FUNDAMENTAL OF EXPORT BUSINESS PLAN

Presented by Rahim Jabbar November 2010

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FUNDAMENTAL OF EXPORT BUSINESS PLAN

Points of Discussion An Overview of Export Business The Outline Detailed Explanation
Introduction Current Market Position Market & Industry Trend Export Audit Market Assumptions Export Objectives Export Marketing Strategic Plan Export Management Plan Action Plan Financial Forecasts
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Summary & Conclusion

AN OVERVIEW OF EXPORT BUSINESS

AN OVERVIEW OF EXPORT BUSINESS ACTIVITIES

EXPORTER
Export Market Audit (Opportunities/Threats) Internal company analysis (Strength & Weaknesses) S/W/O/T analysis strategic decisions Objectives & Targets
What is needed to successfully sell the export product?

EXPORT PRODUCT

EXPORT MARKET

PRODUCT MARKET COMBINATION (PMC)

How to enter the selected export market successfully?

FEEDBACKS

EXPORT MARKETING STRATEGY (EMS)

EXPORT MARKETING PLAN: Market segment Product Identity Price Distribution Promotion Trading Partner

EXPORT ING ACTIVITIES

EXPORT BUSINESS PLAN (INCLUDING FINANCIAL PLAN 4 & SCHEDULE

FIRST STEPS TO BUILDING AN EXPORT BUSINESS PLAN

PLAN, but more importanty, IMPLEMENT it! Be ready to CHANGE as you LEARN and GROW Ensure Management and Staff COMMITMENT What do you wish to achieve? (Goals & targets) Capabilities? Restrictions? Seek AGREEMENT on all aspects of the Plan
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KEEP THE PLAN SIMPLE AND FLEXIBLE

An Export Busines Plan should be SIMPLE and FLEXIBLE

Some market information and planning elements may not be available at the time of drawing up an initial export plan The export plan will generate more information and understanding as your Company learns more about exporting and your Companys competitive position improves in the Global market place.
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A GENERAL FORMAT

EXPORT MARKETING & BUSINESS PLAN (1)

1. Introduction, Mission and Business Principles

2. Current Market Position

3. Market & Industry Trend

4. Export Audit
4.1 Market Audit 4.2. Competitive Audit 4.3. Company Audit 4.4. S/W/O/T Conclusion
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EXPORT MARKETING & BUSINESS PLAN (2)

5. Assumptions about the Target Export Market

6. Export Objectives

7. Export Marketing Strategy 7.1. Strategy Summary 7.2. Market & Segment(s) 7.3. Positioning Strategy 7.4. Product Strategy 7.5. Branding Strategy 7.6. Pricing Strategy 7.7.Distribution Strategy 7.8. Promotional Strategy 7.9. Trade Partner Strategy

EXPORT MARKETING & BUSINESS PLAN (2)

8. Management Plan 9. Action Plan 10. Financial Forecasts 11. Periodic Review & Evaluation

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DETAILED EXPLANATION

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INTRODUCTION, MISSION AND BUSINESS PRINCIPLES (1)

The first thing put things and principles into perspective an introduction a sense of location who you are, what the company is, what it does

(business concept),
a short historic track record a brief statement on your current position and performance the markets that are currently covered
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INTRODUCTION, MISSION AND BUSINESS PRINCIPLES (2)

The first thing put things and principles into perspective:

a brief description on the set of basic thinking & ideas that

form the basis for the future of your Companys business the sense of direction

the company's mission statement (the companys

charter) where your Company wants to be (the Companys goal)

how your Company wants to get there (the Companys

strategy)
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CURRENT MARKET POSITION (1)

The CURRENT SITUATION/CONDITION is the STARTING POINT for THE FUTURE international market expansion As a preparation for compliance to market access requirements adaptations in the production, marketing and logistics processes may require investments. An x-ray of the Companys current market position to identify the gap to be closed between the current market position and desired market position to clarify to what extent the organization has optimized the opportunities in the current markets.
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CURRENT MARKET POSITION (3)

PRODUCT:
What products does the Company sell? What is their market position? What competitive alternatives are available in the market?

