Business Growth in Export
Trading Company
The business development of companies relies on several factors. Their development on international level is such a factor. There are certain markets that provide important opportunities in comparison with domestic markets. Therefore, companies must focus on such opportunities and on the benefits they provide.
Naturally Green is a company that produces organic foods. The company is established in the U.S. In order to increase its incomes, the company wants to address the markets in other countries also. This is intended to help Naturally Green to increase awareness of its products.
The exports strategy of the company relies on identifying markets that have an important potential that can be addressed. This means that Naturally Green is oriented towards countries where a certain number of customers are likely to be interested to purchase organic foods. Such foods usually have higher prices in comparison with traditional products. Therefore, there are certain customer segments represented by their income that are likely to purchase such products. Naturally Green is interested in countries with individuals that have higher incomes.
Product Category
The category of products that Naturally Green intends to export is represented by organic foods. Such foods are of higher quality in comparison with other types of foods. Organic foods are made from natural products that are not affected by chemicals. These products are preferred by people that are interested in developing healthy lifestyles.
There are several reasons that determine naturally Green to export organic products in other countries (OTA, 2012). The U.S. has numerous organic producers that can become the company’s suppliers in case its production must increase. This means that the company is able to expand its production in order to address important demand from other countries.
In addition to this, the interest in organic foods has significantly increased. The U.S. are the most important producer and market in the case of organic foods. Other producers are represented by Brazil and certain countries in Europe. Therefore, Naturally Green can supply the organic foods demand in other countries.
Target Country Analysis
In order to develop its business on international level, Naturally Green has decided to export some of its products to Germany. This is because Germany has reported an increased interest in organic products. Therefore, the market in this country is able to provide significant demand to the company.
There are several reasons that determined the company to select Germany as an exports country. Germany has the largest economy in Europe. Its large population can provide a high number of customers. In addition to this, the economic development of the country leads to individuals with higher incomes that can purchase organic foods that are more expensive in comparison with other types of foods.
The country’s GDP reaches $3.114 trillion. Most of the GDP composition can be observed in the services sector. The industry is also developed. However, the country’s agricultural sector is not developed. This is because Germany is interested in investing in technology in comparison with agriculture.
Therefore, the country does not produce the organic products that are required by customers in this country (CIA, 2012). The most exported products by Germany are represented by motor vehicles, machinery, chemicals, computer and electronic products, electrical equipment, pharmaceuticals, metals, transport equipment, foodstuffs, textiles, rubber and plastic products. The most important exports partners of Germany are represented by France, the U.S., the Netherlands, the UK, Italy, China, Austria, Belgium, and Switzerland.
The most imported products by Germany are represented by machinery, data processing equipment, vehicles, chemicals, oil and gas, metals, electric equipment, pharmaceuticals, foodstuffs, agricultural products, and others. The most important imports partners are represented by China, the Netherlands, France, the U.S., Italy, the UK, Belgium, Austria, Switzerland, and others. It seems that Germany has a strong trade relationship with the U.S.
This trade relationship between Germany and the U.S. makes it easier for Naturally Green to export its products in this country. Therefore, it is important that the company focuses on addressing the German market. This is intended to significantly increase the company’s incomes.
Distribution Strategy
The success of Naturally Green in Germany also relies on its distribution strategy. In order to address this market, the company can distribute its products with the help of other distributors, retailers, or at the customers. In order to reach its objectives, Naturally Green must distribute its products through retailers.
There are several benefits that retail distribution can provide to Naturally Green. The retailer can help the company to improve its supply chain management. Such retailers also know the market in case, and can provide important information on the demand in this country. This allows the company to better evaluate its production.
In addition to this, retailers can increase visibility on the company’s products. benefit from numerous customers. These customers can also be addressed by Naturally Green. If the company selects another distribution channel, it would be difficult for Naturally Green to enter the market, and to address a large number of customers.
Large supermarket chains also provide the benefit of developing the trust of their customers. The company can benefit from this trust. In other words, customers that shop in such supermarkets trust them, and by associating with these supermarkets, Naturally Green can determine the trust of these customers.
