eco351_dkmdiapers_final

Running head: DKM DIAPERS: EXPANSION ANALYSIS PROPOSAL 1
DKM Diapers: Market Expansion Analysis
Kathryn Kitcho, Mits Oakley, Dominick Gulius, James Lynch
University of Scranton

DKM DIAPERS: EXPANSION ANALYSIS PROPOSAL 2
Market Expansion Analysis for DKM Diapers
DKM Diapers is an American owned firm inspired by Procter & Gamble, the
largest manufacturer of products in the areas of personal care, household cleaning, laundry
detergents, prescription drugs, and disposable nappies (Proctor & Gamble, 2014). While P&G
offers a large array of products, DKM specializes in baby and adult diapers that come in
disposable and biodegradable varieties. We strive to produce
the best quality products at affordable prices which are
currently fixed at $12.99 per forty count case of baby
diapers ($0.32 per diaper) and $62.00 per seventy-two count
case of adult diapers ($0.86 per diaper). Biodegradable
diapers are $0.08 more per diaper due to the cost of
materials. Our prices were chosen based on the current prices of diapers in both markets; we took
the top six company prices for each, chose a price that fell in the middle, and determined if that
price was feasible while abiding by our strict standards for mid to high-grade diapers.
The health of the consumer is priority number one; for example, DKM baby diapers are
always chlorine, dye, and fragrance free to avoid risk of reaction (Spurrier, 2015). DKM
categorizes as a green business, one that considers its current impact on the environment and is
always looking to find new ways to reduce its footprint. The company embraces the vision of
quality products that are eco-friendly and also effectively serve the target market while
conforming to the lifestyle of consumers in terms of personal care privacy and hygienic
practices. DKM currently sells mid to high-grade diapers to states on the east and west coasts,
obtaining most profit from wealthier, more populous states such as California and Florida. We
invest in research and stocks that support green business, raw material consumption

optimization, and new technologies and have seen growth in the company over the past year as
market demand has shifted to higher grade diapers (Nonwovens Industry, 2014).
DKM is based out of New York City, whose headquarters occupies a small office
building with about two hundred administration and finance employees. Diapers are currently
manufactured in Mehoopany, PA, three hours from headquarters and a few miles from one of
P&G’s manufacturing plants, located in the same township (Google Maps, 2015). This location
was chosen for its abundance of flat, wooded land and low population count, which is ideal for a
manufacturing facility’s surrounding area. Cheaper land prices were appealing as well, and its
location on the east coast near water and New York City will prove beneficial for company
interconnectedness and low travel costs of incoming and outgoing materials and products. We
were also able to save money on certain import costs by bundling some raw material orders with
P&G. The single facility uses premium baby and adult diaper machines to output tens of
thousands of our products daily. Raw materials (fluff pulp, Super Absorbent Polymer [SAP],
tapes, closures, elastics, etc.) are sourced from reasonably priced suppliers globally on an annual
basis. An analysis is performed yearly on cost changes and currency exchange rates on raw
materials to determine the best supplier for the year’s supply. The deal is completed via a
forward contract three months in advance unless it is determined that a multi-year contract with
price stabilization provisions is a more cost-effective option.
DKM is quick to follow any beneficial or socially significant trend(s) in the diaper
market. For example, diaper producers are currently working with key material suppliers to
develop new strategies to minimize required materials in fear of risk in the supply chain. Some
suppliers are authorized to change raw material formulations to achieve lowered costs and still
meet performance specifications. Material trends are observed through leading diaper advertising

campaigns that feature the softness, absorbency/leakage protection, and body-hugging fit of their
products. There is a stress on neuromarketing, a technique that requires advertisers to fine-tune
their messages to better reach the target audience. In this highly penetrated market, demand calls
for products with the best fit for purpose, that is, good absorption, dryness, and no leakage. They
also expect extras such as aesthetics and comfort. As absorption cores and elastics move through
their second to third generations, consumers come to expect diapers with higher absorbency
lasting up to twelve hours that also have a superior feel. These characteristics give the consumer
an idea of the level of quality of the product that can heavily influence a consumer’s decision to
buy that particular brand. Hygiene companies in particular, especially those based in the US, are
increasing market position in new and emerging markets due to the aforementioned new
strategies and formulations and the opportunities they present (Nonwovens Industry, 2014).
As DKM Diapers continues to function as a successful American firm in the diaper
industry, corporate executives have begun to consider the benefits of expanding into new
markets. The industry is currently growing, driven by rising birth rates and increased hygiene
awareness across developing countries (Bloomberg, 2012). The diaper industry is not one that is
easily entered by beginners or small companies due to the cost of raw materials, production
machines, staff, and competition (Richer, 2014); as a well-established company of over ten
years, we at DKM Diapers believe that our experience provides a strong foundation on which to
expand. Therefore, we would like to consider four very different candidate countries as potential
markets from both consumption and production standpoints: Japan, Russia, Poland, and South
Africa. Analyses on these countries will be performed by Kathryn Kitcho, Mits Oakley,
Dominick Gulius, and James Lynch, respectively.

The first candidate country is Japan. Located in the Pacific Ocean east of the Sea of
Japan, the island nation is slightly smaller than the state of California but has more than three
times its population living on its four main islands of Hokkaido, Honshu, Shikoku, and Kyushu
(Worldometers, 2014). This is even more astounding considering its mountainous topography,
which is to blame for Japan’s scarcity of livable land and the high cost of what little livable land
there is. The navigable waters that surround the nation are appealing at a first glance, however
Japan is farthest from other
developed countries that
engage in international
trade, so in this case, being
surrounded by water is not
very beneficial (Deardorff,
2004). Climate in Japan is
generally temperate, with
four distinguishable seasons.
This is similar to America
with only slightly harsher
summers, meaning any
American employees who
visit or relocate won’t have
to adapt too much. Resources (except for fish) are scarce; Japan is particularly lacking in fossil
fuels, minerals, and metals, which are crucial in helping to keep the cost of building and
maintaining a new facility low. Despite the country’s abundance of forests, lumber demand
Political Map of Japan
Source: nationsonline.org

exceeds what can be put out (Countries Quest, 2015). There are many earthquakes; in fact Japan
has one of the highest earthquake frequencies in the world. There have already been 384
earthquakes since the beginning of 2015, a dangerous consideration when thinking of operating
here (Earthquake Track, 2015). While almost all of these are minor, one cannot dismiss the
possibility of another disaster such as the 2011 Fukushima earthquake that triggered disastrous
tsunamis and caused nuclear reactors to explode from within a large plant. Extra funding would
need to go into ensuring the facility is safe and its employees are educated on how to deal with a
disaster situation. Airports are scarce as well and are being built on artificial islands away from
the mainland, which may cause unnecessary complications for company employees who might
travel there (Agency, C., 2012). Japan’s time zone is (UTC+09:00), which is thirteen hours
ahead of New York City where DKM is based. Business interactions may be difficult to organize
for this reason, despite the state of the art communication and conferencing technology available
in Japan and the US.
In contrast to the above against basing operations in Japan, the country is very appealing
from a consumption perspective, particularly for adult diapers, what with its large population and
having one of the highest average life expectancies in the world. Women in Japan are expected
to live on average eighty-seven years, while
Japanese men boast an average life
expectancy of eighty years (Thomas &
Fadéla, 2014). For baby diapers however,
the market is not as attractive. Japan is
facing a -0.13 percent population growth
decrease for the year 2014 (CentralSource: census.gov
Population Pyramid Graph

