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Hey there,
This is an international business trade management business plan assignment. 25 pages max. More information enclosed in the International Business Plan Project Requirement’s pdf enclosed.
Since its a international business trade management plan, the main purpose of it, is to analyze a company launching its product into a new business market.
We choose Nokia Entering ( Lumia 920) into morocco Markets as the theme of the plan. Nokia’s Lumia 920 Recently launched, entering into Morocco Market. Headquarters we have decided it to be at Casablanca, Morocco since it is a big city. Again you can mould the plan according to your fictional yet realistic writing.
Sample Business plan enclosed in the attachments.
There is no hard and fast rule for the project. You can write it fictionally as it does not need to be exact statistics and figures but for a company launching its product into a new market. Its a International Business Trade Management business plan. The sample plan enclosed in given for reference. Also please make to read the International trade management business plan requirements pdf enclosed as it gives more information.
The plan would include
1. Executive Summary( 1 Page maximum)
2. Corporate Profile and Nature of Business
– Company Background (Nokia)
– Description of Business and Product + technical specifications (annexe)
– Core Competencies
– Description of Product(Nokia Lumia 920)
– Key Milestones
– Background for Exporting
3. Management and Human Resources
– New Export Structure
– Senior Management Roles and Background
– External Expertise
4. Target Market and Environmental Scan
– Environmental Scan
– Business Climate for phone industry
– Major Commercial Risks
– Consumer Profile
– Nokia Ability to Meet Market Demands
5. Market Entry and Marketing Strategy
– SWOT Analysis
– Market Entry
– Product, Place, Price and Promotion Strategy
– Criteria and Sourcing of Export Partner
6. Operations Overview and Supply Chain Management
– Domestic versus Export Operational Structure
– Key Changes as a Result of Exporting
– Maintenance of Competitive Advantage
7. Financial Analysis and Risk Management
– Current Financial Standing
– Export Cost Accounting
– Profitability of Venture
– Impact on Company’s Cash Flow
– Payment Method
– Risk Management Strategy
8. Conclusion and recommendations
Mention APA referrencing where-ever used.
Ludwig MBA7936
1
The evaluation of your competency in International Trade Management is done through your
submission for this course, i.e. an International Business Plan. The plan must be for either the
company you work for or a fictitious company of your choice. It must take an existing or new
product or service from the country of your choice into an international market which is new to the
company.
Classroom: The International Business Plan is marked out of 100 and represents 50% of your
course mark.
1. Please submit your project (International Business Plan) electronically ( or ) and hard
copy.
2. The title page must contain the name of the company, the product or service, the course title
(International Trade Management) and the student(s) ID number of the person(s) who
prepared the international business plan.
3. The acceptable fonts are Times New Roman (no smaller than 11pt) and Arial (no smaller than
10pt). Line spacing can be either single of 1.5 spacing.
NOTE: The International Business Plan must not
. 1 – 5 additional pages: 2 points
exceed 25 pages (excluding title page, table of
contents and appendices). Points will be deducted for additional pages according to the following
scale:
. 6 – 10 additional pages: 4 points
. 11 – 15 additional pages : 8 points
. Over 16 additional pages : 10 points
Executive Summary—15 marks
Summarize the content of your plan and the important aspects. No more than one page is
sufficient.
Corporate Profile and Nature of the Business—10 marks
The corporate profile details the company’s history, product, capabilities and expertise.
Management and Human Resources—10 marks
This section assesses the management competencies of the company in relation to its ability to
operate the business within an international context and how it compensates for the areas in which
it is weak. It also addresses the human resources requirements needed once the business goes
klludwig
Callout
Please note
klludwig
Callout
See Case Studies folder on the home page of course.
Ludwig MBA7936
2
These requirements could be in marketing, accounting, production personnel, after-sales service,
shipping, etc.
Target Market and Environmental Scan—10 marks
This section describes the target market/country in terms of the factors within that country that will
have an impact on the company’s ability to do business there. It will also describe the target
customer and forecast the potential sales that this segment of the market represents.
Market Entry and Marketing Strategy—10 marks
The market entry section describes the strategy to be used by the business to enter the chosen
market. It may choose to sell directly or use an agent. The strategy will also describe the clientele
being targeted by the company and the marketing strategy to be used to enter the chosen market.
It describes the opportunity in terms of product, price, place, promotion, people, and after-sales
service.
Operations Overview—10 marks
This section describes the production processes used by the business and discusses any
certifications that the company carries such as ISO 9000, etc. It also describes any equipment or
facilities that the company needs to purchase to make the project come to fruition.
Financial and Risk Management Strategy—10 marks
This section describes the financial situation of the business. It includes an analysis of the present
situation together with a capital budget, operating budget and a risk analysis.
Conclusion and Recommendation—10 marks
This section plays a role in the overall international business plan evaluation as it ties the
information together in a logical manner. It draws on the information contained in the plan to
recommend a decision on the best way to enter the target market and the results that could be
expected. It should use both quantitative and qualitative information to support the position taken.
Overall Format of the International Business Plan—15 marks
Pay attention to spelling and grammar. The plan must be clear and not lead to confusion.
When using statistics or information from outside sources, footnote the information on the
page where the information is used.
The occasional use of pictures, tables or graphs is recommended (for illustration purposes)
and helps with the visual appeal.
Remember that you are being tested on your knowledge of the principles of international
trade management and your ability to demonstrate your understanding through the business plan.
Bibliography
Demonstrate the time and effort spent on research by providing a sound bibliography. List all the
sources used in the preparation of your business plan.
Ludwig MBA7936
3
Appendices
Provide outside justification for the information contained in the body of the report. Include
Appendix titles in the Table of Contents. Avoid direct downloads of data from the Internet.
MOST IMPORTANT
Plagiarism is NOT tolerated. Evidence of plagiarism will result in a failed examination.
- The International Business Plan: Project Requirements
Submission Format
Evaluation Criteria
InternationalTrade Management
MBA 7936
Project Evaluation Criteria
Value: 50%
CONTENT
ASSIGNED
MARK
TOTAL
POSSIBLE
MARK
Executive Summary 10
Corporate Profile and Nature of the
Business
10
Management and Human Resources 10
Target Market and Environmental Scan 10
Market Entry and Marketing Strategy 10
Operations Overview 10
Financial and Risk Management Strategy 10
Conclusion and Recommendations
15
FORMAT
Organization and report writing (use of graphics, table of
contents, bibliography, appendices, grammar and
professionalism, etc.)
15
100
Diamonds for Export
The sole purpose of this project is to provide a sample idea of a finished
business plan for students as they prepare an International Business Plan for
the FITTskills International Trade Management course. Use of any material
or data contained within this project is strictly prohibited.
This project is reproduced with the author’s express permission. All
information contained within the document is considered confidential.
Contents may be duplicated by FITT Educational Partners for learning
purposes only. Duplication for any other reason is strictly forbidden.
FITT would like to thank the author, Leslie Lai, for allowing FITT to use this project as a sample.
Diamonds for Export FITTskills: International Trade Management
Table of Contents
1. Executive Summary …………………………………………………………………………………… 3
2. Corporate Profile and Nature of Business ……………………………………………………… 4
– Company Background
– Description of Business and Product
– Core Competencies
– Description of Product
– Key Milestones
– Background for Exporting
3. Management and Human Resources……………………………………………………………. 9
– New Export Structure
– Senior Management Roles and Background
– External Expertise
4. Target Market and Environmental Scan ………………………………………………………. 12
– Environmental Scan
– Business Climate for Diamond Industry
– Major Commercial Risks
– Consumer Profile
– LaiFan’s Ability to Meet Market Demands
5. Market Entry and Marketing Strategy ………………………………………………………….. 17
– SWOT Analysis
– Market Entry
– Product, Place, Price and Promotion Strategy
– Criteria and Sourcing of Export Partner
6. Operations Overview and Supply Chain Management…………………………………… 25
– Domestic versus Export Operational Structure
– Key Changes as a Result of Exporting
– Maintenance of Competitive Advantage
7. Financial Analysis and Risk Management ……………………………………………………. 30
– Current Financial Standing
– Export Cost Accounting
– Profitability of Venture
– Impact on Company’s Cash Flow
– Payment Method
– Risk Management Strategy
8. Conclusion ……………………………………………………………………………………………… 35
FITTskills Sample Business Plan 2
Diamonds for Export FITTskills: International Trade Management
Executive Summary
Laifan Polishers Ltd., located in Toronto Canada is currently the third largest producer of
diamonds by value in the world, Canada’s diamonds are gaining international recognition for
their value and quality. LaiFan Polishers Ltd.’s core competencies lie in polishing and cutting
high gem quality Canadian diamonds. Its high craftsmanship and specialty cuts translate into a
product that is ready-made to meet China’s market demand for large carat, high value
diamonds. The company has recorded seven years of steady domestic sales and feels it is now
ready to expand to the Far East, to capture China’s growing demand for diamond jewellery. In
this business plan, the company sought to measure the market opportunity and external threats
against a specific set of criteria and company objectives to determine the feasibility of pursuing
this plan. Results indicate:
Market Potential: China offers a large pool of customers amounting to approximately 100
million people in the luxury goods consumer category. The country’s growing economic
prosperity, large population and staggered growth, particularly in Shanghai, Beijing and
Guangzhu, offers a sustainable and long-term category of customers for LaiFan’s premium
priced diamonds. First year sales in the market expect to total over Can$350,0001, representing
an 18% net profit for LaiFan Polishers Inc.
Manageable Risk: Competitive threats and commercial risks can be overcome by LaiFan’s
strengths in developing innovative cuts and designs. Its niche position is further enhanced with
its access to a steady supply of Canadian diamonds, an increasingly important factor as world
supply levels fail to keep up with demand. Currency exchange fluctuations and commercial risks
can be mitigated through sound financial planning and the purchase of EDC’s export credit
insurance. With a payback period of 10 months and return on investment of 18%, the proposed
market entry strategy of partnering with a local diamond polisher in China is feasible within
LaiFan’s current financial strengths. This partnership will enable Laifan to benefit from an
established distribution network and local design interests
Product Fit: LaiFan’s product fits well with the Chinese consumer’s demand for glitzy, high
quality diamonds that exude Western opulence. The product fit translates into fewer costs for
product modification. Company branding to enhance LaiFan’s product image in the Chinese
market will be achieved through the use of a local marketing consultant to execute a strategic
long-term marketing plan for the company.
Recommendations are thus for LaiFan to pursue moderate first steps in exporting to China.
Action items and next steps stemming from this report include:
Presentation of the business plan to garner senior management support
Incorporation of the company’s new exporting initiative into LaiFan’s corporate vision
Securing a qualified Export Manager to spearhead the company’s export initiative
Consulting with in-market experts, jewellery associations and Canadian Trade Officers in
China to research options for a compatible co-manufacturing partner in China.
1 All denominations used in this report reflect Canadian currency, unless otherwise noted. Currency
conversions performed on U.S. denominations based on Bank of Canada rate of 1.2428, posted on
February 3, 2005. Currency conversions performed on Chinese Yuan denominations based on Bank of
Canada rate of .1502 posted on February 3, 2005.
FITTskills Sample Business Plan 3
Diamonds for Export FITTskills: International Trade Management
Introduction
This business plan seeks to establish a process for bringing the company’s exporting vision to
fruition. The report conducts a thorough analysis of the company’s operational and financial
strengths and measures these assets against market opportunities and threats to determine
feasibility of pursuing exports. This report concludes with recommendations and an action plan
for the company’s next steps.
Corporate Profile and Nature of Business
Company Background
LaiFan Polishers Ltd. specializes in the cutting and polishing of Canadian diamonds. Based in
Toronto, Canada, operations began in 1998 coinciding with the opening of Canada’s first
diamond mine – EKATI Diamond Mine near Lac de Gras, Northwest Territories. LaiFan’s factory
is housed in Etobicoke in a two level 21,000 square foot building. The company has eleven full-
time and twelve contract staff and is presently divided into four divisions. It is headed by Mr.
Jeffery Fan who has been in the diamond trading and polishing business for over 25 years.
Style of Corporation
LaiFan Polishers Ltd. is federally incorporated, subject to several benefits it would not receive in
a sole proprietorship operation or provincial incorporation including the right to carry on
business anywhere in Canada under its current name, limited liability for the owner and lower
corporate tax rates (Industry Canada, 2004).
Description of Business
Table 1: Value of World Diamond Production1
The Diamond Pipeline, 2003
Rough
Diamond
Production
Rough
Purchased for
Production
(polishing)
Value of
Polished Ex-
production
Polished
Diamond
Content
in Retail Sales
Retail Sales
of Diamond
Jewellery
$12.4 billion $13 billion $19.6 billion $21 billion $79.3 billion
Source: Government of the Northwest Territories Resources, Department of Resources, Wildlife and
Economic Development, 2004.
The diamond pipeline represents the incremental increases in value as the rough stone moves
through the supply chain to its final retail stage. LaiFan’s operations rest between stages 2 and
3 of the pipeline. With annual sales of approximately Can$1.5 million2, LaiFan is classified as a
small to medium sized enterprise (Ontario Exports Inc.).
LaiFan’s procurement activities reflect current standing agreements with the majority owners of
Canada’s only two diamond mines: BHP Billiton Diamonds Inc. who owns a portion of EKATI
Diamond Mine, and Rio Tinto plc of London England who owns a majority share of the Diavik
Diamond mine. Both mines hold two sightholdings a year where their rough stones are sorted
into predetermined valuations and sold to LaiFan. Purchase transactions are conducted in cash
only and are nonnegotiable.
2 Source: The author’s description of the diamond manufacturing process in based on several sources:
Hardness 10; Conversation with Don Law-West, Indian and Northern Affairs Canada; “How Diamonds
Work”, Kevin Bonsor; Russian Gemological Server”
FITTskills Sample Business Plan 4
Diamonds for Export FITTskills: International Trade Management
LaiFan’s current business consists of sales to jewellery wholesalers, independent jewellers and
to two of Canada’s largest jewellery retailers: Peoples Jewellers and Henry Birks & Sons Inc.
Over 85% of the company’s diamonds are cut and polished to be set in ring and necklace
jewellery with the remainder cut and polished for a variety of other jewellery including bracelets
and watches.
Core Competencies
LaiFan’s core expertise is in processing rough diamond stones into cut and polished diamonds.
Its manufacturing process consists of four main stages2:
1. Cleaving: The first stage of manufacturing whereby the rough stone is split into smaller,
manageable components.
2. Sawing: Diamonds that cannot be cleaved and require finer treatment enter this stage.
A laser or manual saw is applied to cut off odd irregularities and shape it for polishing.
3. Bruting: Workers at this stage begin to smooth the diamond’s surface and apply facets
according to the predetermined end cut.
4. Polishing: The final stage where the diamond is polished to maximize its brilliance and
fire.
Following these steps, the diamond is cleaned and sent to the independent gemological
laboratory, Harold Weinstein in Toronto for independent grading of quality. A certificate is
produced by the lab denoting the diamond’s features and LaiFan’s Canadian leaf logo is
inscribed into the girdle of the diamond, with the company’s initials LF appearing below it.
FITTskills Sample Business Plan 5
Diamonds for Export FITTskills: International Trade Management
Description of Product
LaiFan produces four main diamond cuts3, representing traditional pieces in the diamond
market. In addition, the company has developed a specialty cut, The MobiusTM, which was
created and patented in 2000.
Princess: The most popular cut on the jewelry market, the
Princess is a modified brilliant cut with 57 facets (21 crown
facets (the top half of the diamond, above the middle girdle),
32 pavilion facets (the bottom half of the diamond, below the
middle girdle), and four girdle facets). 30% of LaiFan’s
diamonds are princess cut diamonds.
