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FIBO BAMBOO FIBERS BY HONEY COMBS

Export Marketing Business Plan
[Type the document subtitle]
Robert, Jerold, Nichole, RJ, Harry 2/17/2011

Ateneo de Manila University John Gokongwei School of Management Project Information Cataloging System (PICS) Class Project Information and Cover Sheet School Year: 2010-2011 Sem: 2nd Subject Code: Mkt 173 Course Name: Export Marketing Teacher(s): Mr. Senen Perlada (Information below this line and in this colunm for use by Faculty &/or PICS staff only.) Grade: Call Number: Project Title: Fibo Bamboo Textiles Target Market: United States of America Industry Category: Natural Textiles Industry Abstract (150 words or less) This is an export paper proposal directed to the exportation of bamboo fiber textiles to the United States. Bamboo fiber textiles present several benefits owing to its anti-bacterial and biodegradable properties, such as protection from ultra-violet rays, faster evaporation of water and other liquids, and deodourisation as a result of its anti-bacterial property. To purveyors of fashionable clothing in the United States, this textile would be the best option for them, as natural materials are gaining popularity in the fashion industry owing to environmental awareness campaigns which has created buying patterns favorable to products that help conserve the environment. This paper aims to explore the possibility and advantages of exporting bamboo fiber textiles produced by a local manufacturer and aided by an Export Management Company. Functional Area:

Name of Student/s:

BELTEJAR, Jan Robert V. ESPINAS, Ricardo Jose POA, Jerold VILLA-REAL, Nichole Angela

Comments:

Author(s)’ Recommended Key Words: Bamboo textile, Bamboo Fiber, Export product, United States America, Fashion Industry

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Table of Contents
GOAL SETTING ....................................................................................................................... 4
Long-term Goals .............................................................................................................................4 Short Term Goals............................................................................................................................4 Strategies to achieve Long-term and Short-term goals.....................................................................4

PURPOSE OF ENTERING EXPORT BUSINESS ............................................................................ 5 BACKGROUND OF THE BAMBOO FIBER INDUSTRY ................................................................. 5
BACKGROUND OF THE BUSINESS ..........................................................Error! Bookmark not defined.

METHODS OF EXPORTING...................................................................................................... 7 INTERNATIONAL SKILLS ......................................................................................................... 9
Export Management Company .......................................................................................................9 Freight Forwarders .........................................................................................................................9

PERSONNEL ......................................................................................................................... 10
Distribution Manager (in the Philippines) ...................................................................................... 10 Delivery Personnel ....................................................................................................................... 11 Packing Agents .....................................................................................Error! Bookmark not defined. Warehouse manager .................................................................................................................... 11 CONSULTANTS/ ADVISORS ........................................................................................................... 11 WRITTEN POLICIES ....................................................................................................................... 11

PRODUCTS / SERVICES ......................................................................................................... 12 TARGETING MARKETS AND CUSTOMERS ............................................................................. 13 SUPPORT FUNCTIONS .................................................................. Error! Bookmark not defined. COMPETITIVE ANALYSIS ...................................................................................................... 15
Product ........................................................................................................................................ 15 Price ............................................................................................................................................ 15 Place ............................................................................................................................................ 16 Promotions .................................................................................................................................. 17 International Overhead Expenses ................................................................................................. 17

Projected Financial Statements ............................................................................................ 17 Financial Strategy ................................................................................................................ 19

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GOAL SETTING
Long-term Goals
As a company that aims to introduce and provide a sustainable outlet for the exporting of Philippine bamboo textiles to the United States market, Fibo has the following long-term objectives: 1) To be the market leader of bamboo textile products in major bamboo textile importing countries such as the United States of America (US), Japan and Germany, providing quality bamboo textiles to the said countries; 2) To be the most reliable and preferred bamboo textile exporter in the Philippines, with a receptive manufacturing and production team that will produce quality textiles at competitive prices; and 3) To establish a strong brand that will be the preferred choice for institutions and individuals advocating the use of natural textiles.

Short Term Goals
As a company that aims to penetrate the US market through a strategic and appropriate method of market penetration, Fibo has the following short term goals:

1) To identify and establish fruitful relationships with distributors and sales agents and importers in the US through partnering with an Export Management Company (EMC); 2) To enable Fibo bamboo textile’s penetration of the US market via the strengthening of the partnership with an EMC and by complying with policies and regulations set by US authorities; and 3) To establish brand awareness among members of the initial target market in the US (particularly Boston and eventually New York) by crafting the necessary business-tobusiness over-all marketing theme with the partner EMC.

