplier, generally there exist a high number of final clients in the market and it is necessary to carry out investments in promotion/advertisement, therefore a concentration strategy is more suitable.

· Diversification: in contrast, if the product sells better by price, it is standard in different markets and the number of clients is limited, in this case it is advisable to be established in various markets and therefore a diversification strategy applies.

Depending on the type of activity the most advisable is:

· Concentration: food and beverage and consumer products with a brand.

· Diversification: consumer products with private brands, unprocessed goods and industrial products.

The company’s decision depends on the importance of each one of the factors they have to analyse.


2.2Best Trade Areas

In the first pre-selection of the markets, it is not suitable to just consider the individual countries. It is asdvisable to consider them in groups or combinations of countries. Following the initial filter you should select areas or markets which complete the basic criteria and these countries will subsequently be analysed in depth. It is not about selecting the most favourable country; the most important is to eliminate those countries which do not comply with the basic criteria. The grouping of countries is based on five criteria. Below are some examples how you could limit the groups by criteria.

· Geographic: up to 5000 km of distance, the possibility of transport by motorway, time – the limit on delivery is three days.

· Level of development: developing countries (G-7, OECD), emerging countries, central and Eastern European countries.

· Economic growth: countries with a growth forecast of a GDP greater than 5%, import growth in the last three years greater than 7% annually.

· Consumer/buying habits: general consumption, buying in large retail chains, un -seasonal buying.

· Languages: english, French, Spanish, Arabic, etc.



In order to select the most favourable markets you have to evaluate each of the countries selected on the previous sheet and evaluate in agreement with the criteria which serves as a second filter

The following criteria are useful in order to achieve a valuation of the country.

High Score

Low score


EU

South east Asia

Cuantitative restrictions

EU

India

Cualitative restrictions

Latin America

USA Japan

Availability of information

USA, Netherlands

Eqypt, Nigeria

Economic situation

Mexico

Argentina

Finance situation

Switzerland, Nordic countries

Russia, Venezuela

Valuation of “made in”: your company´s country

Latin America

France, Italy


2.4Selection of target market

Following the selection of the countries on the previous sheet, choose the regions or cities where you will initiate foriegn trade. For example if the intention is to export food products to the United States, the most advisable at the beginning is to start with Florida State and the cities on the east coast (New York, Boston, etc.)

(MARKET ENTRY STRATEGIESCHOOSING A METHOD OF MARKET ENTRYSELECTION OF CLIENTS, DISTRIBUTOR AND PARTNERSNEGOTIATING CONDITIONSSECTION IIIMARKET ENTRY)

Explanatory Notes Section III: Market Entry

3.1Market Entry Strategies

The main alternatives to commercialize your products abroad are the following:

· Direct exports (D/E): the company has its own commercial team (director of exports/export executives) who perform direct sales with the clients. This is very useful for products where the final number of clients are limited (for example public work machinery or the sale of food and beverage products to large purchasing centres).

· Electronic commerce (EC): consists of receiving orders over the internet. It requires a system of guarantee of payments and a logistic capacity to comply with delivery conditions. Overall it is commonly used in developing countries, mainly in export trade between companies and in the sales of certain consumer products (books, wine, gourmet food, etc.)

· Commercial agent (C/A): the commercial agent operates representing the company but it has very limited powers. It is not a client but an intermediary who presents and negotiates the final offer with clients or distributors. It is useful when the final number of clients in a foreign country is too high to attend them from the country of origin (for example, this form of entry is used to sell home textiles or furniture in Germany).

· Importer/Distributor (I/D): this is the most common way for SMEs which export. The distributor works with its own portfolio of clients and offers services such as transport, storage, after – sales service, etc. The distributor is a client, who buys directly except in some sectors, those which practice consignment sales (for example fruit sales in France), where the distributor operates more like an agent.

· Purchasing centres (PC): these are corporations of distribution companies which group their purchasing in order to have a greater capacity to negotiate with the suppliers. Occasionally they operate as wholesalers. They are very demanding with regards to the quality of the product and the compliance with delivery conditions. It has a growing importance in the commercialization of consumer goods.

· Trading companies (TC): these are import – export companies which specialise in foreign markets. They know the needs and capacities of consumption of the clients and distributors. Occasionally they can participate or collaborate together in the financial package of the operations. They have a special form of entry in Japan, China and Eastern countries due to their importance of being such large companies.


· Piggyback agreement (PG): this agreement is a collaboration between various manufacturers from non–competitive and complementary products in order to profit the most from the established distribution channels. The remuneration can be determined via a discount that the supplier (exporter) achieves through the carrier company (manufacturer in the foreign country) or by a commission depending on the sales as payment from the supplying company to the carrier company.

· Franchise agreement (FA): this is a contract between the supplier, retailer or organization of services (franchiser) and a retailer (franchisee). It is based in the product, service or brand that the franchiser gives to the franchisee for its operation in agreement with some determined norms. The franchisee receives technical support and it benefits from institutional publicity and many other advantages. The franchiser obtains compensation through different mediums, principally a percentage of the sales or a contribution of the profits.

