export plan

Antonio Balassone EXPORT MANAGEMENT-TASK2
1
1.0 INTRODUCTION
1.1 Abstract
The aim of this essay is to do a consultancy for an imaginary British SME intending to export wetsuits
to USA. Firstly, the essay will introduce the case study and describe the firm’s business. Secondly, it
will analyse the main features of the business and market environment. Thirdly, the essay will address
the marketing issue, such as segmentation and distribution channels. Lastly, it will cover the
practicalities and technicalities of exporting wetsuits from UK to USA.
1.2 The business profile
The firm’s name is “Royal Wetsuit”, and it is a SME with 70 employees in Plymouth (UK). It is a
well-established business specialized in wetsuits for surfers. Royal Wetsuit has never exported so far,
but it is intentioned to enter the USA market relying on its particular product’s features.
Its wetsuits are merchandised under the logo “Royal Wetsuit”. Their main features are the flexibility
and the technology that maintains surfers warm during cold days. The technology developed by the
firm is not common in the market. It is not easy to find a wetsuit comfortable and particularly warm
at the same time.
Although Royal Wetsuits has a good turnover, over the past two years it has had some spare capacity.
Thus, instead of reducing the production, it is willing to target the American market in order to exploit
completely its capacity. Moreover, the company wants to expand its business across the borders even
to protect itself from an eventual downturn of the internal demand.
Due to its high quality products, Royal Wetsuits wants to put in place a premium price strategy.
Indeed, it wants to target the American market with prices higher than the average, differentiating its
offer from other brands (Albaum and Duerr 2011). Moreover, the premium price strategy should
allow the firm to overcome with the weakness of USD$ against the British sterling. In fact, the dollar’s
weakness could compromise a strategy based on the cost advantage, with an undifferentiated offer.
2.0 BUSINESS AND MARKET ENVIRONMENT ANALYSIS
Any export plan requires a general analysis of the business and market environment. In fact, such
analysis aims to provide the exporter with an insight on all external factors concerning the business.
The PEST analysis and Porter’s five forces analysis are useful tools. Indeed, the former analyses
several aspects of the importer country, the latter investigates the five forces influencing the company.
2.1 PEST analysis of USA
Below there is the PEST analysis of USA, which provides a macro snapshot of the American business
and market environment.
Political aspects
The American legal system is based on two different tiers: the state level, and the federal level. Thus,
Royal Wetsuits must carefully meet both level’s requirements during its export activities (gov.uk
2015).
According to ControlRisk, a global risk consulting company, the political risk in USA is classified as
“insignificant” (controlrisks 2015). In other words, it is highly unlikely that export activities could be
undermined by political events, such as a coup d’état or wars.

2
Moreover, the European Union and USA are negotiating an important trade agreement. It is called
TTIP, which stands for Transatlantic Trade and Investment Partnership. The TTIP aims to boost the
trade flow between EU and USA. In fact, it consists of reducing bureaucracy, adopting new rules to
facilitate the imports and exports, and simplifying overseas investments (ec.europa.eu 2015). Indeed,
UK Trade & Investment (UKTI) has predicted that -in the long term- the British economy could
enhance by £10 billion annually thanks to TTIP (gov.uk 2015).
Economic aspects
Analysing the American economy, it is possible to identify some business opportunities for Royal
Wetsuit.
The International Monetary Fund (IMF) has reported that the US GDP amounts to the 22% of the
gross world product. In fact, USA is the biggest importer of goods and the largest consumer market
(exportbritain.org.uk 2015). Moreover, the GDP has increased averagely by 2.4% over the past years,
and it is going to increase by 3% in 2015 (The Economist 2015).
Nonetheless, UK exports -to USA- might be hindered by the unfavourable currency exchange dollar-
sterling. In fact on April 22th 2015, 1 US$=0.67 GBP (ibid). However, Royal Wetsuit is willing to
put in place a premium price strategy, targeting not price-sensitive consumers. Therefore, the
currency exchange should not affect the exporting.
In addition, EU has a trade surplus against USA concerning European textiles and clothing, category
including wetsuits. This is an incentive to export Royal Wetsuit’s products to the USA. Below there
is the analysis of the European imports and exports with USA.
(Data source: ec.europa.eu 2015)
EU MERCHANDISE TRADE WITH USA
Textiles and clothing
2010 2011 2012 2013 2014
annual
average
growth
imports Millions of euros 1,338 1,347 1,476 1,441 1,478 02.05
exports Millions of euros 3,402 3,783 4,45 4,541 5,072 10.05
balance Millions of euros 2,064 2,436 2,973 3,101 3,594
0
2
4
6
2010 2011 2012 2013 2014
European textiles and clothing traded with
USA
imports Millions of euros exports Millions of euros
balance Millions of euros

