International Business    PlanWritten EventA Russian-Based Clothing Company        Bellevue High School DECA           Bel...
Table of ContentsI. EXECUTIVE SUMMARY ……………………………………………………………...3II. INTRODUCTION ……………………………….………………………………………4III. ANALYS...
I.EXECUTIVE SUMMARYIntroduction:       In Russia, American clothing trends are achieving a newfound hype amongst thepopula...
II. INTRODUCTION      Russia has recently eased many of its foreign trade restrictions after moving to afree market system...
present, but that will be outweighed by the hype and desire created for our products,increasing both potential in-store an...
III. ANALYSIS OF INTERNATIONAL BUSINESS SITUATION  A. Economic Analysis of Russia        1.      Economic System          ...
3.      Trade Laws              Although Russia has a free market system, there are a few trade           regulations curr...
The Russian culture of our target market in Moscow mimics the   trends of urban American culture. There is a vibrant night...
3. Analysis of Potential Location      We will be starting off exclusively online for the first year, potentially   branch...
IV. PLANNED OPERATION OF THE PROPOSED BUSINESS  A. Proposed Organization           Alphalife will be run as a sole proprie...
Proposed Staffing:           1 Owner/Chief Operations and Marketing Officer – Barrett –   Oversees all promotional activit...
2 Web Designers – 1 each in charge of updating andmaintaining either www.Alphalife.ru or www.TheZone.ru. Updatesonline inv...
B.   Proposed Product     1.     Product Details             Our line of products will vary from clothing, to shoes, to ac...
information to the Quality Assurance Associates who compile it and     send it to Accounting.2.     Transportation        ...
C.   Proposed Strategies     1.     Proposed Pricing Policies             Because we are an American business operating in...
We too will offer a $5 flat-rate shipping option to make our     customer’s shopping experiences as user-friendly and enjo...
Rep can redeem for cash, gift code for themselves, or a gift code for afriend.   We will unveil our Rep Crew program along...
- 18 -
To work hand-in-hand with the Rep Crew Program, we will alsooffer the Two-Tier Referral Rewards Program. Whenever a custom...
- 20 -
While the Rep Crew Program, the Referral Rewards Program, and theMoney-Back Program are always going to be running through...
SAMPLE FLIER IN ENGLISH          - 22 -
SAMPLE FLIER IN RUSSIAN          - 23 -
V. PLANNED FINANCING     A. Projected Income Statement                                     - 24 -
B. Projected Balance Sheet   C. Planned Growth of BusinessAfter starting up with a bank loan of $100,000 USD, with an annu...
Street. With the Russian E-Commerce market expecting to triple within the next 10years and the 80% growth seen by online A...
VI. BIBLIOGRAPHY"Advantages and Disadvantages of Sole Proprietorships." The New York Times.       AllBusiness.com, 5 June ...
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Transcript of "DECA International Business Plan Written Project"

  1. 1. International Business PlanWritten EventA Russian-Based Clothing Company Bellevue High School DECA Bellevue High School 10416 Bellevue Way Bellevue, WA 98004-4622 January 2012 Barrett Stapelman Tayisiya Amplyeyeva -1-
  2. 2. Table of ContentsI. EXECUTIVE SUMMARY ……………………………………………………………...3II. INTRODUCTION ……………………………….………………………………………4III. ANALYSIS OF INTERNATIONAL BUSINESS SITUATION………………….……..6 A. Economic Analysis of Russia 1. Economic System 2. Government 3. Trade Laws B. Trade Area and Cultural Analysis 1. Geographics and Demographics 2. Market Segment Analysis 3. Analysis of Potential LocationIV. PLANNED OPERATION OF THE PROPOSED BUSINESS……………….……..10 A. Proposed Organization B. Proposed Product 1. Product Details 2. Transportation C. Proposed Strategies 1. Proposed Pricing Policies 2. Proposed Promotional ProgramV. PLANNED FINANCING………………………………..……………………………..24 A. Projected Income Statement B. Projected Balance Sheet C. Planned Growth of BusinessVI. BIBLIOGRAPHY……………………………………...………………………………..27 -2-
