STEP 1: Determine your industry's growth for the next 3 years.

STEP 1: Determine your industry's growth for the next 3 years.

STEP 1: Determine your industry's growth for the next 3 years.

STEP 1: Why is your business successful in the domestic market? What's your growth rate?

STEP 2: What products do you feel have export potential?

Brainstorm a list of pros and cons for expanding your market internationally. Based on your product and market knowledge, determine your probability of success in the international market.

Industry/Product:

________________________________________________________________

         Pros                                                                       Cons

1. ___________________________________ _______________________

2. ___________________________________ _______________________

3. ___________________________________ _______________________

4. ___________________________________ _______________________

5. ___________________________________ _______________________

6. ___________________________________ _______________________

Probability of Success

Given the market potential for your products in international markets, how is your product unique?

1. What are your product's advantages?

2. What are your product's disadvantages?

3. What are the competitive product's advantages?

4. What are the competitive product's disadvantages?

What are the needs that will be filled by your product in a foreign market? What competitive products are sold abroad and to whom?

How complex is your product? What skills or special training are required to:

1. Install your product?

2. Use your product?

3. Maintain your product?

4. Service your product?

What options and accessories are available?

1. Has an aftermarket been developed for your product?

2. What other equipment does the buyer need to use your product?

3. What complementary goods does your product require?

If your product is an industrial good:

1. What firms are likely to use it?

2. What is the useful life of your product?

3. Is use or life affected by climate? If so, how?

4. Will geography affect product purchase, for example transportation problems?

5. Will the product be restricted abroad, for example tariffs, quotas or non-tariff barriers?

If the product is a consumer good:

1. Who will consume it? How frequently will the product be bought?

2. Is consumption affected by climate?

3. Is consumption affected by geography, for example transportation problems?

4. Will the product be restricted abroad for example tariffs, quotas or non-tariff barriers?

5. Does your product conflict with traditions, habits or beliefs of customers abroad?

STEP 1:

Select the best countries to market your product.

Since the number of world markets to be considered by a company is very large, it is neither possible nor advisable to research them all. Thus, your firm's time and money are spent most efficiently by using a sequential screening process.

The first step in this sequential screening process for the company is to select the more attractive countries for your product. Preliminary screening involves defining the physical, political, economic and cultural environment. Rate the following market factors in each category.

(1) Select 2 countries you think have the best market potential for your product;

(2) Review the market factors for each country;

(3) Research data/information for each country;

(4) Rate each factor on a scale of 1-5 with 5 being the best; and

(5) Select a target market country based on your ratings

 MARKET FACTOR ASSESSMENT Country A Country B

Demographic/Physical Environment:

Population size, growth, density __________ __________

Urban and rural distribution __________ __________

Climate and weather variations __________ __________

Shipping distance __________ __________

Product-significant demographics __________ __________

Physical distribution and communication network __________ __________

Natural resources __________ __________

Political Environment:

System of government __________ __________

Political stability and continuity __________ __________

Ideological orientation __________ __________

Government involvement in business __________ __________

Attitudes toward foreign business __________ __________

(trade restrictions, tariffs, non-tariff barriers, bilateral trade agreements)

National economic and developmental priorities __________ __________

Economic Environment:

Overall level of development __________ __________

Economic growth:

GNP, industrial sector __________ __________

Role of foreign trade in the economy

Currency: __________ __________

inflation rate, availability, controls, stability of exchange rate

Balance of payments __________ __________

Per capita income and distribution __________ __________

Disposable income and expenditure patterns __________ __________

Social/Cultural Environment:

Literacy rate, educational level __________ __________

Existence of middle class __________ __________

Similarities and differences in relation to home market __________ __________

Language and other cultural considerations __________ __________

Market Access, Limitations on trade:

high tariff levels, quotas __________ __________

Documentation and import regulations __________ __________

Local standards, practices, and other non-tariff barriers __________ __________

Patents and trademark protection __________ __________

Preferential treaties __________ __________

Legal considerations for investment, __________ __________

taxation, repatriation, employment, code of laws

Product Potential:

Customer needs and desires __________ __________

Local production, imports, consumption __________ __________

Exposure to and acceptance of product __________ __________

Availability of linking products __________ __________

Industry-specific key indicators of demand __________ __________

Attitudes toward products of foreign origin __________ __________

Competitive offerings __________ __________

Local Distribution and Production:

Availability of intermediaries __________ __________

Regional and local transportation facilities __________ __________

Availability of manpower __________ __________

Conditions for local manufacture __________ __________

Indicators of population, income levels and consumption patterns should be considered. In addition, statistics on local production trends, along with imports and exports of the product category, are helpful for assessing industry market potential. Often, an industry will have a few key indicators or measures that will help them determine the industry strength and demand within an international market. A manufacturer of medical equipment, for example, may use the number of hospital beds, the number of surgeries and public expenditures for health care as indicators to assess the potential for its products.