Oval: The oval is a brilliant cut with an
elliptical girdle outline. The diamond features
a circular section with triangular facets. 10%
of LaiFan’s diamonds are of this cut.
Emerald: This is a square step
cut with diagonally cut corners
and two, three, or four rows of
facets parallel to the girdle on the
crown and pavilion. 10% of
LaiFan’s diamonds are of this
cut.
Pear: Variation of the brilliant
cut with a pear-shaped girdle
outline and 56 to 58 facets. 25%
of LaiFan’s diamonds are of this
cut.
And LaiFan’s special developed cut, The MobiusTM – an oval brilliant cut featuring a three twist
mobius band lasered into the center of the diamond. 25% of LaiFan’s diamonds are of this cut.
Mobius band
Source: The Geometry
Center
3 Source for diamond cut information: International Gemmological Association
FITTskills Sample Business Plan 6
Diamonds for Export FITTskills: International Trade Management
Key Milestones
Table 2 denotes the key milestones in LaiFan’s history:
Event 1998 1999 2000 2001 2002 2003 2004
Factory opens
Negotiates $250,000 purchasing
contract with BHP Billiton
Negotiates $100,000 purchasing
contract with Rio Tinto
First sale outside of Ontario, in
Vancouver, BC
First year of profit achieved
Company automates production,
purchasing $350,000 of laser
technology, reduces production
staff to 15 instead of 25
$400,000 purchasing contract
signed with Peoples Jewellers,
over 3 year term
$350,000 purchasing contract
signed with Henry Birks & Sons,
over 2 year term
Annual Sales $350,000 $700,000 $960,000 $850,000 $890,000 $1.2
million
$1.5
million
Background for Exporting
9/11 and subsequent weak consumer confidence levels softened sales across the diamond
industry. However, a rebound in the industry since has posted strong sales and growth for
LaiFan. The company’s stable domestic performance has now propelled it to consider
expanding sales by exporting to a foreign market. Several conditions in the global economy
have further fuelled this decision:
Strong Global Demand – In 2003, world diamond retail jewellery sales increased by 6% over the
previous year, totalling more than $79 billion (De Beers Annual Report, 2003). This demand is
expected to grow even stronger as a result of a projected shortfall in the supply of rough
diamonds.
New Markets of Growth – There is a changing shift in the countries that are leading jewellery
sales. While the United States currently accounts for around 50% of total world diamond retail
sales, 2003 figures reflected double digit growth in Asia and Arabia markets (De Beers Annual
Report, 2003).
Recognition of Canadian Diamonds – The high gem quality of Canadian diamonds is attracting
international attention and Canada is now the third largest producer of diamonds, by value
(Bruce Boyd, Natural Resources Canada). The international movement to prevent the entry of
conflict diamonds4 in the diamond trade provides a further opportunity for the promotion of
authentic, high quality diamonds such as those found in Canadian mines.
4 According to the United Nations, “Conflict diamonds are diamonds that originate from areas controlled
by forces or factions opposed to legitimate and internationally recognized governments, and are used
to fund military action in opposition to those governments, or in contravention of the decisions of the
Security Council.” (United Nations Department of Public Information, March 21, 2001).
FITTskills Sample Business Plan 7
Diamonds for Export FITTskills: International Trade Management
Based on these factors, conditions seem conducive to the sales of LaiFan’s diamonds into new
foreign markets. In a previous research report to select the appropriate first market for entry,
LaiFan established three broad strategic objectives and criteria and compared market
conditions in the target country against these criteria. It was concluded that China would serve
as an excellent target market. This conclusion was supported by a number of findings:
Market Potential: The pool of approximately 200 million middle-class consumers in China is
larger and growing faster than any other emerging market with buyers carrying the purchasing
power to make luxury good purchases such as diamonds.
Product Fit: Once ostracized by Deng Xiaoping’s government as symbols of Western
ostentation and corruption, diamond jewellery is enjoying renewed popularity. The in-pouring of
Hollywood movies, foreign multinational chains and American pop icons is fuelling consumer
demand for Western products. To that end, LaiFan’s diamonds fit very well with the Chinese
market’s desire for large, high gem-value diamonds from a foreign source. This translates into
lower product modification costs for LaiFan and a strong ability to compete by offering a steady
supply of the stones.
Manageable Risk – As a criteria for pursuing the export opportunity, the target market must
present risks that are manageable within the context of the company’s existing strengths and
resources. Initial review of China’s commercial infrastructure and competitive environment
revealed that LaiFan was in a position to overcome weak legal protection and obtain market
position in the country.
This report now moves to expand on these initial findings and assess the opportunities and
threats in China against LaiFan’s operational and financial strength. Implications of this analysis
are subsequently defined in the marketing and market entry sections. Similar to the criteria set
out in the last research report, analysis of data in this report will be measured against the three
criteria previously established and summarized again below:
Market Potential: The new market must possess a sustainable and growing consumer
base.
Manageable Risk: Overcoming risks and barriers in each market must be achievable within
the context of LaiFan’s existing strengths.
Product Fit: LaiFan’s product should be compatible with consumer demand and
implications for product modification achievable within the realm of the
company’s resources.
FITTskills Sample Business Plan 8
Diamonds for Export FITTskills: International Trade Management
Management and Human Resources
Figure 1: LaiFan’s Export Structure
Regional Sales
Reps
Master Cutter Administrative
Assistant
Shipping
Clerk
Sales & Business
Development Manager
Production
Manager
Export
Manager
Logistics
Manager
Finance
Manager
President
Sales & Business
Development Production Logistics Finance
Cleavers Sawers Bruters Polishers R&D
Figure 1 proposes the ideal structure for LaiFan in its initial export stage. This structure differs
from its current domestic setup with the introduction of an Export Manager who now plays a
central role in coordinating the company’s export activities across all of its existing divisions.
The ideal profile of the Export Manager thus includes a good mix between desired skills,
background and experience. Table 3 summarizes the criteria LaiFan will place on candidates for
this role.
Table 3: Hiring Criteria for Export Manager
Skills Background & Experience Desirable Personality Traits
Good analytical and problem
solving skills
Detailed understanding of the
international trade
environment, preferably of
China and the Asia Pacific
region
Experience managing budgets
Negotiation skills
Fluent in Mandarin Chinese
Innovative and versatile
10 years or more experience in
exporting and international
trade, preferably in the Asia-
Pacific region
Experience in the diamond
industry, particularly in the
diamond manufacturing sector
Experience developing market
entry strategies
Open to cultural differences
Team-oriented
Comfortable with working non
conventional hours
High self confidence
Flexible and adaptable
FITTskills Sample Business Plan 9
Diamonds for Export FITTskills: International Trade Management
At the senior management level, the head of each department will work closely with the new
Export Manager to coordinate the additional sales, production, labelling and packaging activities
in selling the diamonds overseas. The role of existing senior management is therefore extremely
critical to the company’s transition to the new structure. The following presents brief bios of
senior personnel with an emphasis on their roles in the new structure.
President: Mr. Jeffery Fan
Key responsibilities as pertains to international trade:
– oversees all operations and ensures smooth integration of the Export Manager role
– leads negotiations and makes final decisions on market entry strategy
– instils a renewed company vision that embraces LaiFan’s new exporting initiative
Background:
Mr. Fan was born in Lan Tian, Xin Jiang province, the center of China’s jade industry and grew
up as an apprentice in a jade factory. Pursuing an interest in diamonds, Mr. Fan trained in Israel
and New York City in diamond polishing and cutting techniques. Upon immigrating to Canada,
he ran his own jewellery store for fifteen years in downtown Toronto and enrolled in Aurora
College’s twenty two week Canadian diamond polishing program.
Sales and Business Development Director: Mr. Keynan Gujarit
Key responsibilities as pertains to international trade:
– manages purchasing contracts with the EKATI and Diavik mines and will lead
negotiations on increased purchase volumes for the Chinese market
– works closely with Export Manager to determine purchase volumes ahead of
negotiations
– oversees work of three regional sales representatives and will incorporate international
sales calls into their work portfolio
– participates in international diamond trade shows in China
Background:
Mr. Gujarit worked for India’s largest jewellery wholesaler as Sales Director in Mumbai and sold
silver and gold jewellery to Canadian retailers. He moved to Canada in 1992 and joined
LaiFan’s operations as the sales lead when it opened in 1998.
Logistics Manager: Ms. Cathay Banton
Key responsibilities as pertains to international trade:
– oversees materials management for packaging of diamond products
– sets logistics schedule and oversees the packing and shipping of diamonds
– works closely with Export Manager to determine shipping strategy
Background:
Ms. Banton began her career in logistics as an Account Executive in a local courier company in
Sydney, Australia. Prior to joining LaiFan Polishers, Ms. Banton worked as the Logistics
Manager at Kuehne & Nagel’s Chicago office for seven years.
Finance Manager: Ms. Shannon Lum
Key responsibilities as pertains to international trade:
– manages all company budgeting, accounting and billing activities
– works closely with senior management to determine financial activities to support the
increased purchase volume of diamonds for export
– advises on credit terms to offer foreign buyers that will be most beneficial for LaiFan
– determines LaiFan’s borrowing needs and initiates discussions with banks to borrow
funds
FITTskills Sample Business Plan 10
Diamonds for Export FITTskills: International Trade Management
Background:
Ms. Lum is a Certified General Accountant and has worked in the financial departments of
various Hong Kong-based institutions prior to immigrating to Canada in 1993. Ms. Lum then
operated her own independent accounting practice for five years upon moving to Canada. Ms.
Lum studied and is fluent in Mandarin Chinese.
Production Director: Mr. Torin Sandler
Key responsibilities as pertains to international trade:
– sets production schedule and directs production staff
– works with Master Cutter to establish cut styles
– works closely with the Export Manager to determine production needs and schedules
additional production hours accordingly
– manages routine maintenance and repair schedule of equipment
– oversees materials management
– oversees Research and Development Associates to innovate new diamond cuts
Background:
Mr. Sandler was born and raised in Jerusalem, Israel and entered the diamond industry as an
apprentice in his father’s diamond polishing factory. Upon his father’s retirement, Mr. Sandler
took over the factory of one hundred staff and managed it for ten years before selling it. Mr. Fan
had trained in Mr. Sandler’s factory when living in Israel and hired Mr. Sandler when he moved
to Canada.
Having reviewed LaiFan’s management structure, there are several inherent strengths that will
support its new export initiative:
A diverse management team and workforce. Over 85% of LaiFan’s workforce comes
from countries outside of Canada. This multicultural background harnesses greater
acceptance of cultural differences and better ability for the company to overcome cultural
and language barriers.
Experience in international trade: Many of LaiFan’s senior managers and staff have past
experience in exporting. Collectively, this background presents a pool of expertise to
manage problems that may arise in the new market.
Despite these strengths, LaiFan does lack expertise and resources in several areas which it will
need to offset by accessing outside expertise.
Marketing: The company’s strength in polishing and cutting overshadows a weakness in
marketing ability. LaiFan currently defaults to using its company brochures to promote its brand.
With the industry’s charge towards heavy branding of company names, poor marketing could
hinder the company’s competitive stance in the Chinese Mainland.
LaiFan currently does not have the in-house resources nor the expertise to undertake a
proactive marketing strategy. The development of such a strategy would thus be best led by an
outside marketing consultant. The consultant would be hired to review LaiFan’s current
marketing literature to determine language and messaging modifications required, and to
develop a long-term marketing strategy for LaiFan in China.
FITTskills Sample Business Plan 11
Diamonds for Export FITTskills: International Trade Management
International Lawyer: Advanced consultation with a lawyer well versed in international trade law
and experienced in China practice is critical to identifying legal costs and risks. LaiFan will also
need the lawyer to draw up the terms and conditions of its contracts with a foreign partner or
buyer.
International Tax Consultant: Although LaiFan employs a financial officer, Ms. Lum is not
experienced in China’s tax structure. Advanced consultation with an international tax consultant
is therefore necessary to determine LaiFan’s tax obligations in China, and the implications this
will have on its Export Costing, cash flow and market entry strategy.
Freight Forwarders: The company will continue to use an external transporter for its diamonds,
but will have increased reliance on major international shippers such as United Parcel Service
of America, Inc. and DHL Express, two companies that are internationally reputed and well
represented in the Chinese market. Both can advise on customs and documentation
requirements in the Chinese market.
Banking and Insurance: Increased purchasing requirements and new export initiatives translate
into additional costs for LaiFan. Specific costs associated with the new venture will be discussed
in greater detail in the Financial Analysis section, but do imply that the company will need to
undertake additional borrowing activities. LaiFan’s Finance and Logistics Managers will lead the
discussions with Export Development Canada (EDC) to establish export insurance protection,
and with its current bank, Royal Bank of Canada, to obtain a higher line of credit and a short-
term loan.
Translators: Marketing literature for the Chinese market will need to be translated into Mandarin.
Experienced translators will be required who can also assist the company in developing catchy
slogans or branding messages.
Target Market and Environmental Scan
This section of the report strives to achieve several objectives:
Present a broad overview of economic and market conditions in China
Discuss the business climate as specific to the diamond industry
Identify risk factors the company will have to mitigate
Zone in on the target market and target region of initial entry for LaiFan’s product
Environmental Scan
Rapid evolutions in China’s political, economic and commercial infrastructure are creating a
business climate increasingly favourable for the diamond industry. China is the world’s fourth
largest country by size and the number two economy measured by purchasing-power parity
(CIA – The World Factbook, China, 2004). The country is divided into twenty-two provinces, five
autonomous regions, four municipalities and two special administrative regions and is home to
1.3 billion people (CIA – The World Factbook, China, 2004).
China is a one party state, governed by the Communist Party led by Hu Jintao (Ambler and
Witzel, 2004). Over the past twenty years, the country has gradually embraced market-oriented
reforms and decentralized economic decision-making.
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Table 4: Key Economic Indicators
Graph 1: GDP Growth
Economic Indicators China
Gross National Income
– 2002
– 2003
– 2004
$1.6 trillion
$1.9 trillion
$2.1 trillion
Gross Domestic Product
(purchasing power parity)
– 2002
– 2003
– 2004
$7.5 trillion
$8.4 trillion
$7.8 trillion
Inflation
– 2003
– 2004
– 2005 (forecast)
1
2.5
3.2
Foreign Direct Investment
– 2002
– 2003
– 2004
GDP (annual % growth, real)
6
6.5
7
7.5
8
8.5
9
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
(f
ore
ca
st)
Year
% China
Sources: The WorldBank Group; EDC Market Forecasts,
2004; International Monetary Fund, 2003; CIA – The
World Factbook, 2002, 2003, 2004, 2005
$65.1 billion
$71.3 billion
$74.5 billion
Table 4 and Graph 1 provide a longitudinal profile of China’s economic performance and reveals
several trends that support a positive investment climate:
Stability – Despite nominal fluctuations, the country’s GNI and GDP levels are relatively stable,
at times reporting an upward trend. Inflation rates also appear to be well managed and rest
within a low-risk range (EDC Global Export Forecast, 2004). In a conversation with Phillip
Wong, Ontario Exports Inc.’s International Marketing Consultant for the Asia-Pacific region,
China’s increasing exports and diversified export portfolio mitigates the risks of over-
dependence on one trade partner, decreasing its susceptibility to averse economic conditions in
one market. Taking the United States market as an example, China only exports 22% of its
products and services to the U.S. compared to Canada which exports 89% of its goods and
services to the U.S. (CIA – The World Factbook, China, 2003, Ontario Exports Inc. – Trade
Factsheets).