  3. 3. I.EXECUTIVE SUMMARYIntroduction: In Russia, American clothing trends are achieving a newfound hype amongst thepopulation, yet the industry is plagued by exorbitant prices due to a lack of accessible,high quality clothing. E-commerce is rapidly growing worldwide-in Russia especially-while Brick-and-Mortar retail stores are steadilydeclining. There is a multitude of online stores beingopened up constantly, however, they all blend togetherand none can succeed without standing apart from theircompetition. The owner of Alphalife, a fresh andinnovative Russian-based American clothing venture,Barrett Stapelman, working closely with TayisiyaAmplyeyeva and the company, will not be selling mereproducts but rather the culture that goes behind them.Our Mission Statement: To provide to each and every customer the “Alphalifestyle:” thehighest quality American fashions with affordable prices and accessibility.Analysis of the International Business Situation: Alphalife will be based in Moscow, Russia- the most populous city in Russia- onTverskaya Street, one of the busiest shopping streets in Moscow city center and in thewealthy area of Rublevka. Very recently, Russia has loosened its restrictions on foreigntrade in hope to initiate growth. Russia still does have some laws, regulations, andtaxes, but none of which are too impedimentary. Our primary focus will be on customersatisfaction and user-friendliness. The majority of our marketing efforts will be puttowards promoting the “Alphalifestyle” and letting our customers grow our business in amarket eager to follow American trends. Planned Operation of the Business: With an efficient 24 person workforce, Alphalife will cut unnecessary labor costs as well as the expenses from a brick-and-mortar location because all operations will be exclusively online for the first year. The company will differ from the bland multitude of competitors through unique specialty promotion programs that involve the customers and make them feel as if they are part of the company, suchas the Rep Crew and Referral Rewards Programs. Alphalife strives toemphasize customer service and accessibility overall.Planned Financing: In the first year of operation, Alphalife took out a $100,000 business loan to bepaid off in 36 months, and earned a Net profit of $325,034 after all expenses and taxesfrom a Gross Income from Sales of $1,500,000. Of that $325,034, 25% shall go to end-of-year bonuses to reward the hard-working staff, and 75% will go to company growth,such as opening a brick-and-mortar location on Tverskaya Street.With American growthtrends and Russian E-Commerce being expected to triple in the next three years, weexpect our Net Profit to triple to at least $1,000,000 within three years. -3-
  4. 4. II. INTRODUCTION Russia has recently eased many of its foreign trade restrictions after moving to afree market system. Urban American culture is increasingly influencing Russian trends,yet the market is plagued by exorbitantly high prices due to a lack of accessible highquality clothing. E-commerce is also beginning to dominate retail sales over thedeclining Brick-and-Mortar stores. Alphalife combines all of these factors. By reachinginto a previously untapped and rapidly growing market, Alphalife is grasping the optimaltime to introduce a new and more accessible means of acquiring these well sought afterfashions. The difficulty of running a business such as this one is being able to stand outfrom the competition. Here at Alphalife, we are not merely selling the products, butrather, the culture behind them. This ideology will be heavily rooted in our promotionalactivities. Instead of simply advertising to the customers, we will involve them and makethem all feel as though they are a part of the company. This will be done by activelyincluding customers in our operations such as giving away sticker packs with our logo,introducing the Referral and Rep Crew Programs, holding scheduled giveaways, andhosting parties, concerts and other events to connect with our target marketcommunities. We will start off running exclusively online with offices and a warehouse inMoscow, with the option of opening a Brick-and-Mortar location on Tverskaya Street,one of the busiest shopping streets in Moscow after a year in business. This is wheremuch of our promotional activities will take place such as putting up posters andhanding out fliers.One drawback of holding this location is the level of competition -4-
  5. 5. present, but that will be outweighed by the hype and desire created for our products,increasing both potential in-store and online sales as well as creating new customerswho can become a part of our business and help to grow it even further. Our primary focus will be on e-commerce through our main site:www.Alphalife.ru, and our discount site for the previous season’s merchandise:www.TheZone.ru.Operating exclusively online will only serve to benefit us by increasingcustomer demand and keeping expenses low.In such a rapidly expanding market, it is the perfect opportunity to start an onlinebusiness in Russia while many other mediums and nations are struggling. In a setting ofhigh product demand, low competition, newly lessened restrictions and a growingmarket, Alphalife will thrive. -5-
