Exportbusiness requires the consideration of many factors that influencethe global business environment. This means that an exporter shouldconsider local business environment and business guidelines set bythe international community and the target country of export. Theorganization that plans to venture in the export business shouldfocus on specific product of services to present to a foreign marketsegment (Delaney, 2004). The target product in the present exportbusiness plan is the microencapsulated natural pyrethrum used tofight whiteflies, especially those that affect plants in greenhouse.The target export market is Netherlands, which has some of thelargest (covering about 11,000 acres) greenhouses in the world (Greer& Diver, 2000). The product was selected because it promises aviable venture given the fact that all greenhouse plants affected bythis insect that is highly resistant to common insecticides. Thisexport business plan will focus on the available resources, socialforces, financial forces, economic forces, physical as well asenvironmental forces, legal forces, and competitive and distributiveforces.
Availabilityof resources required for production and distribution of a givenproduct determines the effectiveness and efficiency of the processscheduling (Xu, Liu, Zhao & Yongchareon, 2010). Beforeimplementing the plan for exporting microencapsulated naturalpyrethrum, it will be important to consider the available ofresources necessary for its processing and transportation to thetarget market segment. Nearness to the raw materials or availabilityof means of transport from the source to the processing plant is animportant factor to be considered. The primary raw material requiredin natural pyrethrum, which is readily available in the local farms.The available technology should be of the state-of-the-art in orderto ensure success in production and export of the final product. Thefirm will use the ordinary machine used to process pyrethrum deploythe biotechnologists and biochemists who have been working with thefirm to aid in processing the new products. This will help in keepingthe fixed costs low, while increasing the revenue. However, theencapsulating phase will require the acquisition of new machines toensure that the final product meets the international standards. Theraw material will be transport by the road to the processing plant,while the finished product will be transported to the target marketsegment by water and road. This shows that the firm has nearly allthe resources required for production and exportation of the productto the target market.
Thekey sociological factors that are likely to affect any exportbusiness include language and culture. The capacity to speak thelanguage of consumers helps in the establishment of mutualconfidence, thus increasing the chances for success of an exportbusiness. Study shows that 18 % of non-exporters choose to operate atlocal levels due to language barrier (Dhillon, 2013). This impliesthat the language used in product labels and marketing campaigns willdetermine the success of any export business. In the case of thepresent export business plan the Standard English, Dutch, and Frisianwill be used market the product in Netherlands. Different communitieshave different values and beliefs that can determine the way theyrespond to presentation of new products in the market. The influenceof culture on an export business is even more complicated in case thetarget market signet is composed of a multiethnic community.Understanding the cultural beliefs and values of the target communitywill ensure that accept the product.
Oneof the primary goals of starting up an export business to increaserevenue and add to amount that is generated in the local market.However, there are several financial forces that can hinder therealization of target financial gains from an export business.Tariffs are financial barriers that are mainly set by a country toprotect domestic firms from stiff competition from exporters(Sanders, 2014). The barriers are imposed in the form of tax onimports or exports. Exporters can consider the existence of anybilateral agreements between the two countries since trade agreementsmanly focuses on elimination of trading barriers. Exchange rates aredetermined by market forces of supply and demand. More revenues willbe generated by exporting the product when the foreign currency isstronger than the domestic because it will be possible to offer theproduct at a lower price, which in turn will increase its demand andprofits generated from sales (Council for Economic Education, 2014).
Themajor economic forces that are likely to affect the export businessinclude the rate of inflation and the general economy. Inflationaffects imports and exports indirectly by influencing the currencyexchange rate. Based on conventional currency theory, a currency thatis affected by a higher inflation rate depreciated at a higher rateagainst the currency that has a lower inflation rate. A country witha high inflation rate exports less because inflation discouragesexports by increasing the cost of production inputs, such as laborand material (Gylfason, 2000). Currently, the U.S. rate of inflationis 2.0 % while the rate of inflation in Netherlands is 0.89 %(Trading Economics, 2014). Although the rate of inflation is lower inthe target country, it will be important to consider the futurechanges in inflation rates in the two countries. Exporter shouldmainly consider the general economy of the target country. A highrate of economic growth in the target country is likely to increasethe buying capacity of consumers, thus increasing chances for thesuccess of the exports business.
