How Moose and Walrus Can Be Able to Thrive in the Competitive Global Context - Case Study Example

Exporting/Thriving in the Competitive Global Context Exporting/Thriving in the Competitive Global Context Introduction It is important for companies such as Moose & Walrus (M&W) to ensure that they carefully assess both the innate disadvantages and advantages before they can commit considerable amounts of resources to venture into the export business. While some companies are seen to enter into the export business unintentionally after the receipt of purchase orders from foreign buyers wishing to purchase their products, other companies made careful and well deliberate moves in venturing into the export business by their conducting extensive amounts of research before they can finally decide to enter into a given new market. Regardless of whether a move into a foreign market is deliberate or unintentional, companies should ensure that they carefully assess and evaluate the potential challenges, and advantage of exporting before they can move to commit their resources to such ventures. In this regard, this brief will carefully describe the disadvantages and advantages that M&W stand to gain from venturing into the export business, it will also provide an suitable systematic approach that M&W can effectively utilize to export, it will also present examples of possible export payment methods as well as a systematic approach that can be used in the management of export-import transactions. How Moose & Walrus can be able to thrive in the competitive Global context According to Baker (2003), the total world exports as at 2000 were estimated to stand at US$6.3 trillion as at 2000, which was an increment of nearly 15 percent from the total exports recorded in 1999 which were by then estimated to stand at US$5.47 trillion. The volume of this trade has however continued to experience exponential growth and as at 2012, the dollar value of the total merchandise exports were estimated as standing at about $18.3 trillion (WTO 2013). Advantages of Export trade to Moose and Walrus (M&W) It is important for Moose & Walrus to ensure that it taps into the global market to ensure that it benefits from the increased profitability and volumes of sales that is promised by its expansion into Turkey, Japan and other European destinations. Some additional benefits that the company stands to gain from participating in export trade include: Increased Sales and Profits: By selling its products to the new markets in Turkey, Japan and other parts of Europe in which M&W has never before sold its products in, Moose and Walrus stands to greatly increase its revenues and boost its sales. In addition to this, once the company has managed to recover the costs it will potentially incur during the export development of its products, the foreign sales it will be making will greatly increase its overall productivity (Cavusgil et al, 2013; sba.gov. 2005). Gain new Experience and Knowledge: By going international M&W can be able to easily yield valuable information and ideas pertaining to new technologies, foreign competitors and marketing techniques. This information is crucial as it can be employed in helping the company in both its domestic and its foreign businesses (Cavusgil et al, 2013). Diversification: By selling to different markets across the world, M&W will stand to greatly spread the risk and diversity its business. By doing this, it will avoid being primarily tied down to the changing business cycle of its domestic market ((Ajami and Goddard 2013; Czinkota 2009). Lower Cost per Unit: If M&W is successful in capturing additional foreign markets, this will cause it greatly expanding its production so as to meet foreign demand. As a result of increased productivity, M&W will stand to enjoy associated some of the associated benefits of mass production such as lower per unit costs, an aspect that will itself in-turn result in causing the company to better use its existing capabilities (Cavusgil et al, 2013). Expand Product Life Cycle: The products developed by M&W are seen to go through a number of developmental cycles that include introduction, growth, maturity and ultimately the declining cycle which essentially markets the end of the usefulness of the given product in a given market (Ajami and Goddard 2013). However, by expanding its operations, M&W can be able to introduce a product in another market where it has never been introduced or marketed before once it reaches the final stage in the first market (sba.gov. 2005). Sell Excess Production Capacity: In the event that Moose & Walrus happens to have excess production for any reason, it can be able to easily sell the excess product in various foreign marketed instead of its being forced to either dispose of offer extensive discounts in a bid to dispose of the excess production. Although the benefits that Moose and Walrus stands to gain from expanding to new markets in Japan, Turkey and other parts of Europe seem to be quite enticing, it is important for it to understand that the expansion of its operations into export trade can pose a number of challenges for it. Some of these challenges variously include: Additional