PLACE:
What is the Companys current market coverage? Which distribution channels does the Company use? How does this relate to the competition?
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CURRENT MARKET POSITION (3)

PRICE:
What is the Companys pricing policy? To what extent does the Company apply different pricing from the competition? How does the Company apply pricing flexibility in order to promote sales (e.g. discounts, quantity offers, contractual tenders etc.)?

PROMOTION:
Describe the promotional tools you employ, i.e. the Companys promotional mix (trade fair participation, advertising, Direct Marketing, eMarketing etc.).
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CURRENT MARKET POSITION (2)

PEOPLE:
Describe the company's policy towards social accountability, in terms of occupational health and safety for the workers, and to society as a whole.

PLANET:
Elaborate on the Companys company's environmental
awareness, eco-mindedness and the Companys position on environmental management
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MARKET & INDUSTRY TREND (1)

Description of important developments - past, present and future - in the Companys current and potential markets, at two

levels:
first, describe the international and target market trends you can identify for the Companys industry in generic

terms;
second, go one level deeper and zoom in on trends you've identified in pre-selected markets with high potential

(priority countries) to be singled out as the MOST

POTENTIAL ONE based on RELEVANT MARKET SIZE and FAVORABLE IMPORT GROWTH, and potentially WINNABLE)
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MARKET & INDUSTRY TREND (2)

Consider important variables: economic, political and technological developments

favorable trade relations

historical, cultural or geographic characteristics affinity and proximity

market characteristics
supply chain characteristics competitor activity

market access regulations

fashion, innovation, and consumer preferences
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EXPORT AUDIT: TARGET EXPORT MARKET AUDIT

Major aspects/ dimensions
Social-cultural
Technological Economic

OPPORTUNITES

THREATS

Political
Legal Environmental
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EXPORT AUDIT: COMPETITIVE AUDIT (1)

THREAT OF SUBSTITUTE PRODUCTS

The availability of close substitute products will increase the

propensity of customers to switch to alternatives in response to price increases (high elasticity of demand).

Factors that determine the threat of substitute products:

buyer propensity to substitute relative price performance of substitutes

buyer switching costs

perceived level of product differentiation
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EXPORT AUDIT: COMPETITIVE AUDIT (2)

THREAT OF ENTRY OF NEW COMPETITOR Factors that determine the threat of entry of new competitors: the presence of entry barriers economies of product differences brand equity switching costs or sunk costs capital requirements access to distribution absolute cost advantages learning curve advantages expected retaliation by incumbents government policies
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EXPORT AUDIT: COMPETITIVE AUDIT (3)

THE INTENSITY OF COMPETITIVE RIVALRY Factors that determine the intensity of competitive rivalry:

number of competitors
industry growth rate intermittent industry overcapacity

diversity of competitors
level of advertising expenses economies of scale

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EXPORT AUDIT: COMPANY AUDIT

Major aspects/ dimensions
Men

STRENGTHS

WEAKNESSES

Money

Means

Methods

Machines

Measurable
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EXPORT AUDIT: COMPANY AUDIT (An Example)

Strengths
Men

Weaknesses

Loyal workforce Skilled technicians Good account managers

Methods

Management by objectives Responsibility and accountability accepted by management Responsibility and accountability accepted by management Continuous job rotation Professional marketing department

Limited English language skills Limited international marketing experience Routine oriented Ageing workforce No professional market information system Time availability Dominant product drive Dominant financial control Low insight in industry benchmarks No ISO 9001:2008 No ISO 14000 compliance yet R&D department

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EXPORT AUDIT: COMPANY AUDIT (An Example)

Strengths
Means

Weaknesses

Sound cash flow Good bank relation

Machines

Up-to-date production equipment Packing station Preventive maintenance system High customer satisfaction Specific product specification Sales growth Sustainable profitability Successful product launches Growing customer base High production efficiency Spare capacity

Measurables

Limited budget for brand building No funds for international market research Limited budget for process and product adaptation Limited flexibility Energy consumption inefficient Foreign maintenance dependability Spare part lead time Low degree of computerised manufacturing Energy bills/costs Rejection rate Shipping costs Average stock level too high Occupational hazards and injury incidence Employee absentee rate

