Wild  Coyote Tequila, Inc. Rinu Varghese                                              
Wild Coyote Tequila <ul><li>A) The country overview </li></ul><ul><li>B) The Culture  </li></ul><ul><li>C) The institution...
Geography <ul><li>Total area is 1,972,550 sq km   </li></ul><ul><li>2.5% water   </li></ul><ul><li>Boarder:  </li></ul><ul...
Mexican Facts <ul><li>Official language-Spanish  </li></ul><ul><ul><li>(millions speak indigenous languages southeast)  </...
Government & Politics <ul><li>Government:  Federal Republic </li></ul><ul><li>Constitution Established:  Feb 5, 1917 </li>...
Economy <ul><li>Mexico has a free market economy that recently entered the trillion dollar class.  </li></ul><ul><li>GDP p...
Transportation & Communication <ul><li>The growth of Mexico’s trucking industry has put pressure on the government to impr...
Social System <ul><li>Mexican society is sharply divided by income & educational level.  </li></ul><ul><li>The principal d...
Mexico- Cultural Briefing
Population <ul><li>Estimated 107.5 million people in Mexico </li></ul><ul><li>60% - Mestizo (mixture of Indian and europea...
Religion in Mexico <ul><li>Roman Catholic (89%) </li></ul><ul><li>Protestant  (6%)  </li></ul><ul><li>Other (5%) </li></ul...
Language <ul><li>Spanish is the official language spoken; however, there are  over 50 other  language spoken including Eng...
Do’s <ul><li>Learn Spanish </li></ul><ul><li>Stand close to each other </li></ul><ul><li>When doing business abroad, it is...
Standard <ul><li>Kissing is a standard greeting when any type of relationship is established </li></ul><ul><li>Mexicans ar...
Don’t <ul><li>Use the U.S.“OK” sign, Mexican view this as something vulgar </li></ul><ul><li>Back up when a Mexican gets c...
The Institutional Framework
Wild Coyote Tequila  <ul><li>Government Federal Republic  </li></ul><ul><li>Bureaucracy - Many levels of government and co...
The Institutional Framework <ul><li>Tariffs - Mexico is a part of NAFTA the North American Free Trade Act. This allows goo...
Livingston International  <ul><li>Commercial Invoices  </li></ul><ul><li>Par  </li></ul><ul><li>Bonded warehouses  </li></...
 
Wild Coyote Tequila  <ul><li>Taxation - The income tax rate on business legal entity resident income earners (companies an...
Wild Coyote Tequila  <ul><li>Tequila  </li></ul><ul><li>100% Blue Agave! </li></ul><ul><li>Agriculture product  </li></ul>
Wild Coyote Tequila  <ul><li>Corruption -Due the structure of the government Mexico is full of corruption. With all the re...
Wild Coyote Tequila  <ul><li>9.5 percent of its G.D.P. -- twice the education budget  </li></ul><ul><li>Foreign Corrupt Po...
Marketing strategy Rinu R Varghese
Wild Coyote Tequila <ul><li>Company mission:  </li></ul><ul><li>C reate and serve unique, colorful, great tasting, authent...
MARKET ANALYSIS <ul><li>SWOT ANALYSIS : </li></ul><ul><li>STRENGHTS </li></ul><ul><li>WEEKNESS </li></ul><ul><li>OPPORTUNI...
Market Segmentation <ul><li>Target customers: </li></ul><ul><li>2 segments of our market </li></ul><ul><li>80% of our busi...
JOINT VENTURE WITH MEXICO <ul><li>Leading tequila producer and has returned 100% Mexican control . </li></ul><ul><li>They ...
Market opportunities <ul><li>Mexico Is the only exporter of tequila . </li></ul><ul><li>80% of Mexico's tequila goes to U....
Strategic   marketing plans (4 P) <ul><li>Product </li></ul><ul><li>Promotion </li></ul><ul><li>Price </li></ul><ul><li>Pl...
How do we promote Wild Coyote Tequila ? <ul><li>Advertising: </li></ul><ul><li>Media, newspaper adds, air commercials on l...
