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Global Expansion Project

IB 480

By: Jackie Nguyen, Sasha Morris, Ben Baker, Alex Hazard &

Ben Echeverri

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Group 5

Ben Baker, Alex Hazard, Sasha Morris, Jackie Nguyen, Ben Echeverri

April 27, 2023

Pure Shenandoah Written Proposal

Executive Summary

This report provides a comprehensive analysis of Pure Shenandoah's potential to expand

internationally. As a leading producer of high-quality hemp and CBD products, Pure Shenandoah

is positioned to offer innovative products and solutions to the global market. Through extensive

research, we have identified several potential markets for the company to export hemp fibers,

including Turkey, Syria, Canada, and Mexico. We have provided an in-depth report regarding

each country’s background, potential market, government/regulations, tariffs,

advantages/disadvantages, as well as methods of exporting. It is our recommendation that Pure

Shenandoah focus on exporting hemp fibers and industrial hemp to Turkey. Turkey’s economic,

political, and social factors make it an attractive market for Pure Shenandoah to take advantage

of. Our analysis shows that Turkey’s recent natural disaster presents an urgent need for housing.

This combined with its strategic location and favorable business environment, creates a

significant opportunity for Pure Shenandoah to expand its global reach and contribute to

sustainable development.

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Introduction

a. Short history of the company

Pure Shenandoah is a U.S.-based company that specializes in manufacturing eco-friendly

and sustainable building materials from hemp. The company was founded in 2018 by three

brothers born and raised in the Shenandoah Valley. Since then, the company has established a

strong reputation for producing high-quality and innovative products, including CBD oils,

topicals, and gummies, hemp products, and hemp building materials. Pure Shenandoah

emphasizes that it is a true seed-to-sale company, and its mission is to change the way people

think about cannabis and hemp.

b. The product(s) your team chose to focus on

Our team has chosen to focus on Pure Shenandoah's hemp products that can be used as

industrial building materials. Hemp is sustainable, easy to grow and would be highly effective in

areas that have underdeveloped construction industries.

c. The region your team investigated

Our team has decided to investigate both Europe and North America.

Region

Europe is a very diverse region that encompasses 44 countries, ranging from small

countries to much larger, developed countries. This region has a highly developed economy and

houses some of the world’s largest corporations. The European Union (EU) includes 27

European countries and is the world’s largest trading bloc, with a GDP of over $18 trillion.

Europe is also home to a highly skilled workforce and a wide network of

transportation/communication infrastructure. This region has a complex government regulatory

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environment, with rules varying across different countries. However, the EU has established a

common regulatory environment for many areas of business which can be helpful to Pure

Shenandoah when entering this market. Pure Shenandoah must be mindful of the region’s

diversity, which can cause potential barriers to entry. Language differences, legal and

administrative barriers and physical distance can all pose a challenge to expanding into this

market. On the flip side of this, Europe’s extensive trade agreements and common regulatory

frameworks make it a rather attractive place for Pure Shenandoah to consider. The EU has

fostered trade agreements with over 60 different countries, which provides access to a wide

variety of markets.

The North American region provides a great opportunity for Pure Shenandoah to exploit

by expanding their reach and diversifying their operations. Canada and Mexico’s participation in

trade agreements such as the North American Free Trade Agreement (NAFTA) and the United

States-Mexico-Canada Agreement (USMCA) provides advantages and the ability to streamline

the process of entering these markets. Canada is a highly developed country with a strong

economy, and shared economic interests with the United States. Similarly to the United States,

they have a stable regulatory environment with a strong emphasis on environmental protection

and consumer rights. This is a huge opportunity for Pure Shenandoah to take advantage of and

market their sustainable hemp materials. In Canada, language differences between French and

English could potentially pose a threat to doing business however, most business is now

completed in English. Canada’s close proximity to the United States combined with its highly

skilled workforce, emphasis on innovation and a stable political/economic environment makes it

a great option for Pure Shenandoah to consider. Mexico has a highly diversified economy with a

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large manufacturing sector. Their participation in NAFTA and the USMCA along with the

young, growing population makes it a solid strategic location for companies looking to expand

their operations. Mexico’s government regulations are rather complicated, with federal and state

level rules that vary by industry. In addition, language differences and cultural differences could

pose potential barriers to doing business in Mexico.

Top countries that we think have the best potential, and that should be considered as

possible targets for market expansion.

