The Export Strategy for Sanyo - Case Study Example

BOARD PAPER Paper Reference: ID No. Paper: of Paper: The export strategy for Sanyo; an electronic appliance company from Thailand to UK For End of Module Assessment Brief Synopsis of the Issue Sanyo is an electronic appliance company that majors in a wide range production of Digital cameras, Air conditioners and Cam recorders (BOI 2013). The main aim of Sanyo is to increase its venture into the international market and improve its international customer base by expanding additional sites and service centres within the country. The electronic appliance sector has been experiencing steady growth in the past few years and the trend is expected to post growth in the years to come. In 2011, the overall trade in the electronic industry was worth approximately $56 billion, posting 10% growth from 2007 (BOI 2013). Thailand is the second leading exporter of electronics after China. UK is regarded as the main importer of electronics after Germany, United States and Hong Kong with an export value of $15.9 Billion in 2009 (Observatory of Economic Complexity 2015). The logistic and entry mode recommendations in the UK market are included in the paper. Recommendation Sanyo should seek to apply the indirect export strategy since it is a risk-free way to begin with and demands minimal involvement in the export process therefore allowing the company to concentrate on its domestic business. Because the company needs to perform its businesses in the UK market, there is need for looking for an export management company (EMC). A good one will venture in global extension of the company’s sales and services presence on behalf of the company. Moreover, EMC will mostly specialize in exporting electronic appliances to well-defined customer base in the United Kingdom. Locating customers overseas, arranging agent relationships handling all communications and documentation is another key aspect of EMC(Delaney 2015). The company should seek for custom warehousing that will be used for storage of their exported products. Sanyo should determine the mode of transport through the freight forwarders and logistics experts. In the meantime the company can use services from logistic experts such as DHL and UPS for transportation of its products. Air is considered the most appropriate method for shipment of the Sanyo’s products since it is faster and convenient. However the company must be ready to pay for huge sums of money. Before making any shipment to UK the company should consider security and the custom duty fee of the country. For security purposes, the company should make use of air instead of sea since it poses fewer risks of security. In UK the company has an advantage since its products are duty free. VAT is calculated by the value of goods + international shipping costs and insurance + any import duty due. Sanyo should register itself with a banking institution that will help the company to expand its market throughout the UK market. Sanyo should adhere to the rules and regulations in order to avoid trade barriers. The company should ensure that they have entered legally into bilateral trade agreements (Gopal, 2006). Background Thailand Thailand’s electrical and electronics industry has thrived and has continuously expanded for the past three decades. In 2011, the electrical and electronics trade funded almost 24% of Thailand’s yearly export incomes generating $55 billion (BOI 2013). Considering the global increase in demands for high technology consumer electronics, Thailand is considered as the ultimate investment destination due to its remarkably reputation of production of quality and authentic electronic products. The exporters in Thailand have an advantage since its launching negotiations for a free trade agreement (FTA) which will allow benefits to increase to third parties and yet there are no particulars on the appliance by which this may happen (Industry Focus 2011). Exporters also benefit from the country’s efficient road system and state of art seaports, communication and airports which are convenient and cost effective. Considering the location of Thailand, at the heart of Southern Asia, it gives importers a quick access to what is regarded as the world’s fastest marketplace. Thailand has a wide variety of electronic manufacturers who produce numerous world class electronic appliances that are accepted in the globe. Thailand have reached an accord on trade in goods that incorporates tariff reduction and elimination under the normal track and sensitive track which gives advantages to investors. United Kingdom The UK economy has long been a dominant player in financial services posted huge growth between 2006 and 2009. In 2009, the sector accounted for 10% of UK GDP. Britain has the highest ratio of services exports to GDP at 13% (Duty Calculator 2015). Due to this reason, exporters have an advantage in introducing their products in the United Kingdom which utilizes the powerful attraction via its healthy economy to generate more revenues through retail and the increasing of employment among the high level of salary staff. Arguments against recommendations Indirect export strategy involves