International Business Plan
Instructions: (A 8-page response is required for the combination of Parts A, B, C, D, E, F, and G.) Assume the role of a corporate manager responsible for selling your company’s products in three (3) new international markets. You have been directed to conduct a competitive analysis of potential international markets for distribution of your company’s products/services and to develop an international business plan, which is both strategic for each region (European Union, Pacific Rim, and Latin America) and specific in detail for the establishment of milestone, forecasts capital requirements, human resource, and financial issues. Your business plan is to be submitted to the Executive Committee by the third business quarter. Always include in text citations and references
ANSWER
Business Plan
Business Plan
Part A
Introduction
My company’s name is called Ashanti jewellers. Ashanti jewellers are based in Milan Italy where our head office and factory are located. We specialize in the production of high-end diamond jewellery. We stock earrings, rings, necklaces, lockets and bracelets. Our accessories are made from distinctly shaped diamonds designs with exquisite craftsmanship. Our brand produces high-end diamond accessories and we pride ourselves for affordable prices. We intend to expand to Russia, China and Brazil.
Part B Executive Summary
Worldwide we increasingly seeing the middle class, spend more on luxury goods. Our kind of product requires that we have shops to access the consumer directly. The middle class in the emerging markets is spending more or less than the same amount as the middle-class n developed markets. It is therefore imperative that our brand expands into these markets while maintaining the same values that we share. We propose to enter the target market in January 2021 Critical to these plans is a successful launch and competitive pricing of our products. The executive committee will need to approve our proposal and budget of $10 million for each of the three new shops. The key risks we expect are legal challenges that are unique to each market. Money laundering in our type of business is always a risk that we face each day. To mitigate, staff training on how to detect red flags is a constant requirement.
Every market has different rules for foreign companies that are expanding into them. We are proposing that we find a successful local jeweler for a joint venture with our brand owning a majority stake. A joint venture will enable us to benefit from the local experience. Additional we shall have a healthy customer base to tap in. A joint venture would be the safest way to enter but if that fails, Ashanti jeweler will go it alone.
Part C Product/Service (By Region)
Diamond rings
Our diamond rings are made from the finest diamond. They have a quality cut, colour and shape. The cut quality is by our expert’s craftsmen who ensure that the diamond is precisely shaped, rounder and ever so brilliant. Our rings are fairly priced between $3500 and $5000.
Diamond necklaces
We have diamond necklaces that have a single diamond or several diamonds. We pride ourselves by factoring the desire of our customers in our craftsmanship. Our prices range from $250 for a single diamond to $30,000 for a necklace with several diamonds.
Diamond bracelets.
We offer a huge selection of enchanting diamond bracelets. Our prices are suited for any budget. Prices will begin from $75 to $35000.
Being a luxury brand, Ashanti jewelers we take pride in our craft. As is our tradition, our shops are fused in with cultures of our clients. Our Chinese shop will reflect aspects of Chinese culture. The shop will remain with Ashanti branding a logo but it shall have paintings of dragons and the Chinese symbol of prosperity. In Brazil, we have decided to go with a design that will heavily borrow from the annual samba dance. To us buying a diamond is a happy affair and we want to share in the joys of our consumers. The Russian market is an exciting market to be in. our Russian shop will be designed with the Russian double-headed eagle being part of the theme.
Our target market is the high-end consumers with incomes above $100,000. This target group represents roughly 7% of the market. The global jewellery market was worth $270 billion in 2019 and we feel there are enough brisk business opportunities in our target markets. Industry analysts project the global jewellery market to be worth 500 billion in 2026. This is a huge potential and we want to position Ashanti jewellers at the forefront.
Product/Service Consumer Benefits and Costs
Brazil is a country known for its flair in football, the amazon rain forest and the annual samba dance. We want to share this love with our consumers. Our diamonds will showcase the love and beauty that our consumers greatly show. Brazil is a developing economy with a huge population that is highly educated. Our office in Brazil will be trained on how to protect the business from money laundering attempts.
The Chinese market is an exciting prospect. In 2020, less than 5% of the Chinese were considered urban, however, in 2020 the number had appreciated to 75%. Today, all luxury brands in the world have a presence in china representing the importance of this market. It is said a millionaire is created in China every day. It is this Chinese wealth that we want to tap. Our diamonds will be symbols of wealth and prosperity in China.
In Russia, our diamonds will be important in storing the wealth of our consumers. The national currency is known to fluctuate in value and or diamonds will be an excellent haven for rich Russians wishing to store their riches. Russia is the country of rich oligarchs. Our Moscow office will receive anti-money laundering training to guard the business against this risk.