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EXPORT AUDIT: S/W/O/T CONCLUSION(1)

POSITIVE FACTORS TO ACHIEVE OBJECTIVES NEGATIVE FACTORS TO ACHIEVE OBJECTIVES

EXTERNAL FACTORS

OPPORTUNITIES

THREATS

INTERNAL FACTORS

STRENGTHS

WEAKNESSES

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EXPORT AUDIT: S/W/O/T CONCLUSION (2)

The main challenges: addressing the WEAKNESSES STRENGTHS (Companys strengths and weaknesses are CONTROLLABLE) optimizing the impact of the Companys STRENGTHS to tap identified market OPPORTUNITIES. OPPORTUNITIES and THREATS (UNCONTROLLABLE/given market conditions) drivers for company adaptation and improvement
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EXPORT AUDIT: S/W/O/T CONCLUSION

SWOT analysis completed final decision to export or not (balance the strong points and opportunities against the weak points and the threats) Does the Company think the organization is STRONG

ENOUGH TO COPE with the extra challenge and workload

of the exporting venture? If YES is ready for the Big Jump the next step will be

to focus on the Companys immediate and potential

competition. Get ready to take them on!!!
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MARKET ASSUMPTIONS
TECHNOLOGICAL TRENDS ECONOMIC DYNAMICS & TRENDS

SOCIALCULTURAL DYNAMICS

COMPETITIVE SITUATION

COMPANYS EXPORTING ACTIVITIES: Marketing strategies Marketing activities Cash-flow

POLITICAL DYNAMICS

LEGAL ENVIRONMENT

MARKET DYNAMICS

ENVIRONMENTAL CHANGES
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MARKET ASSUMPTIONS (An Example)

We expect the Japanese economy to recover as of
next year. We expect the distribution system to further concentrate to industry captains and Large Scale Retail buying groups. We assume a continuation of trade liberalisation. The product life cycle will be extended through functional innovation, including packaging for small

households in the consumer market.

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MARKET ASSUMPTIONS (An Example-continued)

The growing number of young consumers will create
a demand for new varieties and brands. We expect a solid domestic market development ensuring sufficient cash flow for sustaining our export venture. We assume that the exchange rate of the Japanese Yen in relation to the US dollar remains relatively stable.
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EXPORT OBJECTIVES: SMART

SPECIFIC:the Companys product(s) and market(s) should be specified. MEASURABLE: the Companys objectives should be quantitative, expressed in terms of sales value, sales growth, market share, number of customers etc.

ACHIEVABLE: the Companys objectives should be based

on the Companys company's strengths and its critical success factors (the internal potential) and market opportunities (external potential).
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EXPORT OBJECTIVES: SMART (2)

REALISTIC:the Companys objectives should be realistic in

the sense that the required investments remain in

proportion to expected gains.

TIME-LED: set a specific period within which the

Companys objectives are to be achieved. It is advisable to

formulate short-term, mid-term and long-term objectives.

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Export Marketing Strategy

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EXPORT MARKETING STRATEGY: TARGET SEGMENT

Market People or organizations with needs or wants and the ABILITY and WILLINGNESS TO BUY in the export market Market Segment A subgroup of people or organizations sharing one or more characteristics that cause them to have SIMILAR PRODUCT NEEDS in the export market

Market Segmentation

Market Segmentation The process of dividing a market into meaningful, relatively SIMILAR, IDENTIFIABLE segments or groups in the export market.

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EXPORT MARKETING STRATEGY: TARGET SEGMENT Different Basis of Segmentation

DEMOGRAPHIC SEGMENTATION
Age Gender Income Occupation Religion Social class Family size

GEOGRAPHIC SEGMENTATION
Regions Cities States Countries

PSYCHOGRAPHIC SEGMENTATION
Lifestyles Personality Values Beliefs

BEHAVIORAL SEGMENTATION
Occasion of usage Benefits sought Usage rate Loyalty status

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EXPORT MARKETING STRATEGY: POSITIONING

Positioning is about finding the BEST POINT/PLACE IN THE

CONSUMER MIND IN THE MARKET for the product/

service and the most appropriate for the target market. (It is all in the consumers mind!)