selling to an intermediary in the country where a company wishes to transact business. They then sell the products directly to the customers or any other importing distributers. This means that, the company will not know who their ultimate consumers are and therefore Sanyo will lose the opportunity to tailor its offerings to their customers evolving needs. Indirect export strategy involves a number of chains in order for the goods to reach its customers. For this reason, the company’s profits are in the verge of being lower. This is due to the fact that it has to cater for the payment of each and every transaction made between the intermediates and the company. Most of the time the intermediates fail to do perform thorough research in the UK market and therefore the company lacks customer base for their products. In addition, they may fail to adhere to ethics that are supposed to be followed in UK. By doing this, the Sanyo will be at the verge of failing to perform businesses in the UK market. Overlapping sets of rules and complex rules of origin including different privileged tariff rates on exporting electronic appliances may impose substantial costs on Sanyo when they are seeking to obtain origin within UK trade area. There is a fierce competition in United Kingdom due to plenty of well-established electronic appliances firms. The government of the country may implement protectionist policies to protect its home industries and reduces the effects of competitions. With the rapid fluctuation of oil prices, transport can be a problem to the company since the cost of transportation will be high. For this reason, the importers will be affected since the price of the electric appliances will rise accumulatively. Arguments in support of recommendation Indirect export strategy has several advantages that suit the exporters in that it is almost a risk-free way to begin (Belaney 2015). In addition, the exporter has limited liability for product marketing problems since there is always someone else to point a finger at. Depending on the type of intermediaries with which the Sanyo Company deals with, the company does not have to concern itself with the shipment and other logistics. For this reason, it creates room for the company to involve itself on other domestic businesses within the country. In regards to transportation, air which is considerably the most efficient way of transporting Sanyo products since it is the fastest mode of transport (Department for Business, Innovation & Skills 2013). By making use of this, customer satisfaction will be achieved by reaching its demands of orders. Germany has several banking services that have greatly made significant steps forward regarding helping businesses export more goods and services in UK (Barclays 2015). Banks for this reason can be of great help in offering extensive international know-how and access to trade corridors through networks of correspondent and proprietary banking presence in multiple countries. For this reason Sanyo has to be a member of the Barclays banks to expand its business in UK (Barclays 2015). When Sanyo acquires a form of custom warehousing, it is to the advantage of being able to delay with payment of import duty and VAT on the electronic products. This will help with the company’s long-term cash flow planning. Moreover, if the company does not have the correct licenses in place for the goods, the storage of the goods in a custom warehouse will give the company time to remedy the situation. Implementation of recommendations The shipment of Sanyo products start from the major Thailand airport in Bangkok to United Kingdom. This is after declaring the best way of transportation as air. After undergoing the right procedures and export authorisation or licence are offered at the custom office (European Commission 2015), the goods are safe to go from the airport to the warehouse in United Kingdom. Airports in United Kingdom are known for their popular services throughout the world. In addition, UK warehouses offer a wide range of chilled and ambient warehouse industrial units and distribution space that range in sizes (Coop Estates 2015). These warehouses are offered for sale or let on The Co-operative Estates. Sanyo needs to act faster in order to cub competition from UK major producers of electronic products. Bibliography Barclays. (2015). BOI. (2013). Thailand’s Electrical and Electronics Industry. Coop Estates. (2015). Delaney Laurel. (2015). Indirect Exporting: Advantages and Disadvantages to Indirect Exporting. Department for Business, Innovation & Skills. (2013). Transporting Goods and Transporting Goods. DutyCalculator,. (2015). Import duty & taxes when importing into Germany - DutyCalculator Help Center. European Commission. (2015). Taxation and Custom Union. Gopal, C. R. (2006). Export import procedures documentation and logistics: inclusive of latest computerised customs clearance procedures : an exclusive & comprehensive book covering revised UGC syllabus. New Delhi, New Age International (P) Ltd., Publishers. Industry Focus. (2011). Influence of Thai E&E Industry Growing at Home and Abroad. Observatory of Economic Complexity. (2015). Read More