Turkey

The country was devastated by an earthquake that caused the collapse of living units,

offices, etc. The earthquake exposed the out-of-date formations of buildings, clearly not made to

withstand such pressure. This is a potential target market for Pure Shenandoah when Turkish

construction projects begin in the future.

Syria

Syria was also impacted by the earthquake that occurred in February of 2023. With

similar circumstances as Turkey happening in Syria, we believe Pure Shenandoah should also

pursue this market.

Canada and Mexico

These countries neighbor the U.S., so exporting hemp building materials would be cheap,

quick and efficient because of how close they are.

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In-depth analysis regarding potential advantages and disadvantages to exporting to each

country.

Turkey

Turkey has the 19th largest economy in the world with 85 million recorded habitants (as

of 2023) and a GDP of about $906 billion (WorldBank). The country is located on a large

peninsula in-between Europe and Asia that provides a strategic location for potential expansion

into neighboring countries. In 2021, Turkey was ranked the 5th best Foreign Direct Investment

destination in Europe, and it attracted a total of about $240 billion in FDI between 2003-2021

(FDIinTurkey). It is not part of the European Free Trade Association, but they have a customs

union agreement with the European Union, which means that Turkey can trade freely with the

European Union (import and export) (WorldTradeOrganization). In its relationships with the

U.S. both sides have benefited from trade with the other, with Turkey’s biggest imports from the

U.S. being from mineral fuels, oils, iron and steel, machinery, nuclear reactors, cotton, etc

(Turkey imports from United STATES2023). Some of the U.S.’s top imports from Turkey are

machinery and mineral fuels, vehicles, pearls and stones, etc (Turkey imports from United

STATES2023).

Construction is an essential industry in Turkey right now as the population is continually

rising due to huge numbers of refugees coming from Syria. As of 2021 the country hosts more

than 3.6 million refugees (WorldBank). There is a lack of homes and with the recent earthquake

that struck the country, many buildings collapsed, leaving people homeless. The government will

be actively seeking home projects that use the best material and have strong structures to hold up

homes in the case of another natural disaster.

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Turkey and the U.S. are founding members of the General Agreement on Tariffs and

Trade that provides protection and certain advantages compared to countries outside the

agreement. Some advantages include protection of intellectual property rights beyond borders,

encouragement of free trade such as low tariffs on specific items and zero quotas, and dispute

resolution options if there were to ever be a feud between two countries

(WorldTradeOrganization). The Turkish government welcomes foreign companies to do

business in the country, and to attract FDI it offers incentives such as: tax reductions/

exemptions, low customs duties, land allocation, income tax withholding allowances, etc

(DoingBusinessinTurkey). There are only a few regulations that the government imposes when

exporting into the country that should not affect Pure Shenandoah. Regulations are imposed on

certain chemicals, certain waste, and metal scrap that could harm the environment

(InternationalTradeAdministration). Customs also requires that a commercial invoice and a bill

of lading or airway bill accompany all commercial shipments before crossing into Turkey. It is

important that the company stays up to date regarding Turkey’s trade barriers because according

to the WTO, Turkey sometimes changes documentation requirements and other items without

notifying the organization of its intentions (InternationalTradeAdministration).

There are multiple potential barriers to trade with Turkey that Pure Shenandoah should

consider before exporting there. The first barrier is the difference in language and culture, but

since the company would be selling to wholesalers that part will alleviate the B2C pressures.

Another barrier to exporting to Turkey is getting wholesalers to buy the hemp industrial products

because they are more expensive than traditional construction products on the market

(DreamCivil). The next potential barrier is the competitive construction industry that will be

busy with construction projects all over the country. Companies will have many options of

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materials to use and will want to save money, but Pure Shenandoah has to find a way to relay

messages that their quality hemp materials that are just as effective as traditional ones. An

additional barrier is the geographic distance of the U.S. from Turkey, which can mean potential

delays in supply chain operations and logistics, and time differences between the U.S. and

Turkey (Turkey is 9 hours ahead). The final potential barrier that we see for Pure Shenandoah in

exporting to Turkey are document requirements, customs duties, or any non-tariff trade barriers

that could arise (but do not expect many barriers).

In 2021, the construction sector accounted for about 31.11% of Turkey’s GDP (Turkey

imports from United STATES2023), so it is an essential part of the country’s economy. Pure

Shenandoah is in a good position today to start distributing hemp industrial products to a country

that is in a fragile state and will need all the help it can get. There are 85 million people living in

that country and with more and more refugees being admitted into the country, housing will only

continue to be needed. The construction FDI from 2003-2021 is at 3.2% (InvestinTurkey) , which

shows that it is a mostly domestic industry just waiting to have new entrants come into the

market. The hemp products that Pure Shenandoah have to offer are durable and environmentally

friendly and will have an impact.

