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AMB201 Importing Exporting essay

By bg2478 Jan 07, 2014 2264 Words
IMPORTING AND EXPORTING
AMB210
BRIDGET GRACE

2156 words

Executive Summary

This export planning report will outline The Pentland Furniture Company’s strategy for exporting its products to New Zealand and introducing it to the New Zealand market. The New Zealand market was chosen after initial research was carried out in several countries of interest.

As a result of identifying New Zealand and Queenstown as an area of ‘need’, it was decided that Queenstown should be the target market.

The Pentland Furniture Company’s strategy is to maintain market share and sales by pricing its product slightly below the average market price (The Pentland Furniture Comapany, 2009). This is aimed at maintaining and sustaining competitive advantage in both Australia and New Zealand. As such, the New Zealand consumers are much like those in Australia and will spend money when it is perceived to be sold at a lower than average or discounted price (Barker, 1987).

Before the commencement of exporting, an export readiness analysis was carried out. It has been identified that The Pentland Furniture Company is ready and prepared to commence exporting. A detailed exporting schedule has been designed which is aimed to cover all essential activities and work that needs to be carried out prior to the commencement of exporting activities.

Export Readiness Analysis
The Pentland Furniture Company is a small family supplier of quality furniture. The furniture offered by the company are of varying sizes and made from different material (The Pentland Furniture Comapany, 2009). Furniture designs can vary based on personal preference. The total number of employees is 3 and the company is run out of a warehouse in Victoria. The export readiness of the company has been carried out as a result of the analysis of three components of export readiness criteria including competitive advantages, resources and objectives. Consequently, it is possible to state that The Pentland Furniture Company is in a strong position to begin exporting their product to New Zealand. The Pentland Furniture Company has a strong reputation in its home base of Victoria and Australia-wide which provides a good foundation for the commencement of exporting to New Zealand.

As a result of the high regard for the quality and craftsmanship of the furniture, the company has enjoyed ongoing success since its establishment in 1992 (The Pentland Furniture Comapany, 2009). From a resources perspective, the company has the ability to carry out exporting activities considering the fact that there are adequate finances, a recognisable brand name and the capability to deploy resources to support marketing and the promotion of the furniture in New Zealand. To ensure the highest level of competitive advantage, quality checks are carried out on the furniture to identify any manufacturing flaws before they reach the consumers. Furthermore, and in association with the company’s high level of competitive advantage, the product is unique. The uniqueness of the product is coupled with the fact that the operator of The Pentland Furniture Company has been in the business for a long time and strives to continually update their products to match the latest trends and also maintains the highest market share in the country – not one other business has a larger range of hand made quality furniture.

The Pentland Furniture Company produces furniture that cater for mega stores such as Bunnings as well as small businesses and members of the public all across Australia. As such, there are various types of furniture ranging in price and design. Entry-level furniture are marketed for mainly members of the public whereas deluxe furniture such as a custom made bed frame are more suited for businesses or larger buyers such as Bunnings or various hotels and resorts.

In an effort to keep on top of demand and predications of future demand, especially in the event of exporting overseas, the company has an understanding of current and future demand for their product as well as its competitors. As a result of carrying out secondary research, it has been found that tourism in New Zealand has increased since 2007, which demonstrates a level of understanding associated with potential risks with the economy (Barker, 1987). Secondly, the seemingly low intensity of competition will work in the favour of The Pentland Furniture Company in establishing their brand name and product in New Zealand market targeting relaxation resorts and eventually homes.

Mitigation of risks when exporting will be communicated with all staff as a way of ensuring the minimal staff is able to cope with increased levels of orders. Furthermore, a logistics strategy has been recommended as a way of outsourcing all administration and management of transporting the furniture from the Victorian warehouse to New Zealand.

Country Analysis
The chosen target market for The Pentland Furniture Company’s exporting is the holiday / tourism sector of New Zealand’s Southern city of Queenstown. Queenstown enjoys hordes of tourists and honeymooners each and every year. As a result of analysing the tourism market of Queenstown, it is possible to identify the market as being one that is busy all year round. Through this, The Pentland Furniture Company is predicted to introduce and export their product successfully to their chosen market and supply to various resorts.

In an attempt to ensure a well-rounded analysis of potential benefits and risks was carried out, the following was identified as potential risks to the exporting activities of The Pentland Furniture Company. Firstly, there is an existing competitor and secondly, the competitor’s product is stocked at all Bunnings stores in New Zealand. In order to achieve success, The Pentland Furniture Company will adjust their pricing strategy to ensure their product is competitively priced and obtain competitive advantage through this strategy. Upon further analysis, The Pentland Furniture Company’s furniture are made of a more durable material as well as more competitively priced which places the product in a more favourable light than the existing product.

In relation to overall branding and brand image in New Zealand, it is predicted that, considering The Pentland Furniture Company’s strong brand image and reputation in Australia, New Zealand’s Queenstown tourism market will be able to easily recognise the products as a result of initial advertising, displaying the furniture in Australian holiday conditions (Schiff, 2000). Consequently, it is predicted that The Pentland Furniture Company’s will build a steady and long-term demand in New Zealand. The overall attractiveness of New Zealand is a result of analysing the GDP, consumerism and business growth and finance over the past 10 years. 2012 statistics report that international tourism expenditure increased by over 1.9 per cent which added approximately 15.4 per cent to the country’s total exports of goods and services (Organisation for Economic Co-operation and Development, 2013). Furthermore, tourism in 2012 generated a direct contribution to GDP of approximately $6.2 billion (Organisation for Economic Co-operation and Development, 2013). Consequently, the effect of such a strong, booming tourism economy would be one that would support The Pentland Furniture Company’s product. As a result of further research into the tourism industry in New Zealand’s South Island and particularly in Queenstown, it was found that it attracts millions of foreign visitors per year. As such, The Pentland Furniture Company’s products would be targeted towards resorts, which would then lend the idea of ‘keeping the holiday alive’ by wanting this custom made furniture in ones own house.