Positive Growth – Steady increases in GNI and Foreign Direct Investment levels denote growing
wealth and a favourable investment climate. China’s Ministry of Commerce reported a 7.6%
increase in the number of new foreign-invested venture licenses in 2004, totalling 43,664 (CIA –
The World Factbook, China, 2004).
These facts point to a nation with increasing prosperity and a growing pool of customers
capable of affording luxury goods. The country’s stable economic and political climate also
reveals a low risk environment for civil strife and sudden currency devaluations in the Chinese
Yuan. Despite these facts, LaiFan still has to carefully monitor trends amidst industry analyst
warnings of potential risks. In EDC’s presentation of its 2004 Global Export Forecast, Chief
Economist Stephen Poloz warned of overheating in China’s economy in 2005 and 2006, a
condition fuelled by soaring bank credit and rapid increases in money supply. Unexpected
anomalies such as the region’s SARS epidemic in 2003 which cost Asian economies $16.5
billion to address further underscore the importance for foreign companies to buffer against
such risks.
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Business Climate in Relation to Diamond Industry
In 2000, China opened the Shanghai Diamond Exchange, a first step in its aggressive plans to
build a strong domestic diamond industry. According to Martin Rappaport, in March 2004,
diamond trading volumes increased 91% to $40.7 million, with diamond imports rising 48% to
$12.2 million and the rough diamond trade soaring 270% to $3.71 million. Analysts predict the
country will account for 10% of the world’s total sales of diamond products by 2010.
These conditions have both positive and negative implications for LaiFan. Strategies for
overcoming negative conditions will be discussed in greater detail in the Market Entry section of
the report.
Positive:
Lower Costs – To develop a more competitive trading environment, China has progressively
reduced its high import tax on raw and processed diamonds from 33% to 10% (People’s Daily
Online, 2002). This reduction can amount to significant savings for LaiFan.
Higher International Standards – The Shanghai Exchange was inducted into the World
Federation of Diamond Bourses in New York in May, 2004 (World Diamond Council, 2004). The
rigorous guidelines imposed on China’s diamond activities as a result of entering the
international community upholds a standard that will protect the credibility of diamonds in a
market plagued with counterfeit brands and imitation jewellery.
Negative:
The downside to liberalization of the diamond trade is the influx of foreign competitors who are
setting up polishing factories in Shanghai as well as in the Southern provinces of Guangdong
and Shandong. These factories possess a competitive threat to LaiFan along several planes:
Greater Product Mix – Foreign polishers from Belgium and Israel trade in higher gem quality
diamonds with more sophisticated craftsmanship. The increased supply of such diamonds in the
market dilutes LaiFan’s claim that its diamonds are unique in these qualities.
Competitive Pricing – Local jewellery retailers are more inclined to purchase diamonds from
polishing factories in China. Diamonds from these factories are cheaper due to their use of
lower wage workers and exemption from taxes by re-exporting a portion of their product out of
China. As a result, retailers have larger profit margins and can exact price penetration strategies
to compete more aggressively in the market.
Advanced Technology and Know-How – LaiFan’s competitive standing against local Chinese
manufacturers has been its progressive use of technology to streamline its manufacturing costs
and increase productivity. Its workforce is highly trained to operate laser machinery to effect
more refined cuts. This ability will however, become increasingly challenged as Israeli and
Belgium owners bring in advanced technology from their countries to automate their processes
and transfer knowledge and skills to the local labourforce (Asia Times, November, 2002).
Major Commercial Risks
This section concludes with a discussion on China’s weak legal infrastructure as a risk for
LaiFan’s operations.
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China’s rapid economic growth is outpacing reforms on foreign investment and its present legal
framework is poorly equipped to govern more complicated business transactions (Ambler and
Witzel, 2004). Regulations are frequently changed and inconsistently enforced with parts of
commercial law often contradicting one other. This has several implications for LaiFan:
Poor Legal Protection – A weak legal infrastructure complicates access to protection against
unfair treatment from a foreign partner or buyer. Legal advice must thus be sought in advance of
any negotiations with local buyers or sales agents. Guanxi is still extremely important and
supersedes many written regulations and the tremendous discretion of government officials in
exercising approval powers cannot be underestimated (Ambler and Witzel, 2004).
Resolution of Disputes – Litigation is not a popular option in China as there is a strong
preference for the resolution of disputes through conciliation, to save face. Dispute resolution
procedures need to be well defined in any export contracts with local businesses and a good
translator is often needed should the dispute land in court.
Poor Intellectual Property Protection – The Chinese market is notorious for constant breach of
intellectual property rights. According to a Bloomberg report, half of the US$100 million in
counterfeit goods seized by customs officials in 2002 were from China (Bloomberg, 2002). Such
breaches pose a grave threat to LaiFan’s strategy on developing a well-branded Canadian
image. Strategies to combat this situation include early registration of its patented cuts in the
market, educating buyers on distinguishing between real and fake pieces and increasing
innovation of patented cuts to make it difficult to replicate pieces.
Consumer Profile
15% of China’s population is designated as middle class (Ambler and Witzel, 2004) which
equals roughly 200 million people. According to China’s Chief Trade negotiator, this number is
expected to rise to 400 million in 2010 (Yap, 2004). Jewellery has now become the third most
frequent item purchased by disposable income and in a report by the International Herald
Tribute, the average middle to upper-middle income consumer had an average of $8,500 yuan
in disposable income in 2003, 36% more than in 1998. In the past four years, China’s retail
sales growth has outpaced that of the United States, totalling $205 billion in 2003 (Yap, 2004).
While wages across the country have been steadily increasing, regional disparities are salient
when you compare the annual per capital disposable income of city residents – an average of
$1,200 for city residents versus $395 for rural residents (China Statistical Yearbook, 2003). The
majority of the wealth is concentrated in the eastern coastal cities of Shanghai and Beijing and
in the Southern part of Guangdong province (Ambler and Witzel, 2004).
China’s Middle Class Consumer
LaiFan’s strategy to target the middle to upper middle income bracket of China’s population can
be justified when one analyzes the size and buying power this subgroup represents.
Several conclusions can be drawn about this:
• There is a large base of potential consumers for LaiFan’s product concentrated in the
lower middle to upper middle class range.
• The target consumer can be further segmented to consist of the middle to upper
middle class populations as they possess the buying power and disposal income to
purchase luxury goods.
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Primary Markets: Shanghai, Beijing and Guangzhou
China’s growing wealth is not equally distributed and to strive to sell across the entire country
would be mismanagement of the company’s time and resources. The ailing conditions still
present in the Western provinces become apparent when you consider in cities such as
Xinjiang, Guizhou and Yunnan, the government has struggled to sustain adequate job growth
for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants
to the work force. Eighty to one hundred and twenty million surplus rural workers float adrift
between villages and the cities, many surviving through part-time, low-paying jobs (CIA – The
World Factbook, 2004).
Leading the country’s charge in economic growth, Shanghai, Guangzhou and Beijing are three
important markets for LaiFan to target first entry into. Of the three, Shanghai claims a
heightened role in this development and should be greatly focused on in the company’s initial
entry. With a population of 16 million, the city contributes one twelfth of China’s total industrial
output value, a quarter of its total exports and one eighth of the nation’s financial revenue
(Shanghai Foreign Investment Service Center).
China’s Jewellery Consumer
Having established the target market group, this section now moves to better define the buying
trends of LaiFan’s export customers.
According to Ken Fong, Marketing Manager at the Hong Kong Trade Development Council,
increased buying power, lower jewellery import tariffs and a standardization of China’s jewellery
market have all led to new dynamics in jewellery buying trends. These include:
Shift in Purchase Motivation – Jewellery was once purchased for investment purposes, often to
hedge against inflation and rifts in the economy. Consumers now buy jewellery for their
aesthetic value and personal pleasure rather than for long-term investment.
Type of Jewellery Purchased – Gold jewellery, once the treasured favourite in the country, is
now competing for buyer preference with platinum and diamond jewellery. An increasingly open
market to jewellery imports further raises local awareness of other alternative pieces.
Branding is increasingly important with the Chinese buyer, a fact reinforced by the growth of the
luxury brand market (Benson and Whitcomb, 2003). International fashion houses such as
Giorgio Armani and the Paris-based Cie Financiere Richemont, which owns Cartier, are
expanding in China (Yap, 2004). The role of the younger consumer has also grown increasingly
important, a group that is extremely fashion-conscious and influenced by Western trends (Ken
Fong, HKTDC).
The role of the female consumer cannot be underestimated as women in China increasingly
make the purchasing decisions. Female employees total 330 million in the country, accounting
for 46% of the total workforce, an increase of 0.3% from 1995 (All-China Women’s Federation,
2004). Women’s education levels are also rising. Over the last seven years, the number of
female students completing adult higher education increased 37.6% (All-China Women’s
Federation, 2004), denoting a population that is increasingly independent and influential.
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LaiFan’s Ability to Meet Market Demands
Having better defined local market demands, several features of LaiFan’s diamonds
differentiates it from its competition and makes the company well suited to meet current
demand:
A Canadian Source – There is much opportunity to actively export Canadian diamonds into the
region. LaiFan’s product would be one of the first in China from a Canadian source, allowing
LaiFan to claim it holds a unique position in the market.
Sustainable Access to Supply – Diamond jewellery is in the beginning stages of the product life
cycle in China. The predicted shortfall in supply in the near future will lead diamond traders to
seek a reliable and sustained access to diamonds. Canada’s two operational mines are young
and both have expected life spans of another twenty to twenty five years. There are two
additional diamond mines expected to open by 2010 in the Northwest Territories. In contrast,
some of the world’s largest diamond mines that supply the rough to factories in China have
been in operation for greater than ten years and are reaching the end of their lifespan. For
example, the Mir pipe in Russia, which has been in operation since the 1950s, recently
surpassed its lifespan and was decommissioned (Natural Resources Canada, 2004). Research
to find new deposits is a very lengthy and expensive process and this shortfall in supply will
drive up demand for Canadian diamonds.
Quality Diamonds
Canadian diamonds are becoming internationally renowned for their high gem quality because
of their origin in kimberlite pipes which trade for a larger value in the marketplace (Bruce Boyd,
2004).
Innovation
LaiFan’s automated technology is cutting edge in the industry and allows for greater and more
precise cuts on traditional pieces such as the Princess Cut and the Round Brilliant. In a market
where size and shine are the predominant buying criteria, a refined cut that can maximize the
flare of a diamond would do extremely well in China. The increased productivity and finishing
time to produce a polished diamond allows LaiFan to supply its product faster to a market that is
largely being supplied by manual labour. LaiFan is also unique in that it houses an in-house
research and development department. Though small, the two-person team presents an added
advantage for the company to produce and patent unique cuts faster than other factories who
concentrate on the processing aspect of polishing diamonds only. As diamond jewellery moves
through the product life cycle, this allows LaiFan to introduce new and innovative cuts to the
market, offering alternatives to traditional pieces the market may tire of.
Market Entry & Marketing Strategy
This section proposes that LaiFan’s market entry strategy take the form of a partnering
arrangement with a local polishing plant in China. The merits and justification for this proposal
will be presented within the context of a SWOT analysis on LaiFan Polishing and the benefits
the company can expect to accrue through this partnership.
SWOT Analysis
Strengths
Within its first seven years of existence, LaiFan has become a reputable leader for its ability to
value-add to a raw commodity through the use of advanced technology. The company’s
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obsession with quality echoes throughout its operational structure, beginning from the
procurement stage through to the delivery of its product to customers.
Innovation occurs through LaiFan’s use of three state-of-the-art ROFIN RX3000 C02 laser
machines to perform more refined and precise cleaves that result in better cut diamonds.
Consequently, LaiFan’s diamonds command a much higher mark-up of 75%, compared to the
industry average.
LaiFan’s small research and development team further expedites new innovations by dedicating
full-time commitment to researching new technologies and designs. It was the first to respond to
market demand for a specialty cut, away from routine traditional pieces, and introduced the
patented “Mobius” design.
Weaknesses
Three main internal weaknesses hinder LaiFan’s competitive strength in China:
– Financial resources. LaiFan is a small operation with limited resources to create a brand
new export division. The strict purchasing schedule dictated by the diamond mines
places an added strain on the company’s cash flow during specific times of the year.
This reduces the company’s ability to invest aggressively in a new export initiative as
well as reduces its capability to withstand significant losses should its export initiatives
fail.
– Weak Marketing Ability. Already discussed in the Management and Human Resources
section of the report, LaiFan has neither the marketing budget, nor the in-house
expertise to develop an extensive marketing strategy. In an industry where large
competitors such as De Beers and Cartier launch multi-million dollar advertising
campaigns, this weakness can significantly impede recognition of LaiFan’s product over
competing brands.
– Inexperience. Although LaiFan’s workforce is extremely diverse, concerted efforts
across the company to pursue exporting activities is a new vision and presents a large
learning curve for all involved. A more important aspect of the company’s inexperience is
a lack of connections and distribution networks in the Chinese market. Not being able to
access a strong distribution link into China could hamper the company’s entry strategy
into the country and prevent it from performing effectively against aggressive
competitors.
Opportunities
Target opportunities were presented and justified in the preceding section and will be
summarized again at a high-level in this section.
Target Locations – Beijing, Shanghai and Guangzhou’s lead in the country’s wealth and middle-
class boom make them the prime centers of target for LaiFan’s initial entry.
Product – The market’s crave for large gem quality pieces means a higher level of acceptance
of LaiFan’s product requiring fewer modifications.
Consumer Type – As the target market analysis demonstrated, there is a large and growing
base of consumers for LaiFan’s product within the middle to upper middle class segments of the
population. Selling to this pool of customers still allows LaiFan to price its diamonds to about a
65% mark-up.
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Threats
External threats in China takes the form of domestic and foreign competition. At one level are
jewellery products other than diamonds that compete with LaiFan for jewellery sales. At the
other level are diamonds produced within China and from outside of China.
Other Products as Competition – Despite the new attraction to diamonds, traditional pieces such
as jade, platinum and gold are still very popular, especially with the older generation (Ken Fong,
HKTDC).
It is also important to note the growing prevalence and threat of fake diamond jewellery pieces.
Cubic zirconia and synthetic moissanite jewellery exude similar brilliance and fire as genuine
diamonds but retail for half the price. Improvements in technology will increasingly make these
pieces more desirable to consumers who seek less expensive jewellery with the same flair of
real diamonds.
Domestic Diamond Producers – China Diamond Corporation is the country’s largest diamond
producer and controls four mining properties in the country (AZoMM, 2004). Roughly more than
50% of the stones recovered from the company’s 701 Changma mine are gem quality stones.
The country thus has access to a supply of polished and ready to set diamonds.
Regional Competitors – China’s jewellery industry is heavily dominated by retailers from Hong
Kong that carry strong branding through chain stores. Similar cultural background and
preferential treatment of Hong Kong products as a result of the Mainland and Hong Kong Closer
Economic Partnership Arrangement (CEPA) gives added advantage to Hong Kong players
(Raymond Yuen, HKTDC).
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Market Entry
Table 5 summarizes several feasible market entry options and their pros and cons for LaiFan
Polishers.
Table 5 – Market Entry Options
Market
Entry
Option
Advantage Disadvantage
Sales Agent Low Risk: Partnership can
be terminated upon
dissatisfactory
performance.
Low Investment: Payment
from LaiFan tied to
commission from sales.
Established distribution
network.
Local knowledge.
Additional costs: Increased staff wages as a result of
increased activity.
Potential intellectual property infringement by agent.
Chinese commercial law still underdeveloped and
often favour the local agent. Contractual disputes
would be costly and time-consuming.
Less incentive to commit to LaiFan’s product if other
clients have larger portfolios or offer larger
commissions.
Manufacturing
Plant in China
Cheaper labour costs. Most labour is manual labour and productivity is
slower than automated process in Canada.