3
Socio-cultural aspects
The socio-cultural differences across the regions make the US market an enticing opportunity for
British exporters (exportbritain.org.uk 2015). These differences provide several basis for the market
segmentation. In fact, it is possible to adapt the offer to the various ethnic groups, household disposal,
age, etc.
Moreover, there is no language barrier between UK and USA. So, the information flow between the
exporter and the importer is not affected. Additionally, both countries have a very similar business
culture (gov.uk 2015), and similar economic systems: they are both liberal market economies. These
shared features support business relations between UK and USA.
However, American business partners might present some cultural peculiarities to take into account.
For example, Americans follow strictly their schedule, being on time at business meeting is important.
In addition, due to the high level of litigations, Americans are likely to have an adviser during business
meetings. It is part of their business culture; it should not be taken as a lack of trust. Furthermore, in
business context Americans are used to making decisions quickly, minimizing the time for
negotiations (ukti.gov.uk 2015)
Technological aspects
The United States not only is the first economy in the world, but it is even the most technologically
advanced one. Moreover, American consumers are highly keen on technologically advanced products
(gov.uk 2015). Thus, it goes without saying that the spread of internet is wide and efficient. Therefore,
maintaining contacts with business partners overseas should not be a problem.
Moreover, it is forecasted that US is going to remain the innovation leader. In fact, it can benefit from
its top world ranked universities (ibid), such as the Massachusetts Institute of Technology.
In addition, in USA there is the Silicon Valley (California), which represents the most important
technological cluster in the world. In fact, global high-tech companies -Apple, Intel, Google, etc. -
have their headquarters there. It certainly contributes to the American competiveness in
microelectronics, information technologies, biotechnologies and instrumentation (Crone 2015).
2.2 Porter’s five forces analysis
Before exporting to USA, it is necessary the use of Porter’s five forces model. This model aims to
provide Royal Wetsuits with an industry assessment, by analysing the five forces that affect its
business. These five forces are the bargaining power of suppliers, the bargaining power of buyers, the
threat of substitutes, the threat of potential entrants and the main industry competitors (Grant 2013).
Bargaining power of suppliers
The bargaining power of suppliers is significant because of a couple of reasons. Firstly, Royal Wetsuit
requires a specific material to produce their wetsuits, which have to be comfortable and warm at the
same time. Therefore, its suppliers do not produce a standard product easy to buy from someone else.
Thus, the success of Royal Wetsuit depends on its differentiated supplies. Secondly, Royal Wetsuit
lacks of bargaining power against suppliers because of its modest dimension.
As mentioned before, it is a SME with 70 employees. In fact, the smaller is the firms, the higher is
the bargaining power of suppliers.