Price and distribution <ul><li>PRICE </li></ul><ul><li>Our prices are primarily cost based . </li></ul><ul><li>We take int...
Packaging and Grades  <ul><li>We want to reflect the modern side of Mexican design . </li></ul><ul><li>We ensure that our ...
MARKETING PROMISE <ul><li>We promise to devour the freshest high quality tequila and provide the best memorable experience...
Financial Management
Financial Environment  In Mexico <ul><li>Mexico Currency : Peso ( MXN, $) </li></ul><ul><li>Exchange rate :  1 US$ = 11 Me...
Financial Environment  In Mexico <ul><li>Reserves including gold :  85.01 billion USD (2006) </li></ul><ul><li>Government ...
Financial Environment    In Mexico  <ul><li>Mexico is firmly established as an upper middle-income country, but it still f...
Wild Coyote Tequila  Joint Venture vs. Foreign Direct Investment <ul><li>Foreign direct investment is more expensive way t...
Wild Coyote Tequila  Financial facts   <ul><li>Total capital requirement : 9 Million US $ </li></ul><ul><ul><li>Financing ...
Directo a Mexico <ul><li>We will decide to use &quot;Directo a Mexico” a new program which is jointly publicized by The Fe...
Wild Coyote Tequila Estimated Income Statement For the year ended on 31st Dec, 2007 14,080 27,720 41,800 33,000 74800 1,28...
Wild Coyote Tequila Financial facts   <ul><li>In this Income statement, manufacturing expenses includes amount payable to ...
How a joint venture will affects  company’s profit   <ul><li>Profit of Wild Coyote Tequila will increase because: </li></u...
Management scene <ul><li>Joint Venture </li></ul><ul><li>Avoid typical pitfalls in employee management </li></ul><ul><li>-...
The Management Scene  continued <ul><li>Profitability  </li></ul><ul><ul><ul><li>Worked with host company management to  <...
Conclusion                                               
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Wild Coyote Tequila Inc 1 Final

  1. 1. Wild Coyote Tequila, Inc. Rinu Varghese                                              
  2. 2. Wild Coyote Tequila <ul><li>A) The country overview </li></ul><ul><li>B) The Culture </li></ul><ul><li>C) The institutional framework </li></ul><ul><li>D) The marketing strategy </li></ul><ul><li>E) Financial management </li></ul><ul><li>F) The Management Scene </li></ul>
  3. 3. Geography <ul><li>Total area is 1,972,550 sq km </li></ul><ul><li>2.5% water </li></ul><ul><li>Boarder: </li></ul><ul><ul><li>North: United States </li></ul></ul><ul><ul><li>Southeast: Belize and Guatemala </li></ul></ul><ul><ul><li>East: Caribbean Sea & the Gulf of Mexico </li></ul></ul><ul><ul><li>West & Southwest: Pacific Ocean </li></ul></ul><ul><li>Climate: Tropical to desert </li></ul><ul><li>Terrain: High, rugged mountains, low coastal plains, high plateaus &deserts. </li></ul><ul><li>Majority of Mexicans live in the densely populated waist of the country </li></ul><ul><li>The location of Mexico is convenient for businesses such as Wild Coyote Tequila for export into the US. </li></ul>
  4. 4. Mexican Facts <ul><li>Official language-Spanish </li></ul><ul><ul><li>(millions speak indigenous languages southeast) </li></ul></ul><ul><li>Currency-Peso. </li></ul><ul><ul><li>(U.S. dollar is widely used in Mexico) </li></ul></ul><ul><li>Population- 108,700,000. </li></ul><ul><li>Age structure is composed of: </li></ul><ul><ul><li>30.6 % 0-14 years old </li></ul></ul><ul><ul><li>63.6% 15-64 years old </li></ul></ul><ul><ul><li>5.8% 65 years and older </li></ul></ul><ul><li>Median age- 26 years old </li></ul><ul><li>Life expectance rate-75 years old. </li></ul><ul><li>Ethnicities- Mainly mixed Spanish and Indian descent </li></ul><ul><ul><li>(30 percent are Indian) </li></ul></ul><ul><li>Religion- Roman Catholic </li></ul><ul><li>Literacy rate- 92% </li></ul>
