Market Entry Strategy in aLogistics Management Environment

RLO 565Professor: Emiliano Introcaso

Adrienne Lau – 018-688-093Brooke Glasford - 061-678-116

Kelly-Ann Warner – 014-827-125 Kristen Hammill – 013-712-120

Barriers to Entry

Creditability of Partners

When a small business owner operates their company most, if not all, establish

partnerships with local vendors when they carry on international business in order to

create close relationships and cut on costs of duties and tariffs. By doing so it can help

eliminate uncertainties because the local vendors understand the marketplace, laws/

regulations and customer demands.

Before signing an agreement document, the main company should do a credit and

background check in order to find out if the partnership will be a good move and if the

new partner has had any past problems with vendors, cli reviews, and corruption lists.

Written and Unwritten Laws

When partnering with an international market one should take into consideration that

each country has a different set of laws and rules that they adhere to when doing

business. With that being said, the laws and regulations that the United States adheres

to is the same as Canada as it’s civil laws. In which would ease the process and

possible law uncertainties with having the same law type as the company’s future

international market. Another thing to take into consideration is the foreign markets

unwritten laws. When going about the unwritten laws they sometimes carry more

weight as the government law in some people’s eyes as they can be the difference

between being accepted and offending someone. The unwritten laws can vary from

racial slurs, conversation topics to how one will approach or greet someone.

Currency and Tax Implications

When it comes to financial barrier currency and tax implications can greatly affect a

company when entering a foreign marketplace. The currency and tax issues are mainly

around and pertain to tariffs, duties, exchange rates on the dollar, employment taxes

and banking rules. By taking precautions when dealing with currency and tax

ramifications to overcome potential risks, the business owners can avoid legal and

money trouble before it starts.

Legal protection

If a country has bad legal protection it can become a barrier. When a company has bad

legal protection, some of its property such as, copyrights, patents, trademarks and fair

and effective settlement may become compromised and might suffer losses in the

market. A successful way to prevent the business from suffering losses one should try

to differentiate their product, and or limit their clout in countries that have little legal

safeguards, especially when they have valuable property that is key for their success for

business.

Potential IssuesHigher Health Insurance Costs

A new issue that small to middle size retailers face is the increased health insurance

costs. A survey analysis done by Retailers Association of Massachusetts (RAM) found

that the cost increased by 11% in the past year. The reason for increase was due to

federal rules that pertain to the Affordable Care Act (ACA) that zone in on the state

health insurance which affects the small businesses and raise the cost of healthcare as

a whole. There is a 12.3% increase annually which can take a big piece out of a small

business owner.

With that being said the costs adhere to the ACA, the RAM is seeking the administration

to give the small business owners a waiver from the ACA. Another thing that the RAM

is trying to change is they asking the Obama administration and the Massachusetts

congressional delegation to see that the ACA is refined so that small businesses are not

put into the same category in which they have to adhere to provide certain levels of

coverage.

POS Sales Keeping

With recent book keeping work, The Massachusetts Department of Revenue has

constructed a plan on deciding what sales records have to be kept by all vendors,

retailers, and contractors when using point-of-sale (POS) systems to run their business.

The reasoning for the book keeping is to make sure that the state can establish what

goods were sold and if the retailer paying the right amount of tax. These rules have

increased the rising list of state laws having to do with POS data collection process.

When it comes to Massachusetts, the retailers might be affected by the new regulations

and should take careful consideration when putting the new POS activities into action.

As for the documents that have to be kept by the retailers and business owner they are

as follows to make sure that the state can arrange bills, invoices orders and other

papers that pertain to the business owner’s tax returns.

Documents required:

Item(s) that were sold

Price of goods

Tax collected

Invoice order number

Date the sale was made

Payment type method

POS terminal number

POS transaction number

The data of the documents have to be held for minimum 3 years, in Massachusetts to

be able to do added estimates on tax returns. An additional requirement is that the

business owner has to hold internal controls to prove that the records are authentic and

complete fully.

The reasoning for the reviewing of the POS sales keeping is to make sure that all sales

documents are accurate and follow that state regulations necessary to run a business in

the state of Massachusetts that won’t break civil or criminal laws.

