International Business Plan

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Prepare a business plan for a brand new Australian based organic baby clothing company, setting out clearly how you would internationalise its delivery and management. Use the framework of this course to consider issues such as:

• the international economic environment;
• the international trading environment;
• finance and banking needs;
• political and legal concerns;
• human, cultural and employment aspects; and
• marketing and promotion requirements

There is no set format for the business plan, but please bear it in mind that this is an academic exercise. It may well be the case that the completed assignment, with a little reworking, could be submitted to a workplace superior or to a financial institution as a “real” business plan

Sections need to include:

1. Executive Summary

This summary should outline concisely the contents of the business plan. The summary should follow the layout of the plan and faithfully represent the contents of each section of the plan. Note: the summary should be prepared after the plan has been written in detail. It should not be a ‘wish list’ of what you would like to be in the plan. The essential purpose of the executive summary is for external readers of the business plan. People such as potential investors or financiers need to be convinced of the business opportunity. Usually they will read an executive summary. If the ideas and arguments are not compelling then often the remainder of the business plan will not be read.

2. The Product/Service

Clearly identify the product/service to be internationalised. Describe in detail the nature of each item and any special features that enable product/service differentiation. Outline, the development of the product/service and current research and development associated with the product/ service. Outline how the product/service fits into the company’s overall range of products and provide a general background statement on the company, such as incorporation and any prior business experience. Demonstrate how the product/service fits into an overall industry structure. Identify competitor products and services and substitutes. Outline the current state of research and development associated with these products and services. Comment on general factors such as market size, growth of the market, innovations and issues associated with product life cycle in the industry. Finally, outline variables associated with your marketing plan such as pricing, distribution and advertising that will assist the acceptance of your product or service.

3. International Economic Environment and Market

This is a key section in the overall business plan. In this unit emphasis will be placed on this section and the level of analysis and research undertaken. First you need to identify a foreign country where you plan to internationalise your operation. In this unit you will need to be specific—it will be unsatisfactory to specify for example North America, Asia or Europe. Instead you should select; USA—West Coast, California; Suzhou/Shanghai, Peoples Republic of China; Milan, Northern Italy. In each of the above instances a specific city, state, region and country are targeted. Your research should identify general economic, legal and political aspects of the country that you plan to operate within. The next level of research is to target a specific location for your operations and to demonstrate how and why this location will create competitive advantage for your business. Important factors that include related industries, sources of supply, labour and environmental legislation are important here.

You should spend considerable time in preparing this section of your report—it is essential that you demonstrate how your organisation can successfully enter the market and achieve growth while meeting any competitive threat that may arise. The market research you do is critical for all other sections in the business plan.

The specific elements in the marketing plan are:

Customers: who are the customers for your product/service? What are the demand conditions? How do you contact customers? How are buying decisions made within the industry? What contacts do you have with potential customers?

Market structure: How big is the market? What are the growth trends within the market? What factors are affecting growth in the market?

Competitive advantage: What competitive strengths does your product/service have? Analyse your product/service in terms of:

• market share;
• quality;
• price;
• performance;
• delivery;
• customer service;
• warranties;
• upgrading; and,

4. Cost Structure and Competitive Advantage

This section should translate the overall scope of the business into specific costing of products and services. First it is essential to identify the planned level of operations. At this level you should be able to identify fixed and variable cost, calculate excess capacity and normal level of operations. This will enable you to calculate a product cost per unit or a charge out rate per hour of service. Also, you can calculate a fixed overhead cost rate for application to products and services. This information will also enable you to calculate the margins—gross and operating—that attach to your product and service. Next you should be able to calculate a breakeven point in terms of sale volume and sale dollars. This provides a rudimentary indicator of risk associated with the business. Another critical financial aspect is to prepare a cash flow analysis. Identify clearly what cash outflows will occur at each stage of the operation and also, when cash inflows will occur and the policy you expect to adopt to ensure collection of receivables.

5. Marketing Plan

The purpose of this section is to describe how sales projections will be achieved. The key elements in the marketing plan are:

Pricing: Entry pricing

• seasonal factors
• cost recovery
• discounting

Distribution: Sales methods

• direct selling
• wholesalers

Customer service: Warranties

• training
• service calls

Advertising: Media outlets

• trade shows
• schedules, costs, agencies

Philosophy

• review the specific philosophy and strategy of the business and its products/ services.

6. Operational Plan

The operations of the business include such factors as the location of activities, equipment, maintenance, labour and infrastructure requirements. Key elements in the operational plan are:

Operating cycle nature of activities

• seasonal effects

Facilities space and building requirements

• start-up
• processing
• inventories

Strategy sub contracting

• sourcing supply
• labour training
• quality control

Environmental

• legal aspects for pollution, labour, licences, health, zoning and patenting.

7. Management Plan

In this section a description of the management structure and duties of individual managers should be outlined. The governance of the business, (e.g. Board of Directors) should be detailed and issues of ethics and control outlined. Reward and compensation schemes for day executives should be discussed, including the role of deferred compensation in ensuring congruence of corporate and management goals.

Key issues that need to be addressed include:

• Organisational structure
• Key managerial employees including technical managers
• Management compensation
• Governance structure and philosophy of the Board
• Shareholder/investor rights and protection
• Employment agreement and general staff contracts
• Professional and staff training and development programs.

8. Planning Schedule

This section of the business plan should outline the major activities that need to be completed to establish the international business venture and to continue operations through the first few years of the business’s existence. The planning schedule should be realistic and be based around the cash flow model developed in the financial section of the business plan. Some of the important points that should appear on the planning schedule include:

Pre-production activities:

• incorporation
• preparation of prospectus and fund raising
• product design and development
• market testing
• development of marketing plan
• sales staff recruitment
• production staff recruitment
• trade shows and initial marketing
• ordering materials and equipment
• production
• research and development
• delivery systems
• shareholders meetings
• directors meetings.

Issues that arise if any of these events are delayed should be highlighted and contingency plans indicated. The planning schedule will force you to identify critical issues in your business plan. Such issues should be identified and alternative solutions developed so that if and when problems arise in implementing the business plan you do not have to resort to ad hoc planning and solutions.

For example some of the problems you may need to consider include:

• Underestimating cash requirements prior to commencing operations;
• Responding to price cutting by competitors;
• Economy/industry wide slumps in demand;
• Excess production costs;
• New product innovations by competitors;
• Difficulty in obtaining raw materials; and
• Difficulty in obtaining finance from investors or creditors.

9. Predicted Financial Statements

The plan should include brief financial statements consistent with the assumptions in the costing schedule. The financial statements may include:

• Income statements;
• Balance sheets;
• Cash flow statements;
• Statement of key accounting policies to be adopted in preparing the financial statements; and
• Policies for controlling foreign currency exchange risk.

Also, you could highlight some key data for the business plan from the predicted financial statements, such as:

• return on investment
• return on equity
• dividend yield
• earnings yield
• dividend payout ratio
• times interest earned
• gross profit margin
• operating profit margin
• asset turnover
• inventory turnover
• receivable turnover
• debt to equity
• current ratio.

The points outlined above are designed to provide you with guidance in preparing your business plan. Each business plan will be different and designed to meet the needs of the particular situation being addressed. For this reason, do not be concerned about observing this format too rigidly. However, you should endeavour to cover and include reference to each of these points in preparing your major assignment, even if you go into more depth in some areas than in others. Furthermore, you may wish to think about issues that pertain to training and development and recruitment strategies.