  5. 5. Government & Politics <ul><li>Government: Federal Republic </li></ul><ul><li>Constitution Established: Feb 5, 1917 </li></ul><ul><li>Levels of Government: </li></ul><ul><ul><li>Federal Union </li></ul></ul><ul><ul><li>State governments </li></ul></ul><ul><ul><li>Municipal governments </li></ul></ul><ul><li>All officials at the three levels are elected by voters. </li></ul><ul><li>The capital of Mexico is Mexico City </li></ul><ul><li>There are thirty-one states in the country </li></ul><ul><li>The voting age qualification in Mexico is 18years old. </li></ul><ul><li>The federal government is constituted by the Powers of the Union, the three separate branches of government: </li></ul><ul><ul><li>1 ) Executive- controlled by the President (chief of state and the head of government) </li></ul></ul><ul><ul><ul><li>Felipe Calderon is the current president. </li></ul></ul></ul><ul><ul><li>2) Legislative- bicameral Congress of the Union </li></ul></ul><ul><ul><ul><li>Senate and a Chamber of Deputies </li></ul></ul></ul><ul><ul><li>3) Judiciary - Supreme Court of Justice. </li></ul></ul><ul><li>Three major political parties in Mexico include: </li></ul><ul><ul><li>PAN: the National Action Party (Partido Acción Nacional). Conservative party. </li></ul></ul><ul><ul><li>PRI: the Institutional Revolutionary Party (Partido Revolucionario Institucional). C entrist party. </li></ul></ul><ul><ul><li>PRD: the Party of the Democratic Revolution (Partido de la Revolución Democrática). Left wing party with socialist tendencies. </li></ul></ul>
  6. 6. Economy <ul><li>Mexico has a free market economy that recently entered the trillion dollar class. </li></ul><ul><li>GDP per capita - $10, 600 </li></ul><ul><ul><li>Highest and fourth largest Latin America </li></ul></ul><ul><ul><li>13th largest economy in the world </li></ul></ul><ul><ul><li>The income distribution remains highly unequal. </li></ul></ul><ul><li>Recent administrations have made improvements </li></ul><ul><li>Influence of NAFTA and free trade agreements. </li></ul><ul><li>Minerals- including silver, copper, sulfur, lead, and zinc </li></ul><ul><li>Advanced technology </li></ul><ul><li>Huge workforce. </li></ul><ul><li>It profits from its maquiladora border industry. </li></ul><ul><li>Main industries-food and beverages, tobacco, chemicals, iron and steel. </li></ul><ul><li>Staple agricultural items- corn, wheat, soybeans, rice; beef; wood products. </li></ul><ul><li>Major exports-manufactured goods, oil and oil products, silver, fruits, vegetables. </li></ul><ul><li>Mexico is one of the world's largest oil </li></ul><ul><li>Agriculture remains an important employer. </li></ul><ul><li>Tourism in Mexico is a large industry, the third in importance. </li></ul>
  7. 7. Transportation & Communication <ul><li>The growth of Mexico’s trucking industry has put pressure on the government to improve the highway system. </li></ul><ul><li>Well-developed airline system. </li></ul><ul><li>Long-standing urban transportation problems, especially in the Federal District, are gridlock and air pollution. </li></ul><ul><ul><li>Modern, efficient bus and subway system in the capital, cars remain the most popular form of transportation. </li></ul></ul><ul><li>Business and governments experience adequate telephone service </li></ul><ul><ul><li>Majority of the population is poorly served. </li></ul></ul><ul><li>Cellular subscribers outnumber fixed line subscribers at the moment. </li></ul>
  8. 8. Social System <ul><li>Mexican society is sharply divided by income & educational level. </li></ul><ul><li>The principal division is between the wealthy, well-educated elite and the urban and rural poor. </li></ul><ul><li>Agrarian reform has institutionalized much of the rural peasantry with limited opportunities for economic or social advancement. </li></ul><ul><li>An increasing proportion of the rural population depends on day labor, often at less than minimum wages, for survival. </li></ul><ul><li>Large landholders form agricultural elite which control nearly half of the income generated by agriculture. </li></ul><ul><li>A rural middle class has evolved, but it represents only a small percentage of total agriculturalists. </li></ul><ul><li>It is estimated that at least 40 percent of city dwellers have incomes below the official poverty level, including a significant percentage of workers who are government employees. </li></ul><ul><li>In contrast, the relatively affluent middle and upper-income groups enjoy the amenities of urban life and control most of the social, political, and economic activity of the country. Compared to the United States, Mexico’s middle class is relatively small. </li></ul>