  6. 6. III. ANALYSIS OF INTERNATIONAL BUSINESS SITUATION A. Economic Analysis of Russia 1. Economic System In the 1990s, Russia moved from a centrally planned economy to a free market system. Currently, Russia’s economy is the ninth largest economy in the world by nominal value (and sixth largest by purchasing power parity). As urban American culture continues to influence and inspire Russia, we believe that these American-set trends in fashion will strike a lot of attention in the Russian market. 2. Government Although previously limited in foreign trade and private business, in 2011 Prime Minister Vladimir Putin announced Russia plans to become more involved in foreign trade and terminate the majority of previous restrictions and barriers with foreign trade. Putin claims that "[Russia needs] to pursue a consistent, predictable, and responsible policy. We need to improve the business environment." The prime minister pointed out that Russia needs to lift all sorts of barriers and limitations with foreign trade. As the barriers start to disintegrate, this creates a perfect opportunity to start business with Russia and their new foreign trade policies emphasizing a welcome to foreign trade and less restrictions on foreign business environments -6-
  7. 7. 3. Trade Laws Although Russia has a free market system, there are a few trade regulations currently in effect. The retail trade policies have a few key features: Imports are subject to a customs processing fee equal to 0.15% of the value of goods. Taxes can be charged on imports. All labels must include Russian text. Where product packaging is in a foreign language, an additional label must be attached listing the necessary information in Russian. Russia applies import duties to most goods. These generally range from 5 % to 20% of goods customs value (generally cost-insurance-freight). Some goods are subject to specific duties which are calculated by volume, weight or quantity.B. Trade Area and Cultural Analysis When advertising, it is important to know your target market and how to reach them. Because our target market has such a wide age range and a middle- class income, we will be marketing primarily in Moscow, the most populated city in Russia. 1. Geographics and Demographics According to the results of the 2010 Census, the population of Moscow was 11,503,501; this is the most populated city in all of Russia. -7-
  8. 8. The Russian culture of our target market in Moscow mimics the trends of urban American culture. There is a vibrant night life in Moscow. The city is full different kind of clubs, restaurants and bars. There is an opening every two weeks and the night life scene changes all the time. There are different levels of venues. Moscow city center and Rublevka (the richest area of the city) is full of luxury locations. Tverskaya Street is also one of the busiest shopping streets in Moscow. This would be an advantage to our company because advertising American clothing will create a lot of hype and desire and attract new customers. However, a disadvantage to such a place for advertising is the level of competitive advertisement.2. Market Segment Analysis Our target market will be primarily young adults and adults up to the age of 40 with a middle-class income level. Since we are primarily focusing on advertising in Moscow, with a population of over 11.5 million people with generally a middle-class income, our advertisements are bound to easily spark some attention in the Russian fashion market; and with our Rep program, the newfound customers will carry on the advertisements themselves and create desirability for our urban American street-wear among their personal communities by acting as “Brand Ambassadors.” -8-
  9. 9. 3. Analysis of Potential Location We will be starting off exclusively online for the first year, potentially branching out later into brick-and-mortar stores on the aforementionedTverskaya Street, one of the busiest shopping streets in Moscow city center and in the wealthy area of Rublevka. In terms of and advertisements, we will use visual channels such as fliers, business cards, online ads. Leaving much of the promotion to our specialty programs mentioned in the promotional outlines below. In terms of competition, there is not much to offer an affordable and high quality line of merchandise as Alphalife. Stores such as Hugo Boss will be indirect competitors but will cater to those of the upper- class. There is a current lack of name-brand merchandise for those on a middle-class income. -9-