The process of developing a competitive position for a brand starts with the segmentation of the market, followed by targeting (selecting a particular segment) to whom a product or a brand is to be positioned (=positioning).
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EXPORT MARKETING STRATEGY: POSITIONING

In order to explore competitive values to be wrapped in the product or brand to be positioned, we should analyze the target consumers ( CONSUMER INSIGHTS) and the competitors

product/brands.( COMPETITORS MAPPING)

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EXPORT MARKETING STRATEGY: POSITIONING

Competitive Mapping
Class Pride Distinctive look

Mercedes

Lexus

B.M.W.

Conservative Somewhat older

Mitsubishi

Honda. Toyota.

Sporty Fun Young

Practical Fuel Economy Affordable

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EXPORT MARKETING STRATEGY: PRODUCT

A Definition of Product
METHODS/ TECHNIQUES

Raw Materials

COMBINED & PROCESSED WORKS

PRODUCT

TO FULFILL THE NEEDS & SATISFY THE WANTS OF

CONSUMERS/ CUSTOMERS

Auxiliary Materials

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EXPORT MARKETING STRATEGY: PRODUCT

Components of a Product
Functions
C O N S U M E R S

Attributes/ Features

PRODUCT

BENEFITS

VALUES

Usage
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EXPORT MARKETING STRATEGY: PRODUCT

Product Development
Develop the product range in accordance with the CUSTOMER NEEDS and prevailing MARKET CONDITIONS

(competition and rules and regulations) in the

target markets.

Can you use the Companys existing product

assortment or does it need adaptation?
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EXPORT MARKETING STRATEGY: PRODUCT

Features/AttitubesBenefits Analysis
Do the Companys products offer features (physical property of the product) or benefits that add value to the customer/consumer? Are there elements of the Companys intrinsic product which are not appreciated by the Companys customers? Always remember that product safety, recyclability and user-friendliness are dominant success factors in the

developed markets due to legislation.

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EXPORT MARKETING STRATEGY: PRODUCT

Unique Selling Proposition (USP)
Before developing a USP, it helps to know: The features of the product/service How and why the customers uses the product services Features of competitive products

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EXPORT MARKETING STRATEGY: PRODUCT

Unique Selling Proposition (USP) (continued)
Steps to develop a USP (1) List all main features/attributes of the product. (Features/ attributes describe what the product/service does). Features can be: quality, type and level of service, price, functional or technical characteristics. Convert each feature/attribute benefit. (A benefit describes what customer need it fulfils). Customer buy benefit, therefore obtaining value from that. An example: Feature of an industrial machine: reliability, which means available for more hours of the working day ( benefit for the buyer).
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EXPORT MARKETING STRATEGY: PRODUCT

Unique Selling Proposition (USP) (continued)
Steps to develop a USP (2) Rank the benefits according to their relative importance to the customer Group the benefits into standard ones, i.e. available to all competitive products or the different and special (unique) to your product/service)

If no anything special or different, you have to develop at least

one unique benefit ( IT IS ALL IN THE MIND = PERCEPTION)
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EXPORT MARKETING STRATEGY: PRODUCT Product Packaging

Packaging needs market adaptation (advisable to include the trade partner in the packaging adaptation decisions) Packaging must be PRACTICAL, CONVENIENT and PROMOTIONAL engineering, design, graphics, distribution and marketing issues to be addressed over packaging solutions for exports. New packaging issues in developed markets: environmental concerns, safety concerns
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EXPORT MARKETING STRATEGY: PRODUCT

Critical Success Factors:
Product life cycle stage: Does the Companys product
fit in the current life cycle stage in the market? Product profitability: Does the Companys margin justify the Companys market entry efforts? Product seasonality: Does the Companys timing of the Companys product launch match seasonal demand, or is there a possibility for counter season offering?

