This paper presents a business plan for managing a startup import-export firm operating between the United States, China, and Mexico. Drawing on U.S. trade data, the plan identifies beef exports to China and mango imports from Mexico as core product lines, selected for their strong market demand and favorable trade conditions under existing agreements such as NAFTA. The paper covers the firm's overall strategy, product selection rationale, supplier and distributor choices, transportation methods, use of intermediaries, inventory and warehousing policy, financing requirements, and terms of sale. Risk management through political and financial insurance as well as active credit monitoring are also addressed.
Despite the recession and weak growth in the housing market, the US is still one of the strongest regions for international trade. Some of the largest developed and developing economies conduct business with the US in some form. This is illustrated by looking at the largest import and export partners of the United States:
Largest Trading Partners of the United States
Country | Imports | Exports
China — 19.5% | 7.2%
Mexico — 11.8% | 12.2%
Canada — 14.2% | 19.4%
Japan — 6.3% | 4.7%
(United States, 2012)
These figures show how the US is one of the largest countries for conducting commerce. For the startup firm being managed here, this represents an opportunity to expand market share. Achieving this objective requires a business plan that examines the products to be imported and exported, provides a brief description of each country, addresses the choice of suppliers and distributors, methods of transportation, the use of intermediaries, inventory and warehousing policy, financing requirements, and the terms of sale. Together, these factors provide the greatest insights into the issues that must be considered throughout the process.
The basic strategy for operating the business is to import and export to those nations that are the largest trading partners of the United States. These nations were selected based on the free trade agreements and low tariffs currently in place, which will keep the costs of importing and exporting products as low as possible.
The policies and procedures to be followed include maintaining insurance against political and financial risks, and effectively managing credit. Insurance against political and financial risks involves purchasing specific insurance policies to protect the firm from potential hazards of doing business in a particular country. In some cases, this means working with the Import-Export Bank to purchase policies designed to cover certain events, such as a coup or the nationalization of assets. Commercial insurance can also be purchased to cover potential damage to products during transit. These measures protect the firm against sudden changes that could negatively affect operations. (Seyoum, 2009, pp. 130–135)
Managing credit means determining which customers have the ability to pay for a product after it arrives. This is challenging because firms can potentially lose millions of dollars by extending credit to the wrong clients. Identifying the lowest-risk customers requires an active monitoring system that is updated as a customer's financial situation changes. This can be accomplished by reviewing reports from Dun and Bradstreet, TRW Credit Services, Graydon America, Owens Online, the NACM, and various government agencies. Doing so allows the firm to identify customers who both demand the products it sells and have the credibility to conduct continuous business. (Seyoum, 2009, pp. 130–135)
The product to be exported is beef. This was selected because there is strong demand for beef in developing nations such as China. Beef exports are expected to rise from 5.45 million tons in 2010 to 7.4 million tons by 2016, demonstrating the strength of demand for this product in the Chinese market. (Nelson, 2010)
The product to be imported is mangos from Mexico. Mango demand declines by approximately 46% from summer into winter, driven by rising prices and lower fruit quality. A study conducted by Mango.org found that summer mango demand accounts for approximately 5.0% of all U.S. household purchases, compared to 2.7% from November onward. The factors contributing to this change include higher prices, lower quality, and a lack of available fruit. Importing mangos from Mexico throughout the year is an excellent way to address this ongoing demand. (Consumer Research, 2011)
Since the 1970s, China has been going through a series of economic reforms designed to open the nation's markets to foreign competitors. The results are that it has quickly emerged as one of the fastest-growing economies in the world. The offshoot of this growth is increasing demand from a wealthier population, which means greater need for a wider range of food products. Beef is one that many consumers are beginning to prefer, driven by rising income levels and the expansion of fast food restaurants serving these products — such as McDonald's. These elements demonstrate the strong demand for beef exports in China. (China, 2012)
"Market conditions in each trade partner country"
"Supplier selection and freight methods"
"Low-inventory model and capital requirements"
The strategy outlined in this plan will ensure that the firm is able to take advantage of strong demand in the US and China by focusing on products that can address these needs. At the same time, the policies and procedures put in place will reduce the total risks facing the organization. These elements are important in illustrating the broader challenges that most firms face when importing and exporting products internationally. What makes this approach distinctive is that it takes these issues into account and creates a plan designed to reduce underlying costs, thereby maximizing profit margins and addressing customer demand in key markets.
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