· Licence agreement (LA): this agreement consists of an access to a technology or a certain way of manufacturing in exchange for a finance compensation which is carried out with the payment of royalties or commissions. The licenser has the technology and the know-how, and the licensee receives exclusive rights to produce and sell in markets. When the technical knowledge that they give is not protected by a patent we talk of “Technical Assistance”.

· Sales Branch (SB): consists of the expansion of the company’s commercial department to a foreign market. In legal terms, the branch forms part of the head office, in this sense one does not depend on the operating facilities that a subsidiary requires.

· Sales subsidiary (SS): it is a form of entry that you can use once you have reached a certain volume of sales in the market. It presents numerous advantages: a direct relationship with the client, independence to fix final prices, the elimination of commercial margins, greater agility in distribution and the possibility to offer a post sales service. The disadvantage is that it demands an unnecessary investment in market entry methods and it assumes a greater risk and a certain level of commitment.

· Mixed company. this is a company created by two or more companies from different countries for the common development of an activity. Usually they are companies of the same sector but with different competitive advantages. For example, the participation of one of the associates may consist of the transference of technology while the other may consist of an in-depth knowledge of the market and distribution network. It is a very useful form of entry for markets with difficult access (China, Eastern countries) which depends a lot on preferential finance and the support from international programs.


3.2Choosing a Method of Market Entry

If the company wishes to penetrate a new market it is vital to find an importer or a client before deciding how to penetrate the market. However, the chosen form of entry will be determined depending on the success in the short - medium term. Once the possible alternatives are chosen in the previous sheet one should select the most favourable and evaluate them on certain criteria. Below are a few examples demonstrating how to valuate this criterion.

FAVOURABLE ALTERNATIVES

NOT FAVOURABALE ALTERNATIVE

Resource shortage

Commercial Agent

Trading companies

Mixed company

Difficult to find qualified workforce

for exports

Importer/ distributor

Purchase centres

Direct exports

Commercial delegation

Necessity of foreign storage

Importer/distributor

Piggyback agreement

Direct exports

Commercial agent

Reduction of intermediation margins

Direct export

E-commerce


Piggyback agreement

Requirement of demonstrations for the clientele

Importer/Distributor

Delegation/Sales subsidiary

Direct exports

Commercial agent

Need for after sales service

Delegation/Sales subsidiary, Licence agreement

Direct exports

Commecial agent

Direct negotiation with the final client

Filial comercial

Direct exports

E - commerce

Sales subsidiary

Commercial agent


Trading campaign

Development of brand policy

Sales Branch/Franchise

Piggyback agreement

Trading campaign

One does not want to assume the risk of unpayment of a large number of clients

Trading campaign

Licencsing agreement

Direct exports

Commercial agent

Strategy of finding partnerships

Piggyback agreements

Licence agreements

Mixed companies

Direct exports

Trading company



Once the form of entry is chosen it is advisable to develop the company´s profile – even if you have final clients, intermediaries or partners – through those you will efficiently penetrate the market. The aspects that must be defined in this role are the following:

· Size of the company: it should be of sufficient size to comply with the trading objectives, but not excessive, however in such a way so they can reach demand and not exert too much power on the international negotiations.

· Business culture: similar in terms of appreciation of quality, use of technologies, decision - making, investment, promotion etc.

· Product range: preferably complementary to what the export company offers.

· Solvency: payment history without conflicts or complaints in previous years. Also look for companies belonging to multinational groups.

· International experience: preferable companies with experience of imports of your products from your geographical area (UE, North America, Asia, etc)

· Installations: storage, means of transport, commercial network, etc. in order to trade the product in an assigned area

· Commercial practices: conditions of payment and delivery conformity with the offer you are going to realize.


3.4Negotiating Conditions

Once the characteristics of the ideal client/intermediary/partnership are defined it is necessary to establish the conditions which delimit the business relationship between both parties. The aspects to look out for are the following:

· Type of contract: it is necessary to implement a contract which guarantees from the beginning the accomplishment of the commitments which they acquire. The contract type depends on the chosen form of entry (buying and selling for direct exports, business agent or distributor as intermediaries, licence agreements for the transfer of technology)

· Products: you must determine a description of the products and trading brands which are distributed from the exporter to the supplier. In the contract you can leave open the possibility to add more products that the exporting company might manufacture however in the first few years it remains excluded from the contract.

· Selling objectives: this consists of a determined volume of sales, minimum quantity of purchase; positioning of the product in a certain number of points of sale, etc. The objectives must always be quantifiable and refer to a limited amount of time.

· Exclusivity: this is a very important aspect as it affects the business expectations of both parties, in terms of what is not advisable in the first negotiation. One can establish a test period (for example, one year), whereby both parties agree to comply with certain conditions (for example: achieve a determined level of sales)

· Geographic zone: overall, when one exports via intermediaries and licence agreements, the performance zone must be clearly delimited, may be a region of a country, a whole country or various nearby geographical countries.

· Industrial property: the options are either to sell with the brand of the exporter or the importer, however the exporting company must always register their name and the industrial property rights (patents and brands) of the products they intend to trade with in the foreign markets.