Intelligence Agency, 2014) and this shows little sign of potential increase as women continue to
become more independent and men work long hours and base their lives around their careers. As
seen in the population pyramid graph above, birth rates are low and shifting inward, while a large
number of middle aged adults is shifting upward. This only further supports the assertion that the
adult diaper market is what should be focused on were Japan to be targeted as a potential
consumer market.
Japan has a collectivist culture, meaning there is emphasis on group decision and well-
being over the individual. The main religions are Shintoism and Buddhism, both of which
emphasize the importance of community, although most Japanese do not practice their religions
vigorously and thus religion does not have a big impact on everyday life and purchasing
decisions (Japan-guide, 2015). Although Japan is collectivist, its citizens are big on personal
privacy. Japan has a high context culture, meaning impressions and relationships are important
and a big first step in establishing and maintaining business connections. It is thus important to
note that Japan is very materialistic and that many Japanese citizens are in favor of high quality,
brand name items that are often associated with wealth and stability. Since appearances are so
important, when marketing our products, DKM should focus on themes of inconspicuousness
and dignity.
The main language of Japan is Japanese, spoken by 122 million people in the country
with a literacy rate of 99%, one of the highest in the world (Mundi Index, 2015). While Japan
has formal English-language education, Japanese is still the primary business language and one
of the most difficult languages to learn. This is due to there being three types of writing styles
(hiragana, katakana, and kanji) and the different levels of implied formalities given the context of
the conversation. In fact “business Japanese” is often differentiated due to its emphasis on said

formalities. Businesses often need to hire multiple translators, as individuals cannot conduct
business without a deep understanding of the language and its contexts. This is especially
important because as mentioned previously, respectful relationships (i.e. ensuring the language is
understood and used properly) are crucial to Japanese business relations. High power distance
also contributes to this, that is, the Japanese believe that those in high positions must be
respected at all times, and often choose to follow whatever decision the higher ups make.
Japan faced an unexpected recession late last year, largely due to the consumption tax
increase that was put into effect April of 2014. Since then Japan has been on the rise, with
projected GDP growth at 3.7 percent for Q4 2015 and overall GDP growth at 0.6 percent
(International Business Times, 2015). Japan’s GDP is 4901.00 in USD billions with a steady
growth rate of .4 percent. GNI is 46140.00, and GDP per capita (Purchasing Power Parity),
which is the average income adjusted to inflation and other influencing factors, is valued at
35481.11 USD, the highest it has been according to Trading Economics’ 2015 data. Japan’s
projected growth and high PPP is a good indication that consumers will be willing and able to
purchase DKM’s mid to high-grade products. The country’s currency is the Japanese Yen, which
at the time of writing (12 May 2015) is 120.024 JPY for every 1 USD (Xe, 2015). The Yen
exchange rate is considered very favorable due to ease of exchange facilitated by monetary
easing by the Bank of Japan (Global Edge, 2014).
Much like Britain and Canada, Japan boasts a parliamentary system. This system, which
began in 1947, was based upon “the sovereignty of the people, respect for fundamental human
rights, and renunciation of war”. The system has three branches of government: legislative,
executive, and judicial, and is overseen by the Prime Minister, currently Shinzō Abe. Unlike in
the United States where the people elect their leader, the Prime Minister of Japan is selected

from current diet members amongst themselves (Web-japan, 2015). There is typically little
external backlash despite the lack of citizen involvement in this matter thanks to high power
distance. The current government has returned to a more traditional approach, and is working on
restoring citizen faith in the government, which is an attempt to combat the appearance of
internal instability in previous years. For example, Japan went through seven Prime Ministers in
the past seven years, an issue that caused concern and agitation in
its citizens (Global Edge, 2014). The two most powerful political
parties are the Liberal Democratic Party (LDP) and the
Democratic Party (DPJ). The former is more traditional, and
embraces such ideals as conservatism and Japanese nationalism
(staying separate from Western influence, military power, etc.).
The latter is more focused on new ideas and social equality and is
the main opposing force of Japan (Japan-zone, 2015). The
emperor is also a highly respected official, but has little say in
government and serves mostly to boost the morale of the Japanese
people. As we can see from Delcredere | Ducroire’s 2015 risk assessment above, there is little
risk in anything outside commercial issues. This is however perhaps the most relevant type of
risk from DKM’s perspective. Commercial risk refers to anything related to the buyer and seller
and consequences include consumer limitations, devaluation, and corruption (Delcredere |
Ducroire, 2015). There is also a decline in the number of citizens who are economically active
and a growing proportion of workers without job security (Global Edge, 2014). This implies that
workforce trust will not come easily with constructing a firm in Japan.
Source: delcredereducroire.be
Japan 2015 Risk Assessment

