SOUTH-EAST ASIA

This region has long been a problematic area for shipping as it is littered with countless island chains and is rife with government corruption which are two factors that make it a prime breeding ground for maritime piracy. Increased number of attacks have been specifically reported in (but not limited to):

• Malaysia
• the Philippines
• China
• Bangladesh
• Indonesia
• Thailand
• Vietnam

AFRICA

With a population that is not cooperative with investigations due to fear of reprisal from criminal organizations, some of the most widespread government corruption on a global scale, and ease of selling stolen cargo as you go further inland, the region of Africa plays a large role in maritime piracy. Increased number of attacks have been specifically reported in (but not limited to):

• Somalia
• Sierra Leone
• the Red Sea
• the Gulf of Aden
• Nigeria

LATIN AMERICA

Last but not least, Latin America with its high volume of drug and human trafficking by organized cartels, numerous islands, and a high level of government corruption provides a constant threat to shipping lanes and private yachts. Increased number of attacks have been specifically reported in (but not limited to):

• Brazil
• Columbia
• Venezuela
• Nicaragua
• Costa Rica
• Dominican Republic

Emboldened acts of maritime piracy have increased by enough volume that the International Maritime Bureau (IMB), founded by the International Chamber of Commerce (ICC), broadcasts daily reports of piracy via satellite to all shipping companies.

The international community is beginning to pursue curbing maritime piracy much more aggressively on many fronts ranging from ICC/IMB sponsored seminars to the hiring of Private Military Companies (PMCs) by shipping companies.

]]> http://optimumoutcomes.wordpress.com/2009/01/25/top-3-zones-of-escalating-maritime-piracy/feed/ 0 andreypolston http://optimumoutcomes.wordpress.com/2009/01/24/6-mission-critical-supply-chain-elements/ http://optimumoutcomes.wordpress.com/2009/01/24/6-mission-critical-supply-chain-elements/#comments Sat, 24 Jan 2009 06:54:47 +0000 Andrey Polston http://optimumoutcomes.wordpress.com/?p=46 ]]> Your supply chain will make or break your global trade platform and is also one of the primary macro-elements of import/export where details are overlooked and then plague operations at a later date. Whether you are a manufacturer taking a product into a market yourself, an export management company representing a client, an export trading company seeking buyers, or a trade merchant establishing a trade route: conducting the proper due diligence on your supply chain will not only ensure that you make better informed decisions but will also enable you to monitor the pulse of your operation more clearly thereby maintaining operation flexibility and leanness.

While a supply chain is not something intrinsic exclusively to import/export ventures, there are few parallel industries with as many numerous individual players (middle men, specialist service providers, logistics, etc,.) and moving parts (regulation compliance, government policy changes, currency fluctuations, etc,.) that must all be worked into your long-range business planning for sustainable operational success.

While the organizations, team members, and resources you utilize in the execution of the following six phases of your supply chain are subject to change, these same six phases, however, will not change in playing on-going mission critical roles in your supply chain management.

The six supply chain elements that you should conduct due diligence on in thorough detail with long-range flexibility playing a key factor are:

1. Research and Development (R&D)
2. Material Planning
3. Purchasing
4. Logistics
5. Traffic
6. Distribution

Keep in mind that the sum of your supply chain is greater than the parts. While each element is independent in its change management, strategic processes, and individual moving parts, if one phase experiences interruption for an extended period of time then it will cause a catastrophic ripple effect through the entire supply chain.

When you conducted your change management strategy development (you did right?) you should have included “What-if” and “Work-Around” scenarios and schedules that you would put into motion thereby keeping the issue isolated to its phase and avoiding a domino effect. Tip on ensuring you maintain the integrity of your supply chain: conduct “Business Interruption Drills” to test the effectiveness of your change management strategy and management team.

The old adage “only as strong as your weakest link” is quite relevant to your supply chain.

1. Tradekey.com
2. EC21.com
3. Alibaba.com
4. Fuzing.com
5. Busytrade.com
6. Tradenet.com
7. Stat-usa.gov
8. Embassy.org
9. Ita.doc.gov
10. Ita.doc.gov/cs
11. Ita.doc.gov/uscs
12. Trade.gov/cs.domfld.html
13. Trade.gov
14. Usatrade.gov
15. Tradepoint.org
16. Owit.org
17. Iccwbo.org
18. ez-forms.com/ezformsexport.htm
19. Export-legal-assistance.org
20. wtn-de.com
21. opic.gov
22. ny.frb.org
23. tradezone.com
24. fita.org
25. importexporthelp.com
26. export.gov

Happy learning!

