Managing a Start Firm Despite the Recession Essay
- Length: 6 pages
- Sources: 3
- Subject: Business
- Type: Essay
- Paper: #48270749
Excerpt from Essay :
Managing a Start Firm
Despite the recession and weak growth in the housing market, the U.S. is still one of the strongest regions for trade. The reason why is because, some of the largest developed and developing economies are conducting business with the U.S. In some form. A good example of this can be seen by looking at the below table (which is illustrating the largest import and export partners of the United States).
Largest Trading Partners of the Unites States
("United States," 2012)
The figures are showing how the U.S. is one of the largest countries for conducting any kind of commerce. In the case of the startup firm that we are managing, this is an opportunity to be able to expand market share. To achieve this objective requires creating a business plan that will examine the products to be imported / exported, provide a brief description of the country, the choice of suppliers / distributors, methods of transportation, the use of intermediaries, the inventory / warehousing policy, financing requirements and the terms of sale. The combination of these factors will provide the greatest insights as to what issues must be considered during the process.
Strategy for the business
The basic strategy we will be using for operating the business will be to import and export to those nations, who are the largest trading partners of the United States. The reason why these nations were selected is based on the free trade agreements and low tariffs that are in place. This will keep the costs of importing and exporting different products as low as possible.
The policies and procedures that we will be focusing on include: having insurance against political / financial risks and effectively managing credit. Insurance against political / financial risks is when there are specific insurance policies purchased to protect the firm. These are designed to help minimize the potential hazards of doing business in a particular country. In some cases, this involves going to the import - export bank. To purchase specific policies that is designed to cover certain events (i.e. A coup or nationalization of assets). At the same time, we can buy commercial insurance that will cover potential damage to the product during transit. These factors will protect against any kind of sudden changes that could have an impact on the firm. (Seyoum, 2009, pp. 130 -- 135)
Managing credit is when you are determining what customers have the ability to pay for the product after it arrives. This is challenging, because many firms can potentially lose millions of dollars by extending credit to the wrong cliental. To identify the lowest risk, requires having an active monitoring system that will update for changes in the customer's financial situation. This can be accomplished by looking at reports provided by Dunn and Bradstreet, TRW Credit Services, Graydon America, Owens Online, the NACM and various government agencies. Once this happens, is when we can find customers who are demanding the products we sell. At the same time, they have the credibility to conduct continuous amounts of business with the firm. (Seyoum, 2009, pp. 130 -- 135)
Products to be imported or exported
The product that will be exported is beef. The reason why this was selected is because there is strong demand for beef in developing nations such as China. A good example of this can be seen in how beef exports are expected to rise from 5.45 million tons (in 2010) to 7.4 million tons (by 2016). This is significant in showing how there is strong demand in China for this merchandise. (Nelson, 2010)
The product that we will be importing is mangos from Mexico. In this case, mango demand will decline by 46% from the summer into the winter. The biggest reason is that prices are rising and the quality of fruit is lower. Evidence of this can be seen with a study that was conducted by Mango.org. They found that in the summer the demand for mangos is approximately 5.0% of all U.S. household purchases. This is less than the 2.7% that was reported from the month of November onward. The biggest factors that contributed to this change were higher prices, lower quality and the lack of available fruit. This is significant, because it is showing how importing mangos from Mexico is an excellent way to address this demand. ("Consumer Research," 2011)
Brief description of sourcing country or export market
Since the 1970s, China has been going through a series of reforms. These were designed to open the nation's markets up to foreign competitors. The results are that it has quickly emerged as one of the fastest growing economies in the world. The offshoot is increasing demand from a wealthier population. This means that there are greater needs for food products. Beef is one that many foods consumers are starting to prefer. This is based upon the growing income levels and the fast food restaurants that are serving these products (i.e. McDonalds). These elements are important in showing how there is strong demand for beef exports in China. ("China," 2012)
During the 1990's, Mexico underwent a major transformation thanks in part to the reduction in trade barriers through NAFTA. This means that various fruits can be sent to the U.S. markets without any kind of regulatory issues. One of the more difficult ones is mangos. This is based on the fact that warm weather is required to ensure the proper growing conditions. Given the fact that most of the U.S. will experience some form of winter, means that supplies are limited. Our basic strategy is import mangos to the U.S. throughout the year. This will allow the company to address customer demand and it will provide consistent profits to the firm. ("Mexico," 2012)
Choice of supplier or distributor
The supplier that we will be using for beef products is Mooresville Meat Center (in North Carolina). The reason why this was selected is because the firm can provide a better quality of beef. The animals are fed through local farmers, who are using grass instead of alfalfa. This means that the meat is leaner and will taste better. ("Mooresville Meat Center," 2012)
In the case of mangos, we will sign an exclusive agreement with a series of local farmers to purchase their entire crop. This will helps us to capture a large portion of this market and immediately begin selling the product in the U.S. Over the course of time, is when we can expand the total number of growers and imports.
Methods of transportation
The methods of transportation that we will be using for the beef is air freight. The approximate cost of importing the beef from the U.S. will be $11.82 per kg. This is based on the firm shipping between 21 thousand kg and 500 thousand kg at any point in time. ("Forwarder Express," 2012) In the case of the imports from Mexico, we will be shipping the mangos via truck. The rate that will be charged is $5.57 per kg. ("ABF Freight Systems," 2012)
Use of intermediaries
The intermediaries that we will be using are two different transportation companies (who are responsible for delivering the final product to retailers). For all beef exports we will be using Forwarder Express. They have a history of working with large corporations in exporting products into China going back to 1998. In the case of mango imports, we will be using ABF Freight Systems. They have an established track record of driving back and forth between the U.S. / Mexico going back to the early 1990s. In both cases, these intermediaries have the experience in quickly delivering the product to retail markets in the U.S. And China. ("Forwarder Express," 2012) ("ABF Freight Systems," 2012)
Inventory and warehousing policy
To keep the costs low there will be very little inventory or warehousing. Instead, once a customer needs an order is when it is placed with whole sellers or farmers. At which point, one of the intermediaries will pick up the merchandise and deliver it the customer. However, in the event that there is a backlog there will be warehouses established in North Carolina, China and Mexico. The costs for these facilities will be $7 million.
To finance the operations of the firm; means receiving large amounts of investment capital. In order to achieve these objectives, we will need an upfront investment of $25 million. This will be secured through various banks and offering limited partnerships to accredited investors. To ensure continued financing, the company will have available lines of credit at all of the major banks in the U.S., China, Europe and Mexico. This will require having loans available ranging from $1 million to $10 million.
Terms of sale
The terms of all sales will be that customers can send merchandise back prior to signing for it. Once the delivery is received, all clients will have the opportunity to inspect the merchandise…