  9. 9. Mexico- Cultural Briefing
  10. 10. Population <ul><li>Estimated 107.5 million people in Mexico </li></ul><ul><li>60% - Mestizo (mixture of Indian and european) </li></ul><ul><li>30 %- American Indian </li></ul><ul><li>9% - white </li></ul><ul><li>1% - other </li></ul>
  11. 11. Religion in Mexico <ul><li>Roman Catholic (89%) </li></ul><ul><li>Protestant (6%) </li></ul><ul><li>Other (5%) </li></ul>                                                                                                                                     * WORLD FACTBOOK 2002
  12. 12. Language <ul><li>Spanish is the official language spoken; however, there are over 50 other language spoken including English especially in the corporate world. </li></ul>
  13. 13. Do’s <ul><li>Learn Spanish </li></ul><ul><li>Stand close to each other </li></ul><ul><li>When doing business abroad, it is appreciated for you to give a small gift </li></ul><ul><li>Use Senor or Senora plus family name when addressing someone </li></ul><ul><li>Get to know family before doing business </li></ul>
  14. 14. Standard <ul><li>Kissing is a standard greeting when any type of relationship is established </li></ul><ul><li>Mexicans are generally not on time, you can expect them to be at least 1 hour late </li></ul><ul><li>Strong family bond </li></ul><ul><li>Expect collective bargaining from tourist </li></ul>
  15. 15. Don’t <ul><li>Use the U.S.“OK” sign, Mexican view this as something vulgar </li></ul><ul><li>Back up when a Mexican gets close to you </li></ul><ul><li>Use first name unless invited to do so </li></ul><ul><li>Make extended eye contact when talking </li></ul>
  16. 16. The Institutional Framework
  17. 17. Wild Coyote Tequila <ul><li>Government Federal Republic </li></ul><ul><li>Bureaucracy - Many levels of government and countless entities without justification. There are many secretariats, commission agencies, and institutes often these group duplicate work and are not results orientated. Therefore there is a lot of red tape that needs to be cut to get anything accomplished when dealing with their government </li></ul>
  18. 18. The Institutional Framework <ul><li>Tariffs - Mexico is a part of NAFTA the North American Free Trade Act. This allows goods to move freely across the boards of Canada, United States and Mexico that are produced with in one of those national. All other material is taxed according to the country of origin. All imports and exports must go through customs before entering or leaving the nation thus ensuring that tax revenues are collected and the local economy is protected. </li></ul>
  19. 19. Livingston International <ul><li>Commercial Invoices </li></ul><ul><li>Par </li></ul><ul><li>Bonded warehouses </li></ul><ul><li>NAFTA forms </li></ul>
  20. 21. Wild Coyote Tequila <ul><li>Taxation - The income tax rate on business legal entity resident income earners (companies and possibly individuals) is 35% of the net income. Additional reduction is permitted if the legal entity is solely in the agriculture, livestock or fishing activities (50% reduction), if it is in the preceding businesses but also in the industrialization thereof or it combines them, where the commercial or industrial activities do not exceed 50% of its gross income, then it is permitted a 25% reduction. </li></ul>
  21. 22. Wild Coyote Tequila <ul><li>Tequila </li></ul><ul><li>100% Blue Agave! </li></ul><ul><li>Agriculture product </li></ul>
  22. 23. Wild Coyote Tequila <ul><li>Corruption -Due the structure of the government Mexico is full of corruption. With all the red tape that is created by the endless layers of government it make is very easy for the corrupt to infiltrate through the boarders and influence officials. Mexico being a poorer country struggling to make advances in the world is being hindered by these criminals that pay off officials to look the other way while they conduct their business </li></ul>