Strategies to Overcome BarriersConquer the Market

Learn to conquer economies of scale. Gain knowledge of what other retailers are doing

to become successful and what tools they are using. With that being said, some

companies might be bigger or smaller than each other; but do what works best for your

company. Decrease the cost in the start and be reasonable when it comes to production

and sales.

Know the Shopper

In order to make a business successful, you need a target consumer and for that you

need to understand them and their wants. Especially if it’s in a different market that can

come with new wants to suit the consumer’s lifestyle in that region. To have the upper

hand you need to know your target market better than your competition. This includes

what kind of things they need and what makes ones buy.

Web out your Business

In order to successfully enter a market one should increase brand awareness on many

levels. This includes having an e-commerce site to further sales and gain profits. By

having a website one can create more connection in order to make and create

partnerships.

Split the Risks

When going through a partnership there are many advantages, one of them can be

visible in the research and development area. The costs of those areas are increasing

each year and also the rate of innovation and how fast goods become outdated or old

and the risks of making new products are large. When partnering one can spilt the

research and development or manufacturing costs to make the most of their money. An

added value is also being able to share knowledge that can speed up the process in the

business. Partnering can not only help cut costs in the research and development, but

also in transit and distribution systems. Overall, splitting the risk through partnering can

be good advantage to gain returns to each of the partners.

Agents, Distributors and Trading Houses

A distributor purchases goods to sell on their own account and are liable for repairs and

warranty issues, leaving no risk to the supplier. The trade name is kept and the supplier

remains in charge of all decisions. An agent works with other third parties and is given

authority to make decisions for the suppliers. Using both agents and distributors can be

very beneficial to entering international markets, especially for small companies like

Franco Mirabelli, because they have the knowledge and expertise in international

distribution that many market entry businesses don’t. For Mirabelli, a transport service

agent could help make his entry into Massachusetts a lot easier by providing freight

services from Toronto to Boston in a timely and efficient manner while also providing

customs brokerage.

Finding the right agents and distributors can be done through the Consulate General of

Canada in Boston, where the resources for exporters is listed. Through this list we

found Export Development Canada (EDC), a database for export knowledge and

solutions, where we found CIFFA (freight forwarder) and Mode Transportation (customs

broker).

Trading houses would serve well for Franco Mirabelli in indirect exporting because they

provide all the services beneficial to businesses entering foreign markets. Some of

these benefits include: low cost for market entry, market selection and market research,

vendor development, protection against export risks, and export documentations

handled, etc. As long as there is a relationship built with trust and commitment between

the manufacturer and trading house, there is almost nothing to lose with using a trading

house; therefore it would definitely be something we would utilize.

Modes of Transportation and

Methods of Inventory Control strategy

Shipping Modes

Different shipping modes and available transportation networks between Toronto and

Massachusetts include:

1. Roadway—by truck the average travel time is 10 hours

- Options: McKinna, Canada Cartage, 3PL Links

2. Railway- 13 hours

- Options: CN, 3PL Links

3. Air- 1 hour 50 mins

- Options: Using Air Canada, UPS, DHL, and Purolator

Transportation Networks

Increasing distribution methods and points can conversely decrease distribution costs.

In the case of Franco Mirabelli, considering a third party logistics firm to diversify both

shipping and storage methods can really expand the reach his company has.

He currently only uses trucks—that we know of—to move goods within Canada. The

most efficient way to get his product to Massachusetts and around the state would be

via trucking as well.

Using a 3rd party logistics company would allow Mirabelli to outsource the warehousing,

shipping, and even order processing for his online sales and international export to

Massachusetts. The most cost efficient way to move the goods to Massachusetts would

be by road.

Inventory Control Methods and Technologies

We will be looking at Franco’s inventory as finished goods—product that is ready for

sale and consumption. The company is small and therefore won’t be able to afford the

large investment of a high tech inventory storage system. For this reason, the

implementation of a zoning system that is based on the use of memory is suggested.

The zoning system will remain relatively simple with storage broken down into the

categories of clothing carried by the designer, for example it will be divided by dresses,

pants, tops, jackets, skirts etc. and within those categories the break down of styles can

be arranged. This will work well for such a small company since the person doing

inventory would be around the product from the design changes and would be capable

of recalling from memory.