The first of a few legal issues that also act as barriers to trade is taxation. There are
fourteen payments a business is required to pay yearly which total about 330 hours per year of
filing time. 29.8 percent of a company’s profit is taxed under a profit tax, an additional 18.1
percent goes toward labor tax and contributions, and there are other miscellaneous taxes that
require an additional 4.2 percent. These are incredibly high rates, totaling 51.2 percent of profits
that the company would not retain were it to operate within Japan. In terms of getting credit, the
most outstanding thing we noticed was that the strength of legal rights for Japan (on a scale from
0-12, 12 being the strongest protection of borrowers and lenders) is a measly 4 for non-Japanese
firms. Looking more closely at Doing Business’s 2015 page on Getting Credit, most of the
statistics indicate that much of what an outside firm is trying to do is either not covered or poorly
covered when it comes to finances. Japanese workers on the other hand are very well protected,
with high availability of unemployment protection schemes, health insurance for permanent
employees, and court/court sections specializing in labor disputes. Intellectual property rights of
said employees are similar to the US with patent, copyright, utility law, and trademarks (Japan
Patent Office, 2015), but with the type of work they would be doing for DKM, i.e. managing
sales, distribution, and manufacture, this isn’t too pertinent. Additional barriers to trade include
the physical distance from other developed countries, relationship requirements between firms to
strike business deals, and general antitrust from the Japanese toward outsiders. At the very least
bribery is low, and this is thanks again to high power distance and the genuine relationships the
Japanese try to form in the business world before agreeing to work with an outside firm.
To summarize briefly, Japan presents too many physical, cultural, and legal barriers when
thinking about expanding operations in the country. They are somewhat closed off and hesitant
to comfortably welcome outsiders into their economy. The lack of livable land and resources as

well as its distance from other developed countries is also unappealing. If anything, the market
for adult diapers should be considered further due to the large elderly population and the
willingness of the Japanese to pay more for a higher quality product. These conclusions will be
explained and justified in more depth in the final section of this report.

The second candidate country is Russia (Fig. 1), the
largest in terms of area and the ninth most populous in
the world (Worldometers, 2014). Russia is located 60
degrees north (longitude) and 100 degrees east
(latitude) and covers eleven different time zones.
Russia is located far north of the equator, which
causes it to experience long, cold winters and short, cool summers. Russia has a total area of
17,098,242 sq. km, of which 16,377,742 sq. km is land; this is almost twice the size of the
United States. It is a mountainous country with nine major mountain ranges, most of which lie
along various country borders. It borders European and Asian countries as well as the Pacific and
Arctic Oceans. In general, the eastern half of the country is most mountainous (Photius, 1996),
thus most of the population and major industries are situated in the western half on low plain
terrain, west of the Ural Mountains (Lardbucket, 2012), known as the Russian Plain. This major
area includes the Moscow, Volga, and Ural Mountain regions. This central industrial area is
home to more than fifty million people which makes up 35 percent of the Russian population
(Lard Bucket, 2012). If DKM were to consider expanding its operations into Russia, which is
appealing given its large population, this would be the area to consider targeting. A great
resource that is available on this side of the country is the Arctic Passage. This is now possible
due to the change in climate in that area from extreme to moderate (National Geographic, 2007).
This passage connects the Pacific and the Atlantic oceans; if DKM were to expand operations
into this area, this passageway would be a vital source of cheap water transportation for the
import and export of raw materials and finished goods.
Source: GoogleMaps
Fig. 1 Map of Russia

With the possibility of importing and exporting of goods in Russia, DKM will examine
some barriers to trade. Russia is a member of the APEC organization, which Japan, the first
candidate country, and United States, DKM’s base country, are both members of (Global Edge,
2015). For DKM this means a lower transportation cost when shipping goods between Russia,
Japan, and the United Stated because there are no tariffs imposed on the importing or exporting
of good to these countries under APEC. This is appealing to DKM’s transportation budget. If
there is a reason to import from or export to other countries, the cost increases significantly. To
export goods from Russia, it requires nine documents, takes 21.1 days and costs $2,400.50 USD
per container. To import, it requires ten documents, takes 19.4 days, and costs $2,594.50 USD to
import each container (World Bank Group, 2015). These time-consuming logistics are not
appealing.
Bordering countries such as China, North Korea, and Ukraine all have current political
issues that could potentially affect business in Russia. The current conflict between Russia and
Ukraine that started in April 2014 has caused WTO to postpone a bid Russia had placed to join
the Organization for Economic Co-operation and Development (2015 Economic Freedom,
2015). This conflict has pushed Russia into a closer relationship with China. Tensions with
Ukraine involve low oil prices and resulting sanctions have elevated Russia’s political risks.
These sanctions have caused banks and corporate financing capabilities to weaken, and due to a
lack of foreign financing, Russia is currently at a level three for terrorism risk (Aron, 2015). The
possibility of a terrorist act against Russia is low, but that could rise suddenly because of the
current conflict Russia has with Ukraine. According to Delcredere/Ducroire, Russia is at a
medium risk for short term and long term export transactions. The commercial risk for doing
business in Russia is rated at seven. This middle to high risk range of doing business in Russia is

not appealing to foreign investors like DKM, because the likelihood of DKM receiving payments
for goods exported to Russia is not likely to happen. The risk of war is also fifty percent and
there is a medium high risk of expropriation, which means there is a good chance the Russian
government will take ownership of a company and pay back the company less than what it is
worth (Delcredere Ducroire, 2015). A situation like this would leave DKM with financial loss.
The financial risk of starting a company in Russia presently is very risky due to OPIC suspension
of all consideration for any new financing and insurance transactions in Russia (Opic, 2015). The
cost to start a company in Russia is 1.1% of income per capita (World Bank Group). Without
financial insurance, if DKM fails or has any loss, it will have to absorb these losses.
Russia has recently lessened its birthrate decline; as of 2014, it boasts a 0.011% increase
in births, bringing them up from the previous years to a -0.03% overall population growth rate.
The average life expectancy in Russia is seventy-seven years for women and sixty-four years for
men (Central Intelligence Agency, 2014). Being that there are so many people in Russia, even
with its small decrease in the overall negative birthrate, there is still a relatively large opportunity
in the baby diaper market. Average life expectancy isn’t so high that the market for adult diapers
is overwhelmingly attractive, but again, since Russia is so populous, actual numbers should be
considered before making a definite conclusion. Russia’s current population size is 142 million
with a median age of 38.4 which is equivalent to 1.97% of the population (Worldometers,
2015). This population group is in the prime of their life, typically with families and would be
actively seeking jobs with higher wages to maintain households. Fig. 2 shows that the current
working age group of the population is now at it largest, but over time that group will shrink due
to the low fertility rate which may be a result of the low education levels of women in Russia.
This shrinkage will result in a labor wage increase, due to the demand for workers. From a

consumer perspective, the large age group of citizens
from 34-64 years of age will shift up, making it
appealing to sell adult diapers here. However, it will
take a significant amount of time for this group to
reach the dependent age; if DKM wishes to consider
expansion now, this may not be ideal.
Russia offers free education to its citizens. It
is mandatory for citizens between the ages of 6 and
15 to attend school (Just landed, 2015), resulting in a high literacy rate of 98%. 94% of the
population group from ages 25-64 have a high school diploma or equivalent. This is the case
more so for women in Russia than men (OECD Better Life Index, 2015). These numbers give a
better understanding of the reason the Russian population growth rate is on the low side. The
level of education for woman has an impact on how many children they’ll bear, that is, the
higher the education level, the less children a woman is likely to have. The Russian population
has taken a hit due to health issues as well. According to Yale Global Online, there is a high
premature mortality rate due to smoking, alcohol consumption, drug use, obesity, HIV/AIDS,
and environmental pollution (Yale Global Online, 2015). “The probability that a 15-year-old boy
will die before he reaches 60 is more than 40 percent” (Common Dreams, 2012). With these
health crises in Russia, there is potential for DKM having to shell out a high amount for health
insurance for its Russian employees were we to expand here.
DKM being a US company; when looking to start a business in a foreign country where
English is not the native tongue, it is important to investigate to see what percent of that
population speaks English. According to Country Comparator.com, only five percent of the
Source: census.gov
Fig 2. Population Pyramid Graph