Explanatory Notes Section IV: Product and Price Strategy

(SECTION IVPRODUCT AND PRICE STRATEGY)

(PRODUCT AND SERVICE SELECTION FOR TARGET MARKET)

(STANDARDIZATION VS. ADAPTATION )

(PRICING STRATEGY)

(TERMS AND PROCEDURES)


4.1Product and Service Selection for Target Market

Not all the products manufactured by a company are exportable or are suitable for the International Business plan. From a strategic point of view it is necessary to choose those which are the most profitable and offer the most potential for foreign sales. In order to carry out the selection with success both internal and external criteria of the company and destination market must be employed.

-Internal criteria

* Sufficient production capacity

* Experience of trading on the domestic market

* Incorporation of new technologies/designs

-External criteria

* Adaptation costs to the legal normative

* Adaptation costs to the market

* Advantages in relation to the competitive offer

* The level of prices in relation to the competitors

Those companies which have a wide range of products should not select products, but strategic units which will be formed into products and have the same characteristics. In order to develop strategic units it is necessary to take into account the following characteristics: caducity, price/quality, transport, distribution channel, selling point and characteristics’ of the consumer´s behaviour.



With regards to the product´s policy it is advisable to define the characteristics of each one of their attributes and the necessary adaptations for its sale in foreign markets. There exist two alternatives:

*Standardization: to sell the same product in all foreign markets.

*Adaptation: consists in adapting the main attributes of the products for each market. In a double sense: on one side the legal normative of the country and on the other side the needs of the client in each country.

Very few companies successfully sell products on a global level, and if succeeded they have found a way to unify all the tastes of the consumers with large publicity campaigns. For a SME it is recommendable to adapt the product as they lack sufficient resources to carry out large publicity campaigns.

Below are the main aspects to take into account at the time of adaptation of the product.

· Composition: legal normative (raw materials, chemical analysis, environment, certifications, etc.) and the needs of the client (benefits, requirements, tastes, etc.)

· Quality: level of country development, buying habits, quality perception, etc.

· Design: colours, forms, fashion trends, consumer type, etc.

· Packaging: capacity, materials, shapes, selling point, etc.

· Packing: materials, climate, means of transport, etc.

· Etiquette: client information, language.

· Brand: possibility to register, pronunciation, negative meaning, relation with the product and the country of origin.

· Client service: time and place of delivery, pre and after sale service, guarantee


4.3Pricing Strategy

On this sheet one must assess the final selling price incorporating all the elements of the price which conform to the exports prices. These are: cost price, commercial margin, transport costs, insurance and duty taxes, distribution margins (importer/distributor and retailer) and other costs imputable to exports:

Cost price: raw material, packaging and packing, work force costs and general expenses. One must also include the adaptation costs of the product for the destination market, for example different labelling or packing.

Commercial Margin: a percentage of the cost price. In the beginning, the most advisable is to apply a similar commercial margin which the domestic market applies or to other foreign markets. If you apply a superior margin, the surplus can be alocated for promotion budget or it can be considered as atypical profit.

Transport and insurance expenses: these must include all the expenses until the merchandise has reached the consumer (internal transport in the country of origin, international transport and transport to destination). In order to carry out this, it is necessary to get a price quote from the forwarding agent. Remember that the prices will be different for a complete or a fractional load.

Tariffs and custom charges: this includes the dispatching of importing and exporting for example tariffs, other taxes and rates which occur in the process of importing products. In most cases the tariff is a percentage of the value of merchandise in the customs house; this includes the value of the products plus transport expenses and insurance until it reaches the customs officer.

Distribution margins: this must include all the margins of the different links of the distribution chain: importer, distributor, and retailer. These margins are different in each sector and also may be very different from one country to another. Also you must take into account the different criteria that you apply; for example in Europe the commercial margin usually applies to the buying price and that is a new charge margin, while the United States and Latin America are accustomed to applying it at the selling price.

Other costs: in this part you can include for example the commission of the commercial agents and the costs of adaptation to the legal normative(certifications,homology).


4.4Terms and Procedures

Once the price has been calculated, it is important to develop the international offer which includes all the necessary information so that the clients are capable of making a buying decision.

For international sales, it is necessary to display the following points:

· Product: description of the characteristics, type, quality, packaging, packing, certifications, benefits, etc, in agreement with the users of the sector.

· Quantity: in weight, volume, units, cash box, etc. It is advisable to specify the charging unit that is used: palettes for a fractional load and containers for complete load.

· Price: this is the numerical expression of the value referred to the chosen parameter. You should offer the unit price and the total price. It is advisable to offer the currency of the country of destination. There exist internationally accepted abbreviations for each currency: EUR (euro), USD (dollar USA), GBP (pound, sterling), JPN (yen japonese), CHF (franc, swiss), etc.

· Delivery conditions: it is necessary to specify the expenses and responsibilities of the transport and insurance of the merchandise which the exporter assumes and the geographical point of delivery. For this purpose Incoterms are used. At the same time a certain delivery date agreed on the day the client accepts the offer. On this day you must take into account the delivery date, the available stock or the period of manufacturing –in case you may not be able to produce all the stock- and at the same time transport the product on the agreed delivery point.

