10. How to develop an export business plan

The reading level for this article is Expert

Each section must be completed before you start the next section. After you have completed the entire worksheet, you will be ready to develop an international business plan to export your product. Once the business plan is completed, an in-depth analysis of your readiness to export can be completed.

Products/Services
STEP 1:
Select the most exportable products to be offered internationally.

To identify products with export potential for distribution internationally, you need to consider products that are successfully distributed in the domestic market. The product needs to fill a targeted need for the purchaser in export markets according to price, value to customer/country and market demand.

What are the major products your business sells?

1. ________________________________________________________________

2. ________________________________________________________________

3. ________________________________________________________________

What products have the best potential for international trade?

1. ________________________________________________________________

2. ________________________________________________________________

3. ________________________________________________________________

STEP 2:
Evaluate the products to be offered internationally.

What makes your products unique for an overseas market?

1. ________________________________________________________________

2. ________________________________________________________________

3. ________________________________________________________________

Why will international buyers purchase the products from your company?

1. ________________________________________________________________

2. ________________________________________________________________

3. ________________________________________________________________

How much inventory will be necessary to sell overseas?

1. ________________________________________________________________

2. ________________________________________________________________

3. ________________________________________________________________

Identifying Products With Export Potential
List below the products you believe have export potential. Indicate the reasons you believe each product will be successful in the international marketplace.

Products/Services Reasons for Export Success

1. _____________________ ____________________________________

2. _____________________ ____________________________________

3. _____________________ ____________________________________

4. _____________________ ____________________________________

5. _____________________ ____________________________________

Decision Point: These products have export potential:

________________________________

________________________________

________________________________

________________________________

Planning
What is the purpose of completing this workbook?
You know that you want to see your company grow through exporting.

Five reasons it will be worth your time and effort:

Can’t I hire someone to do this for me?
No! Nobody will do your thinking or make decisions for you. This is your business. If the business plan is to be useful, it must reflect your ideas and efforts – not those of an outsider.

Why is planning so important?
The planning process forces you to look at your future business operations and anticipate what will happen. This process better prepares you for the future and makes you more knowledgeable about your business. Planning is vital for marketing your product in an international marketplace.

Any firm considering entering into international business transactions must understand that doing business internationally is not a simple task nor one for the faint of heart. It is stimulating and potentially profitable in the long-term but requires much preparation and research prior to the first transaction.

In considering products for the international market, a business needs to be:

Developing a business plan helps you assess your present market situation, business goals, and commitment which will increase your opportunities for success.

What’s the bottom line for me if I do the plan?
Research shows that small business failure rates among new businesses are significantly lower for new businesses that have developed a business plan.

Isn’t planning just for the big companies?
Planning is important for any organization that wants to approach the future with a plan of action. The future comes whether you are prepared for it or not. A business plan helps you anticipate the future and make well-informed decisions because you have thought about the alternatives you will be facing.

How often do I have to do this?
A plan must be revised as needed, at least once a year. Planning is a continuous process. You will be surprised how much easier it is to develop a business plan after the first time. Plus, after a revision or two you will know more about your international business market opportunities to export products.

Goal Setting
Determining your business goals can be a very exciting and often challenging process. It is, however, a very important step in planning your entry into the international marketplace. The following exercise is intended to help you clarify your short and long-term business goals.

STEP 1: Define long-term goals.

STEP 2: Define short-term goals.

STEP 3: Develop an action plan to reach your short-term goals by using international trade.

Industry Analysis
STEP 1:
Determine your industry’s growth for the next 3 years.
Talk to people in the same business or industry, research industry-specific magazines, attend trade fairs and seminars.

STEP 2:
Research how competitive your industry is in the global markets.

STEP 3:
Find out your industry’s future growth in the international market.

STEP 4:
Research government market studies that have been conducted on your industry’s potential international markets.

STEP 5:
Find export data available on your industry.

Your business/Company Analysis
STEP 1:
Why is your business successful in the domestic market? What’s your growth rate?

STEP 2:
What products do you feel have export potential?

STEP 3:
What are the competitive advantages of your products or business over other domestic and international businesses?

Pros and Cons of Market Expansion
Brainstorm a list of pros and cons for expanding your market internationally. Based on your product and market knowledge, determine your probability of success in the international market.

Industry/Product:

________________________________________________________________

Pros Cons

1. ___________________________________ _______________________

2. ___________________________________ _______________________

3. ___________________________________ _______________________

4. ___________________________________ _______________________

5. ___________________________________ _______________________

6. ___________________________________ _______________________

Probability of Success

0% _____ 25% _____ 50% _____ 75% _____ 100% _____

Marketing Your Product
Given the market potential for your products in international markets, how is your product unique?

