Importing and Exporting Operations
Introduction
Chilean Trade Company is a startup company operating in the import/export business. The company’s main business specialization is Lithium products trade operation between Chile and US as both of these countries provide high-technology products.
The impacts of such trade of operations must be clearly understood. Different methods are considered along with the business set up, organization, and location to come to such a conclusion. The strategic approaches are elaborated and further described so that the document can act in guiding investors, public consumers and the government.
Chilean Trade Company (CTC) is a start-up company located in Hamburg with a specialization in import and export transactions between Chile and US and vice versa as both countries provide good trade potentials. The company has a special interest in Lithium products that have got an increasing demand in the US industry. Chilean Trade Company (CTC) aims at creating a strong business relationship with the US-Chile importer First Western Import & Export Company (FWIEC) whereas in return CTC imports wheat products from US to Chile. CTC believes in the productivity and success of these products in the local and foreign markets. The success of this business is strongly based on the United State-Chile Free Trade Agreement which has operated for years. As of January 2004, duties were reduced to zero on 90% of our exports to Chile with a promise of all the remaining to be phased out in 2015.
Long term and short term Goals
Chilean Trade Company aims to have a stable and strong stakeholder foundation. This would help identify smarter committed company shareholders and stakeholders. In return, it will boost and increase product recognition in the market place and help improve all the business operations. Chileans Trade Company has laid a strong strategic plan for the achievement of these objectives. Her goals are divided into two. It has both long-term and short term goals in the business.
In Lithium business, the short-term business goals are described by business orientation and strategic management for the next three years. In addition, the long term goals aim at building the business alignment for the coming five to six years.
Having such vision calls for intensive monitoring of the business objectives. According to strategic and financial management in business, the business objective, aims and goals should be categorized into two. That is into non-financial goals and financial goals. The business goals include cash flow, revenue, expenditure prediction and profit/wealth maximization. On the other hand, non-financial goals include workable business strategy, planned business processes, customer chains and the society and community aspect.
Financial
Each company aims at increasing its wealth and profit. Similarly, Chilean Trade Company aims at accumulating from the lithium transaction they successfully process. Mainly, this will be achieved by developing and promoting the marketing department that will lead to an increase in the sales quantity. This approach will help the company in increasing the fixed cost alignment. In such cases, the profit and saving of the business will be attained with a short time. For instance, the company can adopt a strategy to import the lithium products to its locals in the home country. Similarly, the company can extend its business and export it lithium products to the foreign country. In so doing, the company will gain maximum profit and wealth that will stabilize the company’s business structure.
Non-financial goals
Customer management Goals
Chilean Trade Company being a trading company. It requires to deal with the consumers’ needs and management. Mainly, it focuses on exporting and importing goods to and from the United States of the America and Chile. For the succession of the business, the management of the company must ensure good and firm relationship with its shareholders and customers. To increase its sales, the human resource manager and the personnel department must accomplish a strong foundation with its consumers. In so doing, the business foundation and sustainability will be assured.
This the reason we have the Chilean trade company defining its business goals as long and short term. Mainly, the company made this approach in relation to its customer needs, and the end will assist in promoting customer management. First, the Chilean company must establish a rapport with the US-American importer. That is the First Western Import & Export Company (FWIEC).This will help it in selling the lithium products on a monthly basis in the future.
The relationship will also help the Chilean trade business in importing wheat products from FWIEC. The products will all be imported to Chile. Chilean produces high quality products which are classified into four categories. The advantage makes it the only renowned company in U.S.A producing high quality lithium products. Chilean has monopolized the market in the US.
Chilean Trade Company being in Antofagasta Chile and the business partner in Francisco United States makes it possible for them to easily practice border business transaction. This will ensure that the lithium products and brands are well known within the two states. Similarly, the partnership will help in boosting all the marketing initiatives and strategies.
For the business to succeed, one consideration must be a community or the societal perspective. Putting this consideration, the company will be able to follow all rules and regulation. Similarly, the company can follow all the ethical considerations in that given community or society. Some of these may include purchasing licenses for the business, doing environmental impact assessment on the company’s production and being involved in legal businesses. In addition, these may help the company pay its revenue and taxes in a timely manner.