· Payment conditions: there exists different means of payment with regards to international trade; the most common are: bank transfers (swift), receipt/letter and documentary letter of credit; the last one is indicated by the letters L/C (letter of Credit). Also you need to establish a date of payment, equal to the date of delivery or a certain date, for example, referenced to the delivery date of the merchandise.

For all of these conditions you should establish an expiry date for the offer. In certain sectors (for example, primary materials) where the prices fluctuate a lot and the time could be as short as 24 or 48 hours. If prices are quoted in different currencies it is advisable to include a revision clause of prices in function with fluctuations of the exchange rate between the Euro and the quoting price.

(BRANDPOSITIONING IN TARGET MARKETCOMMUNICATION TOOLSCOMMUNICATION BUDGETSECTION VCOMMUNICATION STRATEGYPOLÍTICA DE COMUNICACIÓN)

Explanatory Notes Section V: Communication Strategy

5.1Brand

On this sheet one must verify if the brand which the company uses in the domestic market adapts appropriately to the foreign markets or if it is advisable to create a new brand. If necessary, create a new brand for trading in foreign markets and carry out a comparison with the domestic brand based on a series of criteria that can help make a decision in respect to the ability of pronunciation, the connection with the product and the absence of negative meanings.

Once the valuations are introduced in each criterion, a diagnostic is carried out: if the foreign brand is 7 points or more than the domestic brand, you are advised to introduce this new brand to the foreign markets.


5.2Positioning in Target Market

The positioning is the company´s strategy to manage and control the perception of their product in the eyes of the consumers. There exist various positioning strategies of a product in the market:

· The characteristics of the product: the uses, the quality, the duration, the guarantee, etc. are characteristics that can achieve the positioning of a product or brand.

· The benefits that it produces or the problems that it resolves: for example, dental care, displays the benefits that it carries: combats cavities, leaves good breath, teeth whitening, refreshing.

· The usage/application: home products generally employ this type of positioning.

· Type of users: consists in defining the segment of people who use the product. It identifies the people who are accustomed to products of a high level of quality (luxury goods, gourmet products).

· Relation quality/price: generally for massive consumer products or those in which the price is the principal argument of sale.

· In relation to the competition: when one wishes to emphasise the competitive advantage or innovation in regards to the other offers of the market.

· It is not only necessary that the positioning is clearly defined however it should be clearly communicated in an efficient way. From there on the importance is to display a promotional message that transmits to the client the competitive strategy the company has chosen.

· Capture the attention: the option to centre yourself in a fixed idea or an important aspect directed at the target market.

· Understand: it is advisable not to use words or concepts of difficult comprehension for the receiver.

· Persuade: it is necessary to convince the receiver with arguments and proposals.

On this sheet emphasise in your company’s language a short promotional message (no more than 10 words), based on the type of positioning chosen and then translate it into English.



The tools required to identify the product in foreign markets are basically the same tools employed in the domestic market. You can classify them in two groups: promotion tools and publicity tools. Between the first ones you can choose advertising as a means of communication and publicity through internet while the promotion includes the elaboration of the documentation and promotional videos, the assistance at trade fairs, promotion at the point of sale etc.

For the SME exporters, the most effective tools of communication in relation to results/cost are:

· The promotional documentation: editing of catalogues of the company or the adapted products.

· Internet advertising: adaptation of the website to foreign markets, high up in main researchers, links with other websites and incorporation of electronic trade portals.

· Attendance at trade shows: especially those which are located in large markets (EU, United States, China) and control all the offer and world demand in the sector.

· Advertising in specialized magazines of the specific sector.


5.4Communication Budget

The activities of communication imply some necessarily economic resources which should not be considered as an expense however as an investment. The SME with export vocation, no matter how small the company may be, it should dedicate some quantity of the budget to promote their products in foreign markets. This quantity can fix itself as a percentage of sales which it has obtained in the previous year or in function with the target sales for the next year (between 3% and a 5% would be reasonable). The SME which does not have international experience must equally fix a small quantity even if it is reduced from 10,000 euros you can put in practice one of the most basic promotion techniques.

Once the budget is established it is necessary to perform a breakdown for the types of activity with the most precision possible. For it, you have to order print budgets (promotional documentation), interpreters, organizers of trade shows, internet suppliers, and press media for public advertisements.

(SALES FORECASTINTERNATIONAL OVERHEAD EXPENSESBUSINESS PLANSECTION VIBUSINESS PLAN)

Explanatory Notes Section VI: Business Plan

6.1Sales forecast

The evaluation of the success of the plan should be done in relation to certain objectives, generally, target sales are the most common.

In the international activity these objectives should be accomplished at least with regards to the following three requirements:

· Geographic delimitation: this should be determined for each one of the selected markets in sheet 2.4. Another sheet should also be included for new markets.

· Precision: refer to a concrete concept, something which is easily calculated by the exporting company. In the plan, the foreign sales should be calculated multiplying the average price of the exporting products by the quantity sold (unit, metres, litres, etc), but without including neither the costs of transport and insurance nor the commercial margins of intermediation.

· Time: establish a period of time. Plans are generally annual.



