International logistics Inc. has built a reputation within the United States as a premier manufacturer and distributor of high tech equipment. This particular track record has led us to be a trusted supplier for all our domestic and international clients alike. However, recent indicators have shown that our competitors have started to gain market share globally due to forging relationships with new clients overseas, within new export markets. As the manager of international logistics for this company, the first question that I would ask is why? Are clients overseas simply demanding more technology products? Do we currently understand our target market? And do we wish to continue to make our presence known within this global economy? The only way to get true answers to these questions is to go out within the global marketplace and make our presence known. International Logistics Inc. opened its doors because we believe that technology is a survival tool which creates solutions for almost all areas of life. With this in mind, it is of great importance to our development strategy to venture into foreign markets in a bid to initiate and expand our global presence. This document aims to highlight a potential foreign market for International logistics Inc., assess its viability as an export destination, outline the supply chain assessment, develop a transportation plan and give recommendations on the the best way to implement the plan.
After careful assessment of the world’s key external markets, the European union emerged as the best export destination for our product. The European union presents a great opportunity for growth due to its integration and favorable business environment. Studies also reveal that exporting countries tend to perform better than non-exporting companies (Bernard and Jensen 1999). But to venture into the European market requires a pilot country which would usher our company into these. The country that International logistics Inc. has identified is Finland and specifically the city of Helsinki. Finland is a European country located in Northern Europe and bordered by Sweden, Russia, Norway, and Estonia. For a relatively small country, Finland has a robust business environment with a healthy balance between its imports and exports. Their policy on business and exports is welcoming and open to external companies seeking to do business with it.
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The advantages of Finland as an export destination first lies in its ability to act as a gateway in a new business frontier. Being a country of the European Union, access to Finland will give International Logistics Inc. unfettered access to the European markets, and this will be great for this business. Its proximity to Russia also presents a great opportunity for expansion. Finland is specifically attractive because of its transparency and relatively low levels of corruption in their dealings. Their taxation rates are also relatively low. Finland is a highly industrialized economy growing at a modest rate and therefore positioning itself as a potential market for highly mechanized equipment. This coupled with the government efforts at removing obstacles to free trade and opening their doors for more business makes it the ideal destination for export. Currently, the Finnish government is opening up its country for business with developing countries and other countries that might have an interest in making partnerships with it. In 2014 alone, the imports made by Finland amounted to a whopping $72.8B worth of business from different countries all over the world. This figure is only set to grow with time giving new opportunities for our companies. It is important to review both sides of the coin. Given the advantages, what possible challenges does this market present that the company will need to look out for before taking the leap?
Finland presents itself as a European country and as such largely compares its trade policies to those of countries like the United Kingdom. But in international trade, trade policies only form part of the greater concern. For International Logistics Inc., the primary challenges are presented by the transition from the local market to international markets. The fact that this is the first time the company is venturing overseas, a lot of groundwork and planning will be required to make a successful launch of these international operations. The first challenge that will be three from the onset is that of cultural differences and as an extension the language barrier (Hardy 2012). The predominant language in Finland is Finnish, and their culture is markedly different from the American culture (Johnson and Arunthanes 1995). The second challenge that international markets present is mostly to do with financial matters including payments, credit and currency disparity (David, 2013).
Payment is at the center of any business, and international business normally presents a challenge when it comes to payment schedules, currency, and channels. Another important factor is currency fluctuations which are normally influenced by different phenomena at different times (Hardy 2012; David 2013). The issue of currency is especially of great importance since a financially sound business with great demand and supply plans might have its gains eroded by an unfavorable currency match up. The third challenge is the matter of international credit risk. International Logistics Inc. should do due diligence on its potential trade partners in Finland to safeguard its cushion against instances of the questionable creditworthiness of an international partner. There can also arise the issue of infrastructural differences (Johnson and Arunthanes, 1995), which might not present a challenge given the great infrastructural strides in Finland. The final challenge would be on the issue of international contracts and the law that would bind and enforce them (David, 2013).
International contracts are agreements made between business partners in different countries and that are bound by law and therefore enforceable by law. Legal issues are bound to arise in international business especially because skipped payments and disputes that are usually inevitable (David, 2013). There should be steps taken to ensure protection and assistance in the event of these disputes from credible and reputable experts at international trade laws. The final challenge is the knowledge on ‘incoterms’ which are basically the short form for international contract terms. These are standard trade terms used in international contracts for the sale of goods that must be understood by the parties in business before signing or finalizing the contract (Hardy, 2012). The terms, for instance, specify which partner pays for what and who eventually bears the risk in case of damage or loss of shipments. A clear agreement of such terms prior to the commencement of business will ensure a smooth sailing business operation in the long run. Another issue that cannot be put aside is international terrorism and how it can affect the supply chain (Sheffi, 2001).
The next stage of planning for the launch into Finland is to do a supply chain assessment which requires the company to go back to the drawing board and streamline its operations to minimize losses and increase profits. As it is, the foreign space already presents a certain level of risk and ironing out the supply chain process to plug any loopholes that may increase this risk. The supply chain assessment begins with the primary suppliers of the company which refers to the source of raw materials used in the production of our product. The next phase is to assess the production process. The last phase involves the analysis and evaluation of processes that will get the final product to the end consumer. As a company that handles both its manufacturing and distribution process, International Logistics Inc. is advantaged since most of its processes are in its control and can, therefore, be tweaked to align appropriately with our long-term goals and objectives. The assessment is important for review of progress and the changes in progress made and the logistical performance over time.