Major capital investment costs: A minimum of
US$140,000 is required of registered capital with a
minimum of 15% paid up within three months and the
balance paid up within a year (Offshore.com, 2004)
Failure of operations in China represents major
financial loss that may not be recovered by its
domestic operations.
Cannot access tax breaks in special economic zones
as company is not exporting goods out of China.
Co-
manufacturing
Partnership
Agreement
Less investment than
setting up a local
manufacturing plant.
Access to local knowledge.
Due diligence in protecting intellectual property rights.
Transfer of knowledge to local partner could enhance
its position as a future competitor.
Access to local distribution
network.
The third option presented above is the most feasible in terms of LaiFan’s current financial and
risk management abilities. Working with a local partner will facilitate LaiFan’s entry into China
through:
Providing local experience and networks
More efficient working process – the hours in China are longer than in Canada and
output can be greater with a larger workforce
An economy of scale that the company may not otherwise have if it opened up its
own factory in China
The proposed co-manufacturing partnership will consist of LaiFan undertaking the initial three
steps in the polishing chain: cleaving, sawing and bruting of the rough diamonds. At this point,
the diamond will be cleaned and packaged by its logistics department, then sent to the local
partner in Shanghai where it will complete the polishing and faceting of the diamonds according
to LaiFan’s cut design, licensed for use to the partner. The diamonds will also undergo the final
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brillianteering stage in China and be inscripted with the traditional Canadian maple leaf emblem
with the co-initials of LF and the partner company appearing beneath the logo. The partner will
make an initial payment on LaiFan’s semi-processed diamonds on net 30 day credit terms. A
further commission of 20% on the sales value of the polished diamonds will be forfeited to
LaiFan once the diamonds are sold in the retail market. The commission will also be made on
net 30 day terms.
Upon finding an appropriate partner to undertake this relationship, LaiFan will enter into a one-
year contract, with a purchase schedule set out for the year and licensing of its patented cuts to
the partner to cover this one year period as well. Routine reviews of the partnership will be
made by both parties with negotiations on the renewal of the partnership to be held on an
annual basis.
This report now moves to support the merits of this strategy within the context of the company’s
product, pricing, place and promotion strategy.
Product
In the absence of a large marketing budget, the proposed partnership could act as a bridge to
better connect LaiFan’s product to consumer demand:
Distribution Network: The partner would be expected to have an established network of
buyers. Accessing this network would expedite LaiFan’s entry into China and save it time
and costly research to tap into this network on its own.
Local Knowledge: The local partner would be best suited to predict upcoming trends in the
Chinese market and advise on minor modifications needed to LaiFan’s current product.
There are also regional differences between local markets that only a business could pick
up through extensive experience in a country. The local partner could thus help LaiFan fine-
tune its product and market entry strategy to better match regional demands.
Price
Two conditions about pricing in the diamond industry will govern the pricing strategy that LaiFan
uses:
1) Widespread industry consensus that a shortfall of supply will keep diamond prices
elevated well into 2010.
2) Limited range and flexibility for diamond traders at the polishing stage to set pricing
strategies. The greatest discretion and flexibility in pricing occurs at the retail stage,
where mark-up can be made as high as 200%. This flexibility unfortunately does not
exist at the polished and semi-polished stage as rough and polished diamonds are
strictly priced according to the Rappaport Diamond Report (Don Law-West, Indian and
Northern Affairs Canada). The report is an industry standard based on global supply and
demand dynamics and reflects prices of small brilliants to stones of 5 carats, of colour D
to M and from “pure” to “pique 3”.
Despite the rigid pricing structure, shortage of similar sized and graded diamonds in China
means LaiFan’s diamonds would command a premium price in the market. Noting that the same
carat diamond in China is not necessarily graded at the same standard, the higher price that
Canadian diamonds command in this market thus resembles a market skimming strategy. This
strategy supports the results discussed in the target market section of the report where LaiFan’s
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target market would have to preclude the lower end of the middle class category, who do not
have the purchasing power to afford LaiFan’s pieces.
The merits of the proposed partnership strategy become evident again at this stage of the
analysis. A high premium price commanded by a product often requires similar messaging to
justify the product’s cost. With the expertise and help of a local partner, LaiFan can refine its
messaging to emphasize the diamond’s quality as support for its higher cost.
This said, there are two areas in pricing which LaiFan does have control over when pricing its
diamonds to its partner: the shipping terms used, and the currency payment will be made in.
In Appendix A – Export Cost Accounting, LaiFan has calculated its pricing to its partner based
on the Incoterm CIP Shanghai. This term is potentially the most reasonable one to negotiate
between two parties who have no familiar history with one another. CIP also presents a
balanced share of the risks and costs as LaiFan manages the responsibility for transportation to
Shanghai and the partner oversees the entry of the product through local customs. As the
Export Cost shows, using the CIP Incoterm, the $16,000 cost of transportation and insurance
specific to the CIP term still makes the export venture feasible and profitable for LaiFan.
The sales price will be set in the foreign buyer’s currency – Chinese Yuan. This decision was
made based on an assessment of environmental conditions including the foreign exchange rate,
inflation, laws and regulations in China. The environmental scan reveals that China has a stable
foreign exchange and inflation rate with low risk of currency devaluation. Quoting in Chinese
Yuan will help the partner clear the goods through the Shanghai Diamond Exchange which
operates in local currency and will make for more favourable negotiating terms between the two
partners.
Place
LaiFan’s shipping strategy is very dependent on its partner’s intimate knowledge of China’s
customs and documentation procedure. In a telephone interview with Philip Yue, Operations
Manager of Kuehne & Nagel, diamonds are considered high value products and as such, are
very vulnerable to theft. Air transportation is the main mode of delivery used in the industry and
once in-land, diamond traders use high security trucks to transport the diamonds to their final
destination.
Under the CIP Incoterm, the risk passes from LaiFan to the importer when the cargo is handed
to the first carrier (FITTskills International Trade Logistics). However, responsibility for the costs
stay with LaiFan until the goods actually arrive in Shanghai. The term offers a good risk
management opportunity for LaiFan because it does not have to worry about finding a local
customs broker to clear the goods. LaiFan’s responsibilities before the goods leave Canada
then are that it must prepare all the certification for the diamonds and complete other export
paperwork.
Certification includes a report from a gemmological lab and a Kimberely Certificate, to prove that
the diamonds are from a non-conflict source. Documentation includes a B13A, three copies of a
commercial invoice, the shipper’s waybill and evidence of insurance.
As the Canadian government does not restrict the export of diamonds, no Export Permit is
required to clear the goods (Canada Customs and Revenue Agency). There are also no
restrictions of the importation of diamonds into China. According to Samira D’Costa, FedEx
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Sales representative, these documents do not need to be translated for accompanying the
goods into China.
Transit points for LaiFan will thus be two areas. LaiFan will have UPS pick up the shipment from
its factory in Toronto. Its diamonds will land at Pudong International Airport in Shanghai and be
transported by Brinks armoured car to the Shanghai Diamond Exchange where they will clear
customs. Clearance of the goods in China will be managed by LaiFan’s partner who will need to
hire a local customs broker. According to the HKTDC, documentation requirements are handled
by the Chinese importer and include the bill of lading, invoice, shipping list, sales contract, an
import quota certificate for general commodities, import license, inspection certificate issued by
the State Administration for Import and Export Commodity Inspection (SACI) or its local bureau,
insurance policy, and customs declaration form (Raymond Yuen, HKTDC).
The packaging of the diamonds will need to be enhanced due to the extra travel time they are
subjected to. To prevent the shape of the diamonds changing through contact with other
materials during transportation, they will be wrapped very tightly in heavy duty parcel paper.
There will also be a paperweight placed in the parcel paper before it is folded to prevent the
diamonds from “jumping” in shipment. The parcels are lined with double layers of soft cotton
fabric liners, instead of the regular single layers. As with domestic shipments, the diamonds will
be placed in aluminum parcel boxes, but packed more compactly to prevent shifting or
movement.
Promotion Strategy
Diamond conglomerates such as De Beers, Tiffany’s and Cartier, are spearheading the
industry’s move towards massive branding of their names on jewellery. This phenomenon will
compound the importance for all diamond participants in the supply chain to step up efforts to
brand their product. With this in mind then, there are several avenues for which LaiFan can
promote its diamonds – some specific to its short-term strategy and some specific to its long
term strategy.
LaiFan’s first line of customers in China is the jewellery retailer – the company’s first point of
sale after their partner polishes the diamond pieces. The company’s marketing brochure will
thus be its key piece of marketing literature to build awareness within the retailing market. Extra
prints of its promotional brochures will be supplied to retailers for display at their jewellery
counters or jewellery stores. The market’s affinity for Western products means images in the
brochure should depict a Western culture theme, showing a Caucasian model in a North
American wedding bearing a Canadian ring. Symbols of good fortune should also be utilized in
the material such as the colour red or the number eight, both symbols of auspicion to the
Chinese.
Heavy government control in China means extra caution must be exercised when establishing
product messaging. Messaging should not have any political overtures but instead, emphasize
the following qualities:
• The size of the Canadian diamond.
• The authenticity of the Canadian diamond. In a country ridden with counterfeit products,
being able to provide retailers and consumers with a government-backed certification
provides reassurance to the buyer of genuine quality.
• North American source of the diamonds.
• Prestige of owning a Canadian diamond.
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On a long-term basis, this marketing outreach will extend to utilize channels that would reach
the target diamond consumer. The high cost of television and radio advertisements and the
lower control of targeting the message to a specific audience makes them less appealing
channels for LaiFan to pursue. Instead, print advertising in fashion magazines presents a more
feasible medium for LaiFan to promote in, ensuring the company of better reaching its target
audience. The influx of Western magazines such as Esquire, Cosmopolitan and Vogue all
present highly circulated mediums for LaiFan to advertise in. Additionally, glossy fashion and
lifestyle magazines such as iLook and Rayli have become prime marketing tools for jewellery
retailers to market to the young and affluent woman.
To offset its weakness in marketing, LaiFan will rely heavily on its local partner to assist with two
components of its marketing plan:
– Initial review of LaiFan’s marketing materials and advisement on how to adapt its
products to better suit the market’s tastes. The first modification of the marketing piece
that the company will undertake is translation of the piece into Mandarin Chinese. Here,
the local partner would be of benefit in suggesting credible translators. The partner could
also take initial looks at the marketing materials and advise what modifications are
required to the colours, messaging and imagery used.
– The second benefit the partner would bring to the relationship consists of advising on the
long-term marketing strategy for LaiFan. It is LaiFan’s intention to secure the expertise of
a local marketing consultant who will develop and implement a long-term marketing
strategy for the company. The co-manufacturing partner would be of value in identifying
a reputable marketing consultant, advising LaiFan of acceptable and current market
rates for consulting fees and evaluating the feasibility and merits of the consultant’s
marketing results. Using a consultant will be less expensive for LaiFan in the long run
(i.e. consulting with the marketing expert at 40 hours at $40 per hour, the industry norm,
will cost LaiFan approximately $1,600 versus hiring an additional in-house marketing
staff at $24,000 a year.)
Criteria
As this section shows, the partner plays a very important role in the success of LaiFan’s entry
into China. Extra attention should thus be paid to sourcing a reputable company with the
experience and expertise of polishing high valued diamonds. Specific criteria will be used when
selecting the partner. Ideal qualities in the partner include:
Foreign owned factories that source high value, gem quality diamonds similar in size and
grade to Canadian diamonds
The use of advanced technology such as laser equipment in the factory
Established in China for longer than five years
Financial stability and a history of timely payment to suppliers
Timely and satisfactory delivery of product to customers
Target partners will be Israeli or Belgium owned companies who have been established in
China for greater than five years. These foreign owned firms often source higher gem quality
diamonds, similar to the size and grade of Canadian diamonds and use advanced technology to
effect the polishing. Locating such a partner would give LaiFan greater assurance that it can
uphold its quality standards in the Chinese market and that it can continue to market “quality” in
its messaging.
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Diamonds for Export FITTskills: International Trade Management
How to Source Partner
A number of avenues can be used to locate the foreign manufacturer and these include:
Canadian Consulate Officers in Guangzhou, Shanghai and Beijing. Trade officers are
very attuned to local conditions and can recommend local polishing factories that meet
LaiFan’s criteria as well as advise on companies that may not possess a good fit with the
company.
Hong Kong Trade Development Council – Consultants in HKTDC are divided into
sectors of expertise and the diamond and jewellery industry in China is very heavily
researched by the organization. HKTDC also has strong representation in Canada with
an office in Toronto where LaiFan could speak to one of their consultants.
Local trade shows – Shanghai held the country’s first ever diamond fair in 2004 and the
success of the show will guarantee future trade shows for this industry. These are an
excellent venue for LaiFan’s President to meet face-to-face with manufacturers, to learn
about current trends in the diamond industry in China, and to meet with government
level decision makers.
International diamond associations are another great source to access because they are
tapped into China’s development in the jewellery market and are well acquainted with
local contacts in the regions. It is important for LaiFan to speak with individuals at the
World Diamond Council, the International Gemological Association and the International
Diamond Association to review China’s progress in this industry from an external and
less biased viewpoint.
Operations Overview and Supply Chain Management
LaiFan’s operational setup has been critical to maintaining its competitive advantage against
competitors. The company has improved its operational processes in several ways:
Integrating technology into its manufacturing process. In 2001, LaiFan purchased
three laser machines and two CAD design programs to automate its production
process. The transition resulted in a 25% reduction in production staff required to
manually produce the diamonds and a 37% reduction in time to manufacture a
finished piece.
Since its inception, LaiFan’s President has instilled a commitment to quality in the
company, not just in the final polished piece, but throughout the company’s entire
operational structure. In 1999, LaiFan was ISO 9001:2000 certified and has
established regulatory standards across all its departments
FITTskills Sample Business Plan 25
Diamonds for Export FITTskills: International Trade Management
Graph 2 – Operational Structure: Domestic Versus Exports
Operational Structure: Domestic Operational Structure: Exports
Customer
orders
Logistics team:
– determine packing and labeling
needs for the week and ensure
materials on hand
– coordinate shipping times
Financial Manager & Admin Assistant:
– invoice customer upon release of
diamonds
– track payment and follow up with
payment reminder
– update financial reports to reflect sales
Production team:
– schedule cleaving,
bruting, sawing
and polishing
– R&D consistently
evaluates new
technologies for
company
according to that
week’s orders
Sales team
coordinates
Sales team
solicit
sales
President & Business
Development Director
purchase diamonds
from mines based on
previous years’ sales
President & Business
Development Director
purchase diamonds
from mines for export
Export
Manager:
Manages
contract with
China partnerProduction Team:
– schedule
cleaving,
bruting, sawing
of diamonds to
be polished by
overseas
partner
– R&D evaluates
new
technologies to
give company
competitive
edge in Chinato
that week’s
Logistics Team:
– orders additional
packaging supplies
– preparesB13,
commercial invoice,
consular invoice,
Sales Team:
Financial Manager & Admin Assistant:
– obtain export credit insurance
– obtain BDC loan to cover diamond
purchase
– invoice partner
– track payment and follow up with
payment reminder
– update financial reports to reflect
sales
– ensures
enough
brochures
available
In the export structure above, each of the four existing departments will expand to incorporate
exporting components to their current operational processes. A central difference between the
domestic and export structure is that while in the former, the sales team plays the central role in
coordinating activities with the four departments, the Export Manager now takes on the
coordination role. The Export Manager manages the partner contract, establishes the sales
volume with the partner and sets the purchasing schedule for the year. The contract will
stipulate the number of diamonds the partner will procure throughout the year and the dates of
delivery to Shanghai. The Export Manager will work with the lawyer to solidify the terms into a
contract and oversee the licensing of the cut designs to the partner. Having established the
buying schedule, the Export Manager then works with the four department teams in the
following manner:
Production Team – The Export Manager communicates the purchasing schedule with the
production team. The Production Director then establishes the schedule to process the rough
diamonds for export. The two R&D team members will evaluate new technologies and cuts to
introduce into the Chinese market.