Russian population speaks English. This could be an issue with doing business in Russia. With
such a low rate of English speakers, there is a great chance that most of the potential workforce
does not speak English. DKM would need to invest in backward translation in order to avoid
unnecessary expenses due to miscommunications and consequential missteps.
The Russian currency is the Ruble. It is pegged against the US dollar. The current spot
rate on 08 May 2015 was 51.0460, the price of one US dollar to Rubles (Bloomberg, 08 May
2015). The currency exchange rate is a pro for DKM. According to The Big Mac Index, the
Ruble is undervalued by 71.5% (Economist, 2015). This will attract business to Russia and in
turn bring potential business to DKM for its
low cost diapers. The GDP per capita is
$24,114 and the top 20 percent of the
population has an income level of $45,618
USD per year (OECD Better life Index,
2015), which is about the GDP. This group
of people will be able to afford DKM
diapers.
The March 2015 manufacturing
wage rate in Russia is 33205.00 Rubles per
month which is equivalent to roughly $650.49 USD which can be seen in Fig. 3. This is an
increase from that of February 2015 which was 31325.00 Rubles (Trading Economics, 2015).
The unemployment rate has increased from 5.8 percent in February 2015 to 5.9 percent in March
2015 (Trading Economics, 2015). This increase in unemployment is appealing because there is a
chance that potential employees may be willing to work for less than the going wage rate. An
Source: tradingeconomies.com
Fig. 3: Russia Avg. Monthly Earnings

ongoing threat to the worker in Russia is the issue of pollution. “Pollution is adding to budgetary
strains, reducing labor productivity through illness and absenteeism, and damaging natural
resources. It also is deterring some domestic and foreign investors who are concerned about
cleanup and liability issues” (Fas, 1999). If considering operating in Russia, DKM has to take
this issue into consideration to evaluate how this will affect the productivity of the company. If
employees are always getting sick and are not able to work, there will not be a high pay out for
medical insurance like mentioned earlier but also in productivity and the turnover rate of the
worker.
We have determined that the Russian market is not a good candidate for DKM Diapers to
manufacture in nor sell to after analyzing the data provided in this report. The main reason for
this conclusion is the current conflict between Russia and Ukraine. It is causing the economy to
fall and has a 50 percent chance of war breaking out. If a war does spark, the chance of the
Russian government expropriating DKM Diapers to fund its cause is high. There is a current lack
of foreign investments in Russia and with OPIC suspending all consideration for any new
financing and insurance transactions, this is a huge risk since all monetary funds that would be
invested would not be insured. If DKM fails in Russia, it would suffer all that loss with no
return. With the commercial risk at the highest seven, if DKM were to export goods from the US
to Russia for the sales market, the likelihood of DKM receiving the payment is greatly unlikely.
Thus, DKM should not do business in Russia.

Poland is the third of four countries being
considered as a possible destination for foreign direct
investment (FDI) by DKM Diapers. Poland’s relative
location is Central Europe. As seen on the map, Poland
is mostly landlocked except for the Baltic Coast. From
a business perspective this is extremely beneficial. We
have the opportunity to transport our product by sea and
by land to its bordering countries. The capital and largest city in Poland is Warsaw, located on
the Vistula River, in east-central Poland.
Poland has a total area of 312,685 sq. Km, with a land area of 304,255 sq. Km, a water
area of 8,430 sq. km and a coastline of 440 km. Poland is the ninth largest country in Europe and
the sixty-ninth largest in the world (worldatlas.com). There are two main regions with in Poland,
the Polish Plains and the Southern Uplands and Mountains. The Polish Plains lying along the
Baltic Coast stretch from Germany to Kaliningrad Oblast (Russia). This region has thick deposits
of debris left by retreating glaciers, which has left some of the land marshy and poorly drained.
The two main rivers that drain northwestward to the Baltic Sea are the Vistula and Odra
Rivers (nationsencyclopedia.com). The Vistula, Poland’s most important waterway covers all of
the southeastern and east-central regions, and drains into the Baltic Sea at the Gulf of Gdansk
(ceebusinessportal.eu). The Oder covers most of the border between Poland and Germany and
also drains into the Baltic Sea. The main ports in Poland are the Gdansk, Gdynia, Kolobrzeg, and
Ustka (ceebusinessportal.eu). If DKM Diapers were to invest into Poland, the Vistula and Oder
would be optimum waterways for product distribution. The Vistula and Oder are linked with the
Source: GoogleImages
Map of Poland and Bordering Countries

inland waterways of Western Europe. We would also be able to use the ports to export our
product from Poland’s Baltic Coast to destination ports.
Inland, the surface rises to rolling land known as the Baltic Heights. This area contains
numerous lakes, mountains, and glacial hills. Mountain ranges, low-lying plateaus, and partly
enclosed basins all make up the landscape of the Southern Uplands (worldatlas.com). As a
country of interest for DKM Diapers, Poland offers very few geographical barriers, as most of
the country’s landscape consists of flat terrain. This kind of topography will allow us to maintain
low distribution cost and effectively transport our product to other potential destinations.
Poland has a temperate climate with cloudy, moderately severe winters with frequent
precipitation (globaledge.msu, 2014). In the winter, Poland faces temperatures well below zero
degrees Fahrenheit and sometimes-heavy snowfall. Poland’s winter often brings sub-zero
temperatures that may negatively affect distribution channels. In the case of these sub-zero
temperatures, our use of the Vistula and Oder as navigable rivers may be limited. The winters
would increase our distribution costs, as we would need to use more expensive means to
distribute our product. In the summer, Poland often experiences dry, sub-tropical air masses that
bring warm days (Weather Online). In these summer months, DKM Diapers would see lower
distribution costs, as we would be able to use the Vistula and Oder for our main distribution
channels.
Poland has a population of approximately 38,346,000 as of 2014; making it the second
most populated country in Central Europe (census.gov, 2014). Poland’s labor force is made up of
18,511,932 citizens (2013), and about 30.4% are employed in industry. If DKM Diapers were to
open a factory in Poland, many of these potential employees would already possess the necessary
skill to work in this industry. This skilled work force ensures us that limited training will be