  10. 10. IV. PLANNED OPERATION OF THE PROPOSED BUSINESS A. Proposed Organization Alphalife will be run as a sole proprietorship under Owner, Barrett Stapelman. Because it is such a small business, a sole proprietorship is advantageous because it is much quicker to become active, there are minimal legal costs, no corporate tax payments, few formal business requirements, and complete control and decision-making is in the hands of the owner for fast responses to adverse economic conditions.There also will be no specific business taxes needed, just personal income taxes from America and Russia, although there will be exemptions thanks to the Double Tax Treaty between America and Russia against paying taxes for both countries. Start-up Steps to Form Alphalife: Register as an individual entrepreneur and become a Russian Tax Resident. Submit a Russian Personal Income Tax Declaration. Begin to develop two websites and park the domains: www.Alphalife.ru and www.TheZone.ru. Hire staff. Rent a warehouse and office space in Moscow. Begin to order base amounts of apparel. Publish the sites and become active, adjusting purchasing to match customer trends and exporting out-of-season merchandise from Alphalife.ru to TheZone.ru on clearance. - 10 -
  11. 11. Proposed Staffing: 1 Owner/Chief Operations and Marketing Officer – Barrett – Oversees all promotional activities within the company. Is the “face” of the company, and manages all day-to-dayoperations as well as the overall direction of Alphalife. Oversees Rep Crew and manages promotional events. 1 Chief Financial and Implementation Officer – Tayisiya – Oversees the company’s finances; is the head of accounting, and is in charge of handling Human Resources problems and implementing Alphalife’s business practices in the Russian setting. 1 Logistics Manager – Manages the logistics departments of reception and distribution. Oversees the logistics workforce. 2 Quality Assurance Associates – One each in assuring the quality of the goods when receiving and distributing; reports to Logistics Manager.Keeps inventory to make sure there is no discrepancy.Reports inventory and loss to Accounting. Must be able to lift 50 lbs. 15 Logistics Team members – 10 work in receiving shipments and taking inventory; reports inventory to QA Associates, 5 work on merchandising and distribution. Assist in promotional activities should the need arise. Must be able to lift 50 lbs. - 11 -
  12. 12. 2 Web Designers – 1 each in charge of updating andmaintaining either www.Alphalife.ru or www.TheZone.ru. Updatesonline inventory and manages online promotions. 2 Accountants – keep track of the company’s finances;expenses, income, wages, profits, etc. and reports them to theCFIO. Files taxes and necessary paperwork. We shall hire a legal consultant on a per-need basis tominimize expenses. Our Proposed Organizational Chart - 12 -
  13. 13. B. Proposed Product 1. Product Details Our line of products will vary from clothing, to shoes, to accessories under the umbrella term of “Street Wear.” With partnerships with companies such as Vans, Skullcandy, Supra, Betsey Johnson, Adidas, Nike, Goodwood, Kr3w, Kidrobot, and Lifetime Collective, we will be marketing the lifestyle behind the fashion; the products just come with it. To a market so vastly influenced by contemporary American trends, why not make it more readily available to them? This is precisely what Alphalife will be doing; selling the “Alphalifestyle.” These popular brands are only getting bigger in America and Russia can now follow these same trends without spending exorbitant prices on ordering these long sought after styles from foreign companies. We will be bringing in our customers to become a part of the Alphalife Family. Together we shall grow, prosper, and live the lifestyle. Upon reception of every shipment, our 10 Reception Logistics Team Members will unpack, sort and take inventory of all merchandise before reporting that inventory to the Quality Assurance Associates. The 5 Distribution Logistics Team Members will then make the products presentable with attractive packaging and effective merchandising before once more taking inventory of all merchandise before it is shipped off to the customer. They then give that inventory - 13 -
