International Business Organization
Export/International business can take on many challenges as it unfolds. Goal should be to construct the company’s strategic building blocks, using it’s assets to support international opportunities. The outline is formatted from a more basic approach, increasing through stages of complexity. There will be points below that overlap and dovetail. Some corporations may have already touched on many of these points. The examples below are geared toward the food/protein industries. Nevertheless, the concepts are transferable to many others. Below are organizational ideas for consideration:
I. International Business Unit Establishment- Create P&L.
A. Budget to encompass 3-5 key trade shows and conferences that support the geographic strategy.
– Restaurant Chain Shows (Subway, McDonalds, etc.)- Important shows that demonstrate a company’s willingness to globally expand with the chains.
– Distributor Shows.
– Trade organization conferences. Provide key insights to new emerging markets and trends i.e., USMEF, USDEC, etc.
B. Forecasting- By product category and market to determine business profitability.
C. Expenses- Identify expenses against the business. Be fiscally prudent.
II. Geography- Are the most immediate markets being efficiently addressed by export? Begin with the immediate opportunities i.e., target nearest or import friendly international geographic markets.
D. Domestic Exporters-
III. Export Product Portfolio- Product’s export potential? What are the popular US items sold? Using meat products as an example:
A. Pork- More than likely highest export potential.
B. Poultry- Certain drawbacks (Avian viruses), but often has the necessary price points for market entry.
C. Beef- Still questionable into many overseas markets (BSE). Slowly improving.
D. Other- Veal and lamb offer the specialty items often sought in many of the smaller boutique markets i.e., Caribbean. Should be a high margin opportunity?
IV. Utilize and maximize current customer base. Grow internationally with domestic customers.
A. Chains- What chains are currently being serviced (i.e., McDonalds)? What are the int’l springboard applications of those chains?
B. Distributors- GFS,US :: GFS, Canada; Sysco, US :: Sysco, Canada…Sysco, Export
C. Schools- Offer products supplied to the US to Puerto Rico. Puerto Rico, Virgin Islands and Guam have same requirements.
V. Expand Geography- Be first in emerging markets. Chains, trade organizations and trade shows will assist in breaking into new venues.
A. Australia, open to US pork imports. US plants must be Australian approved.
B. Brazil and Argentina- as economies improve, so should pork imports.
C. Middle East- Israel.
D. Asia- SE Asia, Latin America.
VI. Product adaptation-
A. A commitment to international product customization. Overcome import non-tariff barriers through product modification.
B. As point “A” is evaluated, determine volumes and pricing with the customer completing the value proposition.
C. New protein introduction- Growing US Hispanic community looking to satisfy traditional diets i.e., goat. US ranchers begin to emerge from their traditional ranching habits to fill a consumer need. Shift creates new export opportunities.
D. Profit Margin/Revenue Growth- Theoretically, there is no competition for custom production and margins should reflect business value.
VII. Resource utilization-
A. R&D efforts to meet 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 on corporate to further support the chains international expansions.
Distributor Managers- Joint calls in evaluating immediate opportunities extending across borders.
C. School Managers- Joint calls in US territories to expand and maximize product presence.
VIII. International Partnership Arrangements. Partnering/Joint Ventures with like businesses overseas. Some ideal targets are Japan, Australia, Mexico, China. Key defining terms…product novelty, business profitability, uniqueness, pricing, product demand, market distribution, language understanding, product understanding. If there is a commitment from an overseas manufacturer who understands the product/species, but lacks certain manufacturing capabilities, a partnership should be suggested.
A. Responsibility considerations :
o Raw Material Hedge
o Currency Hedge
o Brokerage Agreement
o Time lines
o Production Capacity
o Legal contract/Export Insurance
B. Partner’s Responsibilities:
o Volume Projections
o Co-Pack Agreement
o QA Plant Approval
o End User Presentations
o Stand-by Letter of Credit/Purchasing Contract
o Currency Hedge
o Other product opportunities
Notice currency hedge may fall under both and is open for negotiation. It depends on relationship’s strength. Many times it should be for the account of the partner. An exception may be made to consummate the deal, or as a long term service insuring a yearly contract renewal.
IX. Licensing- Often used as a barometer in evaluating potential opportunities and minimizing immediate risks.
A. Brand Licensing- What is the true value of a certain brand in an international market? Would be determined by the partner company in that country.
Example. What was the value of the Parkay brand in Canada? Became the second best Canadian margarine brand. Produced by Parmalat in Canada. Brand was licensed by ConAgra US.
B. Technology- Minimizes capital overseas investment, while transferring US production technology.
X. Mergers and Acquisitions- Up to this point a corporation may be supplying and evaluating their export potential. Simultaneously, it should be considering the business worthiness of certain key markets. Ultimately, it may consider investment in those markets.
A. Partnership/JV company may be ripe for buy-out.
B. Margin potential internationally warrants an acquisition for corporate diversification purposes.
C. Many similarities i.e., language, business culture, profitability, increased product demand from growing middle class, business supporting political environment.
D. Overcome stringent food import barriers i.e., EEC. Example- Companies have improved international exposure, opening manufacturing plants within the EEC. An example has been the recent purchase of Sara Lee European brands by Smithfield.
XI. Summary- These idea compilations are based on 20 years of international business experiences with four major corporations and an MA in International Business. No one size fits all. The outline can be used to build new profitable opportunities that may not otherwise have been realized or fully exploited.