needed, in turn keeping labor cost and wage rates low. Poland’s strong educational system has
been an important factor to increase its countries skilled labor force. Poland holds a total
population literacy rate of 99.7 percent, and a school life expectancy of 15 years (cia.gov, 2012).
As of 2014 Poland has an unemployment rate of 12.7 percent (cia.gov, 2014). This relatively
high unemployment rate does not suggest that consumer buying power is low. The World Bank
has Poland valued at a high income level per capita GNI. (globaledge.msu, 2014). Although
Poland has a higher unemployment rate, their large domestic market is an appealing factor for
DKM Diapers. Poland considers diapers as a necessity item, so sales in the domestic market
should remain constant.
Poland Currently has a declining population growth rate of -0.11 % (Index Mundi). With
a declining growth rate, a fertility rate of 1.3 (2014) births per woman, and an infant mortality
rate of 6 per 1,000 population; this is a possible threat to sale and growth for DKM Diapers baby
products (census.gov, 2015). With the declining population and low fertility rates, Poland still
has an average life expectancy of seventy-seven years of age, allowing DKM Diapers to target
this aging market. (cia.gov, 2014). With the data from Poland’s growth rate, fertility rate, and
infant mortality rate, looking at the Population Pyramid Graph below, we can see Poland is
entering a very unstable stage. Poland is currently in stage four, which could be very
problematic. In the long term this stage can lead to a large number of people retiring from the
workforce, which means fewer workers available, eventually leading to increased labor costs.
For DKM Diapers our target market would be the aging group, but with fewer workers and
increased labor costs, we may not have a large enough labor market to be profitable.

The Polish currency is called the Polish
Zloty, and as of May 9, 2015 Yahoo
Finance has it set at 3.61 Polish Zloty’s
for one US Dollar. Poland’s 2014 gross
domestic product, as measured by
purchasing power parity, was $941.4
billion and GDP / Capita was $24,400 in
2014 (cia.gov, 2014). Over the past five years growth has slowed in the Polish economy due to
the ongoing economic difficulties in the euro-zone (Central Intelligence Agency). But economist
predict that Poland’s economy will grow by about two and a half percent per year throughout
2030 (Foreign Affairs) For DKM Diapers, Poland has displayed that it has a stable economy and
is able to maintain it-self in times of distress. If Poland is able to maintain its expected growth,
DKM Diapers can expect growth as well in the diaper industry. Poland’s transition to a free
market economy allowed Poland to integrate into the mainstream global economy (cfr.org,
2012). Poland has been able to harness its high productivity, low wages, and educated labor force
to market itself as an attractive destination for investment. Poland, offers a friendly business
climate and plenty of skilled labor.
Poland’s constitution states “that the Republic of Poland is a democratic state ruled by law,
implementing the rules of social justice, ensuring the protection of the natural environment in
line with the principle of sustainable development” (president.pl, 2015). The governmental
structure consists of three branches of government, similar to the United States, with; legislative,
executive and judicial branches. In the executive branch power is vested in the President of the
Republic of Poland and the Council of Ministers.
Source: census.gov
Population Pyramid Graph

The president serves a 5 year term and can only serve a 2 term presidency. The Current
President of Poland is Bronisław Komorowski. He is currently finishing up his first term and is
running for the presidency for 2015. The next electing is set for 10 May 2015. The Prime
Minister of Poland is Ewa Kopacz. She has promised to the public of Poland that she will not
make any radical changes, but instead will create more nursery schools, senior living homes, and
to reduce youth unemployment. In addition, she has also promised the public more affordable
electrical prices.
By having set election dates, it allows DKM Diapers to predict risks that may come with a
change in office. By knowing this information we can predict policy changes relating to business
functions such as taxation, labor laws, and trade across borders One problem with the President
and the Prime Minister is that they both will soon be facing elections. For DKM Diapers, this
election may bring changes in government, meaning that policy changes may follow. DKM
Diapers strongly believes that with Komorowski and Kopacz in office, we will be able to
implement business operations in Poland with limited political risk.
Poland is a very attractive location for foreign direct investment (FDI) in the emerging
Europe region. Poland’s government has made great strides in lowering trade barriers and
removing restrictions on foreign direct investment (bmiresearch.com, 2015). All of this was
made possible by the establishment of an increasingly stable legal environment. Poland’s open
markets and considerable trade flows are very appealing factors for DKM Diapers. The country
has improved business regulations, privatized state industries, and lowered barriers to trade, all
of which have help Poland see strong economic growth (bmiresearch.com, 2015). For the future
Poland is expected to continue seeing economic growth; with government policies and incentives
targeting FDI into sectors like business services, R&D, automotive, and electronics.

To the right we can see Delcredere | Ducroire’s risk
assessment of Poland. In the three categories under political
risk; Short term, medium/long term and special transactions,
Poland has been given an average rating of a 1 out of 7 for
political risk (Delcredere Ducroire). These ratings identify the
intensity of political risk in that country. Poland has been
given the lowest score of a 1 displaying almost no political
risk of doing business there. They have also been given a
commercial risk grade of an A (Delcredere Ducroire). This
rating is extremely important for our business
functions. This rating suggests that our trading partners
will be able to deliver or pay for products or services agreed upon. The risk assessment also
covers three areas that can have an affect on direct investment; War Risk, Risk of expropriation
and government action, and Transfer risk (Delcredere Ducroire). The scale for these is also from
1 to 7, and Poland averaged a score of 1 for these three areas. These assessments ensure us that
we will not see any government intervention relating to our business functions.
Poland’s top three export partners are Germany, United Kingdom, and the Czech
Republic. In 2014 exports totaled $218.9 billion, in sectors such as, machinery, transport
equipment and intermediate manufactured goods (cia.gov, 2014). Poland belongs to several
international organizations relating to trade and economic sustainability. Poland is a member of
the Organization for Security and Co-operation in Europe, The European Bank for
Reconstruction and Development, the World Trade Organization and the General Agreement on
Tariffs and Trade. These international organizations are extremely important as they help
Source: (DelcredereDucroire Poland’s Risk assessment)