Sales Team – Prepares extra marketing materials and brochures to accompany the diamonds.
The Sales and Business Development Director attends international diamond and jewellery
trade shows in China with the Export Manager to establish contacts and find alternative sales
leads in the country. The Export Manager will communicate any modifications required to the
marketing pieces to the sales team who will implement the changes.
FITTskills Sample Business Plan 26
Diamonds for Export FITTskills: International Trade Management
Logistics Team – The Logistics Manager ensures all staff is trained on preparing export
documents. The Manager secures the appropriate insurance coverage and procures an
adequate amount of supplies and materials used for the shipments. The Manager also
establishes the packaging and shipping schedule to ensure timely delivery.
Financial Manager – The Export Manager consults with the Financial Manager on the extra
purchase volume the company can sustain and works with the manager to establish cash flow
projections. The Financial Manager is responsible for securing export credit insurance and extra
borrowing to cover the increased purchases from the diamond mines. Constant communication
is critical between the Finance and Export Manager to ensure payment is received from the
foreign partner and to monitor the company’s cash flow for future purchases.
To better understand the labour required and materials used in producing the diamonds for
export, what follows is a detailed description of the production processes the rough stone goes
through before being delivered for export to China.
Analysis
The rough stone is first analyzed by the Master Cutter to determine the best cut for the
diamond. The best cut is determined to be the one that will show off the diamond’s four Cs in
the most optimal way. Equipment used in this assessment stage include diamond testers, a
scale to measure the initial and subsequent weight of the stone, a microscope and a gran
diamond colorimeter to assess the colour variations in the diamond.
Following this analysis, the Master Cutter places the rough stone under a camera. The camera
reproduces the picture of the stone on a computer and an image of the diamond comes up on
the screen with lines drawn into it, suggesting the optimum cut for this particular rock. The
analysis involves tracking all possible angles and proportions and determining the regions most
promising for cutting. The Master Cutter can then program the selected cut into the laser
equipment.
Before actual work is done on the diamonds, LaiFan’s diamonds undergo extra steps to
authenticate their origin and guarantee of value from the Canadian mines up north. These steps
follow the voluntary guidelines set out by the Canadian Diamond Code of Conduct where a
unique Diamond Production Number is assigned to each stone and the number is registered
with the Canadian Diamond Code Committee.
Lasering
Lasering is most used during the cleaving, sawing and bruting stages of manufacturing. After
the preset cut is programmed into the computer, the diamond is centered on an X-Y axis on a
platform. As the computer-controlled laser passes over the first time and cuts the diamond at
high temperature, it breaks the carbon bonds and leaves behind the graphite residue, which is
“burnt” or vaporized on the return pass. The gemologist is able to watch his progress on the
computer screen.
Cleaving
The Master Cutter explains the cut pattern to the two cleavers where one will operate the laser
beam to create the kerf incision in the diamond while the other will perform the manual split of
the stone. Basic equipment is utilized at this stage and includes quick-drying cement, a wooden
cleavers’ workbench, the laser machine and a steel blade to make the blow to the stone.
FITTskills Sample Business Plan 27
Diamonds for Export FITTskills: International Trade Management
Sawing
This stage has been greatly automated over the past several years as the laser saw has now
become the predominant tool. The stones are fixed on a circular saw in individual supports,
then subjected to a sensor which detects heat and vibrations. Several stones can be
simultaneously placed on the saw as the laser beam slices through the stones. The Sawer
cleans the stones by putting them into Pyrex pots filled with sulfuric acid before they proceed to
the bruting stage.
Bruting
During this stage, the diamond is placed in a lathe, and another diamond in the lathe is rubbed
against it to create the rough finish of the girdle, the outside rim of the diamond at the point of
largest diameter. Equipment utilized at this stage include one automated bruting machine which
consists of a laser beam controlled by a desktop computer and a manual bruting machine made
of cast iron, mounted on an individual work table with a ¼ HP motor. The manual machine is
also supported by a bruting stroboscope which allows the bruter to monitor the progress on the
video screen and a heating block.
Polishing
Polishing5 puts a number of faces (called facets) on the stone. To give the diamond its finished
look, it is placed onto the arm above a rotating polishing wheel. The wheel is coated with
diamond powder that smoothes the diamond as it is pressed against the wheel. LaiFan operates
five rotating polishing wheels set on wooden polishing benches and employs six polishers
specialized in different streams of polishing. These specialists include:
– 2 crossworkers specialized in round or fancy cuts
– 2 eight cut workers, divided into specialists of the crown and specialists of the cutlet side
– 1 brillianteerer – specialized in round or fancy cuts and the company’s “Mobius” brand
There are various other equipment and tools to support the polishing process including diamond
powder, mesh pads, diamond drill packs and diamond polishing syringes. With greater wear and
tear due to the new export production activities, the equipment will need to be maintained with
parts replaced on a regular basis.
Following these four stages, LaiFan sends the diamond to the Harold Weinstein laboratory in
Toronto to grade the diamond’s cut and quality. After grading, the diamond is inscribed with the
LaiFan trademark symbol.
Upon return of the diamonds from the gemological institute, they are sent to the logistics
department to prepare for packaging and shipment. The diamonds are steam cleaned
once again, then sorted by their gem grading and packaged in 5 ½ x 3 ¼ sized parcel
paper. Diamond Information Fact Papers are taped onto the parcel papers to identify the
stone’s weight, color, clarity and measurements and allows the producer to pinpoint
inclusions and pavilion diagrams. Following this, the diamonds are placed in 3 x 4 velvet
pouches closed with a drawstring and finally placed in aluminum parcel boxes. The
respective mine’s certification and report from the gemological institute are both placed
in the box. The logistics team then completes the waybill and contacts UPS to pick up
the day’s shipments. An invoice to the buyer is enclosed with the package. This sale is
logged with a copy of the invoice kept by the Finance Manager who manages all billing
records.
5 Descriptions of the diamond polishing process is based on the Hardness 10 book by Eddy Vleeschdrager and on
discussions with Don Law-West of Indian and Northern Affairs Canada.
FITTskills Sample Business Plan 28
Diamonds for Export FITTskills: International Trade Management
Key Changes as a Result of Exporting
The new partnership agreement allows LaiFan to focus on its core competencies while not
incurring the added costs of polishing a finished diamond. With the new partnership
arrangement, LaiFan will be responsible for cleaving, sawing and bruting the diamonds and will
take on added overhead costs associated with greater hours put in by the production team. With
the company’s recent adoption of new technology, its production processes have been largely
streamlined where equipment is not being used to maximum capacity. LaiFan’s manufacturing
facility thus has enough room to take on the extra capacity of processing the diamonds for
export, and will not require a new capital budget for additional equipment. It should be noted
however, that as LaiFan becomes more experienced in the export market and begins to
aggressively expand into China, additional equipment will eventually be purchased to support a
full functioning export department. In fiscal years 2009 and 2010, this assumption is reflected in
the purchase of one additional polishing and sawing machine, and one laser machine, totalling
$375,000. All three purchases have been factored into the company’s operational budget and
cash flow projections, with the corresponding borrowing method denoted. Additional support
materials have also been budgeted for and these include extra diamond powder, diamond mesh
pads, diamond drill packs and diamond polishing syringes, additional parcel papers, velvet bags
and aluminum boxes to store the diamonds. In addition, more frequent maintenance of the
machinery will be needed.
Maintenance of Competitive Advantage
LaiFan’s production process will help it establish a competitive advantage in the Chinese
market. For one, its core competency of manufacturing very high gem-quality diamonds allows it
to offer a premium product in the Chinese market, supporting the higher price it will charge for
its diamonds overseas.
LaiFan also leads in the use of cutting-edge technology, supported by an in-house R&D team.
Its proximity to New York City, a world cutting center in quality diamonds means it has access to
new technology on the market faster. This has important implications for LaiFan as it allows the
company to keep ahead of the competition by constantly reinventing its products and offering
new product lines as markets mature in Beijing, Shanghai and Guangzhou.
A third competitive factor that LaiFan has is access to a highly skilled workforce. A multitude of
schools across Canada now offer diamond polishing programs and a number of international
diamond governing agencies have representation in Canada. The high craftsmanship in the
company through a strong domestic training infrastructure again means LaiFan can offer higher
valued diamonds to the Chinese market.
What this all translates into is that LaiFan can deliver to its customers in China something that
local competitors cannot – a larger, higher gem quality stone complemented by a refined cut.
The company’s advanced technological processes also enable it to better respond to market
demand and change, leading the introduction of new products into the product life cycle.
FITTskills Sample Business Plan 29
Diamonds for Export FITTskills: International Trade Management
Financial Analysis and Risk Management
The proposed market entry strategy and entire export initiative can only be pursued if LaiFan’s
financial structure can support its plan. This section thus performs several analyses to validate
the strategy. Analyses include:
– Export Cost Accounting – This section of Appendix A presents the export costs
associated with two market entry scenarios. Comparison of both scenarios allows
LaiFan to measure the direct impact each strategy will have on the firm’s profitability.
Recommendations to pursue the co-manufacturing strategy are supported by the data
presented.
– Performance Ratios – The export venture’s Return on Investment (ROI) and Payback
Period are calculated to determine when LaiFan’s initial investment in the project will be
recovered and if the ROI meets industry and the company’s standards.
– Five Year Cash Flow Forecast – The forecast, included as part of Appendix A, integrates
the costs associated with the export strategy, into the company’s domestic operations.
The effect of the partnering venture on the company’s cash flow is reflected in these
reports and areas where there are cash shortages are isolated and addressed.
This section concludes with a discussion of the financial risks of the export venture and
strategies for LaiFan to mitigate such risks.
Current Financial Standing
The three year income statements and balance sheets in Appendix A provide a snapshot of
LaiFan’s financial performance prior to the undertaking of any exports. The sales revenue in the
Income Statements are consistent in showing the company’s increasing growth in the domestic
market. Over a three year period, this corresponds to a 71% increase in gross sales.
Despite this, the financial statements also reveal that profit levels are not large enough to
support an immediate aggressive pursuit of exporting. To rapidly pursue large export sales,
LaiFan would have to dramatically increase its purchase volume of rough diamonds and also
spend a minimum of $400,000 on new equipment. Both the financial statements and cash flow
analysis show that the company does not have the deep cash pockets to follow this route. More
appropriate actions would instead involve the company moderately adapting a proactive export
structure, processing diamonds for export within the existing capacity levels of its present
machinery. As export sales and cash levels increase, the company will be in a better position to
undertake larger export contracts.
Export Cost Accounting
To validate the proposed co-manufacturing partnership entry strategy, export costs were
performed on this option and the second option of selling to a sales agent.
Scenarios A and B in the Export Cost section details direct costs associated with the export
activities and measures such costs against the sales forecast expected in the first year of
operations. The costs are based on a projected value of $200,000 in rough diamonds that would
be purchased in the first year of export and are totalled to reflect expenses accrued over a
year’s processing activity. In producing this Cost Accounting analysis, a decision on the
allocation of export overhead was made. Overhead such as utilities, long-distance calls,
equipment maintenance and building and property taxes have been proportionally applied to the
costs associated with the export project. In terms of wagers, only those associated with the
extra hours of the production team was factored into the export costs. The cost of hiring an
FITTskills Sample Business Plan 30
Diamonds for Export FITTskills: International Trade Management
Export Manager would still be incurred if the company chose not to export that year, so was not
included in the export analysis.
Reviewing the summary costs in Scenarios A and B, it becomes readily apparent that two large
costs associated with Scenario A render this option highly unfeasible:
Additional Equipment: The fast wear and tear of polishing machines means extra wheels
would need to be purchased to polish the extra volume for export. This represents an
additional cost of $200,000, requiring capital and cash LaiFan does not have to make
the purchases.
Additional Labour: Additional work volume calls for additional polishing wages. The
higher wages that Polishers command makes up 82% of the total wages associated with
processing the export diamonds, contributing to an additional $100,000 the company
cannot afford.
Totalling these and other costs up totals to an aggregate cost of $634,120, an amount that is
almost twice the projected sales revenue, and an unsustainable activity for LaiFan to pursue.
Net profit posted for Scenario Two lends greater credibility to the co-manufacturing partnership.
Ironically, the second scenario draws in greater revenues than the first scenario, in large part
due to the negotiated 20% commission LaiFan will receive on the polished diamonds.
Performing the ROI and Payback Period calculations on Option Two, the payback period for
when LaiFan will generate sufficient profits to recover the initial investment is about 10 months
(300,700/356,000) with the return on investment at 18%, above the industry average of 15%
(ROI = $356,000-$300,700/$300,700). Results of both calculations are acceptable to LaiFan’s
criteria and support the recommendation to pursue the export partnership.
Profitability of Venture
The Operational Budgets in Appendix A present a short and long term snapshot of forecasted
sales and expenses over the next five years. Fiscal 2006’s operational budget expands on the
Export Cost Accounting sheet to measure expenses and expected sales revenue on an accrual
basis – as earned by LaiFan, versus when the cash is actually received.
Sales revenues will be achieved through two means in China: through selling of the semi-
processed diamonds to its partner manufacturer in Shanghai and through a negotiated
commission of 20% on the sale of the polished diamonds. The five year operational budgets
demonstrate corresponding increases in expenses and sales revenue. As the first two years
demonstrate, there will not be a great amount of profitability as LaiFan moderately engages in
exporting. Sales forecasts expect a steady increase in revenue over the next several years to
reflect the industry’s optimism on the role of emerging markets in creating strong, sustained
demand and low supply levels to keep with customer demands. In year four, the increase in
expenses reflects the company’s purchase of extra machinery to match its aggressive pursuit of
markets beyond Shanghai, Beijing and Guangzhou. The higher expense level is
correspondingly matched by an increase in sales, reflecting the company’s sales in secondary
markets. Revenue in the operational budget and cash flow forecast also reflect the trends
discussed in the marketing section of this plan where the highest volumes will be made during
the shoulder months of the calendar year, around Chinese New Year, Valentine’s Day and
Christmas.
FITTskills Sample Business Plan 31
Diamonds for Export FITTskills: International Trade Management
Impact on Company’s Cash Flow
A final important assessment that LaiFan must undertake is the impact of the export project on
the company’s overall cash flow. The past several sections isolate the costs of the export
venture but the cash flow analysis seeks to integrate the export costs into the overall financial
picture.
The most immediate impact on cash flow will occur in the following areas:
– Greater cash shortfall to purchase the rough diamonds destined for China
– Funds required to buy diamond powder and equipment accessories to support increased
cleaving, bruting and sawing activities
– Greater cash shortages to pay for additional hours of workers
– Higher interest costs incurred due to additional funds borrowed to finance cash
purchases
– Increased costs associated with extra packaging and freight expenses
Two unique features of the diamond industry carry significant implications for LaiFan’s cash
buoyancy. First, buying transactions can only be carried out during two very strict periods of
time. Second, rough diamond transactions are only conducted in cash. Such increased cash
requirements are expectantly reflected in LaiFan’s cash flow forecasts for the five year period
into 2010 where the large surplus built from the seven months leading up to the first purchase in
August is accessed to effect the first buy. The tight four month window between August and the
next sightholding is however, not enough to allow LaiFan to build up its reserves again. In each
year, borrowing from external financers is needed to provide the cash for the December
purchases. In the first three years forecasted, the transactions show that LaiFan will still be able
to largely access its one source of financing – the negotiated Line of Credit to support its
December purchases. This line of credit is used towards year end and will be negotiated up
from a maximum of $100,000 to $200,000 to support the new export initiative. While it is heavily
used in the latter part of the year, it is also regularly paid down when the company receives its
payments in the new year. The cash flow denotes that each year however, a short-term loan will
need to be secured. In year four, this will increasingly be accessed as LaiFan pursues more
aggressive strategies to expand its export venture.