Syria

Syria holds potential as a destination to export hemp-crete for construction purposes

despite the ongoing conflict and severe humanitarian crisis that has plagued the country since

2011. Hemp-crete is a sustainable and eco-friendly building material made from hemp, lime, and

water that can offer a cost-effective and environmentally friendly alternative to traditional

building materials. The country's construction industry is significant and contributes to nearly

12% of the country's GDP (Worldbank), and the sector has been identified as a key driver of

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economic growth in Syria's national development plan. The introduction of hemp-crete as an

alternative building material could promote sustainable construction practices, reduce carbon

emissions, and foster the development of the construction industry. Moreover, Syria's

membership in several regional trade alliances like the Arab League (Encyclopedia Britannica)

could facilitate the trade of hemp-crete and provide access to a wider market, reduce trade

barriers, and promote economic integration between Syria and other member states.

However, the ongoing conflict in Syria poses significant challenges to exporting hemp-crete to

the country. The conflict has disrupted trade and transport, leading to increased costs and risks,

and caused damage to critical infrastructure, making it difficult to transport goods to different

parts of the country. The recent earthquake in 2022 has further exacerbated the situation, causing

extensive damage to buildings and infrastructure, which may require more immediate and

traditional building materials to address the reconstruction efforts. Additionally, economic

sanctions imposed by the United States and other countries on Syria could further limit the

ability to conduct business with Syria. Therefore, it is crucial to conduct a thorough risk

assessment and evaluate the potential economic benefits against the risks involved before

considering exporting hemp-crete to Syria.

In conclusion, exporting hemp-crete to Syria is a complex issue with potential

opportunities and significant risks. While the country's large construction industry and

membership in trade alliances make it an attractive market for sustainable building materials, the

ongoing conflict, recent earthquake, and economic sanctions pose significant challenges.

Businesses interested in exporting hemp-crete to Syria must carefully consider these factors and

conduct thorough risk assessments before proceeding. Alternatively, exploring other markets

with more stable political and economic conditions may prove to be a more viable option for the

successful and safe exportation of hemp-crete. Ultimately, the decision to export hemp-crete to

Syria requires careful consideration of both the opportunities and risks involved.

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Mexico

Mexico has a rapidly growing construction industry that is turning more towards

sustainable and eco-friendly building practices. This creates a significant opportunity for Pure

Shenandoah in their efforts to export hemp building materials to the country. As of December of

2021, Mexico had a GDP of $1.27 trillion with 6.8% of that coming from the construction

industry (The World Bank). The trading relationship between Mexico and the United States is

one of the most important economic partnerships in the world. The shared border between the

two countries brings about strong ties between their economies. As of 2022, Mexico was the

United States second-largest trading partner, with total trade of over $324.4 billion (Workman).

The newest trade agreement between the two countries is the United States-Mexico-Canada

Agreement (USMCA), which was implemented in 2020. This agreement has continued to foster

the strong trade relationship that was established through the North American Free Trade

Agreement (NAFTA).

The Mexican government has implemented laws and regulations to ensure that imported

goods meet safety and quality standards and to protect their domestic industries. It is vital that

Pure Shenandoah adheres to these regulations when exporting their hemp building materials.

First and foremost, all businesses who want to export their goods to Mexico must register with

the Official Register of Importers (Trade.gov). The most basic document is the Customs

Declaration Form for customs clearance (Trade.gov). Mexico requires import and export

documentation for all commercial crossings which must be accompanied by a commercial

invoice (in Spanish), a bill of lading, documents proving a guarantee of payment and if

applicable, documents demonstrating Pure Shenandoah’s compliance with Mexican product

safety and performance regulations (Trade.gov).

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Exporting goods to Mexico presents Pure Shenandoah with a wide range of advantages.

Within the country of Mexico there is a growing demand for sustainable building practices,

which provides Pure Shenandoah with an opportunity to export their hemp building materials.

Mexico City is a rising leader in sustainability innovation, with the government working to

decrease pollution and promote public health/wellness (SmartCitiesDive). In addition to the

move towards sustainable building, the Mexican government has recently legalized the

cultivation, processing, and commercialization of hemp in March of 2023 (Bougenies). This

could potentially lead to a more favorable regulatory environment for exporting hemp building

materials. Lastly, one of the most significant considerations in the Mexican construction industry

is cost. Hemp building materials are comparable in price to more traditional building materials,

while also providing added benefits of sustainability. This creates a huge advantage for Pure

Shenandoah to exploit.

