export planning institute _ii_bpm joris leeman©, 2010 export planning a 10-step approach chapter 9:...

Export Planning Institute _II_BPM Joris Leeman© , 2010

Export PlanningA 10-step approach

Chapter 9: Financial plan and legal issues

Internationalisation of the firm


Export PlanningLearning objectives (learning tasks) Ch. 9

At the end of the chapter you are able to:

1. develop your sales plan;

2. put together the profit & loss – and cash flow statement;

3. execute an investment analysis;

4. identify relevant legal issues;

5. prepare the 3rd review gate decision to finalise the ‘Export Plan – phase’


Export PlanningFinancial Plan set up: 8 steps

1. Price set up Pp= average price point of a category Pp = (Pa x W1) + (Pb x W2) + (Pc x W3)

2. Volume calculation Vp =Market size x % age group x % can afford to buy x % market share x % market growth

3. Sales plan Sp = Pp x Vp

4. Investment list / Depreciation I = Equipm + Building Linear Depr = (investment – Residual Value) / depr.years

5. P & L Sp – Costs (incl. DA Depreciation) = Profit (EBIT)

6. Cash Flow CF = EBIT + DA

7. Investment analysis Pay back method, ROI, DCF, IRR


Export PlanningFinancial Plan set up: I. Price set up

+ Buying price goods (FOB) (incl. Gross margin of supplier)+ Duties+ Freight (MNF-DC)+ Quota+ Design fee+ Buying commission agent= Landed Cost price

Landed cost price+ Marketing expenses+ Distribution costs (DC + freight to Cust)+ Adm. Overhead exp.+ Gross margin W/S

= Wholesale price of BLM

Landed costs + W/S costs + Retailer costs = Consumer price

Wholesale price+ Marketing expenses+ Distribution costs (DC + freight to stores)+ Store costs+ Adm. Overhead exp.+ Gross margin Retailer

= Retailer price

Retailer price- Markdowns/Discount+ VAT

= Consumer retail price

W/S = wholesaler, BLM = Brand Label Manufacturer, VAT = Value Added Tax

Landed costs LC = FOB + D + FR + Q + DF + BC

Example: LC = € 8,- + (13% of 8,-) + (3% of 8,-) + (4% of 8,-) + (6% of 8,-) + (6% of 8,-) = € 10,56

W/S price: W/S price = LC + MAR + DIS + ADM + GM

Example: W/S price = 10,56 + (20% of LC) + (5% of LC) + (8% of LC) + (30% of LC) = € 17,21

Retail price: RET price = W/S + MAR + DIS + STORE + ADM + GM + VAT

Example: RET price = W/S + (10% of W/S) + DIS (5% of W/S) + (15% of W/S) + (5% of W/S) + (30% of

W/S) + (19% of Retail price excl. VAT) = 17,21 x 165% = 28,40 x 119% = € 33,80


Export PlanningFinancial Plan set up: II Sales plan

Price set up:

W/S price or Retail Priceper product categoryandAverage sales weight of each product category

Volume plan:

Market size% target group% potential buyers% target market share% yearly market growth

Price x Volume = Sales plan (Turnover or Revenue)

Sales plan:

- by Product Line- by Category

Price set up Pp = (Pa x W1) + (Pb x W2) + (Pc x W3) Pp= average Price Point of a category Pa= product item a, b,c,…z W1=weight % 1, 2, 3, …99

Example: Pp = (€79,00x0.33)+(€89,00x0.33)+(99,00x0.33) = 89,00 average price point of the category

Volume calculation Vp =Market size x % age group x % can afford to buy x % target market share x % market growth

Vp= Volume plan of a category

Example: Vp=17 mln population country x 25% age 10-20years x 40% can buy it x 5% market share target x 1.05 (year 1)

= 89.250 units


Export PlanningVolume forecast calculation - example -

Marketing objective• “Gain 20 percent market share in the disposable diaper market,

by the use of exporting different disposable diapers towards the Indian market, by the year 2010.”

Market size

Source: Export Plan – Project „Proctor & Gamble to Asia“, BA students of INHolland University, Cynthia D. Jin, Ron van der Sman, Daphne Zijlstra, January 2007.


Export PlanningSales Plan per product - example -

Source: Export Plan – Project „Proctor & Gamble to Asia“, BA students of INHolland University, Cynthia D. Jin, Ron van der Sman, Daphne Zijlstra, January 2007.


Export PlanningFinancial Plan set up: III. Profit & Loss (part 1)

For example:Acquisition companyBuilding of factory / DCEquipment purchaseTooling purchaseOpening retail storesGoodwill store rentalTransport trucks etc.Fleetpark sales/serviceIT investments

Linear depreciation*:

(total investment - residual value) _________________

number of yearsallowed for depreciation

Investment list Depreciation method Depreciation cost p/year

For example

($ 11 mln – 1mln residualvalue) / 10 years

= $ 1 mln p/year investment costs

Note: *Several depreciation or amortisation methods exist. The linear depreciation method divides the net investment costs (after taking out the residual value of the investment) by the number of years enforced by the tax authorities for depreciation. For most countries the depreciation for equipment is 7 to 10 years.


Export PlanningFinancial Plan set up: III. Profit & Loss (part 2)

Price x Volume COGS p/unit x volumeExpenditures: - Marketing & sales - Distribution costs - Overhead - rental cost stores - depreciation costs etc.

Sales - Costs = Profit (EBT, EBIT or EBITDA)

Profit (EBIT) or EBITDA or EBT or NIAT

COGS = Cost of goods sold

EBIT = Earnings before interest and taxEBITDA = Earnings before interest, tax, depreciation and amortisationEBT = Earnings before taxNIAT = Net income after tax


Export PlanningImportant elements Agent- and Distributor Contract

1. Information parties2. Information on the product3. Territory & Exclusivity clause4. Warranty clause5. Shipment/ insurance/ payment6. Commission/ method of payment for agent/ distributor7. Quality control8. Dispute resolution, choice of law, choice of jurisdiction & choice of language9. Termination clause10. Expiration clause/ fixed Term11. Termination provision12. Distribution channels13. Trademark14. Force majeure or excuse or non-performance of contract15. Non-competition

Source: Reader distribution law, Dr. Jay. D. Olivier, 2006


Export PlanningChapter review questions (10 min.)

1. Explain the difference between the buying price (at a given INCOTERM) and the landed cost price? Explain your answer.

2. Explain the terms landed cost price, wholesale price, retailer price and retail consumer price. 3. Which price do you need to use if you are exporting via a distributor in Brazil? And if you are importing goods from China in Germany? And if you are selling via your own retail stores products in New York?

4. Explain the relationship between the use of the average base price point and target price set up – calculation.

5. When do you use COGS and when COG? Give an example.


Export PlanningChapter review questions (10 min.)

6. Explain the different profits: gross profit, net income, EBT, EBIT, EBITDA, NIAT.

7. How is a profit & loss statement composed? Create an overview.

8. What does the term cash flow mean? What components do you need to add up?

9. What are the four investment analyses – methods? Provide a brief explanation for each method.

10.What does counterfeiting mean? Explain and give an example.

export planning institute _ii_bpm joris leeman©, 2010 export planning a 10-step approach chapter 9:...

Documents

ws price

sales plan price

consumer retail price

average price point

market size x

category price set uppp

wholesale price of blm

price goods fob