Description

Case Study #3: International Business Plan

Background

You have just begun a new job as President of Unlimited Combines (UC), a farm equipment manufacturer whose flagship product utilizes new technology to increase the productivity of grain harvesting. UC’s equipment allows farmers and commercial grain growing operations to harvest wheat, barley, and similar cereal crops faster and with less waste than any other equipment manufacturer.

You are surprised to find that while UC’s products sell very well in the domestic market, they appear to be a well-kept secret around the world. Recognizing that the world market offers an excellent growth opportunity, you hire Patricia Paget, a new business school graduate as your Export Manager, and assign her the responsibility to create and implement an International Business Plan and begin developing new global business opportunities for Unlimited Combines.

The International Business Plan

Patricia’s first task is to generate an International Business Plan. She develops a table of contents making sure to mention issues of the new era in global business, the global supply chain, technology, culture and ethics. Also addressed are international market research, entry and maintenance, trade finance, global logistics and distribution, and legal issues and compliance.

When her plan was complete, Patricia emailed a form letter to more than 130 Canadian trade offices around the world in order to confirm which markets are the most suitable. Within two weeks she received responses from more than 60 of the offices, with contact information for a total of more than 400 potential business partners. However, she is puzzled as to why some of the companies appear to have no relationship with farm equipment. She receives no reply from the other 70+ offices.

In order to qualify the potential distribution channels, she sent a form letter out to the 400 potential business partners (in English) with a questionnaire for them to fill out. After three weeks, she had received replies from only 12 of them. Patricia is becoming frustrated that she has now spent over a month on trying to find potential distributors for her products, with few results.

One of the positive results Patricia has received is from a Japanese manufacturer of farm equipment. She arranged for a business trip to Japan to meet with them. Upon arrival, she encountered several problems. The company is located several hundred kilometers from the

© FITT 1 FITTskills: Global Business Environment Case Study #5: International Business Plan

nearest large city, and by sheer luck she found an English speaking person to help her with a train connection. When she arrived, she was given several attractive gifts, but had brought none with her—just brochures. She quickly found that nobody at the company spoke English, although the written communications had been in English, and she had only brought English language brochures. The company eventually brought someone in to help with translations. However, this only highlighted a major problem: the company thought the UC combine would work on rice, which was incorrect. In fact, rice turned out to be the main crop grown in Japan, but few cereal crops were grown because it was easily imported at low cost. Only a small percentage of Japan’s land is suitable for farming, so they focus on higher-value produce.

Because Patricia had arranged for no other meetings during her trip to Japan, she was determined to make this one a success. They discussed many topics as she tried to forge a relationship with the company, and it turned out that the Japanese company exported their equipment around the world and might consider a strategic alliance with UC, whereby they would leverage their distribution network to sell her products.

One troublesome issue was financing. She was surprised to find that the Japanese company preferred to arrange for long-term payment terms through trade financing, but she insisted that they work on a cash in advance basis. She knew from what she had heard that international trade was risky, and that payment in advance would eliminate the risk of non-payment.

Another issue was technical support. The Japanese suggested that they would like to have technical training as part of a legal contract they would sign, if they decided to work together. Patricia knew that they might reverse engineer her product, and did not want to be constrained by a contractual or legal obligation, so was not enthusiastic about either issue.

Marketing support also presented a problem. The Japanese wanted to translate her brochure into other languages at their own expense, and asked if she would email the document to them so they could do the translation. However, she said she could not for copyright reasons, but that they could use the brochure she was going to leave them if they didn’t tell anybody.

Another feature of “marketing support”, it turned out, was that it was occasionally necessary for them to pay bribes to government officials in some of their non-Japanese markets. They said matter-of-factly that this was just a cost of doing business in some other countries, and asked if UC would be able to contribute to paying these “commissions”.

Finally the Japanese wanted CIF pricing, but Patricia insisted on EXW terms. This would also help her to minimize risk and keep costs down, and let the Japanese pay the cost of freight. She had enough to do, after all, and did not want to get involved with the complexities of global logistics.

As Patricia left the meeting, pleasantries were exchanged. When she asked if they thought there was a chance to do business together, she received a smile from the General Manager, who said “we will try”.

When Patricia returned, you asked her how the trip went. She provided the details outlined above, and replied that although it went reasonably well, the Japanese were fairly demanding and difficult to do business with. During the next month, after repeated and increasingly demanding attempts to extract an agreement to purchase from the Japanese company, she finally received a simple reply saying “We are sorry, but we prefer to do business with Unlimited Combines at some time in the future”.

© FITT 2 FITTskills: Global Business Environment Case Study #5: International Business Plan