1. What are your product’s advantages?

2. What are your product’s disadvantages?

3. What are the competitive product’s advantages?

4. What are the competitive product’s disadvantages?

What are the needs that will be filled by your product in a foreign market? What competitive products are sold abroad and to whom?

How complex is your product? What skills or special training are required to:

1. Install your product?

2. Use your product?

3. Maintain your product?

4. Service your product?

What options and accessories are available?

1. Has an aftermarket been developed for your product?

2. What other equipment does the buyer need to use your product?

3. What complementary goods does your product require?

If your product is an industrial good:

1. What firms are likely to use it?

2. What is the useful life of your product?

3. Is use or life affected by climate? If so, how?

4. Will geography affect product purchase, for example transportation problems?

5. Will the product be restricted abroad, for example tariffs, quotas or non-tariff barriers?

If the product is a consumer good:

1. Who will consume it? How frequently will the product be bought?

2. Is consumption affected by climate?

3. Is consumption affected by geography, for example transportation problems?

4. Will the product be restricted abroad for example tariffs, quotas or non-tariff barriers?

5. Does your product conflict with traditions, habits or beliefs of customers abroad?

STEP 1:
Select the best countries to market your product.

Since the number of world markets to be considered by a company is very large, it is neither possible nor advisable to research them all. Thus, your firm’s time and money are spent most efficiently by using a sequential screening process.

The first step in this sequential screening process for the company is to select the more attractive countries for your product. Preliminary screening involves defining the physical, political, economic and cultural environment. Rate the following market factors in each category.

Market Factor Assesment Country A Country B
Demographic/Physical Environment:

Population size, growth, density __________ __________

Urban and rural distribution __________ __________

Climate and weather variations __________ __________

Shipping distance __________ __________

Product-significant demographics __________ __________

Physical distribution and communication network __________ __________

Natural resources __________ __________

Political Environment:

System of government __________ __________

Political stability and continuity __________ __________

Ideological orientation __________ __________

Government involvement in business __________ __________

Attitudes toward foreign business __________ __________

(trade restrictions, tariffs, non-tariff barriers, bilateral trade agreements)

National economic and developmental priorities __________ __________

Economic Environment:

Overall level of development __________ __________

Economic growth:

GNP, industrial sector __________ __________

Role of foreign trade in the economy

Currency: __________ __________

inflation rate, availability, controls, stability of exchange rate

Balance of payments __________ __________

Per capita income and distribution __________ __________

Disposable income and expenditure patterns __________ __________

Social/Cultural Environment:

Literacy rate, educational level __________ __________

Existence of middle class __________ __________

Similarities and differences in relation to home market __________ __________

Language and other cultural considerations __________ __________

Market Access, Limitations on trade:

high tariff levels, quotas __________ __________

Documentation and import regulations __________ __________

Local standards, practices, and other non-tariff barriers __________ __________

Patents and trademark protection __________ __________

Preferential treaties __________ __________

Legal considerations for investment, __________ __________

Taxation, repatriation, employment, code of laws

Product Potential:

Customer needs and desires __________ __________

Local production, imports, consumption __________ __________

Exposure to and acceptance of product __________ __________

Availability of linking products __________ __________

Industry-specific key indicators of demand __________ __________

Attitudes toward products of foreign origin __________ __________

Competitive offerings __________ __________

Local Distribution and Production:

Availability of intermediaries __________ __________

Regional and local transportation facilities __________ __________

Availability of manpower __________ __________

Conditions for local manufacture __________ __________

Indicators of population, income levels and consumption patterns should be considered. In addition, statistics on local production trends, along with imports and exports of the product category, are helpful for assessing industry market potential. Often, an industry will have a few key indicators or measures that will help them determine the industry strength and demand within an international market. A manufacturer of medical equipment, for example, may use the number of hospital beds, the number of surgeries and public expenditures for health care as indicators to assess the potential for its products.

What are the projected growth rates for the two countries selected over the next 3-5 years?

STEP 2:
Determine Projected Sales Levels

STEP 3:
Identify Customers Within Your Chosen Markets

STEP 4:
Determine Method Of Exporting

STEP 5:
Building A Distributor or Agent Relationship

Comments:

____________________________________________________

____________________________________________________

Support Functions
To achieve efficient sales offerings to buyers in the targeted markets, several concerns regarding products, literature and customer relations should be addressed.

STEP 1:
Identify product concerns.

Can the potential buyer see a functioning model or sample of your product that is substantially the same as would be received from production?