Price Strategy and Estimate of Price Elasticity
Diamonds are luxury goods and they don’t come cheap. In Brazil, we shall have the lowest priced diamond at $75, in china $250 and Russia $200. In all the markets, the most expensive diamond will be $30000. Our diamonds will elicit high price elasticity because they are luxury goods and they are for high-income earners.
Elasticity curve
As more firms enter the market, the demand curve will no longer represent the demand of the whole market. The clientele will be shared by all participants. Our customers will shift inwards. However, there will be profits. (P > ATC). We don’t anticipate the demand curve of three locations to be any different in all three locations
Supply chain
Ashanti jewelry sources its uncut diamonds from Botswana and Namibia in Africa. The diamonds are shipped by the seller to our Milan craftsmen for polishing and cutting. After they are done, the diamonds will be graded and shipped to the respective countries across. The reason for having one location having the craftsmen is to ensure that all our products across the globe are of uniform quality.
In each of the regions, the polished products will be shipped by armored courier. In this case, we have selected DHL who have operations in all the countries. The diamonds while on transit will be insured by Allianz. The similarity in distribution is similar in all regions to ensure ease in tracking the consignment. Secondly, diamonds may be a target of thieves and the nature of transportation requires elaborate security. DHL has a specialized package for transporting consignment that requires such elaborate measures
In comparison to other global operations, some jewelers have opted to have their craftsmen work on sight, say Harold’s in china, they have a craftsman in China. This saves on the cost of transportation since the uncut diamond is not as expensive. The supply chain is very simplified but due to the nature of security required it requires elaborate planning. The most important thing for this supply chain is to adhere to time deadlines that have been agreed upon with third parties.
Upon approval by the board, we shall immediately begin negotiations with local jewelers on the possibility of a takeover bid or joint venture. We recommend this so that we can benefit from their expertise as well as tap to an existing clientele. We anticipate building synergies using this model will be easier to break even. We have a budget of $10 million for each of the three offices. This will mainly be spent on the acquisition of premises, equipment, legal undertakings and insurance.
Market/Sales
Our products are luxury goods as such we have our marketing strategy has to specifically target the wealthy. We have been sponsoring dog shows, golf events and polo matches. We also showcase our products in Fashion Magazines. We also have a strong Facebook, Twitter and Instagram presence. In all three countries, there are annual fashion events that are graced by celebrities across the globe. We intend to leverage heavily on these events to ensure our brand is present to our target market.
Our brand name remains Ashanti jewelers in all locations but fused in with the local culture. Our premises are in the central business district, especially near financial hubs. The location of the premises must be on a ground floor for visibility. We don’t quote the prices of our products. We believe our target customers being unique desire quality. They are not afraid of paying a premium for a beautiful diamond.
Financial, Payment, Collections, Currency
The currency for China is Yuan. (1 Yuan =0.14 dollars). In Russia they use the Ruble (1 Ruble = 0.014) in Brazil they use the Reale. (1 Reale = 0.18 dollars). We shall be trading in the local currencies in these regions. The financial systems in all three countries are tightly regulated by the respective countries. We do not perceive this to be a challenge. The financial year will run from January to December each year. We are a private company and therefore we are not required to publish our books of accounts to the public. However, for tax compliance reasons we shall need to file our tax returns with the respective tax bodies. Although China and Russia are excellent places to do business, their relationship with the United States is a cause for alarm. It may be categorized as a risk in future. The strained relationships are political but they affect the exchange rate of the currency. China has been accused of currency manipulation while many Russians are banned from doing business with American companies. Currently, we are unaffected by this relationship. The situation is fluid.
The nature of our business requires highly staff that will be able to handle our exclusive clients with confidence but with uttermost confidentiality. To standardize our operations, we intend to have all our staff comes to our Milan offices for orientation purposes. While in or offices they will be taught how to interact with the rich and affluent, how to do a sale and what not to do. Selling a diamond is a delicate process. A basic degree is a requirement. Potential employees will undertake an amplitude test. We require very intelligent individuals who are patient and very temperamental.
Income statement.
