Table of Contents

Executive Summary.....................................................................................................................................2
1. Introduction:........................................................................................................................................3
2.Cost and Pricing Analysis:.........................................................................................................................4
2.1 Production Cost:................................................................................................................................4
2.2 Packaging and shipping cost:.............................................................................................................4
2.3 Export Financing costs:......................................................................................................................5
2.4 Pricing Strategy:.................................................................................................................................5
3. Risk Analysis and Management:..............................................................................................................5
3.1 Foreign Exchange Rate Risk:..............................................................................................................5
3.2 Economic and Political Risks:.............................................................................................................6
3.3 Social and Cultural risks:....................................................................................................................6
4. Recommendation:...................................................................................................................................7
5. Conclusion:..............................................................................................................................................7
6. Bibliography:............................................................................................................................................8
Executive Summary
Importing and exporting commodities and services over international borders constitutes global
trade, usually referred to as international trade. Sneakers are shoes initially made for athletic or
other strenuous activities but are now frequently used for regular casual attire. To run a footwear
business and spread it globally, some terms and analysis must be done. Before starting any
business one should do a risk analysis. Moreover, the footwear business is now dominating the
world economy.

1. Introduction:
In the context of international trade, we typically think about a person or company exporting a
final product to a consumer in a different country after producing all elements of it in their home
country. However, only around 30% of today's commerce in products and services truly involves
this type of trade; instead, 70% of business involves intermediate goods and services that are
parts of global value chainsOECDcd). The origins of the multilateral trading system can be
traced back to post-World War II when countries created structures for more extensive economic
cooperation out of a desire for peace. Twenty-three founding nations signed the General
Agreement on Tariffs and Trade (GATT) in 1948 (thecanadianencyclopedia). The GATT gained
more members as time went on, and repeated rounds of multilateral negotiations significantly
decreased tariffs. The World Commerce Organization (WTO) was established in 1993 as a
replacement for the GATT as a body to regulate international trade after the Uruguay Round of
trade negotiations came to an end. The WTO was founded in 1995, and it was then that the first
international regulations for trade in services, intellectual property, and agriculture were
established. Thus the global trading system starts. Here I’m going to prepare this research
assignment as a businessman, and I want to export my products to a European country. So, I
have chosen the USA market to ship my product. In addition, I’m doing a footwear business in
Canada. I want to export sneakers to the USA. This assignment will cover my plan's cost and
pricing, risk analysis, and management.
2.Cost and Pricing Analysis:
This part consists of the production cost, packaging and export sales cost, export financing cost,
etc. The first thing that must keep in mind while exporting is that we have to calculate all the
costs to set a price.

2.1 Production Cost:

The real cost of producing a pair of sneakers is about $15. Here I have calculated the price of all
parts of a shoe.

Shoe Upper 34%: All upper components, including the tongue, laces, fasteners, foam, and logo
printings (Furrer, 2021).

Leather 16%: The shoe's exterior is made of leather. Labor, Overhead, and Profit (LOP) 27%

14% of the shoe's total area is the outsole.

I am packing 6%: Shoebox, Case Box, and Hang Tags.

Mold Amortization 3%: Rather than purchasing new molds all at once, if there is new tooling, it
can be paid to the factory for each pair.

The factory will use the specification papers and specify the cost of each line item once the shoe
design has been approved. The costing sheet is shown here.

Every component of the shoe, including the packaging box, packing paper, silica gel pack, hang
tags, etc., will be listed on the price sheet. List everything that is contained in the shoe box.

Each component's price per unit and material usage will be listed with it. The percentage of trash
will also be included. The quantity of scrap material left over after the pieces are cut is known as
the waste percentage, also known as the cutting loss. The costing technicians can examine the
material cost for each part and calculate the material utilization if each part is specified.
Although this is laborious work, if 500,000 pairs are produced, the money can mount up quickly.
A diligent costing technician can save far more than their entire salary—many thousands of
dollars.

2.2 Packaging and shipping cost:

With savings of up to 91%, Easyship provides the most affordable international shipping costs
for shipments from Canada to the US. It will cost about $0.50 per pair. If we send 5000 pairs of
shoes at a time, it will cost 5000 X $.50 = $2500.00. The shoe must be lawfully imported once it
reaches the United States. The US government mandates an import charge of 8.5% of the FOB
price for leather sneakers. So, raise the price by $1.32. Add $.32 for insurance and customs. The
footwear is currently in the warehouse: $15.00 + $.50 + $1.32 + .32 = $17.10

2.3 Export Financing costs:

The Export-Import Bank of the United States, the U.S. Small Business Administration, and the
U.S. Department of Agriculture all offer a variety of export finance programs. The interest rates
of those programs might range from 1.25% to 3% per 30 days, depending on the donors.