  14. 14. information to the Quality Assurance Associates who compile it and send it to Accounting.2. Transportation While transportation will vary from company to company exporting to us, the majority of our shipments will be exported from America via Ocean Full-Container service. We will make a shipment of approximately 1000lbs per month of clothing, shoes, and accessories on seaborne cargo transportation. The transportation costs for those shipments will be around $5000 USD every time consisting of: $3700 for a 20’ Freight Container, import duties of $300, $500 drayage to loading area, $150 fuel surcharge, $100 pickup charges, and $250 for Insurance and Customs processing. All packages must be labeled in both English and Russian. Benefits of this system are this it is reliable, able to be scheduled far ahead of time or upon short notice, and is relatively inexpensive. A disadvantage is that it is slow compared to air travel. Risks of using this method are losing merchandise, damage to merchandise, or being delayed behind schedule. While it won’t compensate for lost sales, insurance will protect us from losing most of the merchandise’s costs if such a misfortune as a lost shipment were to befall us. - 14 -
  15. 15. C. Proposed Strategies 1. Proposed Pricing Policies Because we are an American business operating in Russia, we will accept both US Dollars and Russian Rubles. Our costs are relatively low due to operating exclusively online; we have cut many of the expenses of running a brick-and-mortar store such as rent, utilities, displays, and additional sales staff. Since the majority of our competition is indirect, we will have to worry less about competing with them and more about staying unique. However, to market our American goods in Russia, we will markup our products an average of 140% above wholesale, 30% higher than in America, to cover our transportation fees and taxes. These prices, however, will remain much lower than similar goods from foreign companies who offer luxurious products for the very wealthy, and a bit higher than the low quality, mass-produced, nameless clothing that is quite prominent in modern Russia. Our prices will effectively place us right in the middle, catering to the commoner, the working class, so we can fight the cheap and bland styles of the past and the excessively expensive clothes of the rich; to revolutionize Russian lifestyle. For example, a typical shirt from one of our brands would run for about $15 before discounts, and here it would run for about $19.5. - 15 -
  16. 16. We too will offer a $5 flat-rate shipping option to make our customer’s shopping experiences as user-friendly and enjoyable as possible with no hidden or surprise fees.2. Proposed Promotional Program As previously stated, it is Alphalife’s specialty promotional programs that will set it apart from the rest. For example, we have our secondary site: www.TheZone.ru, a site offering our merchandise that is in low stock or out of season to be sold in timed sales of up to 80% off of retail. This will eliminate waste as our company will leave no product unsold, and will better serve to promote our positive brand image of a company that exists to serve. We too have the Rep Crew program where customers may sign up and act as brand ambassadors. Upon signup, these “reps” will receive a six-digit “rep-code” that will get anyone 20% off his or her entire purchase. Reps are encouraged to create promotional media such as fliers and business cards to promote their rep-codes, and in turn, our company. When a customer uses his or her code, the Rep will earn one quarter of what that customer saves in points. If the Rep chooses to convert the points he or she earned from the customer’s purchase into store credit instead of cash, that amount would be 1.5 times as much. The points go from “pending” to “approved” a week after delivery to the customer to ensure that points only become approved if the customer does not cancel the order or return the merchandise. The - 16 -
  17. 17. Rep can redeem for cash, gift code for themselves, or a gift code for afriend. We will unveil our Rep Crew program alongside our launch to assistin the company’s early growth. This program will not only give newcustomers discounts and reasons to shop with us, not only will it givereturning customers money and incentive to continue to shop with us,but it makes our customers feel as though they are a part of theAlphalife Family, helping to grow the business that helps them too.Reps will be incentivized to promote and reps will personally reach outto new customers with opportunities to save. - 17 -
  18. 18. - 18 -