4
(Grant 2013)
Bargaining power of buyers
The bargaining power of buyers should not be overwhelming. Since United States is the largest
economy in the world, it has even the largest number of buyers. Thus, Royal Wetsuit will have many
opportunities to find the most suitable business partner. The eventual buyer is aware of Royal
Wetsuit’s opportunities, so it should be flexible during business negotiations. Moreover, its product
is innovative and differentiated. This should enhance the firm’s bargaining power. In addition, the
bargaining power of suppliers should not be strong because of their corporate strategy. It is unlikely
they are willing to engage a backward integration, by investing in operations to produce wetsuits.
Threat of substitutes
Fortunately, the threat of substitutes is insignificant. In fact, there is no other kind of product able to
substitute wetsuits to practice surfing. Thus, the threat of being replaced by other products is not a
logical concern.
Threat of potential entrants
The threat of potential entrants is medium-high. Royal Wetsuit manufactures differentiated products,
and it can rely on a high know-how, and on a particular technology. Therefore, its products
differentiation constitutes an obstacle for potential entrants that cannot afford the same technology.
Despite these advantages, Royal Wetsuit’s success is undermined by other factors favourable to
potential entrants. Indeed, they can benefit of TTIP agreement as well, and imitate its entry market
strategy. Moreover, Royal Wetsuit is a SME. It has not sufficient resources to set up financial barriers
to potential entrants. For example, it could not put in place a price war by exploiting a sizeable spare
capacity.
Industry competitors
The surf apparel industry struggled in the period following the financial crisis in 2008. It faced heavy
financial losses due to the low earnings and sales. Moreover, the economic slowdown has caused a
very low consumer confidence (Illera 2015). Even the three market leaders, Billabong, Quicksilver
and Rip Curl, seem to have passed their prime (Walker 2014).
According to walker, the sector’s crisis is mainly due to four factors. Firstly, the surf apparel industry
lost its niche identity and alienated its consumers. Secondly, the category faced a low confidence
among consumers, especially in US. Thirdly, the two market leaders- Billabong and Quicksilver-
INDUSTRY
COMPETITORS
POWER OF
SUPPLIERS
BARGAINING
POWER OF
BUYERS
THREAT OF
POTENTIAL
ENTRANTS
THREAT OF
SUBSTITUTES

5
engaged acquisitions at the beginning of the financial crisis. This led to overvalued and
underperforming assets. Lastly, the surf apparel industry lacked of efficient business strategy and
investments in innovation (Walker 2014).
Therefore, a few big companies dominate the market: Billabong, Quicksilver and Rip Curl. Such
concentrated industry is likely to present a low level of rivalry among the main actors. In fact, they
recognize the mutual interest in not engaging collusive strategies (Grant 2013). However, to preserve
their leadership, they could set up financial barriers to prevent potential entrants. Royal Wetsuit has
to take into account these market dynamics, and put in place the most suitable entry strategy. An
innovative and differentiated offer seems the only way to success in this market.
2.3 Who are the competitors?
As mentioned above, the market leaders are Billabong, Quicksilver and Rip Curl.
The Australian Billabong faced a sharp slowdown in the aftermath of 2008. In 2012, it collapsed. The
year later, Billabong declared that its brand was “worthless”. Indeed, in 2013 it registered a heavy
loss of $126 million. However, in 2014 it returned on profits for the first time in three years, by
posting $25.7 million profits. During Christmas 2014, Billabong increased its sales by 9.5% in the
US market, and by $5 million in the European market (Illera 2015).
The American Quicksilver is not thriving. In fact, in 2014 its shares crushed because of low sales and
earnings. In fact, the company achieved results much lower than expected (ibid).
Rip Curl, an Australian brand, failed in 2013. However, since then it has started posting double-digit
profits in Indonesia, Brazil and US. Its recovering is due to massive investments in marketing and
innovation. Indeed, it launched a new model of wetsuit, claiming it is the world fastest drying suit.
(Illera 2015).
In order to have the most suitable strategy, Royal Wetsuit has to bear in mind that the competition is
at global level. In fact, the market leaders are Australian and American. Moreover, the British
manufacturer has to consider the factors that led the industry to a downturn. So, it possible to avoid
strategic mistakes and financial losses.
3.0 MARKET SEGMENTATION AND DISTRIBUTION CHANNEL
Royal Wetsuit has make sure to put in place a winning marketing strategy. It has to plan how to satisfy
the demand, by considering different bases for market segmentation, and the most suitable
distribution channels.
3.1 Customer segmentation
As mentioned before, the surf apparel industry faced a slowdown after the financial crisis. The lack
of innovation and the personalization of its offer contributed negatively (walker 2014). Therefore,
Royal Wet suit should work its way up the export ladder by launching an innovative product, and by
targeting specific segments. Moreover, it should allow a higher degree of personalization for its
wetsuits.
Thus, Royal Wetsuit should divide the US market in smaller groups, and adopt its offer to groups’
features. It has to segment the market according to precise parameters. In other words, Royal Wetsuit
could personalize its products according to the age, income disposal, location, gender and
psychographic characteristics of its users (Capela 2008).