2.4 Pricing Strategy:

The competitive pricing strategy is the best to follow in dealing with the US market. I will keep
my business updated on how my competitors set their product prices. A competitive pricing
strategy can make prices the same as my competitors or even cheaper; it will allow me to keep or
increase my market share as customers will be less likely to switch to competitors' brands or pick
their products over mine. The competitive strategy will help me to compete with them in the
global market.

3. Risk Analysis and Management:

A risk analysis assesses the likelihood of an unanticipated negative event that could impact
important company activities and projects. Organizations undertake risk analyses to determine
when a negative outcome is possible, how the risk may affect a particular business sector, and
how the risk may be reduced.

3.1 Foreign Exchange Rate Risk:

Due to exchange rate fluctuations, the global market will have a financial impact (Campbell,
2019). Businesses that import or export goods or services to numerous nations and investors who
trade on worldwide markets are susceptible to the effects of foreign exchange risk. When
investing abroad, exchange rate risk cannot be completely avoided, but it can be greatly reduced
by using hedging strategies. Investing in hedged securities like hedged ETFs is the simplest
solution. A hedged ETF's fund manager can handle the FX risk at a significantly reduced cost.
The principal strategies to fix this problem are derivative financial instruments. Making and
receiving payments only in own currency can reduce the risk.

3.2 Economic and Political Risks:

The labor-intensive footwear business is influenced by several variables, including the
availability of land, the cost of labor, the availability of materials, environmental protection, and
the sales markets. Some political factors affect business work, such as Bureaucracy, Corruption
level, Freedom of the press, Tariffs, Trade control, etc.

3.3 Social and Cultural risks:

Outsourcing the manufacturing process to other nations with lax or nonexistent child labor laws
is one detrimental social impact that is a sad reality for almost every shoe firm (outsourcing).
There may be social and cultural effects in the footwear industry. So it is better to innovate
creative products that suit current consumer preferences. Sneakers' introduction to sports,
particularly basketball, was a key factor in their consumer popularity growth. Before Chuck
Taylor, there was no specific shoe connected to basketball. High start-up capital is needed to
obtain real estate, machinery, and equipment and create a new product while entering the
footwear industry. The barriers to entry are raised by initial large capital outlays and marketing
and advertising expenses related to creating an innovative product.

4. Recommendation:
There are some recommendations regarding this research:

1) To deal with the foreign market, one must have product knowledge, material and possible
source knowledge, and fashion overview.
2) Market analysis for better sales results.
3) Understanding payment terms, effective workforce management, and soul selection are
crucial for international trade.
4) Reaching out to micro-influencers will be helpful.
5) Create an endless aisle.
6) Invest in Sustainability.
7) Build a community.

5. Conclusion:
This is the purpose of our research report to gain knowledge of the production costs, packaging
and shipping cost, and pricing strategies of the footwear industry. Sneakers are shoes initially
made for athletic or other strenuous activities but are now frequently used for regular casual
attire. The size of the global footwear market was assessed at USD 373.19 billion in 2021, and
from 2022 to 2030, it is anticipated to increase at a compound annual growth rate (CAGR) of
4.3%. The primary drivers of the market's growth are the expanding sales made possible by e-
commerce, significant expenditure by footwear brands on advertising, and increased demand for
sports footwear. Though consumer expectations are impacting market leaders' tactics,
digitization, sustainability, and personalization are significant developments driving the global
market for footwear today. In addition, growing consumer demand for high-quality footwear,
product innovation, and premiumization is important demand-driving factors. So, it is a huge
business opportunity in this century.

6. Bibliography:
1) Campbell, R. (2019, November 27). Currency fluctuations and their impact on International
Trade. Retrieved November 12, 2022, from https://bitrebels.com/business/currency-
fluctuations-impact-international-trade/
2) Furrer, A. (2021, November 02). The 5-minute guide to becoming a running shoe expert.
Retrieved November 12, 2022, from
https://www.runnersworld.com/gear/a26654722/running-shoe-anatomy-parts/
3) General agreement on tariffs and trade (GATT). (n.d.). Retrieved November 12, 2022, from
https://www.thecanadianencyclopedia.ca/en/article/general-agreement-on-tariffs-and-trade
4) Global Value Chains and trade. (n.d.). Retrieved November 12, 2022, from
https://www.oecd.org/trade/topics/global-value-chains-and-trade/
5) Outsourcing the production process to other nations with lax or nonexistent child labor laws
is one - outsourcing the production process to another: Course hero. (n.d.). Retrieved
November 12, 2022, from https://www.coursehero.com/file/162549407/Outsourcing-the-
production-process-to-other-nations-with-lax-or-nonexistent-child-labour-laws-is-one/