  23. 24. Wild Coyote Tequila <ul><li>9.5 percent of its G.D.P. -- twice the education budget </li></ul><ul><li>Foreign Corrupt Policies Act (1977) </li></ul>
  24. 25. Marketing strategy Rinu R Varghese
  25. 26. Wild Coyote Tequila <ul><li>Company mission: </li></ul><ul><li>C reate and serve unique, colorful, great tasting, authentic 100% high end tequila </li></ul><ul><li>Product description: </li></ul><ul><li>Tequila is made from 100% blue agave, a product of vast contrasts in geographic, climate and social environments across the continents. </li></ul><ul><li>We plan to differentiate ourselves from existing tequila market by using 100% blue agave. </li></ul><ul><li>Location of our company: </li></ul><ul><li>Our company is located in New York . </li></ul><ul><li>Famous for its nightlife and serving upscale quality drinks. </li></ul><ul><li>We sell them nation wide too. </li></ul>
  26. 27. MARKET ANALYSIS <ul><li>SWOT ANALYSIS : </li></ul><ul><li>STRENGHTS </li></ul><ul><li>WEEKNESS </li></ul><ul><li>OPPORTUNITY </li></ul><ul><li>THREATS </li></ul><ul><li>Our company identified our target market with the wants and needs of our customers. </li></ul><ul><li>It helped us to identify opportunities and plan strategies for marketing mix </li></ul>
  27. 28. Market Segmentation <ul><li>Target customers: </li></ul><ul><li>2 segments of our market </li></ul><ul><li>80% of our business is from professionals working in the area and college going students. </li></ul><ul><li>On weekends: we have our business from city residents and tourists . </li></ul><ul><li>New York city is consolidated metropolitan statistical area consisting of 8 million people .Hence our marketing opportunities are diverse </li></ul>
  28. 29. JOINT VENTURE WITH MEXICO <ul><li>Leading tequila producer and has returned 100% Mexican control . </li></ul><ul><li>They make the top selling ,super premium 100% blue agave tequila. Hence we obtain a high end wild coyote tequila. </li></ul><ul><li>3 . We could improve our access to </li></ul><ul><li>Financial resources </li></ul><ul><li>New technologies and New customers </li></ul><ul><li>4 . Moderate investments </li></ul><ul><li>Reduced expenditure to risk </li></ul><ul><li>5 . When doing joint venture with leading existing firm in Mexico we could put our products and services in the the hands of 100s of customers without promoting them </li></ul>
  29. 30. Market opportunities <ul><li>Mexico Is the only exporter of tequila . </li></ul><ul><li>80% of Mexico's tequila goes to U.S.A. </li></ul><ul><li>Since 1986, Tequilas consumption in U.S has increased by 900% making it the fastest growing spirit in U.S.A. </li></ul><ul><li>The rapid growth of mixed population in U.S (American’s, African’s, Mexican’s, Indian’s) represents a great opportunity for our company to target. </li></ul><ul><li>Large amount of money entering the company has elevated the per capita income of Mexico. </li></ul><ul><li>Mexico has a good share of business in its economy, from Petroleum (PEMEX), AEROMEXICO, MEXICANA, CFE (Federal Commission of Electricity), CNA (National Water Commission), as well as many concessions like TELEVISA, METRO, BOSQUE DE CHAPULTEPEC, </li></ul>
  30. 31. Strategic marketing plans (4 P) <ul><li>Product </li></ul><ul><li>Promotion </li></ul><ul><li>Price </li></ul><ul><li>Place </li></ul>
  31. 32. How do we promote Wild Coyote Tequila ? <ul><li>Advertising: </li></ul><ul><li>Media, newspaper adds, air commercials on local radio stations, company websites . </li></ul><ul><li>We also obtain customers email address by coupon method where they can voluntarily fill and win free bottle of tequila </li></ul><ul><li>We also pass business cards. </li></ul><ul><li>Personal selling: </li></ul><ul><li>Our servers are the source of our personal selling. </li></ul><ul><li>Publicity: </li></ul><ul><li>News papers, televisions, and banners on subways ,trains and buses. </li></ul><ul><li>Sales promotions: </li></ul><ul><li>We promote sales with coupons available on our website for discounts on drinks </li></ul>