Comments:

____________________________________________________

____________________________________________________

What product labeling requirements must be met? (Metric measurements, AC or DC electrical, voltage, etc.) Keep in mind that the European Community now requires 3 languages on all new packaging.

When and how can product conversion requirements be obtained?

Can product be delivered on time as ordered?

Comments:

________________________________________________

STEP 2:
Identify literature concerns.

STEP 3:
Identify customer relations concerns.

Marketing Strategy
In international sales, the chosen “terms of sale” are most important.

Where should you make the product available: at your plant, at the port of exit, landed at the port of importation or delivered free and clear to the customer’s door? The answer to this question involves determining what the market requires, and how much risk you are willing to take.

Pricing strategy depends on “terms of sale” and also considers value-added services of bringing the product to the international market.

STEP 1:
Define International Pricing Strategy.

STEP 2:
Define promotional strategy

STEP 3:
Define customer services

Sales Forecast
Forecasting sales of your product is the starting point for your financial projections. The sales forecast is extremely important, so it is important you use realistic estimates. Remember that sales forecasts show the expected time the sale is made. Actual cash flow will be impacted by delivery date and payment terms.

Step 1: Fill in the units-sold line for markets 1, 2, and 3 for each year on the following worksheet.

Step 2: Fill in the sales price per unit for products sold in markets 1, 2 and 3.

Step 3: Calculate the total sales for each of the different markets (units sold x sales price per unit).

Step 4: Calculate the sales (all markets) for each year – add down the columns.

Step 5: Calculate the five year total sales for each market – add across the rows.

Sales forcasts:
first five years 1 2 3 4 5

Market 1

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

Market 2

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

Market 3

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

All Markets _____ _____ _____ _____ _____

Cost of Goods sold
The cost of goods sold internationally is partially determined by pricing strategies and terms of sale. To ascertain the costs associated with the different terms of sale, it will be necessary to consult an international freight forwarder. For example, a typical term of sale offered by a domestic exporter is cost, insurance and freight (CIF) port of destination. Your price includes all the costs to move product to the port of destination.

A typical cost work sheet will include some of the following factors. These costs are in addition to the material and labor used in the manufacture of your product: export packing, forwarding, container loading, documentation, inland freight, consular legalization, truck/rail unloading, bank documentation, wharfage, dispatch, handling, bank collection fees, terminal charges, cargo insurance, ocean freight, other misc., bunker surcharge, courier mail.

To complete this worksheet, you will need to use data from the sales forecast. Certain costs related to your terms of sale may also have to be considered.

Step 1: Fill in the units-sold line for market 1, 2, and 3 for each year.

Step 2: Fill in the cost per unit for products sold in markets 1, 2, and 3.

Step 3: Calculate the total cost for each of the products – (units sold x cost per unit).

Step 4: Calculate the cost of goods sold – all products for each year – add down the columns.

Step 5: Calculate the five-year cost of goods for each market – add across the rows.

Cost of Goods sold:
First five years 1 2 3 4 5

Market 1

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Cost _____ _____ _____ _____ _____

Market 2

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Cost _____ _____ _____ _____ _____

Market 3

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Cost _____ _____ _____ _____ _____

Cost of Goods Sold All Markets _____ _____ _____ _____ _____

International overhead expenses
To determine overhead costs for your export products, you should be certain to include costs that pertain only to international marketing efforts. For example, costs for domestic advertising of service that do not pertain to the international market should not be included. Examples of most typical expense categories for an export business are listed on the next page. Some of these expenses will be first year start-up expenses, and others will occur every year.

Step 1: Review the expenses listed on the next page. These are expenses that will be incurred because of your international business. There may be other expense categories not listed – list them under “other expenses.”

Step 2: Estimate your cost for each expense category.

Step 3: Estimate any domestic marketing expense included that is not applicable to international sales.

Step 4: Calculate the total for your international overhead expenses.

Expense cost
Market 1 Market 2 Market 3 Total Yr 1

Legal Fees _______ _______ _______ _______

Accounting Fees _______ _______ _______ _______

Promotional Material _______ _______ _______ _______

Travel _______ _______ _______ _______

Communication _______ _______ _______ _______

Equipment _______ _______ _______ _______

Advertising Allowances _______ _______ _______ _______

Promotional Expenses _______ _______ _______ _______

(e.g., trade shows, etc.)

Other Expenses _______ _______ _______ _______

Total Expenses _______ _______ _______ _______

Less Domestic Expenses _______ _______ _______ _______

(Included Above, if any)

Total Intern’ Start-up Expenses _______ _______ _ ______ _______&lt