Lastly, the company must focus on the strategy and process of distributing their products. The success of distributing the products can be achieved through use of business partners and shareholders. Having established their markets for the Lithium products, the management should establish good rapport with the area. In gaining rapport and owning the marketplace, a business needs to have wholesalers and sales agents who mediate between the business and the consumers. A good example of a wholesaler the Chilean trade business can use is the Empresa carozzi. The wholesalers and sales agents will work on pay or commission basis. To extend its market area, the human resource department must strategize and work with other agents in other countries will promote a good relationship between the business and potential consumers.
STRATEGIES
Strategic management and planning in import and export business is very critical. This is because they develop succession of all processes and operations. Strategies are very critical in importing and exporting business as their main concern is on trading. Similarly, a company such as Chilean Trade Company should work on diversification of market dependency in terms of import and export strategies. Occasionally, the company should also consider all the potential business risks in the strategies.
(Strategy 1) Export strategy
The first strategy in the interest of Chilean Trade Company is a concern in the transportation and distribution of the lithium products. The company can decide to use the available port of Antofagasta to export the materials. In this, it is easy since shipping it to northern of Chile state will easy shipment to San Francisco. This strategy is best when putting in consideration the Chilean sources in the Antofagasta. Similarly, it is an advantage since it will be easy for the United States importer in the San Francisco.
This approach is critical as it’s not sensitive to handling aspect or timing. This is because the products from lithium will be carried comfortably with sea freight. This strategy is also important as is most effective and cost efficient. In addition, the approach helps in the delivery of the lithium products in accurate volumes and to the agreed destination. Lastly, the strategy is critical as the products would be transported in cool temperatures, in the containers. The manufacturing company will be the one responsible for transportation of the products from the extraction sites to the port. It will also handover the products for shipping to the shipping company in FOB. This ensures that the products are not tampered with by any intermediate in the process.
Strategy 2 (Import strategy)
Chilean trade company aims at bringing back wheat products to Chile. Similarly, the wheat will be transported by sea freight. This is because it will time efficient and reliable. In addition, it will carry the requirement quantity of wheat required. The strategy also outlines that, from the port of origin, the wheat will be transported via road transport. The strategy also outlines that the packing should be done at 25kg per bag. Furthermore, the labels will be made in Spanish in references to the Chilean standards and control. The approach also focused on the consumer preferences and end user destination; all these will be made according to the control of the Chilean agriculture department. It will also focus on the marketing part and deciding of the potential clients such as bakeries and supermarkets.
Strategy 3 (importing and export strategy)
Chilean Trade Company has various benefits putting in consideration that they are practicing both export and import at the same time. In this case, the import may compensate the export or vice versa. In most cases, attention both processes will help in profit and business wealth maximization. From a closed account of the Chilean trade business, it has all the necessary management team, active human resource and sustainable resources. This confirms that the company will accomplish the importing and exporting strategy at the same time.
Chilean Trade Company is located in Antofagasta Chile. The location is suitable as it acts as the centre of communication of many companies. In addition, it has good transport systems which are easily accessible. They include air, sea freight and road transport which are the most convenient in carrying bulky trade goods. Chilean trade business can make good use of all these, and the company’s objectives and goals will be accomplished.
PRODUCT LINE PLAN
The product line method consists of good's offers for import and export. This report exhaustively discusses the product line plan for the benefit of the investors, public consumers and the government. Development of this plan requires researching on the possible business locally and overseas for the products the company will be dealing in. The transactions between CTC and FWIEC will be organized as follows: The total converted transaction volume will be $100,000 per month for both parties. This plan is the step that comes up with the business line of trade. A contract will be established for 36 months, which includes exporting four different types of lithium products to the US and in return importing four different types of wheat to Chile. The specific products will be further described in the following section.
Product Line: Export
Chilean Trade Company (CTC) deals with Lithium products exporting to the United States. The company specializes in four major Lithium based products that can be used for lithium battery manufacturing.
Description
CTC exports lithium based products. Lithium is elaborated and consumed in different physical and chemical forms. It can be produced as a metal as well as salt that determines the use of the product. CTC will be exporting a product that can be used for lithium ion battery market. Some strict requirements have to be adhered to in such trade. These include maintenance of the product for export at a >99.2% Battery Grade Lithium substance. The product is a dry, free-flowing powder was packed in 1000 kg bags and shipped for sale. In accordance with US standards, the bags will all contain labeling written in English. It will need to be shipped in a cool, dry environment with standard room temperature. The following table gives a detailed product specification of the diverse branches of the product that could be exported:
Price
The rising automotive industry in the United States has a high demand for Lithium ion batteries. Electric Car companies in the USA such as Tesla, are planning to build plants domestically to produce their production batteries. While, in Chile, the retail price range is between $5500 and $6000, in China it ranges between $6,300 and $6,900.