This instrument gathers, in a provisional form, the costs and economic contributions of the contemplated actions in the plan. This determines, the cost to evaluate, the cost of implantation of the plan and the expected economic output (commercial margin and operating balance).

The concepts included in this account are:

· Foreign sales: target sales established on sheet 6.1

· Commercial brute margin: the average margin that applies to the foreign sales. Establish a similar percentage which should be fixed on the sheet 4.3 in the setting of international prices.

· Structural costs: these are the functioning costs of the department of foreign trade classified by concepts. If the company does not organize an operating unit for the export business, these costs can be calculated as a percentage of the general costs of the company, in function with foreign/total sales.

· Selling costs: costs which are directly related to the activity of the sales for each one of the established concepts. The communication costs are automatically included and calculated in sheet 5.4

· Operating balance: this is the difference between the commercial brute margin and the structure and sales costs.


6.3 Projected Income Statement

Economic plan: on the last sheet of the plan one should perform a forecast of the margins and costs for year 2 and 3 of the plan from the established numbers of the selling objectives (sheet 6.1) and the operating costs (sheet 6.2). Once the plan is operating, a review of the objectives and results should be carried out annually.

(CASE STUDY )

Case Study Section I: Background Analysis

CASE STUDY PRESENTATION

In this case study, a Export Plan is designed for a company, called Geka, specialized in manufacturing of wood. The aim is that this Plan will serve as an example to make plans based on the methodology explained.

Geka is SME located in the north of Spain, which is engaged in the processing and marketing of wood products. The company imports wood from different countries, mainly from Africa and South America. These woods are treated in drying and manufacturing facilities to obtained three types of products: solid wood, wood flooring and doors.

Marketing focuses on the domestic market, while exports have become sporadic to some European Union countries such as France and the UK. The purpose of the Export Plan is to turn the company into a regular exporter through the design and implementation of the actions proposed.

(INTERNAL ANALYSIS (COMPANY)EXTERNAL ANALYSIS (INDUSTRY)INTERNATIONAL SWOT ANALYSIS PRELIMINARY ASSESSMENTSECTION IBACKGROUND ANALYSIS)


1.1.Internal Analysis (company)

The process of internationalisation: classify the following competitive capacities of your company; indicate those considered as strengths (note S) or as weaknesses (note W). In the case where they are not affected significantly note (-). With regards to the selected capacities add two other strengths and weaknesses belonging to the company which are important in its international activity.

COMPETITIVE CAPACITIES

S,W o (-)

Geographical location of the company

Available production capacity

Product Quality

Financial resources of current capital

Financial resources for foreign investment

Foreign market information

Level of technology

Knowledge of languages

Image of brand/company

Ability of quick decision making

S

S

S

W

(-)

W

W

W

W

S

Service and place of delivery for the client

Exporting good will of the managerial team

Dependency on international suppliers of timber

Absence of an export department

S

S

W

W


1.2External analysis (industry)

Classify the following factors of the international and sectorial environment by selecting the factors, which have a positive impact – opportunities, note “O” – or negative impact – threats note “T”. In the case where there is no significant effect note (-). Also add two other opportunities and threats of great importance to the activity of the company to the demonstrated factors below.

ENVIRONMENT AND SECTOR FACTORS

O, T o (-)

Reduction of barriers (custom tariffs, quotas) to foreign trade

Technical barriers (certifications,homologations) to foreign trade

Economic integration of countries (EU, Nafta, MERCOSUR)

General Internet use

Improvement of the transport systems

Appearance of emerging markets as manufacturers

Appearance of emerging markets as consumers

Concentration of the ownership of the companies

Increasing distribution power

Appearance of new products

Changes in consumer tastes

T

(-)

O

(-)

O

T

O

(-)

(-)

T

T

Large commercial margin on exports

Diversification of clients in a depressive/downward circle in the national market.

Introduction of substitute products (plywood, conglomerate)

Pressure from ecology groups in countries protective of their environment, competition of eastern european countries

O

O

T

T

T


1.3International SWOT analysis

Classify by order of importance for your company the first three strengths, weaknesses, opportunities and threats that you have identified on the worksheets 1.1 and 1.2.

Order

STRENGTHS

WEAKNESSES

1º

Service and place of delivery

Absence of export department

2º

Product quality

Image of the brand/company

3º

Geographical set up

Dependence on international suppliers

Order

OPORTUNITIES

THREATS

1º

Dependence of clients in a downward cycle in markets

Appearance of substitute products

2º

Improvement of transport systems

Competition of Eastern European countries (Poland, Baltics) which integrate into the EU

3º

Large commercial margin in exporting

Changes in consumer tastes


1.4Preliminay Assessment

From the completed analysis on the previous worksheets indicate the five most important aspects that your company has to take into account or to realize in order to carry out the process of internationalisation.

