Final Report for the Formation of a Partnership Exporting Business with Mohammad Ghazi
EXECUTIVE SUMMARY
The partnership will engage in the exportation of Crest Whitestrip to Saudi Arabia. The business of exporting goods and services is international in both nature and scope. It refers to the actual exploitation of markets beyond national borders especially in situations where the prospectors identify potential consumers within other countries. Exportation implies that the goods manufactured by the prospectors are primarily meant for the consumption of clients outside the country of production, which is Saudi Arabia in this case. As such, exportation business often requires good infrastructure that can support the required connection between the business entity and the consumers who are in the market. Often, exportation takes place within a large area when it comes to the geographical context (Folsom, Gordon, and Spagnole 1). Consequently, the demands of the business of exportation may be many considering that the business may need to establish efficient structures to facilitate the transportation of goods to the target consumers in Saudi Arabia. However, the advancement in technology makes it possible for export-oriented business to conduct business over the internet without the need to meet with the clients. The virtual internet world has undergone an evolution to the extent that people can exchange goods and services, pay for them, and even enjoy additional services such as guides on using the commodities. In fact, some companies specialize in making online transactions a success for the parties interested. Exportation and online business are possible and successful because consumers can connect with the manufacturers without having to meet them in person.
INTRODUCTION
The objective of this report is to show you, Mohammad, that I understand the problems associated with the nature of our business. I will evaluate the challenges of international business, factors associated with the partnership, challenges of online business, and the opportunities available on the internet. After, the discussion of these factors, I will make some recommendation to you, Mohammad, to make you understand that I am aware of the problems associated with our business and the recommendations will help us resolve them. First, our intention is to establish an exporting business through a partnership that exports Crest Whitestrip to Saudi Arabia. In this light, there are many things to consider starting from the form of ownership of the business to the elements involved in the running and the management of the business. Given that it involves exportation, the demands from the entity may be numerous because of the technicalities involved in managing the business (Thomas 2).
FACTORS OF THE PARTNERSHIP
Partners must reach a consensus before they make any decision in the business, failure to do so implies that the process of making decision stalls until the partners can reach a mutual agreement. Moreover, some important aspects to consider when it comes to the partnership is the ratio of capital contribution by the partners. Prior to the establishment of the business, it is important to agree, as partners, the amount of capital that each partner must contribute.
Unlike the other forms of business ownership, partners often share the cost of establishing a business. Similarly, they also agree on the manner in which they will share the profits or losses accruing from the business. It does not have to be equal to the ratio in which they contributed their capital to the organization. For instance, if one of the partners devotes more time to the business that the other one, then it is logical for him or her to receive a greater amount of the profits generated. Certain legalities also govern the manner in which the partnership conducts its business. For instance, most partnerships have to submit their memorandum of understanding to the government prior to the registration of the business. These factors are important for my partner given that they are the primary elements that will govern his decision to be a member of the partnership.
On the other hand, the core elements of the business also play a role in determining the participation of the partner. The business of exportation is international hence making it subject to the challenges that emanate from doing business across national borders (Folsom, Gordon, and Spagnole 3). Furthermore, the business also relies on the internet as its base or location for the transaction it carries out. Therefore, it is also susceptible to challenges of doing business over the internet.
CHALLENGES OF INTERNATIONAL BUSINESS
Exportation is a challenging business although it has huge rewards when the prospectors manage to accustom to the market and get enough customers. The first challenge of the business of exportation is the cost of the resources required in the establishment of the business. Entering markets beyond the national borders of the business location requires adequate labor and financial investment for the acquisition of the assets required within the business. In the context of resources, the partnership will invest in the acquisition of resources because they expect a return on the investment the partners make in the business. In fact, financial analysis can often indicate the period within which the partnership can expect to recover the cost of its investment. One disadvantage of international business is the timescales of international business in terms of the recovery of the amount invested within the business. In this business, the nature does not guarantee pay back within the short-term hence forcing the partners to use sources of funds that are realizable after a long period. It may be a challenge in maintaining the rate of turnover in the business the long-run periods will compel the partners to have high amounts of stock because the rate of converting the current assets into cash is rather slow.
Another challenge of international business centers on the legalities involved as the guiding principles of the conduct of the trade within particular countries. As a partnership, the main challenge will be identifying countries with suitable regulations that can allow the business to carry out the intended activities. Different countries have varying levels of restrictions especially when it comes to the penetration of the market by participants from other countries (Baker and Bates 4). Such protectionist policies often aim at the protection of the local firms within the country by restricting the level of competition brought by the establishment of foreign firms. The protective measures do not leave any room for the entry of foreign firms regardless of the nature of the market they target. Governments and other regulatory bodies regulate all markets both online and physical markets.