The income statement will primarily have sales as a major source of income. Other sources of income may be derived from repairs and polishing of customer’s jewellery. The cost of diamond cost of polishing it and transporting it to the respective premises will be apportioned to each diamond. In essence, the craftsman in Milan will be paid from every diamond sold. The price of a diamond will be discussed with the dealers in Milan. Thereafter the manager will be required to apply a small mark up to cater for operational expenses. Payment is mostly via electronic funds transfer. We, therefore, do not expect issues to do with fraud. Insurance will be one of the biggest expenses. A sample balance sheet by end of the first year operations is shown below
Ashanti jewellers
Income Statement
As at 31dec 2019
‘000
| Sales | $100,000 |
| Cost of goods sold | 75,000 |
| Gross profit | 25,000 |
Operating expenses Selling expenses
| Advertising expense | 2,000 | |
| Insurance | 5,000 | 7,000 |
| Administrative expenses | ||
| Office supplies expense | 3,500 | |
| Office equipment expense | 2,500 | 6,000 |
| Total operating expenses | 13,000 | |
| Operating income | 12,000 | |
|
Non-Operating or other |
||
| Interest revenues | 5,000 | |
| Gain on sale of investments | 3,000 | |
| Interest expense | (500) | |
| Loss from lawsuit | (1,500) | |
| Total non-operating | 6,000 | |
| Net Income | $ 18,000 |
Balance sheet
The balance sheet will be lean in the first five years as we recoup initial investment but as sales grow, so will the assets and balance sheet.
Ashanti jewelers Balance Sheet December 31 2019
ASSETS 000 LIABILITIES 000
Current assets Current liabilities
| Cash | 2,100 | Notes payable $5000 | $ 5,000 |
| Petty cash | 100 | Accounts payable $35900 | 35,900 |
| Temporary investments | 10,000 | Wages payable $8500 | 8,500 |
| Accounts receivable – net | 40,500 | Interest payable $2900 | 2,900 |
| Inventory | 31,000 | Taxes payable $6100 | 6,100 |
| Supplies | 3,800 | Warranty liability $1100 | 1,100 |
| Prepaid insurance | 1,500 | Unearned revenues $1,500 | 1,500 |
| Total current assets | 89,000 | Total current liabilities $61000 | 61,000 |
|
Investments |
36,000 |
Long-term liabilities |
|
| Notes payable $20,000 | 20,000 | ||
| Property,plant & equipment | Bonds payable $400,000 | 400,000 | |
| Land | 5,500 | Total long-term liabilities $420,000 | 420,000 |
| Land improvements | 6,500 | ||
| Buildings | 180,000 | ||
| Equipment | 201,000 | Total liabilities $481,000 | 481 ,000 |
| Less: accum depreciation | {56,000) | ||
| Prop, plant & equip – net | 337,000 | ||
|
Intangible assets |
STOCKHOLDERS ‘ EQUITY |
||
|
Goodwill |
105,000 |
Common stock $110,000 |
110,000 |
| Trade names | 200,000 | Retained earnings $220,000 | 220,000 |
| Total intangible assets | 305,000 | Accum other comprehensive income 9000
|
9,000 |
| Less: Treasury stock ($ 50,000) | (50,000) | ||
| Other assets | 3,000 | Total stockholders’ equity $289,000 | 289,000 |
|
Total assets |
$ 770,000 |
Total liabilities & stockholders’ equity $77$ |
$ 770,000 |
$770,000
Credit
In all three markets, the financial systems are fully liberalized and international banks are allowed to operate freely. Access to credit is fairly easy and quite affordable. The flow of money in and out of the three countries is liberalized too. The major difference will be the tax systems for the three countries. In order to ensure compliance, we intend to high PWC as our tax advisers since they operate in the three countries.
Each location will have an office manager, two accountants, a head of security, an HR assistant, a craftsman and four dealers. Although the operations will be local in all offices, the office manager will be reporting to the CEO who is based in Milan. The CEO will be in charge of the global strategy. The manager will be in charge of the local strategy for driving sales
When we begin operations, the three offices will be stocked with the same number of diamonds from Milan. Thereafter the manager will make a requisition to replenish any stock that is exhausted. We do not anticipate our products to be fast-moving consumer goods. We have set ourselves a commencement of operations in January so that we can begin with spectacular and elaborate marketing set for valentines. On this day intend to make our brand visible since these are new markets are joining. We need to announce our presence and this is a perfect opportunity.
Management structure
Global CEO
Country manager
Head of security chief accountant human resource assistant head dealer
Bookkeeper 3 dealers
Our premises will not be very busy locations and so we shall have very flexible working shifts and conditions. To motivate our staff to ensure every potential customer to a sale, we shall offer a very attractive package to our employees that will motivate them to buy into our philosophy. We shall require the manager and head of security to furnish us on the security measure taken. We have decided to have lean staff because we do not anticipate a busy working area. Five customers a day most probably.
References
Creating a Business Plan: Expert Solutions to Everyday Challenges. United States: Harvard Business School. 2007. pp. 7. ISBN 1422118851.
Eric S. Siegel, Brian R. Ford, Jay M. Bornstein (1993), ‘The Ernst & Young Business Plan Guide’ (New York: John Wiley and Sons) ISBN 0-471-57826-6