Pure Shenandoah can expect to face some difficulties and disadvantages when exporting

their hemp building materials to Mexico. Due to the fact that hemp materials are relatively new

to the Mexican market, there is sure to be a lack of awareness about their sustainability benefits.

This presents challenges with convincing potential customers to make the switch to hemp

building materials. In addition, Mexico’s push towards more sustainable building practices

creates a wide array of competition for Pure Shenandoah. Materials made from bamboo, adobe,

coconut, and straw bale are circulating within the Mexican market. Pure Shenandoah would need

to compete with these already established materials in the Mexican construction industry. Lastly,

Mexico is still working on building and updating their infrastructure throughout the country. This

can present some difficulties in processing and manufacturing hemp building materials in the

country if production needed to be scaled up.

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The Mexican market for sustainable building materials is rather significant, with the

country’s construction industry projected to continue to grow at a CAGR of 4.7% during 2022-

2026. Mexico’s growing population and expanding middle class is driving the demand for

increased housing and infrastructure in the country. As previously discussed, there has been a

growing interest in sustainable construction practices which presents Pure Shenandoah with a

great market for their hempcrete building materials. The market for hemp materials is still rather

new in Mexico making it difficult to predict the market size however, there is significant

potential for growth. The Mexican government has committed to promoting sustainable

development, bringing about an increased awareness among consumers and construction

organizations about the benefit of using eco-friendly materials.

Canada

Canada is the United States’ largest export market for goods and is the country’s top

trading partner. The two countries share the world’s longest international border, making it

relatively easy and cost-effective to transport goods between the two countries. The two

countries have a long-standing and mutually beneficial trade relationship and about “$2.6 billion

a day in goods and services trade” across the United States and Canada every day (U.S.

Department of State, 2022). Canada is one of the wealthiest countries in the world, with a gross

domestic product (GDP) per capita of $51,987.9 in 2021 (World Bank). This means that

Canadian consumers have high purchasing power and are able to afford high-quality products

and services. According to the World Economic Forum’s Global Competitiveness Report in

2019, Canada has a stable political and economic environment, ranking 14th out of 141 countries

(WEF). This means that American businesses exporting to Canada can benefit from a low-risk

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and stable environment. The employment rate in Canada is also an important indicator of

economic health. In February of 2023, the unemployment rate held steady at 5% (Canada

unemployment RateMarch 2023 data).

Exporting goods from the United States to Canada requires businesses to comply with a

range of government regulations. The Canada Border Services Agency (CBSA) is responsible

for enforcing customs regulations for goods entering Canada. This includes requirements for

documentation, labeling, and packaging (Noah, D.). The most important document required from

a U.S. exporter is a properly completed Canada Customs Invoice or its equivalent for all

commercial shipments imported into Canada (Trade.gov).

Exporting to Canada can present some disadvantages for businesses, depending on their

industry, size, and other factors. Canada has a highly competitive market, with many domestic

and international businesses vying for market share. This can make it difficult for businesses to

gain traction and establish themselves in the Canadian market. There are strict regulatory

requirements for imported goods and services, which can be a barrier to entry for businesses.

This can include product testing, certification, and labeling requirements, as well as industry-

specific regulations (Canada, H). Lastly, understanding Canadian business practices and cultural

norms is important for building relationships and making successful business deals. If not done

well, this can impact the success of exporting to Canada.

The market size for hempcrete in Canada is difficult to estimate, as the use of this

sustainable building material is still relatively niche. However, there is growing interest in

hempcrete in Canada as a sustainable alternative to traditional building materials. There is an

increasing demand for hempcrete in Canada, particularly for use in residential construction

(Hein, T). The Canadian government has been supportive of the hemp industry, with initiatives

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to promote hemp as a sustainable crop and to encourage the development of hemp-based

products. Canada has a strong hemp industry, with a well-established supply chain for hemp

products, so there is likely to be a decent amount of competition.

4 Ps for Turkey

Product: industrial Hemp/Hempcrete, Outsourced to a wholesaler in Britain, The Hemp Block

company.

Price: There is no information regarding the average price of hempcrete in Turkey, but the fixed

price of hempcrete in the U.S. is said to be $135 per square meter based on a 300 mm thick wall.

Place: Selling to a wholesaler in Britain that will ship the hempcrete and lime to Turkey, these

will be combined on site to create the hemp blocks for building.