Now it is time to dig deeper. I’ve said it before and I’ll say it again: import/export ventures are made or broken in the details on a daily basis because IMEX is a world where the sum is greater than the parts and skipping over even a few seemingly minor details can sink your venture in the blink of an eye.

It is not uncommon to find shipped cargo sitting in a dock warehouse for 2 plus years because the exporter simply didn’t verify a few details prior to shipping and the investment is lost… and that is just referring to customs regulations, let alone market research.

So do yourself (and your company) a big favor and either conduct your market research due diligence very thoroughly or hire a firm to do it for you. Knowing the terrain before you commit your entire organizations resources to market entry is paramount for success and sustainability.

10 Factors that need to be clearly grasped before making a decision are:

GLOBAL COMPETITORS

• Which other companies (if any) with similar product(s) are targeting the same market?
• Do they have any advantages? If so, what (political ties, personnel from the market, etc,.)?
• Do they have any disadvantages? If so, what (poor reputation in the market, legal issues at home, etc,.)?
• What is their track record in new market entry? If strong, what are their methods?
• Do they have exo-company support for venture? If so, what (embassy trade office, lobbyists, professional associations)?
• Keep asking questions…

LOCAL COMPETITORS

• Are there any existing local companies in your target market with similar product(s)? If so, how many?
• How long have they been operating?
• What is their percentage penetration of your estimated market size?
• What kind of barriers will they be able to erect to your entry?
• How strong is their brand loyalty?
• Keep asking questions…

SOCIAL CHANGES

• What kind of social changes are occurring in your target market that would affect your product(s) success?
• Which changes are trends and which are new models of living?
• Are social changes becoming more sympathetic to your country of product origin?
• Will your product be left in the dust due to changing social taste or will it harness the next wave?
• Keep asking questions…

SUPPLIERS

• How many potential suppliers do you have currently compiled for your product(s)?
• How strong is your supply chain (fiscally, historically, logistics, ability to meet future demand, etc,.)?
• Are there any suppliers closer to your target market who can provide the same quality but cut down on transportation / logistics overhead?
• Are there competing suppliers developing technology that will leave your current supply chain in the dust? If so, carefully consider how long of a contract you enter into with your current potential supply chain.
• Keep asking questions…

GOVERNMENT REGULATIONS

• Compile a list of freight forwarders with successful track records in your target market to be called upon.
• Does your home government have any special regulations involving trade with your target country? If so, what?
• How are target market regulations enforced (it is your responsibility to find out all the details to gain cargo entry)?
• Keep asking questions…

DEMOGRAPHICS

• Do the demographics in your target market facilitate a growing market potential or a declining one?
• What is the adoption rate of the current demographics for your product(s)?
• What barriers exist in introducing your product(s), creating hurdles to be cleared?
• What needs will your product(s) solve, increasing product adoption?
• Keep asking questions…

GOVERNMENT POLICIES

• Who are the key policy makers for the niche which affects your product(s)?
• Are there any policies under development currently that would affect your market entry? If so, what are they and adjust accordingly.
• Is there a way you can get involved in the policy development process?
• What kind of relationship does your countries embassy trade consulate have with target market policy makers? Of how much help can your consulate be?
• Keep asking questions…

ECONOMIC CONDITIONS

• What is the current trade volume of your target market?
• What is the Gross National Product (GNP)?
• How does the currency difference affect your venture?
• What arbitrage currently exists?
• What are the spending patterns of your target end user in this market?
• Will your product(s) bring value to the economic conditions? If so, how?
• Keep asking questions…

WORLD SITUATION

• What is happening with your target market on the stage of world politics and economics?
• Is it or a neighboring country hosting the Olympics soon? If so, how would this affect your entry?
• Is there civil war in a neighboring nation? If so, what kind of threat does this pose to your sustainability?
• Have there been any recent discoveries of natural resources? If so, how would this affect your entry success?
• Is the target market under international investigation/pressure for alleged support of subversive activity?
• Keep asking questions…

TECHNOLOGY

• What is the level of sophistication of your target market as a whole?
• How does the historical data on adoption of new technology/product(s) affect your entry and sustainability?
• What are the current technology needs of your target market and does your product(s) meet them?
• What are the anticipated future technology needs and how will this affect your sustainability?
• Keep asking questions…

This is not an all inclusive list of market research factors or questions; this will simply get you started in the right direction. Remember that there are four corners to every room so be sure to clearly understand the impact of each factor upon your product(s) entry into the target market. It should go without saying that the better informed an organization is, the more effective it’s entry strategy will be.