It is important that Naturally Green selects supermarket chains with large coverage. This means that the company wants to address the urban and the rural markets in Germany. This is because there is a large number of individuals in Germany that are interested in purchasing organic foods. In addition to this, the company can also identify certain organic products stores and approach them in the attempt of reaching other markets also.
The company must develop a complex distribution strategy. The complexity of this strategy is intended to help the company reach a large number of customers. In addition to this, it is important that the company increases awareness on its products in Germany.
Germany Import Regulations
Germany is a member of the European Union. Some of the benefits of being a member of the European Union also include certain trade benefits. Trade tariffs are lower between countries in the E.U. In addition to this, the reduced barriers between countries in this union make it easier to import and export certain products.
This situation can make it difficult for Naturally Green to export products from the U.S. To Germany. The company must pay certain taxes and tariffs that do not apply to countries within the union. Therefore, Naturally Green must increase the price of its products. This is not helpful in reaching a large number of customers.
The restrictions in Germany’s exports are in accordance with E.U. regulations. The required procedures are also in accordance with these regulations. However, the activity and situation of Naturally Green are not influenced by these regulations. The company’s exports strategy is not significantly influenced.
U.S. Exports Regulations
The U.S. has numerous rules and regulations on trade. The country’s intense trade activity has determined the need of these regulations in order to improve trade relationships. The numerous trade agreements where the U.S. is a member help the country develop the trust of their trade partners.
Safety Regulations and Technical Standards
The foods industry is usually affected by strict safety rules. These rules are intended to protect customers from numerous inconveniencies that can be caused by foods. This also applies to organic products. These products are not chemically treated. However, their quality expires sooner in comparison with other products. The company must focus on certain quality standards that are established by food organizations.
The E.U. also has strict rules and regulations on the quality of food. These regulations refer to food processing, transportation, storage, and others. Therefore, it is important that Naturally Green understands these regulations in Germany and in the E.U. In order to be able to satisfy them with high quality organic products.
Cost Assumptions
In order to successfully address the German market it is important that the company establishes a price level based on the costs of the products.
Costs:
Organic bread – $15
Organic fruits average cost – $17
Organic vegetables average cost: $16
Organic desserts – $32
Organic cheese – $45
Organic wine – $46
The export price established by the company includes 20% profits for Naturally Green. The company must negotiate the export price with each distributor. This is because certain distributors provide greater benefits, and they request higher discounts. If they can purchase larger product supplies, the company can significantly reduce the exports price.
The company is interested in selling large supplies, and does not want to limit to selling at a higher price. This strategy is intended to increase distributors’ interest in Naturally Green’s products (Business Dictionary, 2012). Therefore, the export price must be established in accordance with the supplies purchased by distributors.
Landed Cost
In order to successfully address the German market it is important that Naturally Green also establishes the landed cost that can favor the company. The landed cost includes the purchase price, freight, insurance, and others. In certain situations the landed cost can also include customs duties, and other taxes that apply to the shipment in case.
Shipping and insurance — 7.5% of the product’s cost.
Packaging — 5% of the product’s cost.
Profits — 20% of the product’s cost.
Organic bread landed cost – $15+7.5%+5%+20% = $19.2
Organic fruits landed cost – $17 +7.5%+5%+20% = $21.76
Organic vegetables landed cost – $16 +7.5%+5%+20% = $20.48
Organic desserts landed cost – $32 +7.5%+5%+20% = $40.96
Organic cheese landed cost – $45 +7.5%+5%+20% = $57.6
Organic wine landed cost – $46 +7.5%+5%+20% = $58.88
The landed cost is established in accordance with the profits requirements of the company. The company must also identify the profits that distributors in Germany are interested in. This is intended to help Naturally Green develop a pricing strategy that can satisfy the company, its distributors, and its customers. It is important to also develop the pricing strategy in accordance with productivity.
Reference list:
1. Industry Statistics and Projected Growth (2012). . Retrieved November 21, 2012 from http://www.ota.com/organic/mt/business.html.
2. Germany (2012). CIA, the World Factbook. Retrieved November 22, 2012 from https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html.
3. Landed Cost (2012). Business Dictionary. Retrieved November 22, 2012 from http://www.businessdictionary..html.