Costs: Developing new markets can potentially cause M&W to incur a number of extra costs (Singh 2009). This is because the development of new markets generally tends to take more time, has significantly longer pay back periods, additional upfront costs necessary for the development of various new material, additional costs associated with allocating personnel to travel as well as numerous other marketing costs that can potentially strain the company’s resources (Cavusgil et al, 2013). Export Licenses and Documentation: Although in line with the current trend, the number of documentation and licenses that companies need to obtain so as to engage in export trade has gradually been decreasing, in some of the countries that M&W is planning on expanding into, it might be necessary for the company to obtain export licenses. This will have the drawback of causing the company to become less competitive. Often the documentation required for a company to engage in export trade is found to be more involving and difficult to obtain as compared to the documentation necessary for domestic sales (Parker 1997). Financial Risk: Entering into new foreign markets can potentially pose as a significant financial risk for Moose and Walrus. The collection of payments using some of the currently available means of payment will be found by M&W to not only be more time-consuming as compared to domestic sales, but also more complicated (Cavusgil et al, 2013; Seyoum 2009). Market Information: The process of attempting to find information on its targeted foreign markets by M&W will ultimately prove to be more time-consuming as compared to finding similar information and effectively analyzing its domestic markets. In some of the markets that the company is planning on expanding into, it might experience considerable challenges in obtaining credible and up-to-date information pertaining to factors such as market characteristics, business practices and cultural barriers. A systematic Approach to exporting that can be used by Moose and Walrus Entering into new markets will require for M&W employ a systematic approach that will help it in achieving its set objectives. A comprehensive systematic approach that can be used by M&W in its initial venture into the international trade includes first ensuring that its product is ready for the target market. It might be necessary for the company to make some adjustments and localization amendments to its clothing styles ensure that the products are well prepared for the stiff competition that is sometimes seen in the international markets. Some of the factors that need to be considered in this instance include cultural issues, shipping costs, local regulations, shipping time, local competition, languages as well as the potential impact of the local regulations. The product’s value proposition is also of great importance as it will be key in setting M&W’s product apart from the rest of the competition. Its value preposition will help in defining what the company is currently offering to its customers as well as why the customers will want to purchase any of the company’s current product offering. It is essentially a unique expression of the company’s value-add. The next stage in the M&W’s strategic approach into the export market will be for it to clearly identify its target customer groups. It is important for the company to also collect details on aspects such as why it has chosen the specific target group as well as how many potential clients exist in each of its new export markets. After the identification of its target customer base, the company needs to work on both its marketing campaign as well as the market channels via which its products will be able to reach its customers. The next step in the company’s systematic approach will be to find the right partners in the company’s overseas target market. It is important for Moose and Walrus to ensure that it makes favorable agreements with its partner pertaining to shared marketing plans and sales objectives, margins, payment terms, discounts and pricing. Of importance also is for M&W to ensure that it includes a carefully structured get out clause in the agreement as this will be helpful in the event that the partnership fails to work out. After identifying and agreeing with a local partner, M&W should conduct an extensive competitor analysis to determine who its competitors are not only overseas but also at home. The analysis should also identify the weaknesses and the strengths of the company’s competitors as well as identify M&W’s true competitive advantage. According to Cavusgil et al, (2013), other aspects of Moose and Walrus’s systematic approach to marketing include ensuring that it implements the right sales process in addition to its having adequate and well skilled staff resources. Of importance also is for M&W to determine if it has adequate senior management time and enough finances to commit towards the development of its exportation venture without its having no guarantee of making any returns on its investments. After a careful analysis of whether the company is ready to commit its resources into the venture, M&W should move on to effectively plan is