Overall Logistics Strategy

In regards to an overall strategy, we will be utilizing the services of a third party logistics

(3PL) company for the management and distribution of both the online stock and

shipments to boutiques in Massachusetts.

We have deduced that given the overhead needed to invest in more space for storage

at Mirabelli’s current workroom, 3PL would be the most economically viable. There are

several 3PL companies in Canada that focus on apparel—even some focused on higher

end product.

Steps to implement logistics strategy:

1. Due diligence- what would be the best companies to work with?

2. Determining how it will be budgeted. Find out what the company can afford, and

what the 3PL companies charge.

3. Confirm locations within Massachusetts that the company needs to ship to.

Importing and Exporting Productsto and from the Canadian Market

Importing Fabric from Europe to Canada (Hungary)

In this section we will be highlighting two styles, S5WOA101 (blazer) and S5WOA201

(trouser). Both of the styles will be made from the same fabric which the fibre content

consists 55% viscose and 45% polyamide. We will need to import the fabric from

Hungary. The HS commodity code, MFN rate, sales tax, and additional duties and taxes

are as follows; 5208.59.9099, MFN rate is 8% with a sales tax of 27%.The average

global duty rate to import fabric is 10.1%, therefore the tariff applied is below the

average. Since the fabric being imported is considered to be a woven fabric made of

synthetic filament yarn with a high tenacity of polyamides and polyesters, we will need

to apply the HS code; 5407.10. to import such fabric into Canada for production.

Compliance; In order to import goods into Canada there are a number of required

steps to be considered before your goods can enter the country.

Goods entering the country must following the regulations of the “Marking of imported

regulations.”

General manner of marking:

Goods that do not comply with NAFTA shall indicate the marking of the ultimate

purchaser, or where there is no ultimate purchaser, the ultimate recipient and

recognize the country of origin of the non-NAFTA goods

Non-NAFTA goods shall be marked in English, French , or Spanish

The marking of goods should be legible and permanent and able to be seen

during any time of the process of handling,.

An abbreviation of a country name may be used in a country of origin only if the

abbreviation is clearly indicates to the ultimate purchaser, recipient the country of

origin of the goods.

Time of marking:

Subject to section 14, goods must be marked prior to their importation

Required trade documentation importing goods into Canada:

1) The cargo control document – this document acts as the initial record of the

shipments arrival into Canada. The CCD must have a bar-coded cargo

control number (CCN). The first four digits of the CCN must be the carries

unique carrier code

2) The Invoice – For this you can choose from three options provided. First one

is the Canadian customs invoice which either the company or vendor can

complete, or a commercial invoice, or a commercial invoice which indicates

the buyer, seller, country of origin, price pad, detailed description of goods,

including quantity

3) Canadian Customs Coding Form otherwise known as a B3 – this will help

identify the importer name and export account, detailed description of the

goods, shipment date, the tariff treatment or trade agreement, the trade

agreement , country of origin, tariff classification, the value for duty, the

appropriate duties and taxes

4) You will also need to provide an import permit, in order for the CBSA to

conduct on behalf of federal departments, and detain goods if necessary

5) Tariff treatments and other trade agreements, in this case the tariff treatment

on the imported fabrics would be as follows; 5208.59.9099 and 5407.10 with

a MFN rate of 8% and sales tax of 27%

6) Payment options; you can either pay by cash or any major credit card/debit

card, or even have a broker pay on your behalf. By paying cash the goods will

be released after it has been determined that all of the exporters accounting

documents are accurate and complete. From there you will receive a stamped

detailed coding statement that shows that the duty was paid.

7) There will be late penalties if the importers accounting package if the CBSA is

unable to validate within a five day period. Also if you fail to pay duties within

a certain time period the importer will be charged interest at a specified rate

on the outstanding balance owing

Exporting goods from Canada to U.S.