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EXPORT MARKETING STRATEGY: BRANDING

Operating in a foreign market under the Companys own BRAND NAME requires SUBSTANTIAL INVESTMENTS. Only advisable if, It will lead to higher revenues, It will create binding and stimulate repeat purchases the Companys own brand and company image is appreciated by the trade Done in STEP-WISE, GRADUAL APPROACH Alternatives to own branding that can be considered: Operate under partners companies own brand name or private label Make product according to the buyers specifications (with or without licensing agreement)
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EXPORT MARKETING STRATEGY: BRANDING

Components of a Brand
THE IDENTIFIER/ RELATOR (Name/ Logo)

Identity system

THE PRESENTER (Packaging)

THE BASIS (Product/ Service)

THE NARRATOR (The Message/ Advertisement) THE PROXY OF VALUE (The Price)

Should be matching to each other

Copyright Rahim Jabbar/ @ 2010

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EXPORT MARKETING STRATEGY: PRICING (1)

COST-PLUS PRICING. The Companys production costs PLUS the PROFIT that needs to be made. This strategy is used mostly in opportunity marketing. The focus is more on selling instead of sustainable long term marketing.

COMPETITIVE PRICING With competitive pricing, the exporter establishes the Companys MARKET PRICE by benchmarking with competitors' prices and DIFFERENTIATE THROUGH MARKETING MIX INCENTIVES. The result should be a better price performance ratio than the competitor average.
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EXPORT MARKETING STRATEGY: PRICING(2)

PENETRATION PRICING Penetration pricing is applying LOW MARGINS or even apply marginal costing (in case present sales cover the contribution to overheads while the Company still has spare capacity to utilise) and SELL AT THE LOWEST PRICE of all the Companys competitors. The focus is on ENTRY and HIGH VOLUME. A negative aspect the product/company will also receive A LOW QUALITY IMAGE (or PRICE FIGHTER) which may hinder upward marketing later on. (PERCEIVED) VALUE PRICING. Adopting VALUE PRICING is suitable when there is no competition (yet) or when the product is perceived as UNIQUE or SUPERIOR. The VOLUME may be SMALL, the MARGINS are HIGH, which offers the Company an opportunity to lower the price at a later stage and increase volume.
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EXTPORT MARKETING STRATEGY: DISTRIBUTION

Basic questions to answer in formulating a distribution strategy: What am I selling? Who are my prospects/target consumers? Where are they? How can I reach them? How does the distribution channel work? What does it imply to sell through this channel (trade margins) How many channels should I use?
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EXTPORT MARKETING STRATEGY: DISTRIBUTION

LABYRINTH OF INROADS
Export Organization Manufacturer Cluster
Country or Tariff Border

Buyer

Importer Buyer

Agent
E-commerce

Retailer

Joint venture Trade partner

CUSTOMER
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Source: CBI, Export Planner, 2004

EXTPORT MARKETING STRATEGY: DISTRIBUTION

SIMPLIFIED ENTRY STRUCTURE

Trader

Agent
Distribution (Outlets)

Trader
Exporter
Importing Wholesalers
Country or Tariff Border

Customer

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EXTPORT MARKETING STRATEGY: DISTRIBUTION

THE AGENT An independent person or company who merely intermediates (bringing exporter/seller and importer/buyer together). His services are paid (usually by the exporter) in the form of a commission, which is a percentage of the (CIF) value of the goods imported. THE IMPORTER An independent company, specialized in importing a certain range of goods from abroad. An importer buys directly from the exporter and thus becomes the rightful owner of (or 'takes title' to) the goods. In turn, he will try to sell the goods to wholesalers or, in the case of professional goods, to customers.

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EXTPORT MARKETING STRATEGY: DISTRIBUTION

THE IMPORTING WHOLESALER An importing wholesaler is a company that not only imports but also operates facilities to forward the goods into the distribution channels by means of promotional support.

THE BROKER A broker is an independent person or company who, somewhat like an the agent, brings together buyer and seller and gets paid by the party who hired him. The broker holds neither title, nor stock. Occasionally, he can provide consultancy services, based on his sector knowledge.