Lastly, the partnership will also find it difficult to manage business risk overseas. Risk is an inevitable part of the business emanating from the fact that there is one level of uncertainty within the business. For instance, the mere fact the partnership may pump resources into a target market in another country and fail to recover the price of the investment already poses some risk. In addition, it is not possible to predict the behavior of the consumers hence making it hard the nature of their response to the ventures of the partnership. There may be already market, but it may not respond according to the expectations of the business. Economic development in the target country is beyond the control of the partnership. Therefore, if the economy of a certain country targeted by the partnership deteriorates, it diminishes the income of the consumers. Consequently, their ability to consume the products offered by the partnership declines, which in turn reduces the income of the partnership because of the reduction in sales. Therefore, the possibility of economic depressions in different countries also poses a certain amount of risk for the partnership based on the uncertainty. International business requires stable conditions in the economy of the world, which is not practical because of changes on factors such as population and government policies.
CHALLENGES OF ONLINE BUSINESS
The partnership targets to use the internet as the main channel through which it can reach the consumers. Today’s societies record impressive levels of technological advancement, which makes the internet one of the most efficient channels of business transactions. However, its convenience comes with a certain challenge that the partnership also has to consider before embarking in the business venture. First, there is an issue of cyber security. Today, the internet is highly vulnerable to unauthorized access by hackers who manipulate information for their benefit. They may be competitors seeking to destroy or tarnish the reputation of the partnership through misrepresentation to the clients of the firm. Cyber security has a cost implication on the partnership as it will have to hire the services of skilled personnel to guarantee the security of its systems. Such services may be expensive to acquire for the maintenance of the systems.
The nature of online business also requires the partnership to have enough employees that can maintain regular working hours, given that the clients are in various locations in the whole world, they are in different time zones. Therefore, they access the internet at different at different times, and the organization needs labor that can work for long hours to market serve the clients. The partnership will have to invest heavily in terms of remuneration offered to the employees because they will have to work for long hours or work in shifts (Ginty, Vaccarello, and Leake 5). It requires commitment to the job because it is not easy to convince clients to order and pay for goods over the internet. Most people favor face-to-face communication where they can hold the firm accountable in case it breaches the terms of contractual agreements in the sale of goods. The concept leads the partnership to another challenge posed by conducting business online. Apart from hackers, the internet if full of scum where some individuals or organizations can deceive the organizations or its clients to defraud them. For instance, the may use names that may relate closely to the name of the partnership in order to derail or confuse clients willing tom purchase products from the partnership. The vast nature of the internet makes it difficult to deal with such individuals because the legal rights of the partnership may be beyond the power of the courts that it can access (Folsom, Gordon, and Spagnole 6). Lastly, the partnership will have to ensure that there is efficiency in the system starting from the point of ordering, delivery and payment by the client. It should be fast and convenient for the customer.
OPPORTUNITIES OF ONLINE BUSINESS
Online business presents an opportunity in the sense that there are increasing subscription to the internet every year. Rising populations within many countries imply that more people have access to technology, an element that presents a growing market for the partnership. Therefore, the internet provides an opportunity for the growth of the business because of the increase in the size of the market segment (Ginty, Vaccarello, and Leake 6). If the partnership establishes its business well, it can generate high revenue from the growing market in Saudi Arabia for the sale of Crest Whitestrip.
RECOMMENDATIONS
Following a careful evaluation of the challenges posed by the partnership, the following recommendations are helpful in enabling you, Mohammad; arrive at a decision regarding the business:
- A partnership provides adequate resources to run the business efficiently in terms of producing Crest Whitestrip and exporting it to Saudi Arabia.
- The online business poses a great opportunity for the growth and profitability of the business because of an increasing number of subscribers.
- The partnership should target countries with low tariffs and flexible regulations when it comes to international business, which makes Saudi Arabia a favorable market.
- The partnership should invest in state-of-the-art technology in order to protect its systems.
- It should have many employees to enable them work in shifts and serve customers the whole day.
- The products should target consumers aged between 18 and 35 years since they are the highest number of internet users in Saudi Arabia (Ginty, Vaccarello, and Leake 8).
- There should be regular checks of the systems to guarantee security and the advertisements should be interesting to attract the customers.
CONCLUSION
International business is characterized by numerous challenges although it also presents an opportunity to realize high amounts of revenue. If the partnership manages to raise the required resources to run a business, then it can take advantage of the opportunity presented by the internet. However, measures must be taken to ensure that the systems of the business are secure and free from the manipulation of unauthorized personnel. As such, the firm will require a high number of personnel to serve the clients and maintain the system. Lastly, legal regulations play an important role in determining the entry of the partnership into some markets. Therefore, countries with favorable conditions must be considered.
Works Cited
Baker, James C, and Thomas H. Bates. Financing International Business Operations. Scranton [Pa.: Intext Educational Publishers, 1971. Print.
Folsom, Ralph H, Michael W. Gordon, and John A. Spanogle. International Business Transactions in a Nutshell. St. Paul: West, 2009. Print.
Ginty, Maura, Lauren Vaccarello, and William Leake. Complete B2b Online Marketing. Hoboken: J. Wiley & Sons, 2012. Print.
Thomas, Lorrie. Online Marketing. Maidenhead: McGraw-Hill Professional, 2010. Print.