Product compliance:

The goods must be marked or labelled with the country of origin, fiber content,

care instructions

Goods must comply with consumer safety standards

Goods must not contain and disqualifying or controlled materials such as fur ;

unless importer has a valid license authorizing importation

Goods must not contradict US patent or trademark law

Required trade documentation:

1. Commercial pro-forma invoice – this provides all the information required by the

US customs to clear the items ( for Canadian exporters you must identify your

Canada revenue agency business number or GST number)

2. Ultimate Consignee –this document represents the tax identification number.

3. Terms of sale – this will identify who is for the transportation and customs

clearance into the US ( incoterms)

4. Currency – indicates the currency of settlement

5. Parties to the transaction – you must advise IUS customs if you are related to

your American consumer

6. Description of goods- must provide complete and accurate description of every

article within the shipment

7. Country of growth or manufacturer – must identify the country of origin of each

article

8. HS number – all goods must be classified for customs purposes

9. Quantity – accuracy is very crucial – customs makes no allowance for minor

discrepancies

10.Total price – must mark the unit price and total price that you are charging the

customer

11.Manufacturers identification code ( MID) – this is a relatively new requirement –

the importer must identify the manufacturer whose processes confer country of

origin on the article

12.The NAFTA certificate of origin

Other Documents:

Bill of lading

TPL certificate of eligibility

Textile declaration – this document states the yarn, fabric, and garment

originate, however this document is no longer required

Importing Quotas in Canada

The annual quota for exporters of non-originating goods from Canada is under

CHFTA based on a full calendar year are as follows;

1. Apparel Goods – 4,000,000 SME (small medium enterprises)

2. Fabric and made up goods -1,000,000 (SME)

Importing quota’s for the USA

1. Apparel goods – 10,000,000

2. Fabric and made up goods – 5,000,0000

Managing Global Logistics& International Business Operations

Establish performance-monitoring and management criteria for export

market relationships, including suppliers

When exporting there are a lot of things to think about in regards to performance. On

one hand we have to ensure that the suppliers are reliable, especially our source from

Hungary, as export deadlines are harder to meet than when you are selling right where

you produce.

With export our key is to broker a good relationship and work with a customs broker that

is recognized within the retail industry in Boston to try to ensure high performance on

clearing customs at US entry points. So a good rule to work with would be to only work

with brokers that have experience and have good references.

With the 3PL, we would have to conduct the same type of due diligence as with the

customs brokers to ensure that the company is reliable, responsible, and has good

references.

Communications Plan

In regards to a distribution communications plan, with the launch of our social

commerce site (using an application called spot.im that merges social media and e-

commerce), all customers that buy from us online first have to go through the process of

making a shopping profile. This profile does two big things for us:

1. Allows us to capture the information of this person, and figure out just how within

our target demographic she lies.

2. Know where the majority of our customers live, so that we can increase

communications in regions that are weaker.

When listing their information the customer has the option of choosing their work address or

home address for shipping, or if they’re in Toronto, having it shipped to the location closest to

them.

Customers also have the option of a risk free trial where their first order is free; if they’re not

satisfied with the product they can send it back with the pre-paid envelope we’ve provided. If

they like the item and want to keep it, they will receive a bill for it via e-mail.

Identify strategies for keeping international partners motivated

- Keep in mind time zones and difference in workweeks.

- Think about localization when translating both action and language.- Look at similarities across markets.

In the case of Boston these three points are not wholly accurate as Boston is extremely similar to Toronto. A big part of keeping partners motivated would be to engage them, and nurture the business relationships. Actively making the relationship better—if their service is good suggesting their services to someone—can mean a long-term relationship, better service, and even increased discounts as time goes on.

Incentives on services as work increases, or if they perform well can be a good way of keeping partners motivated—for the customs brokers and 3PL additional incentives for achieving or surpassing their duties may be helpful.

All work and agreements ought to be under contract and completely legal. All work done by the customs brokers and other parties employed ought to be documented in the case that any actions are questioned. This is especially important for exportation, as the company that is exporting is not completely aware of all legalities within the country of export; they are also not always aware of the actions of parties they have employed and whether they may be cutting corners.

Framework for conflict resolution

In the case of conflict these steps will be taken:

- Identify parties involved

- Clarify what happened

- Let documents pertaining to issue be reviewed.

- Supervisors/managers responsible will be contacted.

- Resolution met

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