What are the projected growth rates for the two countries selected over the next 3-5 years?

STEP 2:

Determine Projected Sales Levels

• What is your present domestic market percentage?
• What are the projected sales for similar products in your chosen international markets for the coming year?
• What sales volume will you project for your products in these international markets for the coming year?
• What is the projected growth in these international markets over the next five years?

STEP 3:

Identify Customers Within Your Chosen Markets

• What companies, agents or distributors have purchased similar products?
• What companies, agents or distributors have made recent requests for information on similar products?
• What companies, agents or distributors would most likely be prospective customers for your export products?

STEP 4:

Determine Method Of Exporting

• How do other domestic firms sell in the markets you have chosen?
• Will you sell direct to the customer?
• Who will represent your firm?
• Who will service the customers needs?

STEP 5:

Building A Distributor or Agent Relationship

• Will you appoint an agent or distributor to handle your export market?
• What facilities does the agent or distributor need to service the market?
• What type of client should your agent or distributor be familiar with in order to sell your product?
• What territory should the agent or distributor cover?
• What financial strength should the agent or distributor have?
• What other competitive or non-competitive lines are acceptable or not acceptable for the agent or distributor to carry?
• How many sales representatives does the agent or distributor need and how often will they cover the territory?
• Will you use an export management company to do your marketing and distribution for you?
• If yes, have you developed an acceptable sales and marketing plan with realistic goals you can agree to?

Comments:

____________________________________________________

To achieve efficient sales offerings to buyers in the targeted markets, several concerns regarding products, literature and customer relations should be addressed.

STEP 1:

Identify product concerns.

Can the potential buyer see a functioning model or sample of your product that is substantially the same as would be received from production?

Comments:

____________________________________________________

____________________________________________________

What product labeling requirements must be met? (Metric measurements, AC or DC electrical, voltage, etc.) Keep in mind that the European Community now requires 3 languages on all new packaging.

When and how can product conversion requirements be obtained?

Can product be delivered on time as ordered?

Comments:

________________________________________________

STEP 2:

Identify literature concerns.

• If required, will you have literature in language other than English?
• Do you need a product literature translator to handle the technical language?
• What special concerns should be addressed in sales literature to ensure quality and informative representation of your product?

STEP 3:

Identify customer relations concerns.

In international sales, the chosen "terms of sale" are most important.

Where should you make the product available: at your plant, at the port of exit, landed at the port of importation or delivered free and clear to the customer's door? The answer to this question involves determining what the market requires, and how much risk you are willing to take.

Pricing strategy depends on "terms of sale" and also considers value-added services of bringing the product to the international market.

STEP 1:

Define International Pricing Strategy.

• How do you calculate the price for each product?
• What factors have you considered in setting prices?
• Which products' sales are very sensitive to price changes? How important is pricing in your overall marketing strategy? What are your discount policies?
• What terms of sales are best for your export product?

STEP 2:

Define promotional strategy

• What advertising materials will you use?
• What trade shows or trade missions will you participate in, if any?
• What time of year and how often will foreign travel be made to customer markets?

STEP 3:

Define customer services

Forecasting sales of your product is the starting point for your financial projections. The sales forecast is extremely important, so it is important you use realistic estimates. Remember that sales forecasts show the expected time the sale is made. Actual cash flow will be impacted by delivery date and payment terms.

Step 1: Fill in the units-sold line for markets 1, 2, and 3 for each year on the following worksheet.

Step 2: Fill in the sales price per unit for products sold in markets 1, 2 and 3.

Step 3: Calculate the total sales for each of the different markets (units sold x sales price per unit).

Step 4: Calculate the sales (all markets) for each year - add down the columns.

Step 5: Calculate the five year total sales for each market - add across the rows.