facilitate investment climates, enhance the private sector, and provide legal ground rules for
international trade. As active members of these organizations, we can form our business
operations around the policies already set in place. Since we are looking into foreign direct
investment, OSCE can play a very important role in helping us expand our business into
Poland’s large domestic market.
Polish is the main language spoken in Poland by about 97.8 percent of the population
with the other 2.2 percent is unspecified (culturecrossing.net, 2014). If DKM Diapers is to
conduct business in Poland, we will have to pay close attention to the language barrier, which
can be lessened by having employees that speak fluent Polish, preferably in addition to fluent
English. In regards to marketing in Poland, the color white represents intelligence or neatness,
which may be beneficial for DKM Diapers to market our white products.
Some cultural implications include religion and family. The most practiced religion in
Poland is Catholicism, which is attributed to 87 percent of the population (cia.gov, 2012). Polish
believers celebrate the same religious holidays as in the United States (such as Christmas),
therefore religion should not have much of an impact on DKM’s business operations
(Kwintessential, 2013). Family is the core of their social structure, with family values as the
highest priority for each individual. Marriage consequentially comes as a holy responsibility
(everyculture.com).
In summation, DKM Diapers should strongly consider engaging in foreign direct
investment in Poland. Trends suggest that the majority of parents in the country consider diapers
a necessity item. The products that we will be offering are of high quality and are what the Polish
consumer is looking for. If we are to enter into Poland, our main focus will be on the aging
population. Poland has an estimated population of 1.6 million their mid-60s early-70s. In regards

to business operations, Poland has two main rivers that drain northwestward to the Baltic Sea:
the Vistula and the Odra. As accessible waterways, we will be able to establish distribution
channels throughout Poland and into ports on the Baltic Coast. Since we are looking to cut cost
and increase profits, the use of these waterways will allow us to keep our distribution costs low.
Poland has a labor force of 18,511,932 citizens, which many of these potential employees
already possess the necessary skill to work in this industry. This skilled work force ensures us
that limited training will be needed, in turn keeping labor cost and wage rates low. Poland has
marketed itself as an attractive destination for foreign investment with its high productivity, low
wages, and educated labor force. Poland offers a friendly business environment. Delcredere
Ducroire’s Poland risk assessment suggests that Poland has almost no political risk of doing
business. Poland has also been given a commercial risk grade of an A, suggesting that we will
receive payments from our trading partners. Cultural barriers in Poland will not affect our ability
to produce and market our diapers to consumers. With all variables considered, the Polish market
could possibly be a profitable venture for DKM Diapers.

Source: Utexas
The fourth and final country being considered by DKM Diapers is the illustrious country
of South Africa. Located at the southern tip of Africa, the country has nearly 2,798 km (Central
Intelligence Agency, 2015) of coastline, which splits into both the Atlantic and Indian Oceans.
This would be ideal for shipping via water since it is the cheapest method of transportation and it
allows for exposure to both
seas. In regards to topography,
there is a vast range of terrain
including the Karoo Plateau, a
large, rocky, and mountainous
region that is inhabited by very
few thus making it unattractive
for expanding from a supplier
perspective. There is a lot of
arid savannah located to the
north and luscious grassland stretching amidst central South Africa. The best bet for our
expanding operations would most likely be along the coast in a less tropical and flat grassland
area.
In terms of climate, most areas see extremely hot summers and frigid winters. Tropic of
Capricorn passes through the northern part of South Africa, causing extreme temperatures that
can pose a threat for a healthy business in regards to functionality. It would be challenging to
brace for winters with an average temperature of 5 °F and summers that can reach beyond 110 °F
(South Africa info, 2012). There is a potentially large hazard in the Marion island volcano, which
has erupted as recently as 2004. Although this volcano is on an island approximately 1,190km

off the coast of Cape Town, it still poses a threat to polluting the air with volcanic ash
(Britannica, 2015). South Africa also has a solid abundance of resources, particularly metals,
which include gold, iron ore, nickel, tin, platinum, and copper. Investing in an area that has such
an abundance should cut down costs for constructing our facilities.
There is plenty of land to expand operations in South Africa. To put it into perspective,
South Africa is just under two times the size of Texas, exceeding over 1,219,090 sq. km in total
area (Central Intelligence Agency, 2014). South Africa’s population is near 53,500,000 with a
median age of 26.5 (Worldometers, 2015). The median age at which women in South Africa first
bear a child is 22.5 (Nationmaster, 2014). From this we can conclude that since the median age
of having a first child is under and very close to the median age of the whole population, diapers
are going to be in high demand. The downside to this ploy is that the fertility rate has been on a
constant drop since 1950 and is nearly down 60% as of 2015 (Worldometers, 2014). Over 93.7%
of South Africa’s population is literate, meaning citizens over the age of 15 can read and write
(Central Intelligence Agency, 2014). Further, South Africa is looking to strengthen its school
system through “E-Learning”, which is the connection from each school through WAN internet
connection that will work mutually with the new laboratories and computers that will be added,
which will provide better connectivity to the Internet, allowing easier access to information
(South Africa Info, 2015). Due to investments for better future education, by the time DKM
looks to migrate its business into South Africa, the literacy rate and overall intelligence level will
be higher. As for communication technologies, DKM will need to stay active and connected into
the international populace. South Africa’s telephone system is considered the “best developed
and most modern in Africa” (Phrasebase, 2015). With over 12 million people with phone access
and 2.4 million surfing the Internet, we would easily stay connected to the rest of the world and

spread the word about the best diaper on the market (Phrasebase, 2015). One potentially huge
social issue is the fact that AIDS is one of the biggest health epidemics in South Africa. This
could potentially affect the diaper industry due to the fact that many are disinclined in partaking
in sexual reproduction merely because of this deadly disease and how easily it spreads. South
Africa has the second highest number of deaths per year (globally), exclusively due to AIDS,
with just fewer than 200,000 casualties (Central Intelligence Agency, 2013). This epidemic is
enough to scare a business from ever investing in South Africa, however, there is still a large
population and high birth rate comparatively so despite this devastating fact this is still a very
appealing market.
South Africa has eleven official languages. One of them, English, is a native tongue to
only 13.5% of the population (Central Intelligence Agency, 2011). Other official languages
include the leading language, isiZulu, followed by
isiXhosa, Afrikaans, Sepedi, Setswana, Sesotho,
Xitsonga, siSwati, Tshivenda, and isiNdebele (there
are a few variations in spelling depending on
dialect)(Kwintessential, 2014). English however, is
considered the administration language and is
therefore spoken among most business executives
that operate in South Africa (Kwintessential, 2014).
It is known that South Africa’s connotation with the
English language is that it is one that is most often
associated with having some kind of wealth or power. Due to the obtuse variety of languages
spoken in this country and the consequential language barriers that exist, this puts DKM at a high
Source: The Economist