6
Wagner et al have pointed out that American surfers are averagely in their early 30s, and 90% of them
are males. Moreover, they are mainly employed, educated and well paid. In fact, 62% of them hold a
bachelor degree, 67% of them are full-time employed, and they averagely earn $75000 per year
(Wagner et al 2011).
American surfers’ profile
Age Early 30s
Gender 90% males
Education (BA holders) 62%
Full-time Employment 67%
Annual Income (average) $75k
Moreover, since Royal Wetsuit’s differentiation is based on the warm comfort, it should target
locations with a weather not warm all year long. For example, the state of New Jersey and the state
of New York could be possible targets. These states not only have cold winters, but they even have
two of the top ten towns for surfers: Ocean City (NJ) and Montauk (NY) (surfermag 2015).
Thus, these data should help Royal Wetsuit to identify its customers and to implement a strategy in
line with such parameters. In fact, a premium price strategy seems in line with the American surfer
profile. Their level of employment and income make them responsive to this pricing policy.
3.2 Agent or distributor?
Royal Wetsuit should use a local agent instead of a distributor.
In fact, engaging an agent would allow the company to maintain the control over the pricing. As
mentioned before, it is fundamental to adopt a premium price. Indeed, a distributor would buy the
product and practice its own marketing mix, letting no possibility to influence the sale process.
Moreover, agents have costs relatively low. Their rate of commission is about 2%, 3% or 5%. In
addition, a local agent has contacts and knowledge of the market. These are key factors to enter the
market quickly, with sales since the early stages. In addition, Royal Wetsuit has an innovative offer
because of its technology. Thus, an agent would be motivated to find buyers for a product easy to
sell.
However, agents require a painstaking assessment. First, Royal Wetsuit has to engage an agent with
adequate experience in the states of New Jersey and New York. This would assure proper knowledge
in those geographical areas. Furthermore, it should gain as much information as possible about the
agent’s reputation and financial stability. In addition, Royal Wetsuit should enquiry the agent about
what kind of products he usually introduces. It is preferred an agent familiar with leisure and sport
goods.
(Mekonnen 2015)

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4.0 PRACTICAL AND TECHNICAL CONSIDERATIONS
4.1 Means of transportation
Since wetsuits are not perishable goods, it is not worthy to transport them by plane. In fact, plane is
the fastest but even the most expensive means of transport. Usually it is used for perishable goods,
which have to be delivered quickly. Thus, the most appropriate means of transport for Royal Wetsuit
is a sea freight. Furthermore, there are two different types of sea freight: liners and tramps. The former
offer regular sailing schedule and regular routes; the latter have schedules according to the demand,
and the do not have a fixed route (Reuvid and Sherlock 2011).
Furthermore, Royal Wetsuit should rely on a freight forwarder. It would find the best option between
trumps and liners. In fact, it would help with the transport booking, the documentation and the custom
clearance (ibid). Using a freight forwarder would reduce significantly the transaction costs, especially
for a firm that has never exported before. In fact, if it wanted to go alone, it would have to collect all
information about laws and regulations, and compare all the carriers. It would require extra staff and
time.
According to the British chamber of commerce, exporting a standard container from UK to USA costs
about £1300, and it takes five days (exportbritain.org.uk 2015).
4.2 Documentation
The effectiveness of exporting activities depends heavily on the documentation required. Such
documentation has to be complete and correct. A single flaw could ruin the entire business deal.
Below there are the main documents required to export wetsuits from UK to USA.
 EU Certificates of Origin (exportbritain.org.uk)
 Proforma Invoice (Capela 2008)
 Commercial Invoice (ibid)
 The Bill of Loading (Reuvid and Sherlock 2011).
 The Standard for the Flammability of Clothing Textiles (cpsc.gov 2015)
4.3 Method of payment
The recommended method of payments is a Standby Letter of Credit. According to this method, the
importer’s bank guarantees to pay the exporter once it has met all the requirements specified in the
Standby Letter of Credit. Differently by a letter of credit, the importer’s bank guarantees the payment
only if the importer defaults on the payment. If the importer does not pay, the exporter has to
demonstrate it to the importer’s bank and collect the payment from the bank (ams.usda.gov).
This method of payment has several advantages. Indeed, the Standby letter of Credit is cheaper than
a Commercial Letter of Credit, and safer than a Documentary Collection or Open Account. Moreover,
it is very popular in USA (ibid).