export finance. This will basically involve its developing and running of export operations as well as the determination of the approach that will be used by the company in the management of risk. Some of the factors that M&W will have to consider at this stage include export credit insurance, credit management, invoice discounting as well as letters of credit. It will also have to examine the cash implications of having to fund sales cycles that might at times go on for 18 to 24 months (Cavusgil et al, 2013). The final stage in Moose and Walrus’s strategic approach to export will involve ensuring that it sets-up adequate measures to help in protecting the company from being negatively impacted by the frequent exchange rate fluctuations. Some of the avenues that can successfully be used to effect this includes the setting up of bank accounts in target markets countries, engaging in forward contracts where it agrees to purchase currency at certain agreed rates for clearly defined time-periods. It can also set up a foreign currently account where funds will be kept in their original currently; this will allow for payments and receipts to be made without the hustle of the company first having to convert it. Export payment Methods Moose and Walrus should be careful to select appropriate payment methods if it is to be able to successfully compete against its competitors and win sales from them. It is important for M&W to offer its customers attractive sales terms that are well supported by appropriate sales methods. Some of the key methods of payment that can be used include: Setting up open account transactions that will allow for goods to be shipped and delivered even before their payment is due. The time taken before the goods can be paid for varies in international trade from 20,60 or even 90 days (Mullineux and Murinde 2003). An alternative option to open accounts will be for M&W to look into consignment trade where payments are sent to it only after the foreign distributor successfully manages to sell the goods to the end user (Vasudeva 2011). Another possible option that can be utilized by M&W is the use of documentary collection where Moose and Walrus will essentially entrust the collection of payments to its bank with instructions for it to released the payment documents to the buyer for payments. Using letters of credit is perhaps one of the most secure methods that is available for M&W to use once it starts exporting goods to international markets. A letter of credit is basically a commitment given by a bank on behalf of the buyers promising M&W that payments will be remitted as payment provided that all the set terms and conditions are adhered to(Gillies and Moens 2000). Moose and Walrus can also opt to use cash-in-adverse payment terms that will help it avoid potential credit risks as it first receives payments before ownership of the goods is transferred. This can be effected through the use of credit cards and wire transfers (Luk 2011). Conclusion and Recommendations Before Moose and Walrus can venture into export business and supply goods to Turkey, Japan and parts of Europe, it is important that it recognized the need for sufficient capital, careful planning, access to quality product, good market know-how, and a good marketing strategy. Although there are currently no set rules that can effectively guide Moose and Walrus in making the decision to engage in the export business and eventually become successful, a rather extensive understanding of the export market’s challenges and advantages, best payment methods as well as a strategic approach to venturing into the export market are all factor that can aid M&W in smoothly venturing into its target markets, effectively keep pace with any competition and eventually manage to realize good profit margins. Bibliography Ajami, A. R. and Goddard G. J. 2013. International Business: A Course on the Essentials. M.E. Sharpe. Baker, J. 2003. Financing international trade. Westport, CT : Praeger. Cavusgil, T. S. 2013. International Business: The New Realities. Pearson Prentice Hall. Czinkota R. M. 2009. Emerging trends, threats, and opportunities in international marketing : what executives need to know. New York : Business Expert Press. Gillies, P. and Moens, G. 2000. International trade and business : law, policy and ethics. Sydney, NSW : Cavendish. Luk, K. 2011. International trade finance : a practical guide. Kowloon, Hong Kong : City University of Hong Kong Press. Mullineux, A. W. and Murinde, V. 2003. Handbook of international banking. Cheltenham, UK ; Northampton, MA : Edward Elgar. Parker, K. 1997. Breaking Into the Trade Game: A Small Business Guide to Exporting. DIANE Publishing. sba.gov. 2005. Breaking into the trade game a small business guide to exporting. DIANE Publishing Seyoum, B. 2009. Export-import Theory, Practices, and Procedures. Taylor & Francis. Singh, R. 2009. International Trade Operations. Excel Books India. Vasudeva, K. P. 2011. International Trade. Excel Books India. WTO. 2013. Trade to remain subdued in 2013 after sluggish growth in 2012 as European economies continue to struggle. Acessed at http://www.wto.org/english/news_e/pres13_e/pr688_e.htm Read More