  32. 33. Price and distribution <ul><li>PRICE </li></ul><ul><li>Our prices are primarily cost based . </li></ul><ul><li>We take into consideration the cost of similar items in our competitors market. </li></ul><ul><li>We price items to reflect our image, freshness and quality. </li></ul><ul><li>Place and Distribution </li></ul><ul><li>Tequila from Mexico is exported to US by Livingstone brokers. </li></ul><ul><li>North Americas most innovative and knowledgeable broker </li></ul><ul><li>Offers advanced technology to help manage our imports . </li></ul><ul><li>Helps in material management, inventory management, and transportation management </li></ul>
  33. 34. Packaging and Grades <ul><li>We want to reflect the modern side of Mexican design . </li></ul><ul><li>We ensure that our brand is fully controlled by Mexican government </li></ul><ul><li>We ensure that our production comply with strict regulations set forth by CRT. </li></ul>
  34. 35. MARKETING PROMISE <ul><li>We promise to devour the freshest high quality tequila and provide the best memorable experience. </li></ul>
  35. 36. Financial Management
  36. 37. Financial Environment In Mexico <ul><li>Mexico Currency : Peso ( MXN, $) </li></ul><ul><li>Exchange rate : 1 US$ = 11 Mex$ </li></ul><ul><li>GDP (2006) : $1.134 trillion (13th)  </li></ul><ul><li>Per Capita : $10,600 (64th), fourth largest per capital income in Latin America </li></ul><ul><li>Inflation rate (2006) : 3.4%. </li></ul><ul><li>Average Growth Rate ( GDP) : 4.8 % </li></ul><ul><li>Unemployment (2006) : 3.2 % </li></ul><ul><li>Labor force : 38.09 million </li></ul><ul><li>Trade Organization : NAFTA, WTO , OEC D </li></ul><ul><li>Central Bank : Banco de Mexico </li></ul>
  37. 38. Financial Environment In Mexico <ul><li>Reserves including gold : 85.01 billion USD (2006) </li></ul><ul><li>Government budget : 196.5 billion USD (revenues) </li></ul><ul><li>Public debt : 20.7% of GDP (2006) </li></ul><ul><li>External debt : 178.3 billion USD (2006) </li></ul><ul><li>Bank funding rate : 7% (2/2007) </li></ul>
  38. 39. Financial Environment In Mexico <ul><li>Mexico is firmly established as an upper middle-income country, but it still faces the problems like inequality in the distribution of wealth and Income and huge gaps between rich and poor, north and south, urban and rural . </li></ul><ul><li>Mexico has a free market economy with a mixture of modern and outmoded industry and agriculture, increasingly dominated by the private sector. </li></ul><ul><li>Mexico has signed 12 trade agreements with 40 nations, out of which 90% of its trade under free trade regulations. </li></ul><ul><li>Mexico is highly dependent on exports to the U.S., which account for almost a quarter of the country’s GDP. </li></ul><ul><li>90% of Mexico's exports go to the United States and Canada, and close to 55% from its imports come from these two countries. </li></ul>
  39. 40. Wild Coyote Tequila Joint Venture vs. Foreign Direct Investment <ul><li>Foreign direct investment is more expensive way to enter into international business than joint venture. </li></ul><ul><li>Joint Venture </li></ul><ul><ul><li>Requires less capital </li></ul></ul><ul><ul><li>Provides economic of scale </li></ul></ul><ul><ul><li>Low production Cost </li></ul></ul><ul><ul><li>Saves time which is require for trade sanction and getting license etc. </li></ul></ul><ul><ul><li>Low associated cost that is required to do business in foreign country. </li></ul></ul>
  40. 41. Wild Coyote Tequila Financial facts <ul><li>Total capital requirement : 9 Million US $ </li></ul><ul><ul><li>Financing by : </li></ul></ul><ul><ul><ul><li>Bank loan : 5 million US $ from United commercial bank located at New York with the interest rate of 10% per annum. </li></ul></ul></ul><ul><ul><ul><li>Partner’s capital </li></ul></ul></ul><ul><li>We prefer to take loan from US bank because it is more beneficial for our company to take loan in US dollar and used the some part of loan in Mexico for financing our outsourcing activities. </li></ul>
