Global Exporting – Germany
Essay Preview: Global Exporting – Germany
Report this essay
1. The product, country to export and the size of the market is $ terms.
The product of choice to be marketed is an electric start component for outboard marine engines. The country of choice for export is Germany.
The product is a fully assembled, self-contained unit that implements a universal fit on most outboard marine engines that run on battery power. The manufacturing cost is $50.00 per unit with a 50% markup for a total selling price of $100.00 each. The product is manufactured at a locally owned fabrication facility in Madison, Wisconsin.
According to the latest trade statistics, Germany imported $299 million USD in outboard engines for marine propulsion during 2005. This figure represents an increase of 14.6% from the previous year. Of all the replacement components on an outboard engine, experience dictates the electric start is one of the most frequently needed and there is a market for this product.
I plan to initiate letters of credit for sales transactions, in addition to cash in advance with new customers, or a combination of both. Of course, credit checks will be conducted on the companies seeking to purchase my product. I plan to contact the U.S. Embassy in Germany and request credit information, and also the freight forwarding company I intend to use for the transaction. A Letter of Credit is a binding document that guarantees payment to the seller for goods sold. It takes away the risk of nonpayment by the buyer. The seller presents the bank with the required shipping documents that essentially confirm the delivery of goods. The sellers bank works with the buyers bank to make the actual cash transaction. A fee will be charged by both banks for this service especially since the importer/purchasers bank has the risk. If anything goes wrong regarding documentation and the exporter has already been paid, the importer is not obligated to pay the bank. The cash in advance option appeals to me because the cash transaction is completed prior to shipment of the goods. No risk is undertaken by the seller; only by the purchaser.
2. The import levels for the product in the country of choice.
General imports in Germany for the month of February, 2002 for electrical equipment, appliances, or components was $249,650 million USD, custom value basis. The the year ended 12/05, the total amount of imports was 625.6 billions Euro and exports totaled 786.2 billions Euro. Imports from the United States represent 6.6% of the total, an increase of 1.6% from the previous year.
3. Competing local products and key foreign competitors in the market.
In conducting research on the product and its availability in Germany, there were no readily available local product sources. Importing the product appears to be the only option available. Since this is considered a stock item, my proposed strategy involves selling in quantities at levels at which the buyer will be able to take advantage of price breaks and will allow the cost of exporting to remain within acceptable profit margins
4. The distribution system.
There are no regulations in Germany that bind import suppliers to any certain distribution channel. Customs procedures in Germany follow the laws of the European Union (EU) and the Federal Republic of Germany. Because goods will be shipped to Germany from a non-EU country the shipment must undergo customs clearance. The most common procedure is for the shipment to be brought into free circulation under the customs and tax laws and by paying the established import levies.
The goal is to get as many products to as many distributors as possible in Europe. Due to the fact that there is limited knowledge of marine dealers in various countries, the best option is to use wholesalers who in turn will ship to distributors, who in turn will stock dealer and repair shop shelves for final sale to customers. Information on import companies can be obtained from the Federation of German Wholesale and Foreign Trade. When the product is ready to sell, the order will leave the manufacturing plant in Madison, WI by truck to a shipping facility, where they will be sent by airfreight to Germany. At the destination, the products will be moved to a customs warehouse the clearance and then by truck to the various wholesalers who can produce proof of legal consignment. To assure consistent interpretation of certain delivery clauses that are normal for imports, the trade contract should make reference to the International Commerce Terms or “Incoterms.” Incoterms makes it clear the precise delivery and acceptance obligations of all parties, the transfer or risk, the allocation of costs, transportation and insurance, the procurement of documents and certificates of origin. Incoterms have nothing to do with delivery or forwarding contracts, terms of payment, transfer of title or damage of products. The most recent up-to-date Incoterms document can be obtained from the International Chamber of Commerce, or, there is also a branch in Germany. If there is a dispute, the importer will usually use a legal venue in Germany for the settlement. A court or arbitration can also be used instead of an ordinary court of law. In this case an institutional court will settle the dispute, as long as there is a clause to this effect agreed upon in the contract.
5. The methods to be used to promote the product; and why and how culture affects advertising and promotion.
Germany is currently undergoing a profound cultural and economic transition from industrial to the information age. Germany is embracing the concept that information and communication technologies are accelerating this transition process. The government gives high priority to this transition and has approved an action plan entitled “The Information Society Germany 2006.” Digital Economy, eGovernment and IT education are the focal points. The country has become aware that communication technologies have significantly enhanced commerce, making business transactions cheaper and more efficient. This technology has also opened general attitudes to global commerce. Given this, online advertising and distribution contacts may be the most effective means of product promotion and marketing. Even as little as 5 years ago, more customary methods may have been more effective.
6. Host government incentives/disincentives.
The amount of import levies to be paid, including customs duty and excise tax is specified in the customs tariffs or excise laws. The rates are calculated by the transaction value. This is the customs value. The customs value is the selling price,