risk of communication error. With regards to faith, the leading religion by far is Christianity,
with close to eighty percent of the population classifying themselves as followers (Georgetown,
2015). According to the South African constitution, all who inhabit the country have the freedom
of religion, opinion, and belief. With similarities to that of the United States constitution, we
would not have a problem with any kind of reprimand for our workers’ religious practices. South
African culture does not acknowledge equality for women in the workplace. According to the
Economist, women make up nearly half the labor force yet hold no senior positions. A prime
quote from the Economist states, “On paper, South Africa has one of the world's most impressive
legal arsenals for protecting women's rights. But the gap between principle and practice is often
wide.” Women of South Africa have a great government backing but are yet to lock down any
meaningful and powerful positions. This could potentially pose a social problem when holding
meetings with South African workers; they may be uncomfortable with the participation of our
female executives. This is due to their observance of a high power distance culture in the
workplace. (Hofstede, 2015). South Africa also has a high masculinity rating, meaning they are
focused on competition and becoming the victor. This could mean that entering into a highly
competitive market such as diapers could be more difficult than first thought. They are also an
individualistic society in that they mostly care for themselves and their immediate family. DKM
must be careful when considering their ideals, but it should not prove too difficult, as our society
is quite similar when it comes to factors of cultural relativism when compared to South Africa.
South Africa is on the rise when it comes to economic development, an ideal reason to
bring DKM into its blossoming market. Its GDP (purchasing power parity 2014) is $683.1 billion
and currently ranked thirty one on the global scale. Its GDP per capita (chained 2013 dollars) as
of 2014 is around $12,700 (Central Intelligence Agency, 2014). South African GNI per capita is

around $7,190 (World Bank Group, 2015). GNI is the income of all South African producers
while GDP is the value of all goods and services on South African soil. This gives us a good idea
as to how strong a country’s economy is as well as its standard of living. South Africa has an
upper-middle level income (Global Edge, 2015). Its currency is the rand; for $1 USD you can
obtain 12.1502 rand and for 1 rand you would procure $.0823 USD (Wall Street Journal, 2015).
According to the Big Mac Index, the Big Mac in South Africa was very underpriced by over
50%, which shows the rand is undervalued by the PPP theory. South Africa is our best choice out
of the entire continent as it has the largest economy in all of Africa (Global Edge, 2015).
However, when looking at the balance of payments, we cannot conclude this is our best choice.
As of 2013, the B.O.P has dropped to $-20,507,184,190 USD (Global Edge, 2013). One good
takeaway from making an investment into South Africa would be that there will be a surplus of
laborers due to the fact that the unemployment rate is 25 percent (Global Edge, 2013).
South Africa’s government is a republic, with a president that acts as both chief of state
and head of government. The current president who also won a reelection goes by the name of
Jacob Zuma. He is part of the African National Congress, the leading political party with the
most members, which is only one of thirteen political parties in Parliament (Global Edge, 2015).
Much like that of the United States, South Africa has three branches of government: Executive,
Legislative, and Judicial. Based on the AON political risk map, South Africa is at a medium
level of political risk and still growing. It proceeds to sum up the overall gist of the government
system by saying that, “Government inefficiency, corruption and petty violence hinder the
otherwise favorable business climate.”(AON, 2015) The Government however is implementing
many plans to grow the economy, one being the National Development Plan. This plan looks to
double GDP by 2030, reduce inequality as well as lower the poverty level, and raise the standard

of living (World Bank, 2015). This blueprint looks to be promising for the growth of South
Africa’s economy. DKM could potentially thrive within and be a key investor of that growth.
One recognizable issue that needs to be addressed in South Africa is the ongoing blackouts due
to a lacking infrastructure (Global Edge, 2014). The Clean Technology Fund has granted $250
million for the building of renewable wind and solar energy to combat this issue (World Bank,
2014). This could help rebuild the energy infrastructure, allowing for a potentially smoothly
operating business venture.
The legal environment of South Africa is another very influential external force that our
business needs to explore. One important area to cover is taxation. The corporate tax rate of
commercial profits is 28.8% (Doing Business, 2014). That’s nearly one-third of our profits taken
by the government. However, that rate could save us money in the long run because we would be
avoiding the corporate take rate of 40% in the United States (KPMG, 2015). According to
“Doing Business”, South Africa is ranked 43rd out of 189 economies for ease of doing business
within that country (World Bank, 2015). This refers to everything from obtaining credit and
enforcing contracts to dealing with construction permits and protecting minority investors. A big
strength of South African legal structure is that there is solid protective legal environment for
investors (Global Edge, 2014). South Africa is a member of the World Intellectual Property
Organization. The use of a patent shall last twenty years as signed in the Patent Cooperation
Treaty and the use of a trademark shall last ten years as designated in the Trademark Law Treaty
(Santander, 2015). With all this legal protection, DKM should feel safe in knowing our product
will not be infringed upon or stolen. When it comes down to hiring employees, it is going to be
tough to find skilled laborers. The labor laws in South Africa state that workers cannot work
more than forty-five hours a week or nine hours in a day (Santander, 2015). It is also considered

a criminal offense to employ a child under the age of fifteen (International Labour Organization,
2015). Also the minimum wage for a 19-year-old cashier with 1 year of experience is $336.46
per month USD (World Bank, 2015). Outsourcing our work to South Africa will not be that
much cheaper than getting labor in the United States. Another legal environment consideration of
South Africa is its bribery and corruption. “According to Transparency International, almost half,
47% to be exact, of South Africans paid a bribe last year” (TimesLive, 2013). Bribery being a
way of life opens many opportunities for potential problems and must be researched and
prepared for appropriately if DKM decides to do business here. Corruption is said to span from
police forces all the way to government.
Overall I think there is plenty of untapped potential within the country that successfully
hosted the 2010 World Cup. South Africa is hugely wealthy in the area of natural resources in
which we can benefit from greatly. There is also an enormous labor force in which we can pick
from to initiate our establishment. This will ensure a positive relationship with the local
population as we both can benefit greatly. South Africa is one of the most economically and
politically stable countries out of Africa. If we had to pick a country out of this continent it
would surely be South Africa. With amazing exposure to coast, and large cities inhabiting these
coasts, there will be superior areas to establish easy access trade routes. Another key area is it’s
legal protection for investors. If we invested in South Africa we would have all the necessary
elements to keeping a secure venture. Overall South Africa has the potential to grow and we at
DKM Diapers have the opportunity to prosper along with them.