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EXTPORT MARKETING STRATEGY: DISTRIBUTION

THE TRADING HOUSE A trading house is an independent company that specializes in trading certain range(s) of goods. A trading house or company buys and sells on its own account and at its own risk. It decides on its own export assortment. Trading houses usually have a strong commercial acumen and professionalism. Sometimes their after-sales performance, which is necessary for most technical and professional products, is weak. A trading company can be located in the Companys own country or in the target country.
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EXTPORT MARKETING STRATEGY: PROMOTION

The AIDAS formula = the FIVE (5) KEY GOALS of any effective promotional mix: Get Attention Capture Interest Create Desire, that

Leads to Action, and

Customer Satisfaction
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EXTPORT MARKETING STRATEGY: PROMOTION

MESSAGES ABOUT THE EXPORT PRODUCT & COMPANY A VARIETY OF COMMUNICATION MATERIALS DISTRIBUTED & PUBLICISED & BROADCASTED RECEIVED AND INTERPRETED

EXPORTERS/ TRADERS/ SUPPLIERS/ MANUFACTURERS

THE CYCLE OF MARKETING COMMUNICATION

RESPONSES (among other BUYING OR OTHERWISE)

PROSPECTS/ BUYERS IN THE TARGET MARKET

FEEDBACKS

INLFUENCE HIS/HER/THEIR OPINION, ATTITUDE, BEHAVIOR

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EXTPORT MARKETING STRATEGY: PROMOTION

SALES PROMOTION PUBLIC RELATIONS

PERSONAL SELLING

PROMOTIONAL ACTIVITIES SPONSORSHIP

DIRECT MAIL & E-MAIL

***

ADVERTISING & WEBSITES

**
TRADE FAIRS & EXHIBITION

PROMOTIONAL MIX SHOULD BE DESIGNED SO AS TO MUTUALLY STRENGHTEN ONE ANOTHER (EFFECTIVE PROMOTIONS). ACTIVITIES WITH ASTERISKS (*/**/***) ARE SUITABLE FOR EXPORT MARKETING

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EXTPORT MARKETING STRATEGY: TRADE PARTNER

It takes considerable amount of TIME, ENERGY and MONEY to establish a position in the complex in the developed market as a target export destination Exporter should find a trading partner that would likely be having LONG-TERM PERSPECTIVE and NURTURE MUTUALLY ADVANTAGEOUS RELATIONSHIP with the buyer.
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Management Plan

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EXPORT MANAGEMENT PLAN (1)

ASSIGNING MANAGEMENT RESPONSIBILITIES
The Companys export venture should by no means

jeopardize the Companys domestic position.

Consider CRITICAL CONTROL POINTS and CONTINGENCY

PLANS in order to MANAGE THE RISKS of this international

adventure.
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EXPORT MANAGEMENT PLAN (2)

ASSIGNING MANAGEMENT RESPONSIBILITIES The followings whould be resolved Who will be responsible? How will operations be run? Which systems will be in place? How will the workload be divided? How will your Company control EXPORT MARKETING activities, or balance them and their claim on the Companys capacities and resources with the Companys DOMESTIC MARKETING EFFORTS?
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Exporting Action Plan

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EXPORT ACTION PLAN (1)

Action Plan
1 Kick-off export venture Establish Task force Cultivate commitment at all levels 2 Establish learning organisation Attract young marketing professional Develop new systems and procedures Implement skill enhancement programme Establish market information 3 system Develop terms of reference and benchmarks Assign market research tasks Research first priority markets Reseach second priority markets Establish product adaptation 4 system Develop procedures between marketing and production dept Product adaptation and innovation 6000 3000

Quarter 1 Quarter 2 Jan Feb Mar Apr May Jun

Quarter 3 Jul Aug Sep

Quarter 4 Oct Nov Dec

Budget Year 1 in USD

5000 2000 2100

9000

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EXPORT ACTION PLAN (2)

Action Plan
Jan Implement process adaptation 5 programme Cost saving programme Environmental management programme 6 Direct Marketing Campaign Collect prospect list Prepare one-on-one mailings in first priority country Run the mailing Follow-up Prepare one-on-one mailings in second priority countries Run the mailing Follow-up 7 Upgrade website Develop functional design Subcontract the webdevelopment New website online 2500