1

The competitive capacities of the company allows it to enter in markets where there is higher demand than the domestic market

2

In order to make the most of the oportunites which the foreign market offers it is necessary to create an export department

3

The acquired experience of exporting can be applied to the import of wood which is carried out in Asia and Africa

4

In the short term the international sales can obtain a higher margin than in the national market

5

The appearance of substitute products for wood and the competition from the Eastern countries integrated in the EU may affect the success of the company in the foreign markets

(SELECCIÓN DE MERCADOS OBJETIVOS)

(CONCENTRATION VS. DIVERSIFICATION BEST TRADE AREAS TARGET MARKET IDENTIFICATIONSELECTION OF ARGET MARKETSECTION IIMARKET SELECTION)

Case Study Section II: Market Selection


Choose the concentration (C) or diversification (D) alternative for the markets which correspond to the characteristics of the company/product. If you find that the characteristics favour the concentration alternative: note “C” in the left column and in contrary those which favour the diversification alternative: note “D” in the right column.

CONCENTRATION

DIVERSIFICATION

The potential number of clients in each market is high

X

The potential number of clients in each market is low

The “key” markets are stable with sustained demand

The key markets are very cyclical with changing demand

X

Markets shared by a large number of competitors

X

Markets dominated by a limited number of competitors

Selling is based in factors different to price

X

Sellling is fundamentally achieved by price

The product cycle is long

The product cycle is short

The consumer is loyal to the normal supplier

The consumer is not loyal to the normal supplier

X

Product requires a complex and costly adaptation

The product is standard in different markets

X

Selling demands investments in promotion/publicity

Selling does not demand investments in promotion/publicity

X

Administrative and follow up costs of sales are high

The administrative and follow up costs of sales are reduced

X

The product is repetitive selling to the final client.

The product is not repetitive selling to the client

X

DIAGNOSTIC

DIVERSIFICATION


2.2Best Trade Areas

In order to classify the countries, the following criteria is necessary; choose two countries which you consider the most important for your company noting an “X” in the left column. Transform the group of countries into subgroups based on the characteristics of the chosen criteria. If in the previous sheet the diagnostic is of concentration choose five countries which belong to one of these blocks, if it is of diversification, choose ten countries. List them in alphabetical order.

CRITERIADELIMITATION OF THE GROUP

X

Geographic

Countries where the merchandise is transportable by highway

X

Level of development

Countries with a high level of development in Europe

Economic growth

Buying habits

Language

LIST OF COUNTRIES IN ALPHABETICAL ORDER

1. Alemania

4. Germany

7. United Kingdom

10.

2. Belgium

5. Holland

8.

3. France

6. Italy

9.

Stage 2: Market Selection



Evaluate each of the chosen countries on the previous sheet in agreement with the following criteria. Note a maximum of 5 points to the most favourable and a minimum of 1 point to the least favourable. If necessary add up to three criteria more which you consider the most relevant for your company.

COUNTRIES

PRESELECTION CRITERIA

1

2

3

4

5

6

7

8

9


4

3

4

4

5

4

4

Cultural proximity

2

2

3

4

3

2

3

Cuantitative restrictions on imports

--

--

--

--

--

--

--

Cualitative restrictions on imports

2

3

3

3

3

3

3

Information availability

4

3

4

3

4

5

4

Economic situation (growth perspectives)

4

4

4

3

3

4

4

Financial situation (risk of unpayment)

4

4

3

2

3

4

4

Previous experience (volume of company´s country exports)

3

1

2

2

3

2

3

Potential demand (volume of imports)

4

1

2

2

4

3

4

Valuation of “your company´s country image”

3

3

3

3

3

4

4

Exchange rate oportunities

3

3

3

3

3

3

4

TOTAL

33

27

31

29

34

34

37


2.4 Selection of Target Markets

Select the country which has obtained the top score (for a concentration strategy) or three countries (for a diversification strategy), that would be the regions or cities which offer the greatest potential to trade your products.

COUNTRIES/MARKETS

REGIONS/CITIES

1. UK

North England(Liverpool, Birmingham)

2. France

Paris, Lille, Bordeaux

3. Holland

Main urban nucleus

(MARKET ENTRY STRATEGIESCHOOSING A METHOD OF MARKET ENTRYSELECTION OF CLIENTS, DISTRIBUTOR AND PARTNERS /afdfenamamdknsdndnndfnvclient/agent/distributor/partnerNEGOTIATING CONDITIONSSECTION IIIMARKET ENTRY )

Case Study Section III: Market Entry

3.1Market Entry Strategies

Choose between the following four market entry methods that your company could utilize to sell products in the chosen market in sheet 2.4.

Direct exports from your country to final client (DE)

X

Exports via the Internet – electronic commerce (EC)

Commercial agent in the foreign country (CA)

X

Importer and distributor in the foreign country(I/D)

X

Purchasing centres/Large retail chains(P/C)

Trading companies(CT)

Piggback agreements with foreign manufacturer (PG)

Franchise agreements(FR)

Licence agreements(LC)

Establishment of a sales branch(SB)

X

Establishment of a sales subsidiary(SS)

Establishment of a mixed company(MC)


3.2Choosing a Method of Market Entry

From the following criteria select the form of entry; choose those which are considered the most relevant for your company, noting “X” in the left column. If you consider it necessary add three more criteria. Once you have chosen the criteria value the four most favourable selected alternatives on the sheet 3.1, for each of the criteria. Give 5 points to the most favourable alternatives, 4 to the second most favourable, 2 to the third most favourable and 1 to the least favourable.

