Import Export Plan for Coffee Importer's Plc - Example

Name Course Institution Instructor Date of Submission Import Export Plan Coffee Importers plc is a Canadian based coffee company that wishes to expand its coffee operations in the United States. The company has established various coffee shops across Canada and especially among major cities under the brand name; Kaffè. Although the American coffee industry is more mature than the Canadian market, the company seeks to participate in the American coffee market as an importer. Under the Harmonized Tariff Schedule, Arabica coffee is an allowed import under tariff number 0901110010 (United States International Trade Commission, Para 1). Coffee Importers Plc will be involved in the importation of coffee into the American market. To fully penetrate the American coffee market, Coffee Importers Plc will offer 10 per cent of its shareholding to the local American investors. Coffee importation in America proves to be big business especially due to the nation’s rich coffee culture. Owing to this rich culture, majority of the American population throngs to coffee houses for relaxation and business purposes (Coffee Research, para 1). Therefore, the coffee market in America is highly mature and participants will be willing to purchase coffee directly from an importer. For importation purposes, the coffee will be sourced from Africa and Asia where quality coffee is believed to be grown. The organization will seek to cooperate with the coffee farmers in this region to ensure that they grow quality coffee that is harvested and exported to the United States. Legal Structure As a private company, the company will be registered in Canada as required by the Canadian Company’s Act. According to this Act, private companies are not required to offer their shares to the public as it is a requirement for public companies. The company will be headed by the board through the chairman that is responsible for appointing the chief executive that will manage the daily affairs of the organization. Junior officers under the CEO will be provided with specific objectives that will enable the organization achieve its mission. Therefore the company’s subsidiary will adopt a line organization structure to enhance the achievement of its objectives. In the United States, companies with foreign ownership are required by law to constitute local ownership in their management. As a private company, Coffee Importers Plc will jointly enter into an agreement with a local investor in the coffee industry. The local investor will be included in the management team of the company’s subsidiary in the US. With this arrangement, the American government seeks to protect the interests of their nationals and avoid exploitation from foreign companies. The company will also be obliged to pay taxes according to The North American Free Trade Agreement (NAFTA) to protect the nation’s regional interests (US Customs & Border Protection, p49). In the event that the company is sued, it will be recognised as an individual entity totally different from the owners. Business Plan Coffee Importers Plc seeks to provide American coffee houses and manufacturing companies with a direct bridge linking them with the coffee farmers. Arabica coffee beans harvested in farms from selected regions will be shipped directly to the United States where they will be stored in specially designed warehouses. Coffee processors and shop owners will liaise with the management of the company that will be located at the storage site to place their orders. Once the orders are received, the packaging process will commence and ultimately end with the delivery of the customer’s orders. To establish the company in the US, the management will seek to attract a high number of coffee processing companies as well as coffee shop owners that prefer processing their own coffee. The foreign subsidiary’s management will comprise of three major departments namely the financial, sales and marketing and business development departments. These departments will be headed by executive managers that will steer the specific operations of the department towards the achievement of the organizational objectives. Departmental managers will be required to send monthly reports to the parent company offices to facilitate decision making. Decision making systems should be placed at the local subsidiary offices to facilitate quick decision making on the realisation of a business opportunity. Coffee shipments will be made directly to the stores in the US to reduce the transportation costs. Through lease agreements, Coffee Importers will establish their local offices that will be enclosed in one large compound in southern Miami. Financial Strategy The American subsidiary will receive funds from the parent company in Canada to cater for its operational