Approach this due diligence with attention to even the smallest detail, thoroughly investigate all aggregate data, and compile it into a clear picture of how a successful entry will have to be executed.

Take your time during this process to be detailed and thorough. Check a prospective reps reputation by asking for references,  by running their name with their embassies trade development office here in the US, and by running their name by the trade consulate at your embassy in your target market.

Here is prospective Product Representative Questionaire that you can copy, paste, and use as often as needed:

1. What import products do you handle?

2. What export products do you handle?

3. Where do you make the majority of your sales?

4. How do you prefer to work (as distributor, sales rep, manufacturer’s rep)?

5. What territories do you cover?

6. What commission would you feel comfortable with?

7. Do you work on your own, or do you have a company? If so, how many branches and salespeople do you have?

8. Please list pertinent bank references, including address, phone number, and contact person.

9. Please list at least three client references, including address, phone number or e-mail address, and contact person.

10. May we have some details on your professional history if you work on your own, or on your company history?

• number of employees
• years in business
• annual sales
• assets
• liabilities
• net worth

11. Please list any other information you feel would be helpful to us in considering you (to represent our client).

It goes without saying (but needs to be said because historical data shows otherwise) that picking the right product representative in your target market will (not can) make or break your initial product/service launch. Mistakes can be recovered from and additional attempts made… but that makes for a much costlier market entry pricetag and might even be too pricy to recuperate losses depending on size of the market.

“Obviously” the questionaire above is not an all inclusive list of questions to be asked but it should get you started in the right direction. Listen to answers carefully and look for not only what is being said but what isn’t being said also… ask direct questions in those areas to get direct answers.

Close attention to details and thoroughness in your due diligence process on this step will pay dividends shortly down the road.

Having easily identified packaging is one of the things you (the exporter) can do to ensure smoothness of delivery. Here is a Package Marking Worksheet you can use on your next shipment:

1. Shipper’s mark

2. Country of origin

3. Weight marking in pounds and kilograms

4. Number of packages and size of cases in inches and centimeters

5. Handling marks using international pictorial symbols (if appropriate)

6. Cautionary markings in English and the language of the country of destination (if appropriate)

7. Special labels for hazardous materials

Import/export is as much about clearing customs as it is about finding a product and market and this is something that novice traders aren’t aware of. Being thorough and detail oriented in every step of your trade process will be greatly appreciated by your clients, clear customs with less hassles, and ensure better results thereby helping build your reputation of consistency and reliability.

Each country comes with it’s own set of rules, regulations, advantages, and disadvantages… clearly knowing what each of these are should enable you to make a more balanced decision instead of being biased towards your product/service (which may be great but fail miserably in the wrong market).

Here is a Country Market Research Worksheet you can copy, paste, and use time after time:

1. Why does this country have potential for my product or service?

2. How can I gain exposure in this country?

3. Will I need to travel abroad to find markets, conduct research, and find distributors, or can I do this at home via phone and the internet?

4. Will I encounter language barriers or difficulties?

5. What cultural differences will I need to account for?

6. Who will I handle them?

7. What is the economic climate (on a national level – unemployment rates, inflation, or depression; on a personal level – disposable incomes, spending patterns)?

8. What is the sociological climate (urban and rural populations, literacy and educational levels, any special religious considerations)?

9. What is the political climate?

10. Will I experience any special shipping or handling problems because of geography or local customs? If so, what?

11. What trade channel will I use (direct sales, representative, distributor, or commission representative)?

12. How will I locate my trade channel people?

13. What are the country-specific problems that will contribute to my price, such as quotas, duties, or country regulations?