Physicaland environmental factors
Physicaland environmental factors have the capacity to influence the abilityof a given country to conduct business at global level. Some of thephysical factors that are most likely to affect export businessinclude the transport system and storage facilities. For example, apoor transport system may in either the country of export or theimporting country can reduce the capacity of exporter to reach thetarget consumer (Trading Economics, 2014). Poor storage facilities ineither of the countries can result in spoilage of the products beforeit reaches the consumer, which ca in turn result in a loss to theexporter. Technology compatibility is one of the key factors of thebusiness environment that determine the success of an exportbusiness. For example, the type of crops grown by greenhouse farmersin Netherlands may or may not require the use of pyrethrininsecticide. This implies that the business environment in the targetmarket can determine the nature of potential product designed forexport. Therefore, the exporter should assess the physical andenvironmental forces that might affect the success of an exportbusiness.
Businessoperations in any economy are directly affected by regulatory andlegal environment. Conducting business at the international levels ismore complicated than domestic because different countries usedifferent regulatory and legal systems, which forces an internationalbusiness to observe more than one set of business rules (Samozain,2013). It is important for an exporter to consider both the locallaws that regulate international business and similar laws set in thetarget countries where the firm intends to export its product. Forexample, the domestic county may prohibit the issue of bribes by thelocal traders who intend to get trading license in foreign countries(Samozain, 2013). Although this may affect the competitive advantagesand an opportunity to get a smooth entry into a foreign market, itcan help the export in avoiding conflict with the judicial system.Other legal and regulatory requirements that the exporter should givea consideration include the labor relations, copyright, patent,antitrust rules, product liability, and tax rules set by domestic andthe country of the target market segment.
Competitiveand distributive forces
Theframework of the Five Competitive Forces that was developed byMichael Porters provides five major forces that any business shouldconsider in order to enhance its competitiveness in the market.First, the power of suppliers to bargain for high prices candetermine whether the firm will be able to sell the product at alower price (Nickels, McHugh & McHugh, 2014). This can be avoidedby obtaining suppliers from a large number of small scale supplies.For an instant, it will be advisable to order pyrethrum fromindividual farmers rather ordering the raw material from largercooperative societies that have a higher bargaining power.
Secondly,the bargaining power of the target consumers can also determine thecompetitiveness of the export business. The export business canovercome this challenge by selling the microencapsulated naturalpyrethrum product in retail rather than selling it in wholesale.
Third,threats of new entry determine the level of competition andprofitability (Samozain, 2013). Since it is difficult assess thepossibility of new entrants in an international market, the firmshould seek to secure customer loyalty for the pyrethrin product byproducing quality products and selling them to farmers at areasonable price.
Fourth,threats of substitute determine the possibility of the discovery ofanother product serving the same purpose. Farm inputs have a highthreat of substitute, but exports can buffer this challenge throughclose relationship with customers and brand loyalty.
Lastly,it will be important to consider the competitive rivalry amongplayers in the international market. A high competition reducesprices and profit margins.
Inaddition, it is important to consider the correct chain ofdistribution, which will reduce the middle persons and maximizereturns. A shorter distribution channels will be more preferable.
Thepresent export business plan is a viable project that gives a promiseof high returns, but there are several factors that should beconsidered before implementing it. First, the availability ofresources (including raw materials, technology, transportation andpersonnel) will determine the success of the implementation process.Secondly, sociological forces (such as language and culture) willdetermine the ease of entry into the international market. Third,financial forces (such as exchange rates and tariffs) will affect theprofitability of the export business. Fourth, economic forces willdetermine the production cost and the price at which the product canbe presented in the market. Fifth, physical and environmental forceswill determine the ease with which the product can be transported tothe target consumer. Sixth, legal forces determine the interactionbetween the business and the governmental bodies, especially thejudicial system. Lastly, competitive and distributive forcesdetermine the capacity of the export business to compete with otherplayers in the global market.
Thisplan makes seven recommendations that will result in successfulpresentation of the product into the target market. First, the firmshould use the state-of-the-art technology to ensure that the productmeets the international standards.
Secondly,the firm should use the most common languages used in the targetmarket to label and market the product.
Third,the firm should take advantage of the bilateral agreements availableto avoid both financial and non-financial barriers.
Fourth,the export business firm should do the timing in order to export theproduct in large quantities when inflation rates are lower.
Fifth,the export firm should distribute the product in regions withreliable transportation and storage facilities to avoid damage andspoilage of the product.
Sixth,the firm should comply with legal measures in both the domestic andthe target country.
Lastly,the firm should focus on establishing a rapport with potentialcustomers and seeking for customer loyalty in order to enhance itscompetitiveness.
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