An outline of the products pricing is given below for the four offered packages (per container)
Costs
Costs in the exporting transaction will involve purchasing of the Lithium products, warehouse, shipment and the handover costs as agreed in the contract FOB terms. There are both fixed and variable costs varying from one product to the other. Allocation of the different costs has been summarized in the table below.
Competition
The American local production of Lithium is low, it is apparent that the market depends on imports. The only commercially driven lithium mine is in Nevada. Most companies in the United States producing downstream lithium compounds depend on South American imports of a brine cultured lithium carbonate product. The United States has 850,000 tons of lithium in reserves, while Chile has 7,500,000 tons. Competition can be classified as direct and indirect competition.
Direct Competition
Direct competitors in this field can be characterized as companies offering the Lithium products to the American market. Nevada is the only direct competitor offering lithium to the local market.
Sales Forecasts (2015-2017)
The sales potential for CTC was described in Assignment I (Target Market Size 3.1.1.4). The potential market size for the next five years is assumed to be 90,000 tones LCE requirements.
In terms of annual sales, the worldwide market size for lithium is believed to be just under $1 billion. There is an average 14% market growth expected for the product. The United States import around 3,000 tons of the products per year. 70% of their consumption is import driven (USGS). And the Chilean Atacama brines feed 44% percent of such consumption. The rechargeable battery market is only going to surge demand for lithium carbonate. The electric car industry is on the rise and will thus place lithium carbonate as the leading form of the material in the matter of imports, in the United States.
PRODUCT LINE: IMPORT
The product that will be imported in Chile from the United States is wheat. It is an important commodity used for basic nutritional products.
Description
The product for import will be imported in the form of grains. Wheat will be packed in plastic grain bags of about 1kg and placed in cartons of 25. The product will need to be shipped in a cool, dry environment with standard room temperature. The labeling will be in Spanish and measurements must be metric, according to Chilean standards. This product is used for the food industry mostly. The most basic use of this commodity is bread, yet it is applicable to many different elaborations. The importation of such product is usually found in countries with arid and high temperatures, making it is impossible for the growth of such crop.
Price
The price FOB offered by CTC is shown below together with the onward sale to the sales agent, who will distribute the products. This aspect is further described the sales and marketing part.
Costs
The costs for the import transaction comprise the offered purchasing price FOB the port San Francisco. Additionally, all shipment costs from port of Antofagasta including insurance,
Duties, taxes, and other fees (landing costs) have to be calculated. Moreover, the local
Distribution costs to the sales agent and end-users have to be considered. These occurring
costs all demonstrate arising variable costs for ASCC, which are only due if transactions are
made. The table below displays the variable expenses for the trade
Competition
CTC specializes in importing quality wheat to compete with suppliers providing low quality wheat locally. Demand for wheat imports is in line with population increase in Chile; hence it is most unlikely to suffer a deficiency in demand in the near future. Due to a recent loss in production, in the Argentinean market, Chile has depended more on US imports of wheat in the past years. The floor price in imports with the United States is being decreased 2% a year due to an FTA agreement between both countries. This is advantageous for the competing prices with other markets that provide lesser quality products.
Direct competition
There are 46,000 wheat producers in Chile. Just 550 produce 50% of its production.
Wheat importers from Argentina offer direct competition to CTC. However CTC stands an advantage due to the FTA agreement between Chile and US on imports and exports.
Indirect competition
Small to medium sized farmers with little or no alternative crops. Wheat produced in Chile is of a lower quality than that demanded by the industry. It has a varied in quality and protein content.
Sales Forecasts (2015-2017)
The sales potential for wheat was described in detail in Assignment I (3.1.2.4). Chile is the largest consumer of bread in Latin America. Currently, it consumes around 80 kilos of bread per capita per year.
The sales forecast for the wheat is first derived from the potential national market size combine with the potential in population growth for the period (2015-2017).
