You are a small company in
Reno, NV that produces shock absorbers. You have not
exported in the past, but recent sales leads cause you to believe that
exporting should be a part of your future. How should you go about deciding if you should
export and which markets should you target? The answer is in the development of an
international business plan. Read on and learn…
Step 1: Identify the various international and domestic
classification systems used to statistically classify the goods you intend to export.
By accessing the Harmonized Schedule Numbers (previously known as
"Schedule B" at
http://www.census.gov/,
you find that the Harmonized System Number for shock absorbers is 8708805000.
Step 2: Select the potential countries to market your product.
Using the various sources listed under step 2, you conclude that Canada, Germany, and
Mexico represent potential markets for your shock absorbers because they are automobile
producing nations which are relatively open to trade. In addition, Canada
and Mexico are both NAFTA trading partners with either no or significantly
reduced duties. The following charts reflect the Canadian importation of automotive
shock absorbers in a variety of ways the Strategis Trade Data Online
program.
Title
Canadian Imports
Products
HS 870880 - SUSPENSION SYSTEMS AND PARTS THEREOF, INCLUDING SHOCK-ABSORBERS,FOR MOTOR VEH
Origin
TOP 10 COUNTRIES
Destination
CANADA
Period
Latest 5 years
Units
Value in Thousands of U.S. Dollars
Canadian Imports
Products
HS 870880 -
SUSPENSION SYSTEMS AND PARTS THEREOF,
INCLUDING SHOCK-ABSORBERS,FOR MOTOR VEH
Origin
Distribution by State (U.S.)
Destination
CANADA
Period
Latest 5 years
Units
Value in U.S. Dollars
Title
Canadian Imports
Products
HS 870880 -
SUSPENSION SYSTEMS AND PARTS THEREOF,
INCLUDING SHOCK-ABSORBERS,FOR MOTOR VEH
Step 3: Analyze the potential marketability of your product in
these new markets.
Using the Harmonized Schedule number you found in step 1, you examine the shock absorber industry trade
patterns as reported by the Census Bureau on Trade
Data Web. Your
research produces the following data:
Country
1999
2000
2001
2002
2003
Percent Change
2002 - 2003
Canada
145,731,430
155,600,810
144,620,745
142,543,103
148,748,606
4.4%
Mexico
81,380,740
100,442,094
90,537,434
86,076,082
83,108,096
-3.4%
Japan
54,310,468
60,751,026
53,545,953
48,273,014
48,862,153
1.2%
United Kingdom
35,815,283
38,147,614
37,097,088
30,243,127
30,556,105
1.0%
Germany
25,151,498
27,402,944
28,067,742
24,870,034
26,806,074
7.8%
China
12,584,898
15,335,341
17,959,041
20,552,991
26,706,938
29.9%
Korea
22,037,507
26,302,437
20,899,568
21,150,725
22,524,700
6.5%
Netherlands
18,192,064
20,326,435
18,037,061
16,992,189
19,206,694
13.0%
Taiwan
17,639,708
22,403,683
16,626,104
16,786,180
16,110,588
-4.0%
France
17,653,870
18,920,821
18,625,503
17,521,947
15,682,597
-10.5%
Singapore
14,842,208
15,998,653
15,799,147
14,717,811
14,889,433
1.2%
Belgium
11,198,637
12,823,972
12,450,405
12,031,741
13,323,255
10.7%
Australia
11,393,916
11,683,965
10,225,832
12,293,775
12,449,606
1.3%
Hong Kong
10,965,979
12,207,684
11,782,602
10,027,396
10,541,888
5.1%
Malaysia
8,557,689
10,122,838
8,554,980
9,456,562
10,124,188
7.1%
Subtotal :
487,455,897
548,470,317
504,829,204
483,536,676
499,640,921
3.3%
All Other:
154,733,005
163,817,007
161,191,683
146,061,941
151,783,052
3.9%
Total
642,188,902
712,287,324
666,020,887
629,598,616
651,423,973
3.5%
With this information you see that, as you anticipated Canada and Mexico, represent
large export markets for producers of shock absorbers. You also find that Japan is a
major export market for U.S. shock absorbers.
Step 4: Assess the domestic (in country) competition you will
face.
The next step is to identify the competition in Canada, Germany, and Mexico. Using the
ISA Market Research Reports from the NTDB, you search for all reports that pertain to
Auto-Parts and Accessories ("APS") and "Shocks" or "Shock
Absorbers." The reports include market background information, market industry
statistics, and general overview on market conditions. From this information you determine
that Mexico presents the market with the least amount of domestic (in country)
competition, followed by Germany and then Canada.