The cash flow and sales forecast are inextricably linked but ultimately are also susceptible to
unexpected conditions in the marketplace. These risks could throw the company’s cash flow off
balance and affect its ability to conduct its export and domestic business. Such risks include:
– Large amounts of uncollected debt and delayed accounts payables: LaiFan offers open
account credit terms to familiar customers in Canada and its bad debt is usually less
than 1% of its total revenue. In China however, LaiFan will be offering 30 day credit
terms, lengthening the delay in receipt of money. If the banks or the buyer reject
LaiFan’s paperwork and does not pay within the 30 days, the company’s cash projection
could be thrown off track, affecting subsequent operations throughout the year.
– Unexpected changes in global diamond market. Sudden events such as 9/11 and SARS
could cause immediate and unpredicted slowdown in LaiFan’s sales, again potentially
straining the company’s operations.
– Civil unrest, government expropriation, nonconvertible currency and severe devaluation
of the Yuan could result in significant losses for LaiFan.
These risks and others will be discussed in greater detail in the section to follow with strategies
to mitigate their effects presented.
FITTskills Sample Business Plan 32
Diamonds for Export FITTskills: International Trade Management
Payment Method
As LaiFan’s relationship with the export partner is new and unfamiliar, it needs to implement a
payment plan that will offer a fair length of time for the partner to remit payment but will not
excessively prolong LaiFan’s accounts receivables. Open account is too risky in this case and
cash in advance would be difficult to demand with a first-time buyer that is unfamiliar with
LaiFan. The recommended payment schedule would thus be 30 day credit terms for payment
on the semi-processed diamonds sold to the partner and an additional 30 day credit term for
payment of the commission after the semi-processed diamonds are polished and sold.
Payment will be effected by a Confirmed Letter of Credit (L/C), specifying 30 days after sight. To
initiate the letter of credit process, LaiFan will approach Royal Bank of Canada, its current
business bank that provides the line of credit, and request that RBC issue a Letter of Credit in
favour of the exporter. In the L/C, LaiFan will need to confirm the expiry date or last day it can
present the documents to receive payment, latest shipping date and the presentation days or
number of days from shipment in which the documents must be presented.
To obtain payment from the importer, LaiFan needs to present the following documents to RBC:
– a term bill of exchange signed by LaiFan and the partner that specifies the sum of
money to be paid on an indicated date
– copies of the commercial invoice, packing list and insurance certificate from Prudential
Assurance
– waybill from United Parcel Service
LaiFan’s Financial Manager, Ms. Lum, will be negotiating the L/C instrument with RBC, be
responsible for monitoring the receipt of payment from the partner and will implement a follow
up schedule on the collection of accounts receivables from the partner.
Risk Management Strategy
Exporting to China through the co-manufacturing arrangement, LaiFan is exposed to a number
of risks. Commercial and Currency risks are the most prevalent with potential large impacts on
LaiFan’s operations. Such risks include:
Commercial Risk: Getting Paid – Shipment delays, incomplete documentation and buyer
insolvency are all events that could prevent LaiFan from receiving payment in accordance with
the contractual terms of the sale. At minimum, a delay in payment would throw LaiFan’s cash
flow off-balance. This is less serious if the payment is late by one or two months during the
March to July period when LaiFan’s cash level is most buoyant. As operations near the tight
cash months of August and December however, bad debt and uncollected accounts could
seriously impact the company’s ability to make the purchases it needs to fulfill existing
contracts. Borrowing amounts subsequently grow larger, translating into higher interest rate
expenses and relationships with domestic buyers can become strained if LaiFan is unable to
obtain the financing to fulfill its contractual obligations.
Should its goods be unreasonably rejected by the buyer or the contract contravened by the
partner, LaiFan may be inclined to pursue legal action. Such a course will both be time
consuming and expensive for the company, with a high profile litigation possibly casting a
negative shadow on LaiFan’s reputation.
Currency Risk: LaiFan pays for the rough diamonds in Canadian funds, but quotes to its partner,
and is paid in Chinese Renminbi (Yuan). The consequences of transaction exposure appear if
the Chinese Yuan devalues against the Canadian dollar after the sales agreement has been
FITTskills Sample Business Plan 33
Diamonds for Export FITTskills: International Trade Management
made, before the transaction is completed. Direct impact is again felt at the operational level
where losses due to the conversion of Yuan into the Canadian dollar impacts LaiFan’s
profitability. At worst, such losses could build up to an export venture that is unprofitable and
unsustainable.
Intellectual Property Infringement: A major risk from LaiFan’s first-time partnership with a local
polishing factory is the possibility the partner would steal its patented cuts. Should the partner
terminate the partnership and use LaiFan’s cuts on its own, it would be difficult for LaiFan to
compete with its well-established network in the country. LaiFan’s market position would thus be
seriously challenged, making it difficult to be “first on the market” with its innovative pieces.
Others in the market could also carry out IP infringement. For example, LaiFan’s “Mobius” cut
diamonds could be subject to wide-spread reproduction by other jewellery producers who
fashion their cubic zirconia pieces after the same design but for a lower cost.
Mitigation of Risks
Many options are available to reduce LaiFan’s exposure to such risks but the most meritous are
those that best meet LaiFan’s criteria and support the company’s objectives. A review of such
criteria and objectives are:
– Supports LaiFan’s determination to pursue the co-manufacturing market entry strategy
– Risk mitigation strategies should be proactive rather than reactive
– Strategies that require lower outlays of cash would be preferred over those that need
higher expenditures
The most important action step that underscores all risk mitigation strategies is effective
research and planning in advance of signing any contracts and making any commitments in the
new market. Specific options such as the following can then be pursued:
1) Purchase Export Development Canada’s Export Credit Insurance. This product provides
coverage against both commercial and political risks (FITTskills International Trade
Finance). Purchasing this insurance provides LaiFan up to 90% coverage on loss
sustained from foreign buyer insolvency, default, refusal to accept or take delivery of the
goods and unwarranted termination of contract. This insurance also aligns with LaiFan’s
objectives to pursue a partnership arrangement and premiums paid would certainly be
less than potential losses sustained from commercial risk.
Reducing commercial risk can be proactively done during the research stage to follow
this report. While evaluating potential partners, a key step would include reviewing each
prospect’s payment history and financial strength. This can be done through research on
the Canadian trade commissioner service, consultation with trade officers stationed in
Beijing, Shanghai and Guangzhou, speaking to experts at international diamond councils
and accessing financial reports from Dun & Bradstreet on the prospect companies, if
available.
2) There are several proactive actions LaiFan can take to protect against currency
exchange risk. The lowest cost method can be implemented in the negotiation phase
with the partner whereby LaiFan and the partner can insert a price clause into the
contract. Both partners in the negotiation phase can determine a price band whereby the
price can be adjusted should the exchange rate fluctuate beyond this price range during
the course of the transaction.
FITTskills Sample Business Plan 34
Diamonds for Export FITTskills: International Trade Management
In addition, LaiFan can use a money market hedge to protect against unfavourable
movements in the exchange rate. With this technique, LaiFan would immediately borrow
from a Chinese bank, an amount in Canadian dollars, equal to the sales value of the
diamonds it sold to its partner. Once the partner pays within the 30 – 60 day period,
LaiFan would repay the amount borrowed back to the bank. This technique is more
favourable than purchasing a forward or futures contract because of the higher cost
associated with the latter two options.
3) Constant innovation. Patent infringement is a common occurrence in the Chinese
market and is not well addressed by the Chinese government. Registering for an
international patent on its designs and cuts and stipulating the conditions of the partner’s
use of the designs are two ways LaiFan can reduce copycat reproductions. A third
involves utilizing its research and development team to constantly create new
innovations. New designs can be produced that are difficult to replicate on the Chinese
Mainland and existing designs can be reinvented to incorporate new technologically
refined cuts.
Finally, LaiFan can use its marketing literature as a means to educate its buyers and the
end consumer. In its brochures, it can detail how a buyer can differentiate between a
real and fake diamond and reinforce the importance of a Canadian certificate of
authenticity in supporting a true LaiFan piece.
Conclusion
The purpose of this business plan was to evaluate the feasibility of LaiFan’s export ventures to
China against the company’s criteria and objectives, and to set a “blueprint” for pursuing this
opportunity. This section summarizes the findings along these three objectives and provides a
recommendation on next steps.
Market Opportunity:
In selecting a target market, LaiFan required that the market not only be large enough to provide
a profitable pool of customers, but also that it be sustainable, to support the company’s long
term growth in the country. The target market analysis and market entry sections zoned in on
this market and found that the three cities of Beijing, Shanghai and Guangzhou meet this
criteria. Of note:
– China has an existing and growing market of 100 million luxury goods buyers, with the
purchasing power to buy higher end diamonds.
– Renewed Long-Term Opportunities: The economic disparities between China’s rural
West and its cosmopolitan Eastern coast carves out long-term opportunity in terms of
the country’s primary, secondary and tertiary markets. Staggered economic growth
across the country allows LaiFan to benefit from renewed evolutions of its product life
cycle across many regions in one country.
– Peripheral Opportunities: China offers future access to other prospective markets in the
region. Developed economies such as Hong Kong, Taiwan, Singapore and Malaysia
along with emerging markets such as Thailand, Vietnam and the Philippines together
present a regional power of over 50 million people.
FITTskills Sample Business Plan 35
Diamonds for Export FITTskills: International Trade Management
Manageable Risks:
The report demonstrated several competitive threats in the market that would challenge
LaiFan’s success. Results suggested that LaiFan was able to mitigate the risks through four
primary channels:
– focusing on its core competencies to produce a quality product
– utilizing its highly skilled and multicultural workforce to combat cultural barriers and
export problems
– accessing external experts in areas it did not have the in-house expertise or resources to
address
– partnering with a local polishing factory to access reduced production costs, an existing
distribution network and local knowledge
The proposed market entry strategy of partnering with a local manufacturer provides LaiFan
with an advantage of overcoming language and competitive barriers in China. The selected
partner would be equipped to polish higher gem quality diamonds and allows LaiFan to enter
the Chinese market on a market skimming pricing strategy. Its distribution network would
fasttrack LaiFan into a market that is ripe for foreign luxury brand products. Moreover, the
partner’s local knowledge can assist LaiFan with the proper adaptation of its marketing
materials to build awareness and branding of its name in the market.
This benefit is supported by a sound commercial and economic infrastructure in China which
houses a stable investment environment, lessening the chance of disruptions to LaiFan’s
operations due to uncontrollable external circumstances.
Product Fit:
LaiFan’s export plans time very well with a market that is in the beginning stages of the diamond
product life cycle, demanding very similar features to what LaiFan’s product offers: real
diamonds over fake, high-tech produced pieces; high gem-quality diamonds driven by carat size
and foreign diamonds that epitomize the very essence of Western opulence.
The natural fit of Canadian diamonds with this demand means fewer modifications are required
to the pieces, translating into fewer costs. LaiFan can thus compete in the new market
concentrating on its core competencies of processing gem quality diamonds, rather than
undertake added time and costs to implement new operational processes to extensively modify
its cuts and designs.
Feasibility of the Export Venture
Beyond the three criteria, an assessment of LaiFan’s financial capacity was very important to
determine the feasibility of the export idea. Review of the company’s financial reports and cash
flow projections support plans that it moderately adopt an export structure and conservatively
pursue export sales through its foreign partner in its first three years. The Return on Investment
ratio and Payback Period calculations show that a realistic first export activity consists of a
maximum purchase of $200,000 worth of rough diamonds to process and sell to China in the
first year. An initial purchase beyond that level would greatly strain LaiFan’s cash buoyancy and
affect its ability to recover should it suffer unexpected losses in the new market.
Recommendation and Action Plan
This report now needs to be presented to senior management to garner their support. A new
export venture requires the full commitment of the entire company, with staff feeling their
contributions are valued in the various stages of the export plan. Appendix B presents a critical
FITTskills Sample Business Plan 36
Diamonds for Export FITTskills: International Trade Management
path summarizing the actions that should be undertaken in 2005, to prepare for the company’s
first exports in 2006.
Upon approval from senior officials, LaiFan should begin to incorporate the export structure.
The Export Manager position will need to be filled. Senior manager and departmental meetings
need to begin incorporating the export venture into their domestic operations.
Research should also begin to find a suitable local partner. Discussions can be held with trade
officers in the Shanghai, Beijing and Guangzhou Canadian Consulate offices, representatives of
the Canada China Business Council, The Canadian Jewellers Association and the Hong Kong
Trade Development Council on their recommendations for prospective partners.
The President and Sales and Business Development Director will need to plan a visit to China in
2005 to meet with prospective partners and experience market conditions firsthand. Benefits of
a personal visit include:
– The ability to access current market intelligence not readily available in Canada.
Contacts in the Canadian Consulate offices in Beijing, Shanghai and Guangzhou, the
Canadian Chamber of Commerce in China, the Canada China Business Council, the
Chinese government’s department of trade – MOFTEC, all have extensive networks in
China with information that is not necessarily up to date on the internet or in Canadian
networks.
– LaiFan representatives can visit the market to see in person competitor activities – what
types of marketing/advertising are they using; what are their distribution channels; where
are they located; how are they making contact with their customers? This information
can be compared to the analyses presented in the company’s research and business
plan and revisions made based on new information collected.
– Participation in jewellery trade shows – The success of China’s first ever diamond trade
exposition in 2004 means opportunities to partake in future jewellery trade shows grows.
Attendance in trade shows will help LaiFan establish connections with suppliers, buyers
and potential business partners, gain market intelligence and again witness the
competitors that are currently operating in, or planning to enter into the Chinese market.
FITTskills Sample Business Plan 37
- Canada’s Glitter
FITTskills Sample
Business Plan
Introduction
Company Background
Table 1: Value of World Diamond Production1
Major Commercial Risks
LaiFan’s Ability to Meet Market Demands
Having better defined local market demands, several features of LaiFan’s diamonds differentiates it from its competition and makes the company well suited to meet current demand:
LaiFan’s automated technology is cutting edge in the industry and allows for greater and more precise cuts on traditional pieces such as the Princess Cut and the Round Brilliant. In a market where size and shine are the predominant buying criteria, a refined cut that can maximize the flare of a diamond would do extremely well in China. The increased productivity and finishing time to produce a polished diamond allows LaiFan to supply its product faster to a market that is largely being supplied by manual labour. LaiFan is also unique in that it houses an in-house research and development department. Though small, the two-person team presents an added advantage for the company to produce and patent unique cuts faster than other factories who concentrate on the processing aspect of polishing diamonds only. As diamond jewellery moves through the product life cycle, this allows LaiFan to introduce new and innovative cuts to the market, offering alternatives to traditional pieces the market may tire of.
