Development factors of international trade organizations to consider
International Business Organization
Export/International businesses can take on many challenges as they develop. The goal should be to build the strategic building blocks of the business, using its assets to support international opportunities. The schematic is formatted from a more basic approach, increasing through stages of complexity. There will be dots underneath that will overlap and fit together. Some corporations may have already addressed many of these points. The examples below are targeted at the food/protein industries. However, the concepts are transferable to many others. Below are organizational ideas for your consideration:
I. Establishment of International Business Units- Create P&L.
A. Budget to cover 3-5 key trade shows and conferences that support geographic strategy.
– Restaurant Chain Shows (Subway, McDonalds, etc.) – Important shows that demonstrate a company’s willingness to expand globally with chains.
– Dealer shows.
– Commercial organization congresses. Provide key information on new markets and emerging trends, i.e. USMEF, USDEC, etc.
B. Forecasts- By product category and market to determine the profitability of the business.
C. Expenses- Identify the expenses against the business. Be fiscally prudent.
II. Geography- Are the most immediate markets being efficiently addressed by exports? Start with the immediate opportunities, that is, target the closest or most suitable international geographic markets for import.
To Canada-
B. Mexico-
C.Caribbean-
D. National Exporters-
third Portfolio of export products – Export potential of the product? What are the popular US items selling? Using meat products as an example:
A. Pork: more than likely, the greatest export potential.
B. Poultry – Certain drawbacks (avian viruses), but often has the price points needed to enter the market.
C. Beef: Still questionable in many foreign markets (BSE). Slowly improving.
D. Other: Beef and lamb offer the specialty items often sought after in many of the smaller boutique markets, namely the Caribbean. Should it be a high margin opportunity?
IV. Utilize and maximize the current customer base. Grow internationally with national clients.
A. Chains: What chains are currently being served (ie McDonalds)? What are the international springboard applications of those chains?
B. Distributors- GFS,US :: GFS, Canada; Sysco, USA :: Sysco, Canada…Sysco, Export
C. Schools-Offer products supplied to the US to Puerto Rico. Puerto Rico, Virgin Islands and Guam have the same requirements.
D. Retail.
V. Expand Geography: Be First in Emerging Markets. Chains, trade organizations and trade shows will help break into new venues.
A. Australia open to US pork imports US plants must be approved in Australia.
B. Brazil and Argentina: As economies improve, so should pork imports.
C. Middle East – Israel.
D. Asia- Southeast Asia, Latin America.
SAW. Product adaptation-
A. A commitment to international product customization. Overcome non-tariff barriers to imports by modifying products.
B. As item “A” is evaluated, determine volumes and prices with the customer by completing the value proposition.
C. Introduction of New Proteins: The growing US Hispanic community seeks to satisfy traditional diets, ie, goat. American ranchers are beginning to break away from their traditional ranching habits to fill a consumer need. Shift creates new export opportunities.
D. Profit Margin/Revenue Growth: In theory, there is no competition for custom production and margins should reflect business value.
VIII. Resource Utilization-
A. R&D efforts to find a qualified opportunity. Example, a 51% breaded product can be exported to Canada vs. a product with less than 50% breading.
B. Account managers: joint calls to companies to continue supporting the international expansion of the chains.
Dealer Managers: Joint calls to evaluate immediate opportunities that extend beyond borders.
C. School Managers: Joint calls in US Territories to expand and maximize product footprint.
VIII. International association agreements. Partnerships/joint ventures with similar companies abroad. Some ideal targets are Japan, Australia, Mexico, China. Key terms that define… product novelty, business profitability, uniqueness, price, product demand, market distribution, language comprehension, product comprehension. If there is a commitment from a foreign manufacturer that understands the product/species, but lacks certain manufacturing capabilities, a partnership should be suggested.
A. Liability Considerations:
o Raw material coverage
o Currency hedging
o Brokerage Agreement
or time lines
or production capacity
o Legal contract/Export insurance
B. Partner Responsibilities:
o Volume projections
o Package Sharing Agreement
o QA plant approval
o Presentations for end users
o Stand-by letter of credit/purchase contract
or exclusivity
o Currency hedging
o Other product opportunities
Please note that currency hedging can fall on both and is open to negotiation. It depends on the strength of the relationship. Many times it must be at the partner’s expense. An exception may be made to consume the offer or as a long-term service that ensures annual contract renewal.
IX. Licensing – Often used as a barometer to assess potential opportunities and minimize immediate risks.
A. Brand licences: What is the true value of a certain brand in an international market? It would be determined by the collaborating company in that country.
Example. What was the value of the Parkay brand in Canada? It became the second best Canadian margarine brand. Produced by Parmalat in Canada. The brand was licensed by ConAgra US.
B. Technology- Minimizes capital investment abroad, while transferring US production technology.
X. Mergers and Acquisitions- Until now, a corporation may be offering and evaluating its export potential. Simultaneously, you should consider the commercial value of certain key markets. Ultimately, you may consider investing in those markets.
A. The joint venture may be ripe for purchase.
B. International margin potential justifies an acquisition for corporate diversification purposes.
C. Many similarities, ie language, business culture, profitability, increased demand for products from the growing middle class, business supportive political environment.
D. Overcome strict barriers to food imports, ie EEC. Example: Companies have improved their international exposure by opening manufacturing plants within the EEC. One example has been Smithfield’s recent purchase of Sara Lee’s European brands.
XI. Summary: These compilations of insights are based on 20 years of international business experience with four major corporations and an MBA in International Business. There is no one size fits all. The scheme can be used to generate new profitable opportunities that otherwise would not have been fully realized or exploited.