Through our thorough observations of each of the candidate countries, we have been able
to determine which, if any, would be suitable for DKM Diapers to consider as a host for
expansion of its operations or sales market. In this final section of our proposal, we will highlight
the most outstanding characteristics of each country’s status in terms of physical, social, cultural,
economic, political, and legal environments and take a comparative look from both production
and consumption standpoints for DKM. Based on these comparative observations, we will rank
the four candidate countries in ascending order from most to least beneficial as targets of
continuing analysis for expansion.
In terms of physical environment, Japan, Russia, and South Africa all suffer negative
consequences from having
a mountainous topography.
For Japan, the mountains
that span the entire island
nation limit valuable
resources (fossil fuels,
metals, minerals) and
livable land. Russia’s east
side is covered in
inhabitable mountains and makes water travel from this part of the country difficult. The same
applies to South Africa; the mountains along the southern coasts push the population to the
center of the country and make travel from the bottom edges difficult. While Japan does not have
a shortage of docks from any of its main islands, as mentioned earlier, it is not located physically
close to any developed nations that it engages in international trade with, therefore rendering its
Sources: worldofmaps.net, mapsof.net, www.sras.org, www.selftours.co.za
Topographic Country Maps

Source: worldometers.info
Source: census.gov
abundance of ports useless for DKM’s purposes. It is also dangerous given its high earthquake
and tsunami frequencies. Poland on the other hand is perfect for water and land transportation of
goods via the Baltic Sea and other smaller waterways that stem from it. Its large number of
bordering countries offer many opportunities for relatively close land transportation. From a
production perspective Poland is ideal, as is South Africa due to its abundance of resources such
as metals and iron ores which would assist greatly in constructing and maintaining a
manufacturing plant.
Looking at population and demographics, we can see which countries are appealing to
market to and if so, which type of product
(adult vs. baby diapers) should be
offered. Based on the population
pyramids to the right, we can see a large
number of middle aged to elderly citizens
for both Japan and Poland shifting
upward. Russia is stuck at an awkward
in-between; there are many citizens just
reaching middle age that will take a good twenty to thirty years before there are enough people in
that group that makes it appealing to sell adult diapers. In complete contrast, South Africa,
despite its birthrate decline, has the
majority of its population in the lower half
of the age scale. Not only is it appealing to
market baby diapers here because of the
amount of infants, but the young people of
Population Pyramid Graphs (2015)
Population Statistics (2014)

Sources: countrycomparator.com, census.gov, ec.europa.eu,statssa.gov.za
which there is a high amount may soon be giving birth. The chart above aims to give a more
concrete look at the population through median age, which matches up with the shape of the
pyramid graph for each country and gives an idea as to how many people we are dealing with in
total. Naturally, a high population is more attractive since that mean more consumers to market
to. While Russia is the most populous of the four, its median age is again at that in-between,
which makes it unappealing for both adult and baby diapers. Take note of Japan’s high median
age and South Africa’s low median age; these countries are appealing for adult and baby diapers
respectively, largely for this reason.
If we were to market in any of these countries, literacy rates and languages must be
considered. Japan, Russia, and Poland boast extremely high literacy rates in their native
languages. South Africa, while having a high percentage, lacks in comparison. This is an
indication that our marketing
techniques for South Africa may
need to be tailored in very specific
ways, especially considering South
Africa has eleven official languages.
Another important observation to make is how many citizens in each of these countries speak
English. The above table shows the percentage of English speakers with a moderate proficiency,
which is the proficiency preferred when hiring someone to work at an English firm and perform
day to day operations as well as communicate on a frequent basis with other English-speaking
employees. Poland has the highest percentage with 33 percent, which makes it appealing for an
American firm to consider basing operations here. South Africa comes close with 31 percent
while Japan and Russia pale in comparison. This may be surprising for Japan given its English-
Languages, Literacy Rates, English Speaker Percentages

Source: globaledge.msu.edu
Source: globaledge.msu.edu
language education and wide commercial use of English. It is to be noted however that most
Japanese citizens only reach an elementary proficiency before they quit studying.
Economically, the candidate
countries rate as follows: Japan, Russia,
Poland, and South Africa. As a producer
of mid to high grade diaper products, we
want to be sure the target market can
afford our products. Looking at GDP,
Japan and Russia shouldn’t have a
problem, however Poland and South
Africa cause some rise of concern. After
adjustments for inflation and currency
have been made, which you can see in
the GDP Per Capita graph, the
differences are more leveled, bringing Poland to almost the same level of GDP as Russia. South
Africa still struggles, which suggests that
the prices of our products may need to be
adjusted, which further implies we may
need to find cheaper ways to produce and
transport our products for this market.
Political risk varies for each
candidate country. Based on the risk map to
the left, we can see that Japan and Poland
GDP and GDPPer Capita (2013)
Country Risk Levels (2015)

Source: doingbusiness.org
are both stable and have little political risk. South Africa’s risk is moderate, but Russia’s risk is
high. As we said earlier, this was due to conflicts with Ukraine. It is very risky for a firm to
invest and expand in a country with such high risk, deterring us further from the possibility of
doing so in Russia.
A final look at barriers to trade, specifically export logistics, will further work against
Russia as a candidate country for production. Japan stands out in this instance as the most
efficient and cost effective country from
which to export; Russia is the least.
Poland and South Africa aren’t as
efficient as Japan but are not far behind,
give for South Africa’s incredibly high
export cost, which suggests producing in and selling from South Africa (that is, keeping it
contained to the country) is probably the best option there.
With these observations in mind, we would like to suggest a ranking of the candidate
countries as follows: South Africa, Poland, Japan, and Russia. South Africa is appealing as both
a potential production location and target market for baby diapers due to its abundance of
resources and large population of young citizens. Poland is physically well suited to be the host
of a production location and a potentially attractive market for adult diapers given its
demographics. Japan is unsuited for production due to high cost of land, hazrds, and location, but
its attractive as a potential market for adult diapers given its demographics. Poland and Japan are
also both big on materialism and brand name culture; typically this means they are willing to pay
more for a higher quality product. We believe Russia is unsuited for any type of expansion,
primarily due to its high risk and unappealing middle-age group. We urge DKM Diapers to
Barriers to Trade

continue investigation into the three candidate countries that have been deemed potentially
beneficial for expansion.

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