Market Entry & Marketing Strategy
Product
Price
Recommendation and Action Plan
Nokia Lumia 920 27
Table of Contents
HYPERLINK \l “_Toc348360634” 1. Executive Summary 4
HYPERLINK \l “_Toc348360635” Introduction 4
HYPERLINK \l “_Toc348360636” 2. Corporate Profile and Nature of Business 4
HYPERLINK \l “_Toc348360637” Company Background 4
HYPERLINK \l “_Toc348360638” Description of Business and Product 5
HYPERLINK \l “_Toc348360639” Core Competencies 5
HYPERLINK \l “_Toc348360640” Description of Product 5
HYPERLINK \l “_Toc348360641” Key Milestones 6
HYPERLINK \l “_Toc348360642” Background for Exporting 6
HYPERLINK \l “_Toc348360643” 3. Management and Human Resources 7
HYPERLINK \l “_Toc348360644” New Export Structure 7
HYPERLINK \l “_Toc348360645” Senior Management Roles and Background 7
HYPERLINK \l “_Toc348360646” External Expertise 9
HYPERLINK \l “_Toc348360647” 4. Target Market and Environmental Scan 10
HYPERLINK \l “_Toc348360648” Environmental Scan 10
HYPERLINK \l “_Toc348360649” Gross Domestic Product (Purchasing power parity) 10
HYPERLINK \l “_Toc348360652” Inflation rate (Consumer prices) 10
HYPERLINK \l “_Toc348360654” Business Climate for the phone industry 11
HYPERLINK \l “_Toc348360655” Major Commercial Risks 12
HYPERLINK \l “_Toc348360656” Consumer Profile 12
HYPERLINK \l “_Toc348360657” Nokia’s Ability to Meet Market Demands 12
HYPERLINK \l “_Toc348360658” 5. Market Entry and Marketing Strategy 12
HYPERLINK \l “_Toc348360659” SWOT Analysis 13
HYPERLINK \l “_Toc348360660” Product, Place, Price and Promotion Strategy 14
HYPERLINK \l “_Toc348360661” Criteria of selecting Export Partner 14
HYPERLINK \l “_Toc348360662” 6. Operations Overview and Supply Chain Management 15
HYPERLINK \l “_Toc348360664” Key Changes as a Result of Exporting 16
HYPERLINK \l “_Toc348360665” Maintenance of Competitive Advantage 16
HYPERLINK \l “_Toc348360666” 7. Financial Analysis and Risk Management 17
HYPERLINK \l “_Toc348360667” Financial plan 17
HYPERLINK \l “_Toc348360668”
Pre-operational costs 17
HYPERLINK \l “_Toc348360669” Working capital 17
HYPERLINK \l “_Toc348360670” Proforma profit and loss account 18
HYPERLINK \l “_Toc348360671” Export Cost Accounting 19
HYPERLINK \l “_Toc348360673” Impact on Company’s Cash Flow 20
HYPERLINK \l “_Toc348360676” Financial requirements 21
HYPERLINK \l “_Toc348360677” Payment Method 21
HYPERLINK \l “_Toc348360679” Profitability of Venture 22
HYPERLINK \l “_Toc348360681” Risk Management Strategy 23
HYPERLINK \l “_Toc348360682” 8. Conclusion and recommendation 23
HYPERLINK \l “_Toc348360683” Conclusion 23
HYPERLINK \l “_Toc348360684” Recommendation 23
HYPERLINK \l “_Toc348360685” References 24
1. Executive Summary
Nokia Corporation is a Finnish company that deals in mobile phone. It produces high quality phones which it supplies worldwide. For a long period of time, the Company has been the leading vendor of mobile phones. Its core competencies are customer satisfaction, passion for innovation and continuous learning.
Market Potential: The Company seeks to venture into the new market of Casablanca. Grand Casablanca has an estimated population of 3.85 million people majority (60%) of who are between 15 and 60 years. The demand for smartphones in Casablanca is high with Industry figures suggesting that there are more than 600,000 smartphones in circulation, and annual growth is more than 200%.
Manageable risks: Risks such as Shipment delays, incomplete documentation and credit defaults and currency fluctuations are all expected but manageable risks. This will be overcome by the market entry strategy of partnering with local operators and distributors.
Recommendation
The business plan should be presented to the senior management for their deliberations. Upon approval, should begin to incorporate the export structure. The position of Export Operations Manager will need to be filled. Afterwards, suitable local partners should be contacted so that its implementation can start.
Introduction
This business plan aims to establish the feasibility of Nokia entering the new market of Casablanca, the capital city of Morocco to supply its new Smart phone Nokia Lumia 920. The plan includes a detailed analysis of Nokia’s operational and financial strength that would enable it to exploit the demand of Smart phones in Casablanca.
2. Corporate Profile and Nature of Business
Company Background
Nokia is a Finnish Multinational Information and Communication Technology corporation with its headquarters in Espoo, Finland. Its main products are mobile phones, Smart Phones and other portable telecommunication devices. It also specializes in internet services, which includes applications, and games development among other services.
Description of Business and Product
Nokia was the world’s largest manufacturer and vendor of mobile phones in 2011, with global market share of 23%. However, this has been declining as a result of the growing use of smartphones from its competitors such as Apple and Samsung. Apples iPhones were highly demanded because they were running on iOS while Samsung’s smartphones were running on Google’s Android OS which were both user friendly compared to Nokia’s Symbian OS. To counter the decline, Nokia has had a strategic partnership with Microsoft, where all Nokia smartphones will be running on Microsof6t’s Windows Phone operating system replacing Symbian. As a result, Nokia has unveiled a number of Windows Phone handsets with the latest being Nokia Lumia 920. To expand its network, the company has partnered with NOKIA mobile company as well as Siemens Network to create what is now known as Nokia Siemens Network.
Core Competencies
Nokia’s has an official corporate culture manifesto called The Nokia Way, which has enhanced speed and flexibility in decision making. The company’s core competencies are rooted in this manifesto. These are:
Customer Satisfaction: this quality has enabled the company to win customer loyalty.
Passion for Innovation: this has enabled the company to beat its competitors in the market.
Continuous learning: this has enabled the company to learn from its mistakes as well as the mistakes of its competitors.
Description of Product
Figure 1: Nokia Lumia 920: The world’s most innovative smart phone.
Nokia Lumia 920 is a smartphone developed by Nokia that runs the Windows Phone 8 operating system. It was first released on November 2, 2012. It has a 1.5 GHz dual-core Qualcomm Krait CPU and a 4.5″ IPS TFT LCD which has a high-sensitivity touchscreen which can be used with the gloves worn by the user. It supports inductive charging (it can be charged by being placed directly onto a charging pad). It also has a 8.7 megapixel pure view rare camera with optical image stabilization for still images and videos. It comes with 32 GB internal storage, but does not support expansion using memory cards.
Key Milestones
Table 1:
Key Milestones
Nokia N95 Smartphone
Nokia N97 Smartphone
Nokia N8 Smartphone
Nokia 808
pu
review
Lumia 710 & 800
Released march 2009
Released June 2009
Released September 2010
Released September 2010
Released February 2012
Properties: 5 megapixel camera and sliding multimedia keys.
Properties: sliding QWERTY. (S60 5th
Properties: First Symbian 12 megapixel autofocus lens. (Symbian^3)
Properties: Last Symbian smartphone features a 41 m .p. camera and a 1.3 GHz CPU.
Properties: First running on Windows phone operating system.
Source: Nokia.com
Nokia has undergone many innovative steps before arriving at Lumia 920 which is the world’s most innovative smartphone. This has been a continuous improvement of its earlier phone. This has seen it achieve key milestones like Nokia N95 (Released March 2009) all the way to Nokia 808 Pureview (Released September 2010) which is the predecessor of Lumia 920.
Background for Exporting
Until 2011, Nokia has been the world’s leading vendor of mobile phones in the world. Nokia operates in over 120 countries and sales in over 150 countries worldwide. This success story has been subject to many economic factors outlined below:
Market Potential: There are about 36.5 million mobile phone subscribers in Morocco, representing a penetration rate of just over 113%. Smartphones are increasingly becoming more popular. Many Moroccans are buying smartphones, taking advantage of deals offered by phone manufacturers such as Apple, Samsung and Blackberry, as well as growing 3G access. Industry figures suggest that there are more than 600,000 smartphones in circulation, and annual growth is more than 200% according to the National Telecoms Regulation Agency (ANRT).
Global demand for Smartphones
: All over the world demand for smartphones has gone high. Everyone wants to be connected to the internet using a device that can as well serve many other purposes such as online purchases. Morocco’s IT sector is growing at a double-digit pace. Internet access has expanded by three-quarters in 2011 while the mobile phone market increased by more than 14%, according to the National Telecoms Regulation Agency (ANRT).
Manageable Risks
: Overcoming risks and barriers in Casablanca market achievable through Nokia’s existing strengths. Initial review of Moroccan market has revealed that, despite steady growth in the use of smartphones, there are remarkably few available local applications. This is a risk that Nokia can overcome by promoting local talents to be innovative.
Product Fit:
The Moroccan public authorities and mobile operators have embraced the emergence of smartphones. They are also committed towards the development of applications for public services, companies and other operators.
PRODUCTION
MANAGER
MARKETING
MANAGER
EXPORT OPERATIONS MANAGER
HR
MANAGER
FINANCE
MANAGER
REGIONAL MARKETING REPS
ADMINISTRATIVE ASSISTANTS
R & D
PRESIDENT
MARKETING
PRODUCTION
OPERATIONS
HR
FINANCE
3. Management and Human Resources
New Export Structure
Figure 2: Nokia’s New Export
Structure.
4. Senior Management Roles and Background
President:
XXXXXXXXX
Key responsibilities as pertains to international trade:
– Oversees smooth running of the company.
– Makes final decisions on marketing strategy
-Instills the company’s new export initiative vision.
Background:
Mr. XXXXXXXXX was born in the Grand Casablanca region of Morocco. He pursued a bachelor’s degree in telecommunications and a master’s degree of the same in Massachusetts University. Mr. XXXXXXXXX also has masters in business administration. He has a wide experience in managing international business having worked in various international organizations
Finance Manager:
yyyyyyyyyy
Key responsibilities as pertains to international trade:
– manages all company budgeting activities
-Preparers the company’s financial statements.
– advises the company on credit terms
– determines Nokia’s borrowing needs and initiates discussions with banks institutions.
Background:
Mr. yyyyyyyy is a Certified Public Accountant and has worked in the financial departments of various Casablanca based institutions. He is also a member of Institute of Certified Public Accountants of Morocco. Prior to joining Nokia, Mr. yyyyyyy has been running a highly successful private consulting firm in Casablanca.
Production Manager:
Mr. zzzzzzzzz
Key responsibilities as pertains to international trade:
– sets production schedule and directs production staff
– Works closely with the Operations Manager to determine production needs
– manages routine maintenance and repair schedule of equipment
– oversees materials management
Background:
Mr. zzzzzz was born and raised in Alexandria, Egypt and entered the phone production industry as intern in Samsung’s Alexandrian plant. After graduating from Alexandria University, Mr. zzzzzz joined the same company where he worked for 10 years before joining Nokia.
Marketing Manager:
Ms. ttttttttt
Key responsibilities as pertains to international trade:
– developing marketing strategies for Nokia.
– liaising closely with regional marketing representatives.
– overseeing production of promotional materials
– developing Nokia’s marketing literature.
Background:
Ms. tttttt was born and raised in Kenya. She joined University of Nairobi for a marketing degree. She also has a masters’ degree in strategic marketing from London School of Business. She has worked as senior marketing manager at Kenya’s leading mobile telephony service provider Safaricom. She oversaw the marketing of Kenyan’s mobile banking industry dubbed as M-pesa.
Export
Operations
Manager:
Mr.qqqqqqq
Key responsibilities as pertains to international trade:
– manages all the export operations activities of Nokia in Morocco.
– Works closely with the production manager to determine production needs.
– Supervises all the logistics issues of Nokia in Morocco.
Background:
Mr. qqqqqq was born and raised in Japan. He is an expert in the Japanese production and operations techniques. Prior to being posted to Morocco, Mr. qqqqqqq has been working as Nokia’s regional operation’s manager in Middle east. He is fluent in French, the business, government and diplomatic language of Morocco as well as basic Arabic, which is the, official language.
A close examination of Nokia’s management structure reveals much inherent strength:
A diverse management team. Over 70% of Nokia’s workforce comes from foreign countries. This multicultural background creates acceptance of cultural differences hence enabling the company to overcome cultural and language barriers.
International trade experience
: Many of Nokia’s management team has an experience in international trade hence it will be easy for them to cope with challenges that emerge along the way.
External Expertise
Despite these strengths, Nokia lacks expertise in several areas, which it will, need to outsource.
International Lawyer: Consultation with a lawyer well versed in international trade law and experienced in North African practice especially in Morocco is extremely important in identifying legal costs and risks involved. Nokia will also need a lawyer to draw up its terms and conditions for its contracts with foreigners and buyers.
Freight Forwarders: Nokia will also need to use an external transporter for its phones, but will have increased reliance on substantial international shippers such as EMS and DHL Express, two companies that are internationally reputed and also run their operations in the Atlantic ocean coastline where Casablanca is strategically situated.
Banking and Insurance: Nokia’s export strategy will involve extra shipping costs and risks. This will call for short-term loan from its current National Bank of Finland as well as export insurance from its High seas Insurance Company of America.
Translators: Marketing literature for the Moroccan market will need to be translated into Arabic, the official language of Morocco as well as French the business, government and diplomatic language. Experienced translators will be required who can also assist the company in developing gorgeous catchy slogans for its brand.
4. Target Market and Environmental Scan
Environmental Scan
Morocco has proximity to Europe. This strategic geographical location plus a relatively low labor costs has helped her to build a diverse, open, market-oriented economy. In the 1980’s Morocco adopted pro-market reforms, overseen by the International Monetary Fund (IMF). Since taking the throne in 1999, King MOHAMMED VI has presided over a stable Moroccan economy marked by steady growth, low inflation, and generally declining government debt. Industrial development strategies and infrastructure improvements – for instance a new port and free trade zone near Tangier – are improving Morocco’s economic competitiveness. Key sectors of the economy include agriculture (16.6%), industry (32.2%) and services (51.2%) according to the (2011 est.) In 2006, Morocco entered into a bilateral Free Trade Agreement with the United States; it remains the only African country to have one. In 2008, Morocco entered into an Advanced Status agreement with the European Union.
(CIA – The World
Fact book, Morocco, 2009)
Table 2: Key Economic Indicators
Economic Indicator
Morocco
Gross Domestic Product
(
P
urchasing power parity)
note: data are in 2011 US dollars
(2011 est.)
$163 billion
(2010 est.)
$155.8 billion
(2009 est.)
$150.1 billion
Gross Domestic Product
(
R
eal growth rate
)
(2011 est.)
4.6%
(2010 est.)
3.7%
(2009 est.)
4.9%
Inflation rate
(
C
onsumer prices)
(2011 est.)
1.9%
(2010 est.)
1%
Table 2 above provides a longitudinal profile of Morocco’s economic performance and reveals several factors that create a positive investment climate. A steady increase in GDP and decline, in inflation, denotes a well-managed economy that has a positive growth which is exceptionally conducive for direct foreign investments.
Business Climate for the phone industry
In 1993, the government of Morocco introduced tough privatization reforms which change her economy into a liberal one governed by market forces of demand and supply. This has led to steady yearly growth in the region of 4–5% from 2000 to 2007, including 4.9% year-on-year growth in 2003–2007. Telecommunication sectors have gone strong, due to a steady economic growth. In 2010, the country was about to reach 32 million subscribers to mobile telephone lines. At the end of 2009, it had just over 25 million lines, which means a growth in this sector of 26%. The increase in applications for mobile phones and increased competition in the telephone market has brought this rate upward. (Moroccan Nationa
l Agency of Telecommunications, 2011)
These economic conditions have both positive and negative implications for Nokia.
Positive:
Lower Costs – To create a conducive environment for direct foreign investments, Moroccan authorities has progressively reduced its high import tax. This reduction will amount to significant savings for Nokia.