SELECTION CRITERIA

DE

EC

CA

I/D

X

Your company relies on a shortage of resources to access the foreign markets

For your international strategy look for partnerships with reliable companies

2

3

5

1

X

Your product requires a foreign stock which your company does not wish to finance

1

3

5

2

X

You wish to reduce foreign intermediation margins as much as possible

1

2

5

3

The product requires demonstrations or a room of expositions for the clientele

The product requires a post sale service.

X

You wish to negotiate directly with the final client

1

2

3

5

You want to develop a brand policy in the foreign markets

You wish to develop a brand policy in the foreign markets

X

You do not want to assume the risk of unpayment of a large amount of clients

1

2

5

3

For your international strategy establish the most suitable alliances with ither companies which seek intermediaries

X

The company does not have experience in the operational management of foreign trade

1

3

5

2

TOTAL

7

15

28

16

DIAGNOSTIC

IMPORTER/DISTRIBUTOR



Depending on the chosen forms of entry in sheet 3.2 describe the type of ideal client, agent, distributor, franchiser and qualified partner to sell your products within the chosen markets in sheet 2.4. Distinguish the characteristics which appear the most and add up to three more, if required.



Size of the company

Medium sized, with coverage all over the UK

Business culture

Preoccupied by the quality of the product and the speed of delivery

Product range

Products of high quality, wood originating from Scandinavia or Central Europe

Solvency

Payment incidents.

International experience

Accostumed to working with import products.

Instalations

Stores in different areas of the UK which guarantee delivery in a short period of time.

Commercial practices

Sector business culture

Profitability

Orientated towards obtaining results in the medium term while collaborating with the suppliers



Define the following conditions which determine your negotiation policy for the chosen market entry in sheet 3.2. Add and define up to three more conditions which may be necessary to negotiate.



Contract type

Distribution contract for the type of authorized distributor

Products

The full range

Target sales

Negotiate annually with regards to the capacity of available production and the expectations of the market.

Exclusivity

This is negotiated after the third year, once you have achieved a determined volume of sales.

Geographic zone

All the territory of the UK. There is no restriction with regards to the type of client or market segment.

Industrial ownership

The commercial brands are registered in the name of the manufacturer or exporter

Duration of the contract

5 years with a test period of 1 year.

Non-competitive pacts

The obligation not to distribute for a period of one year after the termination of the product´s contract due to competitive European companies.

(PRODUCT AND SERVICE SELECION FOR TARGET MARKETSTANDARDIZATION VS./ADAPTATION PRICING STRATEGYTERMS AND PROCEDURESSECTION IVPRODUCT AND PRICE STRATEGY)

Case Study Section IV: Product and Price Strategy

4.1Product and Service Selection for Target Markets

Choose three products out of the range which your company produces which represent the greatest volume of business in the domestic market, if the product range is very diverse select strategic units of the product. For the three selected strategic products/units evaluate the following factors with a maximum of five points (very favourable) and a minimum of one point (least favourable) in order to sell these products in the chosen country in sheet 2.4. Add up to three factors more if you consider it necessary.

Product 1 / UE 1

Manufactured

Product 2 / UE 2

Solid wood

Product 3 / UE 3

Parquet floor

Producto 1

Producto 2

Producto 3

Production capacity

1

4

3

Commercial margin in the domestic market

2

3

4

Integration of new technologies/designs

2

4

4

Incorporation of new technologies/designs

3

5

4

Adaptation cost to the customs of destination country

3

3

3

Adaptation cost to the consumer habits of destination country

3

4

3

Transport costs

3

4

2

Differentiated advantages in relation

to the offer in destination

2

5

3

Price advantages with regards to the offer in destination

2

4

3

Speed of the delivery services

2

5

3

Flexibility in the composition of the demand

3

5

3

TOTAL

26

46

35

Product/Strategic unit



Indicate the product´s attributes which are standard (S) and those which have to be adapted (A) in order to sell the product/SU chosen on the previous sheet, in the selected foreign market in sheet 2.4. If necessary add up to three more attributes which may be needed to adapt. Describe what the adaptation consists of.

ATRIBUTE

E

A

DESCRIPTION OF THE ADAPTATION

Components

X

Preferably tropical wood (Bahía, Iroko, Tali, Tatajuba)

Quality

Primary qualities

Design

X

Packaging

--

--

Packing

X

Etiquette

--

--

brand

X

Client service

X

Delivery of full trailers in 24 hours in Spain and 72 in the UK.


4.3Pricing Strategy

Determine the break down of prices (in euros) for the chosen market in sheet 2.4 for the strategy which has the highest potential of sales. Specify a fixed % which corresponds to the margin.

Target market: UK

Strategic product/unit: m3 of wood, plywood, iroko

Price elements

%

Amount

Cumulative

Cost price

623 EUR

623 EUR

Commercial margin

12

75 EUR

698 EUR

Transport and insurance costs

82 EUR

780 EUR

Tariffs and customs costs

--

Importer/distributor margin

15

117 EUR

897 EUR

Retail margin

--

Other costs

--

Final selling price

897 EUR


4.4 Terms and Procedures

Develop a business offer for a client in the chosen market in sheet 2.4. Include any specifications for each of the elements that the offer consists of.