Export Planning Guidelines & Strategies
The exporting implementation strategy will be carried out using a direct exporting method. Through this, The Pentland Furniture Company will be directly involved in marketing the product in the New Zealand market as a result of performing the task of exporting. As a result, the company will ensure all necessary research is carried out including research into physical distribution, export documentation and pricing. The direct exporting method does away with an intermediary party and this, The Pentland Furniture Company will control all activities and collect all drawbacks associated with the practice of exporting.

As a result of further analysis into the potential risks of exporting into New Zealand, regulatory / legal issues and potential challenges has been analysed and it is possible to state that there are no foreseeable risks due to initial research that has been carried out. Furthermore, The Pentland Furniture Company’s product is fully endorsed and complies with the customs requirements of New Zealand which is also scheduled to be researched.

In order to implement a direct exporting strategy, The Pentland Furniture Company must have representation in the foreign market of New Zealand. This can be achieved in a number of ways, however, in the case of The Pentland Furniture Company, it has been recommended that they send an international sales representative into the New Zealand market to establish contacts, especially at Bunnings and directly negotiate with sales contacts. As a result of choosing this approach, there are more corporate resources required and therefore, entail greater risks; however, the benefits are highly desirable. Another risk is that the employee may not be as committed to achieving a high level of success because of the pay structure which is commission and therefore, motivation levels may not always be at the expected level. Despite the perceived risks, there are many benefits of endorsing the above mentioned strategy. The benefits of employing this particular exporting strategy include increased sales, greater control, better market information and the development of expertise in international marketing. As a result of carrying out an analysis of the risks and benefits, it has been identified that the benefits out weight the risks.

From a logistics perspective, the physical distribution of the product from the warehouse in Victoria to Queenstown will be carried out via a multi-modal method. This method will include transporting the products via truck from the warehouse to the airport, airport to Queenstown and via truck from the Queenstown directly to the distributer. This method has been recommended due to the fact that it is cost effective and reliable. The company is able to employ the same freight company in New Zealand as the one used in Australia and have established relationships with the logistics company. In relation to returns or faulty goods, the strategy endorses a timely return of products to the warehouse in Victoria where an assessment will be made and a replacement will be produced. The process will aim to reduce time wasted from when the customer made the purchase and when they returned it to ensure maximum customer satisfaction is achieved and maintained. All staff will be briefed on the procedures and also educated about the potential risks associated with export logistics. As a result, strategies will be endorsed as a way of mitigation any potential risks, ensuring the highest level of customer satisfaction.

Certain strategies and objectives aimed at maintaining customer satisfaction will be employed as part of the competitive strategy of The Pentland Furniture Company. The strategy will aim to attract and please customers, strengthen the company’s image in the New Zealand market and have the ability to compete with competitors and maintain market share. The main way of achieving these objectives will be carried out by ensuring that there is a swift response to all prevailing market conditions and having the ability to shift resources when needed. As such, and as a way of competing with existing suppliers in New Zealand, The Pentland Furniture Company will endorse a ‘Cost Leadership’ strategy. This strategy will ensure that The Pentland Furniture Company remains and sustains its international reputation of being low on cost but high on quality. The below table outlines the export implementation schedule: Priority

Objective
Task
Schedule
1

Introduce and educate existing staff and manufacturers about the New Zealand market, its trends, benefits, risks and characteristics. The workshop will also ensure all staff has a clear understanding of the company’s strategy and commitment to achieving the objectives. Employ an external authoritarian to deliver approximately two three hour workshops / seminars with the staff January, 2015

2

Provide training for international training representative
Provide the international training representative with a block of 2 weeks for training and the desired markets / potential distributers January 2015
3

International training representative to travel to New Zealand to meet with potential distributers Meetings to be scheduled with targeted potential distributers including Bunnings and begin negotiation proceedings for agreement January - February 2015

4

Conduct market research
Carry out primary and secondary research in Australia and New Zealand. Collate research findings and create list of recommendations for the introduction of the product into the New Zealand market February - March 2015

5

Regulatory requirements and restrictions
Carry out an assessment of essential regulatory procedures needed to be completed prior to the commencement of exporting. Access and complete all necessary paperwork before submitting for processing March 2015

6
Increase production of furniture
Facilitate an increased level of production of furniture in Victoria in preparation for the commencement of exporting April 2015
7
Commencement of exporting
Process orders and send the first shipment of furniture over to Queenstown, New Zealand July 2015

In conclusion, schedule outlined above sets out a map of activities and procedures that must be carried out to ensure exporting success. The company is predicted to successfully carry out exporting operations by July of 2015. Should the company comply with recommendations made in this report, the exporting venture is predicted to be highly successful in the New Zealand tourism market with the prospects of branching into the peoples homes in New Zealand.

References

Tansu Barker, (1987) "CONSUMERISM IN NEW ZEALAND", International Marketing Review, Vol. 4 Iss: 3, pp.63 – 74

International Direct Investment Statistics 2012.

Organisation for Economic Co-operation and Development (2013). OECD

Schiff, Aaron F (01/12/2000). "Forecasting New Zealand's Real GDP". New Zealand economic papers(0077-9954), 34(2), p.159.

The Pentland Furniture Comapany. (2009). The Pentland Furniture Company. Retrieved 10 17, 2013, from The Pentland Furniture Company: http://www.pentlandfurniture.com.au/about.html

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