14. What are the country-specific benefits that can contribute to my price, such as duty-free or low trade barriers?

While this worksheet is obviously not all inclusive for your country market research, it does provide a great starting point which should elicit a whole list of more questions as you work through it. Clearly understanding what the rules, politics, and climate will be of your target market is a step that many novice exporters do not give due diligence and pay for dearly soon thereafter. Know the terrain before you make a company commitment.

One of the exercises that any exporter worth their salt should engage in before making a committment is conducting product market research. Creating a set of factors for evaulating a product’s potential in a certain market will help you make a decision about whether or not pursuing the next step is worth the time.

Here is a Product Market Research Worksheet you can copy, paste, and use time after time:

1. Name or description of product

2. What are the product’s selling features?

3. Are there competitive products? If so, list them.

4. Whare their selling features?

5. What is the sales potential of the product or service in my target market?

6. What are comparably priced goods going for in my target market?

7. Who will be the end user of the product?

8. Is the population of potential end users large enough to substantiate sales?

9. Can I expand the market, or will I be taking a share of the existing market?

10. Is the existing market large enough to share?

11. Which elements have the most influence on potential customers or clients? Price, quality, brand name, “imported” cachet, service, credit terms, delivery terms, advertising, or marketing assistance?

12. Where can I buy this product?

13. Will I need to have it manufactured?

14. If so, what is the turnaround time for manufacturing, and will this influence sales?

15. What will be my cost for the product?

16. What variables will affect pricing (special packaging or marking requirements, special shipping requirements as for perishables, other variables)?

17. What are the potential problems that will contribute to my price, such as end-user unfamiliarity with the product or service?

18. What are the potential benefits that can contribute to my price, such as high demand for the product or service?

19. What is the potential for licensing?

While this worksheet is obviously not all inclusive for your product research, it is a great starting point that should elicit a whole list of more questions as you work through it. Having a clear understanding of how your potential product and target market will integrate is invaluable knowledge in making a decision.

Exporter’s Job and
Responsibilities

Buyer Takes
Title At EXW – Ex Works Pack and label merchandise;
have it ready for loading Exporter’s facility FCA – Free Carrier Pack and label merchandise;
have it ready for loading;
load truck Exporter’s facility FAS – Free Alongside
Ship Ship to port or airport;
pay truck freight Ship or plane,
departure city FOB – Free On Board Ship to port or airport;
have loaded; pay freight
forwarder Ship or plane,
departure city CFR – Cost and Freight Ship to destination
port or airport Destination port or
airport CIF – Cost, Insurance,
Freight Ship, insured, to destination
port or airport Destination and
port or airport CIP – Cost, Insurance,
Paid To Ship, insured, to destination
port or airport; then have
delivered by ground transport Importer’s facility DDU – Delivered
Duty Unpaid Ship, insured, to destination
port or airport; then have
delivered by ground transport;
pay customs duties Importer’s facility DAF – Delivered at
Frontier Ship to border; pay truck
freight Specified border
point

Table Tutorial

For most managers the prospect of mastering the international trade arena while risking their companies well being on their learning curve is too much of a risk to take. On the flipside, recruiting an experienced IMEX manager (international purchasing manager, international market research manager, etc,.) to develop an export division for your company could take too long, cost too much, and what if in the end you don’t hire the right person?

The alternative to these two options? Compile a list of prospective EMCs whose specialties fit with the solutions you are seeking and consult with them to compare what they bring to the table individually.

9 solutions that an EMC should provide in order to ensure that they are capable of making the export process smooth for you are:

1. Finding, evaluating, and appointing dealers, distributors, and commission reps in foreign markets.

2. Providing all promotional support – advertising, marketing, and trade show exhibitions.

3. Document and correspondence translation.

4. Preparation of all agreements with foreign distributors.

5. Preparation of all acceptances and approvals.

6. Arranging financing.

7. Overseeing all order-processing correspondence.

8. Managing all shipping and documentation.

9. Providing all after-market assistance.

Finding the EMC with the best fit for your company culture, values, and goals is an important decision. It could result in either you being dismayed with the world of exporting or  in creating phenomenal growth and success for your company. The right EMC will be an invaluable asset to your organizations growth; so make sure you take the time to understand how each prospective firm will handle identifying and developing foreign markets for you.