Promotion: The wholesaler will take care of promotional activities after transfer of goods.

4 Ps for Syria

Product: industrial Hemp/Hempcrete, Outsourced to a wholesaler in Britain, The Hemp Block

company.

Price: $.70/ pound (USHRH) based on American prices, There is no information regarding the

average price of hempcrete in Syria, but the fixed price of hempcrete in the U.S. is said to be

$135 per square meter based on a 300 mm thick wall.

Place: Selling to a wholesaler in Britain that will ship the hempcrete and lime to Syria, these will

be combined on site to create the hemp blocks for building.

Promotion: The wholesaler will take care of promotional activities after transfer of goods.

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4 Ps for Mexico

Product: industrial Hemp/Hempcrete, Outsourced to a wholesaler in the US, American Hemp

LLC.

Price: $.70/ pound (USHRH) based on Us pricing by weight. There is no information regarding

the average price of hempcrete in Mexico, but the fixed price of hempcrete in the U.S. is said to

be $135 per square meter based on a 300 mm thick wall.

Place: Selling to a wholesaler in the US that will ship the hempcrete and lime to Mexico, these

will be combined on site to create the hemp blocks for building.

Promotion:The wholesaler will take care of promotional activities after transfer of goods.

4 Ps for Canada

Product: industrial Hemp/Hempcrete, Outsourced to a wholesaler in the US, American Hemp

LLC.

Price: There are no prices listed for the price of hemp in Canada, but most hempcrete is based on

12-inch thick walls. Hempcrete may cost $135 per square meter (Uni24).

Place: Selling to a wholesaler in the US that will ship the hempcrete and lime to Canada, these

will be combined on site to create the hemp blocks for building.

Promotion: The wholesaler will take care of promotional activities after transfer of goods.

Estimate transportation and shipping time and costs for each country (including tariffs)

The Hemp Block Company is a UK based Wholesaler, they would handle the international

shipping cost. There will be a Customs Tariff for shipping into the UK (gov.uk). The US based

Wholesaler, American Hemp LLC will reap advantages from USMCA or NAFTA that

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eliminates tariffs to Canada and Mexico. The shipping cost for transporting hempcrete to

California (American Hemp LLC) for 10 boxes 40x40x40 is $35,450 and the international

shipping cost for the same dimensions is $49,730 to London for The Hemp Block Company.

(Fedex)

Recommendation

Our recommendation is for Pure Shenandoah to export its hemp fibers and industrial

hemp to Turkey. Turkey's market will provide the most opportunity for the company. The

research provided above reinforces Turkey’s attractiveness for Pure Shenandoah to take their

business international. The construction sector accounted for about 31.11% of Turkey’s GDP

(Turkey imports from United STATES2023), which shows the significance of this industry in the

country. Foreign Direct Investment in Turkey’s construction sector from 2003-2021 was at 3.2%

(InvestinTurkey), proving that the market presence in one of Turkey’s largest industries is

dominated by domestic companies. Pure Shenandoah's entrance strategy into the Turkish market

will be its product differentiation. The only available information regarding hemp products in

Turkey is that it is used in automotive, textile, paper and pharmaceutical industries. This suggests

there has been little industrial hemp and fibers entering Turkey. Historically, the U.S. and Turkey

have traded industrial and energy resources with one another, so it's second nature for the two.

Both have outstanding relationships with little to no trade barriers, as both are members of the

General Agreement on Tariffs and Trade. Pure Shenandoah should take advantage of its strategic

window by becoming one of the first foreign companies to introduce its industrial hemp fiber.

The hemp fibers and industrial hemp are sustainable and eco-friendly, they have a wide range of

usage (insulation, concrete, etc), and Turkey is in need of housing due to the natural disaster that

struck the country.

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Pure Shenandoah will sell its industrial hemp and hemp fibers to Turkey through wholesalers.

Doing this will save the company time and money, as Pure Shenandoah will not have to worry

about marketing and how operations will be done. Some wholesalers we found were: Tezken

Wholesalers, a Turkish construction wholesaler specializing in industrial material as well as the

İzmir Yapı Market, another construction materials wholesaler based in the port city of Izmir.

These wholesalers would benefit Pure Shenandoah by being a key input in the supply chain that

would feed the Turkish demand for industrial hemp fiber for the purpose of creating hempcrete.

They also could use their established local business connections to create a network of buyers

that would greatly aid in the distribution of Pure Shenandoah's product.

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