Quarter 1 Quarter 2 Feb Mar Apr May Jun

Jul

Quarter 3 Aug Sep

Quarter 4 Oct Nov Dec

Budget Year 1 in USD

4000 1000

1000 1000

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EXPORT ACTION PLAN (3)

Action Plan Quarter 1 Quarter 2 Jan Feb Mar Apr May Jun Quarter 3 Jul Aug Sep Quarter 4 Oct Nov Dec Budget Year 1 in USD

Trade fair participation in first 8 priority country Select appropriate fair

Study exhibitors and identify competitors and prospects Make reservations Prepare samples, documentation and stand Arrange logistics Arrange free publicity and advertorials Prepare and send invitations Participate 600

3000

1000 400 7000

Field research and follow-up visits Follow-up Introduce CRM as key management 9 tool Compare different software packages Purchase and implement CRM system Performance monitoring and 10 evaluation

1500 1000

2500

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Financial Forecasts

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BUSINESS = MONEY-EARNING ACTIVITIES THAT REQUIRE MONEYMONEY MATTERS

BASIC QUESTIONS BUSINESS PEOPLE ASK THEMSELVES ABOUT How much money am I bringing in? Sales revenues How much am I spending? Expenses for activities

Is my business making any money?Revenues - Expenses

Whats the value of what my business owns?Assets How much does my business owe to others?Liabilities What is my business worth?Value of ownership(= Equity)

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BASIC PROFIT EQUATION IN EXPORT BUSINESS

PROFIT

PRICE

VOLUME

COSTS

CONSTRAINED BY Competitive environment in the TEM

CONSTRAINED BY Market space for the product field in the TEM

DRIVEN BY Structure Inputs Process Activities

In order to MAXIMIZE PROFIT, exporter should: Improve operational efficiency and effectiveness Economize costs Maximize volume of export sales gain more share Optimize export price
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SALES REVENUES ARE TO COVER VARIABLE COSTS AND CONTRIBUTES TO FIXED COSTS

EXPORT PRICE

X
VOLUME/ QUANTITY OF GOODS EXPORTED

SALES REVENUES CONVERTED INTO LOCAL CURRENCY

VARIABLE COSTS

CONTRIBUTION MARGINS TO COVER FIXED COSTS + OPERATIONAL INCOME

VARIABLE COSTS AND FIXED COSTS

VARIABLE COSTS are expenses that change in proportion to the activity of a business (volume-related and are paid per quantity produced). Variable costs are sometimes called unitlevel costs as they vary with the number of units produced. Direct labor and overhead are often called conversion cost, while direct material and direct labor are often referred to as prime cost. FIXED COSTS are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month.
EXAMPLES OF FIXED COSTS 4000 PAYROLL 4100 RENT 4101 FIXED COSTS BLDNGS 4102 REPAIR/MAINTENANCE 4103 GAS,WATER.ELECTRIC 4104 SERVICE COSTS 4109 OCCUPANCY COSTS 4300 MILEAGE COMPENSAT 4319 AUTOMOBILE COSTS 4500 PROMOTION/ADVERTISE 4520 TRAVEL/HOTELS 4522 MISCELL. TRAVEL 4530 REPRESENTATION 4532 DEBTOR NON-COLLECT 4599 SALES COSTS 4600 INTERESTS & COSTS 4603 INTEREST TAXES 4604 INTEREST DEPOSITS 4700 ACCOUNTANTS 4710 CONSULTANCY 4715 STATIONERY 4720 TELECOM/MAIL 4725 MEMBERSHIPS/SUBSCR. 4735 COMPUTERS 4750 INSURANCES 4790 MISCELL. COSTS

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CONTRIBUTION MARGIN OPERATIONAL INCOME

VARIABLE COSTS OF EXPORT GOODS SOLD VARIABLE OPERATIONAL COSTS FIXED OPERATIONAL COSTS

VARIABLE COSTS

CONTRIBUTION MARGINS

OPERATIONAL INCOME
BREAK-EVEN IS ACHIEVED WHEN CONTRIBUTION MARGINS EQUAL FIZED COSTS

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CASH IS KING, PROFIT IS THE QUEEN