Higher International Standards –Since Morocco entered into a bilateral Free Trade Agreement with the United States in 2006 and Advanced Status agreement with the European Union in 2008, the quality of phones entering Morocco must meet high international standards. This is advantageous for Nokia which produces durable phones like Nokia Lumia 920 since fake pones will have minimal entry.
Negative:
The drawback of liberalizing the Moroccan economy (especially the telecommunications sector) is the influx of other foreign competitors like Samsung and Apple who are also in the business of producing smartphones.
Major Commercial Risks
Poor Legal Protection – Morocco being a developing country has weak a weak judicial system which is yet to catch up with economic reforms. This will leave Nokia vulnerable hence resulting to increased legal costs.
Poor Intellectual Property Protection – Due to weak legislation in relation to Intellectual property fake Nokia Lumia 920 phones may be introduced into the market hence diluting Nokia’s market share.
Consumer Profile
Primary market: Casablanca.
Casablanca being the economic hub of Morocco will be Nokia’s primary. The population of Grand Casablanca was estimated in 2005 at 3.85 million. 98% live in urban areas. Around 66% are between 15 and 60 years of age. The population of the city is about 11% of the total population of Morocco. The 15-60 age groups will form Nokia’s primary market. Since the majority of the population is business people, they will distribute the phones to other regions of Morocco hence reaching to our secondary market.
Nokia’s Ability to Meet Market Demands
Sustainable Supply– Smartphones are in their beginning stages of the product life cycle in Morocco. This implies that the demand will not go down any soon. The supply will be enhanced by Nokia Siemens Network that will ease the supply chain management.
Quality
smartphones-Nokia phones are internationally renowned for their high quality and durability. This is because Nokia has partnered with other great companies like Microsoft, Siemens, and AT&T who buffer the quality of the phones.
Innovation-this is one of Nokia’s core competencies. Production of innovative products like Nokia Lumia 920 will enable the company to meet the market demand for a long time.
5. Market Entry and Marketing Strategy
This business plan proposes that Nokia’s market entry strategy should take the form of a partnering arrangement with local mobile phone service providers as well as local mobile distributors. The merits and justification for this proposal will be discussed within the context of a SWOT analysis on Nokia Corporation and benefits the company can expect to accrue through this partnership.
SWOT Analysis
Strengths
Nokia is famous worldwide as one of the leading mobile phone vendors. This has been enabled by its commitment to innovation. As a result, Nokia has a research and development team that has a full-time commitment to researching new technologies and designs.
Weaknesses
Financial resources
– To produce quality smartphones, Nokia must partner with other companies to purchase hardware and software. This highly constrains the financial resources of the company.
Inexperience
– Nokia lacks connections and distribution networks in the Moroccan market. Not being able to access a strong distribution link into Morocco could hamper the company’s entry strategy into the country and prevent it from performing effectively against aggressive competitors like Samsung, Apple, HTC and Alcatel.
Opportunities
Target Locations – Casablanca, the economic capital of Morocco are the prime target for Nokia’s initial entry.
Product – The markets crave for sleek smartphones has provided Nokia with the opportunity to sell the world’s most innovative smartphone.
Threats
Threats in Morocco will come from Nokia’s competitors. These are Samsung, Apple, HTC and Alcatel.
Market Entry
Par
tnership with Telecom operators
Nokia will partner with local mobile phone service providers as its sales agents.
These telecoms operators are Maroc Telecom, holding 60.71% of the market and Meditel, holding 36.69% of the market among other mobile phone distributors.
This approach has the following advantages:
Low Risk: Partnership can be terminated upon unsatisfactory performance.
Low Investment: Payment from Nokia will only be through commission of sales.
Already established distribution network.
Local knowledge of the economy.
Upon finding an appropriate partner to undertake this relationship, Nokia will enter into a one-year contract, with the agent. However, routine reviews of the partnership will be made by both parties with negotiations on the renewal of the partnership to be held on an annual basis.
This entry strategy can be verified within the context of the company’s product, pricing, place and promotion strategy.
Product, Place, Price and Promotion Strategy
Product Strategy
Local partners already have established distribution networks, which will save, Nokia a lot of time and costly research. The local partner would also be best suited to predict upcoming trends in the market and advice on minor modifications needed to Nokia’s current product. There are also regional differences between local markets that only a business could pick up through extensive experience in a country.
Pricing Strategy
Nokia Lumia 920 is a very innovative smartphone hence it can be sold at a premium price. A high premium price commanded by a product often requires justification of the product’s cost. With the expertise and help of a local partner, Nokia can refine its messaging to emphasize on the quality and innovativeness of the phone as support for its higher cost.
Place Strategy
A local partner who understands Morocco well will help Nokia deal with customs and documentation procedure without a tremendous hustle hence saving on time and cost.
Promotion Strategy
A local partner will help Nokia translate its marketing literature into a form that the local residents will understand. This will help spearhead a very strong brand.
Criteria of selecting Export Partner
The partner must possess the following qualities:
Has well established distribution networks in morocco
Established in Morocco for more than five years
Financial stability and a history of timely payment
Timely and satisfactory delivery of product to customers
6. O
perations Overview and Supply Chain Management
Smooth operations are key to the success of Nokia as a phone manufacturer.
Domestic versus Export Operational Structure
PRESIDENT:
Authorizes proposals from Production Team
OPERATIONS
MANAGER
Coordinates all the teams
PRODUCTION MANAGER
:
Receives orders from the operations team and then
Supervises then production process
H.R.
MANAGER
Hires the needed workforce
MARKETING & SALES
MANAGER
:
-Prepares marketing and promotional materials.
-Receives orders from customers, processes them and then delivers the products.
FINANCE
MANAGER
:
– invoice customer upon delivery of products
– track payment and follow up with payment reminder
– prepare financial statements to reflect sales
Domestic Operational Structure
Export Operational Structure
PRESIDENT:
Authorizes proposals from Production Team
EXPORT OPERATIONS MANAGER
Coordinates all the export operations
PRODUCTION MANAGER
:
Receives orders from the operations team and then
Supervises then production process
H.R.
MANAGER
Hires the needed workforce
MARKETING & SALES
MANAGER
:
-Prepares marketing and promotional materials.
-Receives orders from customers, processes them and then delivers the products.
FINANCE
MANAGER
:
-prepare financial statements
– obtain export credit insurance
– invoice partner upon delivery
– track payment and follow up with payment reminder
Key Changes as a Result of Exporting
The main difference between the domestic and the export operational structure is that the role of the operations manager is now in the hands of an Export Operations manager. The Export Manager is in charge of the partner contract, establishes the sales volume with the partner and sets the purchasing schedule for the year. The rest of the teams function as outlined above.
Maintenance of Competitive Advantage
Nokia will remain competitive in the mobile phone production industry because of its full time commitment to innovation by the highly skilled R & D team. Also, access to state-of-the-art technology will always keep it ahead of the competitors. Production of superior products will, as a result, enable the company to fix premium prices.
7. Financial Analysis and Risk Management
Financial plan
Pre-operational costs
Pre-operational costs that the business expects to incur are included in the Table 3 below.
Cost component
Amount (
US
$
)
Machine and equipment
345,000
Other equipment
57,000
Fixture and fittings
100,000
Materials
100,000
Deposit for rent
20,000
Deposit for water
1,000
Deposit for electricity
3,000
Advertisement campaigns
20,000
Hiring employees
23,000
Business licenses and permits
14,000
Transport and Communication
10,000
TOTAL
693,000
Table 3: Pre-operational costs
Source: Author (2013)
Working capital
Working capital will be calculated as follows:
Working capital= Current Assets-Current Liabilities
At start-up, the working capital shall be = US $ 307,000
Proforma profit and loss account
The table 4 below shows the projections for profit and loss account.
ITEM
2012
2013
2014
US
$
US
$
US
$
Service revenue
2,400,000
3,120,000
3,432,000
Direct costs
572,832
630,115
693,127
Gross profit
1,827,168
2,489,885
2,738,873
Overhead expenses
Indirect costs
795,163
238548.9
71564.67
Depreciation
100,400
60,320
48256
Total expenses
895,563
298,869
119,821
Profit before tax
931,605
2,191,016
2,619,053
Tax (15%)
139,741
328,652
392,858
Net profit after tax for the year
791,864
1,862,364
2,226,195
Cumulative profits
791,864
2,654,228
4,880,422
Table 4: Proforma profit and loss account
Source: Author (2013)
Assumptions
The business will pay tax of 15% on profit before tax, and this percentage is expected to remain constant for the first three years of operation.
The service revenue will grow by 30% per year.
The direct costs are assumed to increase by 10% while the indirect cost will increase by 30% per annum.
The direct costs include the costs of direct labour and direct material. The direct cost per phone is US $ 91.80 X 6240 phones per annum= US $ 572,832.
The number of phones is calculated at 20 per day, 20X6 days =120 phones per week and 120X52 weeks = 6240 phones per year.
The indirect cost per phone was calculated to be US $ 127.4 per phone. Therefore, annual indirect cost is calculated as US
$127.4X6240 = US
$795,163
The indirect cost include the cost of all overhead expenses such as indirect labour, interest expenses, operating expenses, and support services.
Export Cost Accounting
Proforma balance sheet
The following table presents the projected balance sheet of Nokia
Jan-2012
Dec-2012
Dec-2012
Dec-2012
ASSETS
US
$
US
$
US
$
US
$
Fixed Assets
Machine and equipment
402,000
402,000
402,000
402,000
Fixtures and fittings
100,000
100,000
100,000
100,000
Total value at cost
502,000
502,000
502,000
502,000
Less accumulated depreciation
100,400
160,720
208,976
Net Book value of assets
502,000
301,600
241,280
193,024
Total fixed assets
502,000
301,600
241,280
193,024
Current assets
Cash
474,000
1,310,756
3,175,785
5,327,098
Deposits
24,000
48,000
30,000
35,000
Debtors
–
46,000
22,400
25,300
Total Current assets
498,000
1,404,756
3,228,185
5,387,398
TOTAL ASSETS
1,000,000
1,706,356
3,469,465
5,580,422
Financed by
Loan
300,000
214,491
115,237
–
Partners
100,000
100,000
100,000
100,000
Owner’s equity
600,000
600,000
600,000
600,000
Net profit(loss)
791,864
2,654,228
4,880,422
TOTAL EQUITY
1,000,000
1,706,356
3,469,465
5,580,422
Table 5: Proforma Balance sheet
Source: Author (2013)
Assumptions:
The depreciation on the fixed assets is 20% calculated on reducing balance.
The business will have debtors owing US
$ 46,000 as at the end of the first year due to its credit policy. This is because the business will relax credit facilities in order to attract more customers within the inception year. However the business will tighten its credit policy to recover debts and reduce debtors balance to US
$22400 in the second year, but this is expected to rise to US
$ 25,300 as the business gets more clients who might still opt for credit facilities.
Impact on Company’s Cash Flow
Projected cash flow statement
The table 6 below shows the cash flow projection for the first year of operations.
ITEMS
JAN
FEB
MAR
APR
MAY
JUN
JULY
AUG
SEP
OCT
NOV
DEC
Receipts
US
$
US
$
US
$
US
$
US
$
US
$
US
$
US
$
US
$
US
$
US
$
US
$
Bal b/f
524,608
589,215
653,822
718,430
783,037
847,645
912,253
976,861
1,041,468
1,106,076
1,170,684
Capital
1,000,000
–
–
–
–
–
–
–
–
–
–
–
Service revenue
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
Total receipts
1,200,000
724,608
789,215
853,822
918,430
983,037
1,047,645
1,112,253
1,176,861
1,241,468
1,306,076
1,370,684
Payments
Taxation
11,645
11,645
11,645
11,645
11,645
11,645
11,645
11,645
11,645
11,645
11,645
11,645
Machines and equipments
402,000
–
–
–
–
–
–
–
–
–
–
–
Fixtures and fittings
100,000
–
–
–
–
–
–
–
–
–
–
–
Salaries and wages
73,000
73,000
73,000
73,000
73,000
73,000
73,000
73,000
73,000
73,000
73,000
73,000
Deposits
24,000
–
–
–
–
–
–
–
–
–
–
48,000
Material requirements
35,040
35,040
35,040
35,040
35,040
35,040
35,040
35,040
35,040
35,040
35,040
35,040
Permits and licences
14,000
–
–
–
–
–
–
–
–
–
–
5,000
Support Services
5,308
5,308
5,308
5,308
5,308
5,308
5,308
5,308
5,308
5,308
5,308
5,308
Interest on loan
3,750
3,667
3,583
3,498
3,411
3,324
3,235
3,146
3,055
2,963
2,871
2,776
Principal paid
6,649
6,732
6,816
6,901
6,988
7,075
7,164
7,253
7,344
7,436
7,528
7,623
Total payments
675,392
135,393
135,393
135,393
135,392
135,392
135,392
135,392
135,392
135,392
135,392
188,392
Net cash
524,608
589,215
653,822
718,430
783,037
847,645
912,253
976,861
1,041,468
1,106,076
1,170,684
1,182,291
Break even analysis
Gross profit in the first year (indicated in the profit and loss account is US $ 1,827,168
Gross profit margin= (1,827,168/2,400,000) 100= 76%
Total Overhead for the first year= US
$ 895,563
Breakeven level of sales= (overhead expenses/gross profit margin) X100
= US
$ (895,563/76) X100= US
$ 1,176,329
Financial requirements
As at start up, the business will require US
$. 1,000,000.
Item
Amount (
US
$
)
Pre-operational costs
693,000
Working capital
307,000
Total
1,000,000
Payment Method
Proposed capitalization
The total investment in the business at startup will be US
$ 1,000,000. This will comprise of the owner’s equity of US
$ 600,000, partners contribution of US
$ 100,000 and bank loan of US
$ 300,000 borrowed from National Bank of Finland.
Source of capital
Amount (US$)
Owner’s equity
600,000
Partners contribution
100,000
Bank loan
300,000
Total
1,000,000
The loan will be repaid in 36 equal monthly installments at an interest rate of 15% per annum calculated on reducing balance.
Profitability of Venture
Projected profitability ratios
The proprietor projects the following profitability ratios for the business in the first three years of operation.
The calculations are as follows:
Gross margin= (Gross profit/service revenue) X100
Return on equity= (Profit after tax /owner’s equity) X100
Return on assets= (profit after tax add interest/investment) X100
Year
Gross Profit Margin
Return on equity
Return on assets
2010
76%
46%
158%
2011
79.8%
54%
371%
2012
79.8%
40%
443%
Risk Management Strategy
Commercial Risk:
Shipment delays, incomplete documentation and credit defaults are all events that could prevent Nokia from receiving payment in accordance with the contractual terms of the sale.
Currency Risk: The Moroccan currency Dirham is subject fluctuation. This will affect Nokia’s business negatively unsustainable.
Risk mitigation
Strict credit facilities will help reduce the number of defaulters. Proper documentation will also help reduce shipment delays. Agreement with the partners will help deal with currency fluctuations.
8. Conclusion and recommendation
Conclusion
The purpose of this business plan was to evaluate the feasibility of Nokia exporting its Nokia Lumia 920 to Casablanca Morocco. Market analysis has shown that Casablanca is a suitable opportunity which can be exploited if the company focuses on its core competencies, as well as partnering with local telecom operators and mobile phone distributors.
Recommendation
This report should be presented to the senior management for their deliberations. Upon approval from senior management officials, Nokia should begin to incorporate the export structure. The position of Export Operations Manager will need to be filled. Senior manager and departmental meetings need to begin incorporating the export venture into their domestic operations. Afterwards, suitable local partners should be contacted so that its implementation can start.
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