 SALES FORECASTS - FIRST FIVE YEARS

1 2 3 4 5

Market 1

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

Market 2

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

Market 3

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

All Markets _____ _____ _____ _____ _____

 COST OF GOODS SOLD

The cost of goods sold internationally is partially determined by pricing strategies and terms of sale. To ascertain the costs associated with the different terms of sale, it will be necessary to consult an international freight forwarder. For example, a typical term of sale offered by a domestic exporter is cost, insurance and freight (CIF) port of destination. Your price includes all the costs to move product to the port of destination.

A typical cost work sheet will include some of the following factors. These costs are in addition to the material and labor used in the manufacture of your product: export packing, forwarding, container loading, documentation, inland freight, consular legalization, truck/rail unloading, bank documentation, wharfage, dispatch, handling, bank collection fees, terminal charges, cargo insurance, ocean freight, other misc., bunker surcharge, courier mail.

To complete this worksheet, you will need to use data from the sales forecast. Certain costs related to your terms of sale may also have to be considered.

Step 1: Fill in the units-sold line for market 1, 2, and 3 for each year.

Step 2: Fill in the cost per unit for products sold in markets 1, 2, and 3.

Step 3: Calculate the total cost for each of the products - (units sold x cost per unit).

Step 4: Calculate the cost of goods sold - all products for each year - add down the columns.

Step 5: Calculate the five-year cost of goods for each market - add across the rows.

 COST OF GOODS SOLD - FIRST FIVE YEARS

1 2 3 4 5

Market 1

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Cost _____ _____ _____ _____ _____

Market 2

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Cost _____ _____ _____ _____ _____

Market 3

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Cost _____ _____ _____ _____ _____

Cost of Goods Sold All Markets _____ _____ _____ _____ _____

INTERNATIONAL OVERHEAD EXPENSES

To determine overhead costs for your export products, you should be certain to include costs that pertain only to international marketing efforts. For example, costs for domestic advertising of service that do not pertain to the international market should not be included. Examples of most typical expense categories for an export business are listed on the next page. Some of these expenses will be first year start-up expenses, and others will occur every year.

Step 1: Review the expenses listed on the next page. These are expenses that will be incurred because of your international business. There may be other expense categories not listed - list them under "other expenses."

Step 2: Estimate your cost for each expense category.

Step 3: Estimate any domestic marketing expense included that is not applicable to international sales.

Step 4: Calculate the total for your international overhead expenses.

EXPENSE COST

Market 1 Market 2 Market 3 Total Yr 1

Legal Fees _______ _______ _______ _______

Accounting Fees _______ _______ _______ _______

Promotional Material _______ _______ _______ _______

Travel _______ _______ _______ _______

Communication _______ _______ _______ _______

Equipment _______ _______ _______ _______

Advertising Allowances _______ _______ _______ _______

Promotional Expenses _______ _______ _______ _______

(e.g., trade shows, etc.)

Other Expenses _______ _______ _______ _______

Total Expenses _______ _______ _______ _______

Less Domestic Expenses _______ _______ _______ _______

(Included Above, if any)

Total Intern’ Start-up Expenses _______ _______ _______ _______

PROJECTED INCOME STATEMENT - YEAR 1 to 5, ALL MARKETS

You are now ready to assemble the data for your projected income statement. This statement will calculate your net profit or net loss (before income taxes) for each year.

Step 1: Fill in the sales for each year. You already estimated these figures; just recopy them on the work sheet.

Step 2: Fill in the cost of goods sold for each year. You already estimated these figures, just recopy on the work sheet.

Step 3: Calculate the Gross Margin for each year (Sales minus Cost of Goods Sold).

Step 4: Calculate the Total Operating Expenses for each year.

Step 5: Calculate the Net Profit or Net Loss (Before Income Taxes) for each year (Gross Margin minus Total Operating Expenses).