FINANCING SOURCES

Dividends & interests

MONEY OUT
Services/ Products In VENDORS Expenses tor Inputs

D I V & I

F U N D S

MONEY IN
Services/ Products Out

THE BUSINESS FIRM

Sales Revenues

BUYERS/ CUSTOMERS

A PRUDENT BUSINESS ALWAYS STAYS ON TOP OF ITS CASH FLOW: EVEN A PROFITABLE BUSINESS CAN GO BANKRUPT IF CASH IS NEGATIVE (UNABLE TO REPAY MONEY OWED TO OTHERS, TO PAY FOR DAILY NEEDS,ETC.)

A FIRM SHOULD TRACK ITS CASH-FLOW

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THREE CATEGORIES OF CASH-FLOWS

1.OPERATIONAL CASH FLOWS: Cash received or expended as a result of the company's internal business activities. It includes cash earnings plus changes to working capital. Over the medium term this must be net positive if the company is to remain solvent. 2.INVESTMENT CASH FLOWS: Cash received from the sale of long-life assets, or spent on capital expenditure (investments, acquisitions and long-life assets). 3.FINANCING CASH FLOWS: Cash received from the issue of debt and equity, or paid out as dividends, share repurchases or debt repayments.
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A FIRM SHOULD TRACK ITS CASH-FLOWS

In US$ Opening cash balance Operating Cash Flow .. List of all operating items
Investing Cash Flow .. List of all investing items (+/-) $ (1,750.00) $ Financing Cash Flow .. List of all investing items (+/-) $ 5,000.00 $ Total cash flow for the month $ 599.50 $ Closing cash balance $ 599.50 $ 1,000.00 $ 449.50 $ 1,199.50 449.50 $ 1,199.50 (650.00) $ -

January
$ -

February March $ 599.50 $ 449.50

(+/-) $ (2,650.50) $

(500.00) $

750.00

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EVALUATION & REVIEW

Export Marketing & Business Plan
OBJECTIVES & TARGETS ACTUAL BUSINESS RESULTS

EVALUATION: CAUSAL FACTORS THAT CONTRIBUTE TO THE SUCCESS OR ANY DEVIATIONS FROM THE PLAN

ADAPT & REVISE THE PLAN BUSINESS ACTIVITIES

A SUCCESSFUL EXPORT BUSINESS!!!

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Summary & Conclusion

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TEN STEPS TO ENSURE YOUR SUCCESS IN EXPORT BUSINESS

(1)
ANALYSE MARKET POTENTIAL IN TARGET MARKET

(2)
EVALUATE YOUR PRODUCTS POTENTIAL

(3)
DETERMINE THE WAY TO ENTER THE TARGET MARKET

(4)
DEVELOP A STRONG DETERMINATION

(10)

EVALUATE AND CONTROL EXPORTING BUSINESS OPERATION

CONTINUOUSLY REVIEW EACH AND EVERY STEP OF EXPORTING BUSINESS ACTIVITIES AND INTEGRATE ALL ACTIVITIES

ALLOCATE RESOURCES REQUIRED

(5)

APPLY THE MARKETING STRATEGY EFFECTIVELY

ORGANIZE THE EXPORTING OPERATIONAL TEAM

DEVELOP A COMPETITIVE MARKETING STRATEGY

(9)

(8)

(7)

IDENTIFY TECHNICAL AND ADMINISTRATIVE CHALLENGES 82

(6)

THANK YOU
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Capon, Noel and James M. Hulbert, Marketing Management in the 21st Century, Prentice Hall, 2001 Davidson, Hugh, Even More Offensive Marketing, Penguin Books, 1997 Hiam, Alexander and Charles D. Schewe, The Portable MBA in Marketing, John Wiley & Sons, Inc., 1992 Jabbar, Rahim, Approaches towards Segmentation, Targeting & Positioning, 2002, (unpublished) Laman Trip, Johan F., Export Planner, 5th Edition, Center for the Promotion of Imports from Developing Countries, CBI, 2004 U.S. Small Business Administration, Breaking Into The Trade Game: A Small Business Guide to Exporting, 3rd Edition, 2005
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