Utilizing Kompass, you determine the following potential competitors:
Canada:
DOMINION SPRING INDUSTRIES
CORPORATION
Mississauga ON L5T 1R9
Canada
F& P MFG., INC.
Tottenham ON L0G 1W0
Mexico
ALLIED SIGNAL AUTOMOTIVE DE MEXICO S.A.
DE C.V.
Monterrey, NL. 64630
+ 45 others
Japan
Kayaba Industry Co., Ltd.
Minato-Ku 105-6111 Tokyo [Japan]
+ potentially 128 others
Competitors and Potential Licensees or Contract Manufacturers
Step 5: Identify any limitations on trade, including tariff
levels, quantitative restrictions as well as non-tariff barriers to trade (i.e.
regulations and standards).
The next step you take is to find the appropriate tariff levels on shock absorbers for
the three potential markets. Again using the Harmonized system number you consult various
sources to identify the following tariff levels respective to Mexico, Germany and Canada:
European Union (Germany) 20%
Canada 0% from within NAFTA
Mexico 0% from within NAFTA
This information leads to reconsider Germany as a potential export market. Keep in mind
how a tariff can affect your products competitiveness in the foreign market.
The following illustration shows how a 20 percent duty is calculated and its effect on
the final price relative to a domestically manufactured product.
Imported Product
Domestic Product
F.O.B. Invoice Value
$100.00
$100.00
Ad Valorem Duty: 20.0%
$20.00
$0.00
Value Added Tax: 15.0%
$18.12
$15.00
Total
$138.92
$115.00
Remember to assess non-tariff barrier’s (NTB’s) as well as tariffs and duties
when considering the accessibility of you potential markets. NTB’s are impediments to
market entry including vague and/or differing technical standards, trade finance issues,
currency stability, taxes, cultural differences, voluntary export restraints (VER’s),
orderly marketing agreements (OMA’s), subsidies to domestic firms, and quotas. In
this example, language may prove to be a barrier to trade with Mexico or Germany.
Likewise, Mexico’s recent currency instability could make long term trade contracts a
risky venture.
Step 6: Establish a market entry strategy.
Next, you research possible strategies of getting your products to consumers. The Trade
Show Central home page identifies 33 auto-related trade shows in Canada and Mexico (the
two biggest markets), and 24 in Germany (the fastest growing market).
Utilizing the Canadian
Importers Database found on Strategis you are able to identify the following
import information:
Product Selected: 870880 - SUSPENSION SHOCK ABSORBERS FOR
MOTOR VEHICLES
FORD MOTOR COMPANY OF CANADA,
LIMITED/FORD DU CANADA LIMITEE
Brampton
Ontario
L6T 4M3
GABRIEL RIDE CONTROL PRODUCTS
Toronto
Ontario
M8W 4Y8
GENERAL MOTORS OF CANADA LTD.
Oshawa
Ontario
L1H 8P7
HONDA CANADA INC
Toronto
Ontario
M1B 2K8
SHOWA CANADA INC
Schomberg
Ontario
L0G 1T0
Notes:
1 - The
'Major Importers' listed comprise those which collectively account for the top
80% of all imports (in terms of $ value) of the selected product for all of
Canada. This list does not include individuals. The importer is not necessarily
the end-user of the product. 2 - In the case of non-resident
importers with addresses outside of Canada, the U.S. state is displayed if
applicable and the postal code is left blank.
Source: Industry Canada, based on 2003 data collected by Canada Customs
and Revenue Agency (Revenue Canada)
You also locate
information from major trade magazines, key contacts, trade associations, and trade shows
using the Kresge Library resources as described in the handout. Additionally you find
lists of Agents and Distributors from your local USDOC office. Using the USDOC office, you
find that there are currently 439 names and addresses of prospective agents and
distributors in the auto parts industry of the foreign traders index.
At this point, you have collected the key data necessary for developing an
international business plan for exporting shock absorbers. You should keep in mind that
international market research is an imprecise art and that good information is
significantly more difficult to acquire than is domestic market research. However, the
sources listed in this handout should give a basis for locating the data you need to
complete a successful international business plan. For further information and
assistance in the completion of your international business plan, please contact one of
the US Commercial Service network of offices by clicking here.
You are a small company in
Reno, NV that produces shock absorbers. You have not
exported in the past, but recent sales leads cause you to believe that
exporting should be a part of your future. How should you go about deciding if you should
export and which markets should you target? The answer is in the development of an
international business plan. Read on and learn…