Buyer

B.S.W. Timber PLC

Essex SS 11 8BB

Reino Unido UK

PRODUCT

Incoterm and place of delivery

Means of payment

Date of payment

Other conditions of the offer

· Certificates

Validity of the offer

- Denomination

- Quality

- Origin

Iroko (Chiorophira Excelsa)

FAS (1 calidad)

Costa de Marfil (África)

QUANTITY

- Consumption unit

- Minimum order

- Total units (minimum order)

- Weight (tons)

m3

Full trailer

27

22

PRICE

Unit(m3)

Total (Full trailer)

· Transport and insurance

· TOTAL

780.- EUR/m3

21.060.- EUR

2.704.- EUR

23.764.- EUR

DELIVERY CONDITIONS

- Place of delivery

- Delivery date

CIP Essex, UK, ICC 2000

Five days from the day of acceptance of the order (subject to the stock)

PAYMENT CONDITIONS

20% payment up front by bank transfer 80% up to 30 days after acceptanc of the invoice in any English bank

CONDITIONS OF THE OFFER

- Certificates

- Validity of the offer

One month from the date of emission (subject to changes in the quotation of Euro/Dolar)

(BRANDPOSITIONING IN TARGET MARKETCOMMUNICATION TOOLSCOMMUNICATION BUDGETSECTION VCOMMUNICATION STRATEGY)

Case Study Section V: Communication Strategy

5.1Brand

Formulate a new brand for your products in foreign markets. Compare it with the brand used in the domestic market, evaluating both to a maximum value of 5 points and to a minimum of 1 point, for each of the following factors. Add three more factors if you consider it necessary.

Domestic market brand

GEKA

Foreign market brand

MADERTOP

EVALUATION OF THE BRAND

National

Brand

Foreign

Brand

Ability to pronounce in other languages

2

4

Ability to remember

4

4

Aplicable to all the products in the same line

3

4

Without negative meanings

3

5

Valid for all markets

3

5

Identifiable with country of origin

2

2

Transmit the competitive advantages of the product

1

4

TOTAL

18

28

DIAGNOSTIC: MADERTOP

If the foreign brand exceeds 7 points or more than the domestic brand, it is advisable to introduce a new brand for foreign markets.


5.2Positioning in target market

Among the following positioning strategies, which international markets do you consider the most suitable for your products?

Positioning based on the characteristics of the product/service

X

Positioning based on the benefits of the product/service

Positioning based on the usage/applications of the product

Positioning based on the segmentation of users

Positioning based on the relation between quality/price

Positioning at the level of the competition

Draw up a promotional message which communicates effectively the chosen positioning.

IN SPANISH

Entrega rápida de las mejores maderas secadas

IN ENGLISH

Fast delivery of the best dried wood

IN FRENCH

Livraison rapide des meilleures bois séches



Añada hasta un máximo de tres instrumentos si lo considera necesario Evaluate the most suitable communication tools, from a maximum of 5 points to a minimum of 1 point, in order to increase awareness of your product in foreign markets. If you consider it necessary add a maximum of three extra tools.

Promotion tools

Valuation

Promotional documentation (catalogues and brochures)

5

Web sheet (adapting for the foreign markets)

5

Promotional video

3

Fairs and exhibtions

5

Media advertisements

1

Advertisements in specialized magazines

4

Advertisements on the radio

1

Outdoor advertising (billboards)

1

Direct marketing

3

Point of sale promotion

1

Sponsorship of events (sporting, commercial)

1

Seminars, conferences

1

Commercial invitations to visit potential distributors, buyers etc

4

Promotional gifts

3


5.4 Communication Budget

Choose the criteria which are considered the most suitable to fix the price for your company´s communication budget in foreign markets. Add other criteria if you consider it necessary.

What can the company afford?

Percentage of sales in the previous year

Percentage of target sales for the folllowing year

X

Comparison with the level of the competitors

International sales plan. Based on the chosen criteria establish a promotion budget for year 1 of the international sales plan.

Communication budget Year 1

40.000

Distribute the budget between the five most valuable promotion tools in the previous sheet.

Communication tools

Budget

Promotional documents (catalogues and leaflets)

1.400

Web page (adaptation to the foreign markets)

1.800

Trade fairs and exhibitions

25.500

Advertising in specialized magazines

6.500

Commercial invitations to visit potential distributors, buyers etc

2.800

Miscellaneous

2.000

TOTAL

40.000

(SALES FORECASTINTERNATIONAL OVERHEAD EXPENSESBUSINESS PLANSECTION VIBUSINESS PLAN)

Case Study Section VI: Business Plan

6.1Sales Forecast

Establish target sales for each of the selected target markets in sheet 2.4 and for the rest of the foreign markets, for the following three years.

Market

Year 1

%

Year 2

%

Year 3

%

UK

160.000

----

320.000

100

560.000

75

France

250.

export plan€¦ · web viewfor example seeking importers through foreign trade searches, making...

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