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4.4 Financing
Royal Wetsuit will require additional capitals to export its products to USA. In fact, it will have to
enhance its capacity. Therefore, it will require more supplies, more workers, more employees and
additional investments in operations.
Since Royal Wetsuit is a SME, financing the exporting by equity would be too onerous. It is
recommended to finance it by debt, namely by bank loan since it is the most common way.
Thus, Royal Wetsuit could apply for a pre-shipment loan, post-shipment loan or both. A pre-shipment
loan would allow the firm to enhance its capacity. Instead, a post-shipment loan consists of a short-
term loan at concessional rate. This type of loan is meant to maintain the financial stability of the firm
while it is waiting for the due payments (Paul and Aserkar 2013).
4.5 Export insurance
UK Export Finance- a government body- provides British exporters with assurance against risks. The
risks generally covered are: 1) the importer does not pay; 2) some events occur and impede the
performance of the contract.
In order to obtain this insurance, the business has to be in UK, and the exporter has to be overseas.
Moreover, the firm has to prove the inability to obtain credit insurance from the private sector. Since
Royal Wetsuit is exporting to USA, the insurance will cover a period up to two years. Therefore, if
Royal Wetsuit struggles to obtain credit insurance, it will be eligible for this export insurance.
(gov.uk 2015).

9
References :
 Albaum, G and Duerr, E (2011), International Marketing and Export Management, Financial
Times-Perentice Hall
 ams.usda.gov, April 2015, available from:
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3009368&acct=atpub
 Capela, J.J. (2008) import/export for dummies, Wiley.
 ControlRisks, April 2015, available from: https://riskmap.controlrisks.com/#riskmap-map
 cpsc.gov, April 2015, available from:
http://www.cpsc.gov//PageFiles/103085/regsumwearapp.pdf
 Crone, M (2015), Global Business Environment, lecture 8
 ec.europa.eu, April 2015, available from: http://ec.europa.eu/trade/policy/in-focus/ttip/about-
ttip
 ec.europa.eu, April 2015, available from:
http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_111704.pdf
 exportbritain.org.uk April 2015, available from:
http://exportbritain.org.uk/market-snapshots/united-states-of-america.html
 gov.uk, April 2015, available from: https://www.gov.uk/export-insurance-policy
 gov.uk, April 2015, available from: https://www.gov.uk/government/publications/exporting-
to-the-usa/exporting-to-the-usa
 gov.uk April 2015, available from:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/301339/Mark
eting_in_the_USA.pdf
 Grant, R. (2013), Contemporary Strategy Analysis, Wiley
 Illera, J (March 13th 2015), Analysing the Global Surf Apparel Market, Passport database
 Mekonnen, T ( March 9th 2015), Selecting And Managing Agents And Distributors, seminar
five
 Paul, J and Aserkar, R (2013), Export import management, Oxford
 Reuvid, J. and Sherlock, J. (2011) International Trade- An Essential Guide To The
Principles and Practice of Export, Kogan Page.
 Surfermag April 2015, available from: http://www.surfermag.com/features/best-surf-towns-
no-10/
 The Economist, April 25th – May 1st 2015, Economic and financial indicators
 ukti.gov.uk April 2015, available from :
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/301339/Mark
eting_in_the_USA.pdf
 Wagner, S, Nelsen C and Walker, M ( July 2011), A Socioeconomic and Recreational Profile
of Surfers in the United States, Surf-First and Surfrider Foundation
 Walker, R (April 14th 2014), Life's a Beach for Surf-Themed Apparel, Passport database

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