PROJECTED INCOME STATEMENT - YEAR 1 to 5, ALL MARKETS

1 2 3 4 5

International Sales _____ _____ _____ _____ _____

Cost of Goods Sold _____ _____ _____ _____ _____

Gross Margin _____ _____ _____ _____ _____

International Operating Expenses:

Legal _____ _____ _____ _____ _____

Accounting _____ _____ _____ _____ _____

Advertising _____ _____ _____ _____ _____

Travel _____ _____ _____ _____ _____

Trade shows _____ _____ _____ _____ _____

Promotional Material _____ _____ _____ _____ _____

Supplies _____ _____ _____ _____ _____

Communication Equipment _____ _____ _____ _____ _____

Interest _____ _____ _____ _____ _____

Insurance _____ _____ _____ _____ _____

Other _____ _____ _____ _____ _____

Total Intern’ Operating Expenses _____ _____ _____ _____ _____

TIMETABLE

This is a worksheet that you will need to work on periodically as you progress in the worksheet. The purpose is to ensure that key tasks are identified and completed to increase the success of your international business.

STEP 1:

Identify key activities

By reviewing other portions of your business plan, compile a list of tasks that are vital to the successful operation of your business. Be sure to include travel to your chosen market as applicable.

STEP 2:

Assign responsibility for each activity

For each identified activity, assign one person primary responsibility for the completion of that activity.

STEP 3:

Determine scheduled start date

For each activity determine the date when work will begin. You should consider how the activity fits into your overall plan as well as the availability of the person responsible.

STEP 4:

Determine scheduled finish date

For each activity determine when the activity must be completed.

ACTION PLAN

STEP 1:

Verify completion of previous pages.

You should have finished all the other sections in the worksheet before continuing any further.

STEP 2:

Identify your business plan audience.

What type of person are you intending to satisfy with this business plan?

The summary should briefly address all the major issues that are important to this person. Keep in mind that this page will probably be the first read by this person. It is extremely important the summary be brief yet contain the information most important to the reader. This section should make the reader want to read the rest of your plan.

STEP 3:

Write a one-page summary.

You will now need to write no more than a page summarizing all the previous work sheets you have completed.

Determine which sections are going to be most interesting to your reader. Write one to three sentences that summarize each of the important sections.

These sentences should appear in the order of the sections of your business plan. The sentences must fit together to form a summary and not appear to be a group of loosely related thoughts.

You may want to have several different summaries, depending on who will read the business plan.

INTERNATIONAL BUSINESS PLAN SUMMARY:

________________________________________________

________________________________________________

________________________________________________

________________________________________________

_________________________________________________

Setting proper export prices is crucial to a successful international sales program; prices must be high enough to generate a reasonable profit, yet low enough to be competitive in overseas markets. Basic pricing criteria - costs, market demand, and competition - are the same for domestic and foreign sales. However, a thorough analysis of all cost factors going into a cost, insurance and freight (CIF) quotation may result in prices that are different from domestic ones.

"Marginal cost" pricing is the most realistic and frequently used pricing method. Based on a calculation of incremental costs, this method considers the direct out-of-pocket expenses of producing and selling products for export as a floor beneath which prices cannot be set without incurring a loss. There are important principles that should be followed when pricing a product for export, summarized below.

COST FACTORS

In calculating an export price, be sure to take into account all the cost factors for which you, the exporter, are liable.

1. Calculate direct materials and labor costs involved in producing the goods for export.

2. Calculate your factory overhead costs, prorating the amount of overhead chargeable to your proposed export order.

3. Deduct any charges not attributable to the export operation (i.e., domestic marketing costs, domestic legal expenses), especially if export sales represent only a small part of total sales.

4. Add in the other out-of-pocket expenses directly tied to the export sales, such as:

• travel expenses
• catalogs, slide shows, video presentations
• promotional material
• export advertising
• commissions
• transportation expenses
• packing materials
• legal expenses*
• office supplies*
• patent and trademark fees*
• communications*
• taxes*
• rent*
• insurance*
• interest*
• provision for bad debts
• market research
• credit checks
• translation costs
• product modification
• consultant fees
• freight forwarder fees

*These items will typically represent the cost of the total operation, so be sure to prorate these to reflect only the cost of producing the goods for export.

5. Allow yourself a realistic price margin for unforeseen costs, unavoidable risks, and simple mistakes that are common in any new undertaking.

Market Demand

Market Demand - As in the domestic market, product demand is the key to setting prices in a foreign market. What will the market bear for a specific product or service? What will the estimated consumer price for your product be in each foreign market? If your prices seem out of line, try some simple product modifications to reduce the selling price, such as simplification of technology or alteration of product size to conform to local market norms. Also keep in mind that currency valuations alter the affordability of goods. A good pricing strategy should accommodate fluctuations in currency.