  19. 19. To work hand-in-hand with the Rep Crew Program, we will alsooffer the Two-Tier Referral Rewards Program. Whenever a customerrefers a new customer, be it by signing up with a referral identificationcode or clicking on his or her referral URL, he or she earns $10 afterthat new customer’s first purchase. If that new customer refers a newcustomer who makes a purchase, then not only will that customer gethis or her $10 from the new customer’s purchase, but that first referrerwill get an extra $1 from that secondary referral. Both tiers may berepeated infinitely to continue to reward our customers for growing ourbusiness. If the Referral Rewards Program isn’t enough to keep customersshopping with us, we also offer $10 back in store credit after acustomer’s first purchase. If the first purchase wasn’t enough to keepthem coming back, then they will have an extra reason to come back,or they would be wasting money. If a customer were to make a purchase, become a Rep, refer alarge number of new customers who make purchases and referadditional new customers who make purchases all with the rep-code,that original customer not only would have grown Alphalife a greatdeal, but he or she will also have earned a substantial sum of money. - 19 -
  20. 20. - 20 -
  21. 21. While the Rep Crew Program, the Referral Rewards Program, and theMoney-Back Program are always going to be running throughout the year,we will also hold three types of additional promotional activities.The first, we will be sponsoring a concert at Moscow’s Olympic Stadiumwhere we will be disseminating our promotional fliers and stickers. This willbe right after launch in January and will help to kick off our business strong inthe communities of our target market. The second, we will hold 4 giveaways of 64gb iPad 2’s; one on March 1st,one on June 1st, one on September 1st, and one on December 31st. An entrywill be given to every customer per amount of new customers referred thathave made purchases. This will help to stimulate our Referral RewardsProgram in both awareness and actual acquisition of new customers. The third, we will offer double points to Reps during the months ofNovember and December. This will effectively take advantage of the twobusiest shopping times of the year: Black Friday/Cyber Monday and theHoliday Season. People will already be looking for discounts and places toshop, so the Reps’ job will be even easier, and this will once more increaseawareness of both our store and our multitude of programs. Holding thesepromotions on the last two months of the year will help us finish off the yearconfident and strong in sales. - 21 -
  22. 22. SAMPLE FLIER IN ENGLISH - 22 -
  23. 23. SAMPLE FLIER IN RUSSIAN - 23 -
  24. 24. V. PLANNED FINANCING A. Projected Income Statement - 24 -
  25. 25. B. Projected Balance Sheet C. Planned Growth of BusinessAfter starting up with a bank loan of $100,000 USD, with an annual interest rate of6.59% we expect to make monthly payments of $3069.00 and pay off the loan in fullwithin 36 months. We will use the $325,034 of net profit to be split to have 25% gotowards end-of-year bonuses to all the employees, and 75% to go towards companygrowth and start-up capital for a brick-and-mortar Alphalife location on Tverskaya - 25 -
  26. 26. Street. With the Russian E-Commerce market expecting to triple within the next 10years and the 80% growth seen by online American store: Karmaloop, we expectsales and profits for Alphalife and The Zone to at least triple to $1,000,000 annualnet profit in the next three years. - 26 -
  27. 27. VI. BIBLIOGRAPHY"Advantages and Disadvantages of Sole Proprietorships." The New York Times. AllBusiness.com, 5 June 2007. Web. 17 Jan. 2012. <http://www.nytimes.com/allbusiness/AB4113314_primary.html>."Bureau of European and Eurasian Affairs." U.S. Department of State, 2 Nov. 2011. Web. 16 Jan. 2012. <http://www.state.gov/r/pa/ei/bgn/3183.htm>.Bush, Jason. "Russia to Set Investment Rules." Businessweek. Bloomberg, 19 Mar. 2008. Web. 16 Jan. 2012.<http://www.businessweek.com/globalbiz/content/mar2008/gb20080319_484201.htm>."Business in Russia." Russia Ukraine Travel. Web. 17 Jan. 2012. <http://www.russia-ukraine- travel.com/business-in-russia.html>.East-West Digital News. "Russian E-Commerce." EWDN. East-West Digital News, 8 Dec. 2011. Web. 17 Jan. 2012. <http://www.ewdn.com/2011/12/08/russian-e-commerce-now-a-hot- item-on-global-it-map-say-expert-at-techcrunch-moscow-conference/>."Import Regulations - Russia." Doing Business Abroad. Aug. 2009. Web. 16 Jan. 2012. <http://www.tradecommissioner.gc.ca/eng/document.jsp?did=19665>."Income Tax Convention with the Russian Federation." Web. 17 Jan. 2012. <http://www.irs.gov/pub/irs-trty/russia.pdf>." International Business Web Hosting." 101domain. 19 May 2009. Web. 17 Jan. 2012. <http://www.101domain.com/business_hosting_plan.htm>."Russia Welcomes Foreign Investment." CNC World, 25 Oct. 2011. Web. 16 Jan. 2012. <http://cncworld.tv/news/v_show/19263_Russia_welcomes_foreign_investment.shtml>.Warehouses of Moscow and Russian. Web. 17 Jan. 2012. <http://eng.skladno.ru/warehouses/>. - 27 -

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