  41. 42. Directo a Mexico <ul><li>We will decide to use &quot;Directo a Mexico” a new program which is jointly publicized by The Federal Reserve Bank and Banco de Mexico, that will allow U.S. commercial banks and financial institutions to transfer money more easily to bank accounts in Mexico. </li></ul><ul><li>&quot;Directo a Mexico,&quot; the remittance program enables U.S. commercial banks to make money transfers for Mexican workers through the Federal Reserve's own automated clearinghouse, which is linked to Banco de Mexico, the Mexican central bank. </li></ul><ul><li>By using this program, we can also avoid the problem of conversion of US $ in Mexican peso </li></ul>
  42. 43. Wild Coyote Tequila Estimated Income Statement For the year ended on 31st Dec, 2007 14,080 27,720 41,800 33,000 74800 1,280 2,520 3,800 3,000 6,800 Net operating income Less Less 21,780 1,980 Administrative expenses 5,940 540 Selling expenses Gross Margin 33,000 3,000 Manufacturing expenses Income from Sales In Mexican Peso ( Mex$) In thousands 1 US$ = 11 Peso In US Dollar ($) In thousands
  43. 44. Wild Coyote Tequila Financial facts <ul><li>In this Income statement, manufacturing expenses includes amount payable to our co-venture company encompassing production costs, (subset: plant costs, local salary costs, bonus pools and incidentals) salary of those employees which are migrated from US for taking care of onsite production operation, cost of hiring the domestic representative and other outsourcing related expenses. </li></ul><ul><li>Administrative expenses include the amount of interest paid on bank loan to United Commercial Bank about $ 5,000,00 (5 million @ 10%) per annum. </li></ul><ul><li>The amount of net operating income is still the subject of exchange adjustment (due to change in exchange rate). </li></ul><ul><li>We will create a reserve for exchange adjustment from this net operating income for future requirement. </li></ul>
  44. 45. How a joint venture will affects company’s profit <ul><li>Profit of Wild Coyote Tequila will increase because: </li></ul><ul><li>It will allow the company to carry out business with low capital requirement. As a result of this, the requirement of bank loan amount is also decreased and company need to pay low interest on it. </li></ul><ul><li>Company can avoid import taxes because in this case, company manufactures its product in Mexico that’s why not subject to any tariffs on importing its own product. </li></ul><ul><li>Company can avoid associated cost that is required to do business in foreign country. </li></ul><ul><li>It will also provide benefits of economic of scale, cheap labor by using existing manufacturing plant of our co- venture company. As a result of this production cost is low. This will helps company to take competitive advantage in market by selling high quality tequila at comparatively low price than our competitors. As a result of this, increase in sales and profit of the company for considerable amount. </li></ul>
  45. 46. Management scene <ul><li>Joint Venture </li></ul><ul><li>Avoid typical pitfalls in employee management </li></ul><ul><li>- cultural issues </li></ul><ul><li>- religious issues </li></ul><ul><li>- human resource issues, et al </li></ul><ul><li>Utilize existing management structure of host </li></ul><ul><li>company </li></ul><ul><li>U.S. Strategic Management Team sent to host company </li></ul><ul><ul><ul><li>Comprised of: - Legal Counsel </li></ul></ul></ul><ul><ul><ul><li>- Quality Control </li></ul></ul></ul><ul><ul><ul><li>- Comptroller </li></ul></ul></ul>
  46. 47. The Management Scene continued <ul><li>Profitability </li></ul><ul><ul><ul><li>Worked with host company management to </li></ul></ul></ul><ul><ul><ul><li>develop an incentive program to target two </li></ul></ul></ul><ul><ul><ul><li>areas that we deem critical to our profitability: A) Quality Control </li></ul></ul></ul><ul><ul><ul><li>B) Time to market – specifically </li></ul></ul></ul><ul><ul><ul><li> production turnaround time </li></ul></ul></ul>
  47. 48. Conclusion                                              

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