costs. Meanwhile, the company will be establishing itself within the country as an international coffee importer. A major operational cost involves the shipment of coffee beans into the US that will probably account for over 51 per cent of the subsidiary’s expenditure. This cost is also adjustable depending on the exchange rate fluctuations among the involved nations. To avoid increased costs while in business, the subsidiary’s management team will seek to enter into financial agreements with shipping companies as well as the coffee farmers. This will enable the company to face stabilised financial outflows and inflows. Chorafas states that, the use of hedge funds will seek to protect the company from the exchange rate fluctuations evident in the global market (82). Lastly, as an infant subsidiary, the organization will be required to make the most out of forward and future options that will ensure constant supply of coffee beans from the coffee farmers and to the suppliers (Chorafas, p40). Projected Financial Statements Although the management team will be required to prepare monthly reports on the subsidiary’s business operations, financial statements will be prepared quarterly to reinforce the decision making process. The financial statements will include income statements, balance sheets and cash flow statements. For the profit and loss statement Profit Levels Jan-March Apr-June July-Sept Oct-Dec Quarters Figure 1. Profit Levels from the Income Statement For the Balance Sheet; Assets Jan-Mar Apr-Jun Jul-Sept Oct-Dec Cash and Cash Equivalents 203.5 440.5 257.6 1,195.9 Derivatives 75.4 128.1 75.4 311.8 Financial Assets Held for Trading - - - 414.8 Financial Assets Held for Sale 127.9 77.2 130.4 84.6 Receivables 90.0 189 151.3 56.0 Plant and Equipment 53.6 66.7 61.5 113.8 Other Assets - 12.3 26.4 58.9 Total Assets 550.4 913.8 702.6 2235.8 Liabilities Accounts payable 235 579 101 749 Derivatives - - 316.1 198 Income taxes payable 30 41 26 34 Total Liabilities 265 620 443.1 981 Equity Shareholder’s Equity 146 121 76 254 Retained Earnings 100 82 97 325 Interests 39.4 90.8 86.5 675.8 Note: All amounts are displayed in (000’s) Cash Flow Statement Cash flows from operating activities Jan-Mar Apr-Jun Jul-Sept Oct-Dec Trade receivables 128.2 150.6 172.5 211.1 Dividends received 41.2 107 15.7 16.8 Paid taxes (33.4) (46.0) (43.9) (81.9) Trade payables (407.6) (193.6) (420.7) (110.3) Interests on financial instruments - 2.0 11 10.8 Net cash from operational activities (271.6) 20 (265.4) 46.5 Cash flow from investing activities Sale of fixed assets - 0.7 11.6 1.0 Purchase of fixed assets (28.6) (29.2) (117.8) (85.9) Purchase of securities and equity investments (59.2) (91.2) (35.3) (34.4) Sale of securities and equity investments 5.4 11.8 7.7 11.8 Cash on acquisition of a subsidiary - - - - Net cash flows from investing activities (82.4) (107.9) (133.8) (107.5) Cash flows from financing activities Payment of dividends (146) (121) (76) (254) Debt repayment (16) (23) (10) (7) Debenture payments (50) (30) (11) - Issue of Equity 50 82 91 105 Net cash flow from financing activities (162) (92) (5) (156) Increase (decrease) in cash and cash equivalents - - - - Cash and cash equivalents at the start of the period - - - - Cash and cash equivalents at the end of the period 203.5 440.5 257.6 1,195.9 Conclusion At the maturity level, players in the American coffee industry have to revitalise their business operations in order to survive and avoid moving to the decay stage of the business cycle. By providing raw coffee beans, Coffee Import Plc will be able to enable these participants to reduce their operational costs involved in importing the coffee beans. However, the company has to ensure that it accesses quality coffee beans as required by the American people. With modern storage facilities, the company will be able to ensure the freshness of the coffee beans until they are delivered to the customer. The company can also undertake a product diversification program that will provide the company with multiple channels of revenue. Works Cited Chorafas, N Dimitris. Intro. to Derivative Fin. Instruments: Options, Futures, Frwds, Swaps & Hedging. Michigan: McGraw-Hill Proff., 2008. Coffee Research. Coffee Consumption Statistics in the US. Retrieved from < http://www.coffeeresearch.org/market/usa.htm > on Nov. 30,2009. United States International Trade Commiss. Harmonized Tariff Schedule of the US (2009). Retrieved from < http://hts.usitc.gov/ > on November 30, 2009. US Customs & Border Protection. Imprting into the US: Guide for Comm. Importers. Retrieved from < http://www.cbp.gov/linkhandler/cgov/newsroom/publications/trade/iius.ctt/iius.pdf > on Nov. 30, 2009. US Import Requirements. Retrieved from http://www.americanimporters.org/pages/marketing/USimportrequirements.html > on Nov. 30, 2009. Read More