Supply chain assessment factors different aspects of the production, storage, transportation and delivery of the product. The areas that are of great importance in this new frontier include customer experience, supply chain strategy, demand, supply, inventory, warehouse, transportation, international trade, customer service, organization and people development, information technology and performance measurement (Supply chain acuity 2013). To effectively assess all these aspects of the business it will be paramount to first identify the business model that the corporation will follow. The best model is to identify strategic partners with great distribution in the country already. This will go a long way in saving the company from performing market research. Established companies dealing with the same products we manufacture, with extensive pre-established networks will expand our reach at a minimal cost (Bernard et al., 2007). This will also save the company additional costs of customer acquisition and costs incurred in a bid to compete effectively.
An assessment of the market environment reveals an economy whose growth strategy is greatly centered on technology. Finland is highly industrialized and will need the next cutting edge technologies to increase the competitive edge of its products in the global markets. Our products promise to streamline their manufacturing processes and possibly increase their exports. Its priority sectors for economic development include information and communication technologies coupled with clean technology and electronics among others. The main point of focus of our company will be to quench this thirst for high-tech equipment. Since these partnerships created by the company will eliminate some processes such as the end customer satisfaction and experience, the company’s role will be to ensure timely serving of inventory and transport to Finland.
The setting up of a warehouse in Helsinki will be a great move since the company doesn’t have assets on the ground yet. This can serve as a central base of supply of our products to our different supplies. There will be a need for efficient warehouse structures being put in place to great product handling and delivery to the buyer. The company can start with an orientation period of six months that will serve to also test the effectiveness of operations in that period. This can involve the dispatch of a special team from the US to blend and work with a team that will be based in Finland and ensure local participation which will be great for public relations given the future plans of expansion. The weighing of the level of demand and supply will ensure the production line is optimized to service demand on time. The level of production is set to be determined by the volumes required to be supplied at any particular time.
All these processes must culminate with an efficient transportation plan . To completely hit the target on the mode of transport. It is important that the transportation networks in both countries are looked into. Just like the United States, the infrastructural development in Finland is phenomenal. Dotted with both an efficient road and rail network, it will be fairly easy to get our product around to the destinations required. This is crucial in making timed deliveries prior to the actual delivery date to make sure our product is delivered on time. Given that our product is bulky and therefore unable to be transported via the airways, the only option will be by the sea which fortunately will be cheaper but will take a long time. The transportation plan will, therefore, take into consideration three factors including time, cost and state of product on delivery. The great advantage of the product is that it is not perishable, but despite this, the company might be faced with the scenario whereby a company in Finland needs to resume production as soon as possible and needs an overhaul of its mechanization equipment. Such a scenario would need the company to make a timed delivery without fail to ensure customer satisfaction.
For the international shipments, which occupy the bulk of the transportation plan, Finland is well equipped to handle everything that involves shipping. Being a busy shipping hub that serves its neighbor countries such as Russia, Finland has over 50 merchant shipping ports with 23 of them open all year round thus interrupted business all year round (Santander trade portal 2016). Any need for local transportation will require the company to use predominantly rail transport except in cases whereby road transport is more convenient. As a distribution company, the company will take care of all shipments and charge the appropriate costs to the consumer. The recommended route of transportation from the US to Finland given the assessment of costs and the number of days to delivery will be to ship from the port of San Pedro in California directly to the port of Helsingfors in Uusima , Helsinki. This shipment is bound to take 37 days and cost just over sixteen thousand dollars; that is if 40 feet high cube full containers are used. one shipment can be made each month depending on the order, and the number of containers shipped can also vary in the same fashion. With time, a Miami plant might be a great investment in case the European market expands since it would reduce the cost of shipping by over fifty per cent.
The implementation of this transport plan will require the company to identify a reputable shipping company to handle its shipping activities under contract (Stank and Maltz 1996). This agreement can be extended to the various companies that might handle the product in its supply chain to eliminate the hassle of having to pay for each transaction independently. The contracts can be lengthened according to the feedback gotten with the launch of the international shipments and the assessment of the business climate.
In conclusion, the assessment, and subsequent planning for an international operation is a broad and complex process that needs a thorough team to exhaust effectively. From the streamlining of local production processes to meet a demand that might overwhelm the company over time, to the transportation of the end product to the consumer, this process requires an aggressive research of the target market and transportation systems involved. Another aspect which has not been exhausted effectively is the forging of new partnerships are preparing of new personnel for the possible explosion of business that might be brought about by high demand from international markets or the unprecedented challenges due to external factors (Sheffi 2001). This document has highlighted all the important areas that need to be addressed to get the company to successfully transform an expansion plan for a local company to reality. This is from the choosing a target country of export to laying out an implementation plan for its successful launch.
References
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Supply Chain acuity (2013). Supply Chain Opportunity assessment . Retrieved from http://supplychainacuity.com/Supply_Chain_Assessment.html
Sheffi, Y. (2001). Supply Chain Management under the Threat of International Terrorism. The International Journal of Logistics Management , 12 (2): 1-11.