Strategies to achieve Long-term and Short-term goals
a. Aggressive Marketing and Market Penetration through differentiation – To be the best known exporter of bamboo textiles in the Philippines, Fibo shall concentrate on and develop the needs of its target market by differentiating its products from competitors’ products through tailoring its production and marketing activities
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based on the demand of American bamboo textiles importers, particularly those who place an emphasis on importing textiles that meet the demands of American consumers who patronize natural products. b. Geographic Expansion – given that the US represents a substantially large amount of shares of bamboo textiles imports from all over the world, it is a very viable option for the company to export to the said country. With 50 states and with several large Filipino communities in some of the said states (particularly in Northern and Southern California - Sacramento, Stockton, Fresno, Los Angeles, Historic Filipinotown, East Hollywood, etc. 1), there is already a viable market for the product which can support and ease its distribution and visibility requirements.

PURPOSE OF ENTERING EXPORT BUSINESS
The US is the top importing country of bamboo fabrics in the world. One of the causes of this is the emergence of social responsibility and the rise of environmental awareness of its people. Thus sustainable fashion or eco fashion has been a growing trend in the fashion industry. According to Vogue2, this appears not to be a short-term trend but one that could last multiple seasons. The group has sense this possible lifestyle change and translated it into a possible market for our export product. With the increase of environmental awareness and organizations that support eco fashion such as the National Association of Sustainable Fashion Designers the business may deem to be sustainable in the long term. Major players in the apparel industry such as Wills Lifestyle, Van Heusen, Benetton, S Kumar’s Nationwide (SKNL) and Arrow are also leaning towards more on eco-friendly clothing. A number of green ranges of apparel were launched last year like the clothing line of Van Heusen last April. It is seen here that the demand for organic clothing is high as they saw the organic clothes fly off their shelves. 3 According to Van Heusen MD Shital Mehta, this realization has brought about increase of other apparel lines not only focusing on shirts and pants but an expansion to other forms of clothing like trousers.

1

http://en.wikipedia.org/wiki/List_of_U.S._cities_with_large_Filipino_American_populations 2 ^ a b c "Earth to Fashion." Vogue (May 2007). 128-132

3

http://economictimes.indiatimes.com/news/news-by-industry/cons-products/garments-/-textiles/demand-foreco-friendly-apparel-grows/articleshow/6543335.cms

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Also, non-profit organizations such as Earth Pledge4 are able to help promote this product to the market because of their commitment to sustainable development. This will allow better marketing and consumer acceptance for the product in a foreign market. To capitalize on the trend of environmentalism in the fashion industry, the company has decided to export to the USA.

BACKGROUND OF THE BAMBOO TEXTILE INDUSTRY and BUSINESS
Industry & Business Background In the industry of fashion, the world is constantly seeking into new materials to used as fabrics. The folk fashion craze spurred demand for natural, handmade-looking textiles that promotes warmth. One of the hot items in the market is fabrics made from traditional Japanese materials like bamboo. Because of this, bamboo has been generated as one of the new sources of fabrics for fashion. It was showcased in the spring and summer fashion shows within Tokyo that includes apparels such as coats and pants made of fabric containing bamboo fibers. Bamboo fibers are one of the newest things to hit the textile market. Although Bamboo fiber clothes are relatively new, it is continually increasing in terms of popularity within the industry and has been able to position itself in some department stores and women’s boutiques. Clothes made from this fabric can be sold at the same amount as ordinary clothes and because of its distinctive softness, cool and light texture it is perfect for both the winter and summer seasons. As regards the total bamboo shoots industry, from which materials for bamboo textiles are derived, it is currently estimated at 6 million tons per year, with the US importing around 27.5 tons per year (worth US$15.3 million).5 The annual export of bamboo itself amounted to US$2.5 billion in 2000, with China, Indonesia and Viet Nam serving as the most notable bamboo producers and exporters in Asia.6 As regards bamboo products specifically, the US, European Union, Hong Kong and Japan were touted as the major importers, comprising 71 % of total market share for bamboo products, with the US as lead importer (importing as much as US$899
4 http://earthpledge.org/ep 5 http://prosperityinitiative.org/images/stories/Bamboo_International_Markets_Analysis_Pack.pdf 6 Ibid.

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million worth of bamboo products, and serving as 36.6% of the total market for bamboo products), Japan at second, with imports amounting to US$349 million, serving as 14.2% of the total market for bamboo products, and Hong Kong at third, with US$163 million worth of imports, or 6.6% of the total market for bamboo products.7 As regards the production of bamboo and bamboo products itself, it is said that as much as US$5,000 in net income per hectare per farmer per year is earned by farmers in Viet Nam and China. There is also a reported improvement in the quality of production of bamboo and bamboo products over the last five years, leading to a positive reception towards bamboo as a material or intermediate good to be used in the creation of other goods for end-users or consumers.8

METHODS OF EXPORTING
Table 1 Summary of Advantages and Disadvantages of Indirect and Direct Exporting9 Direct Exporting  Price and Brand Control  Personal understanding of customer’s Advantages wants and needs  Maintains good customer relationship  Preference of customers to deal directly with producer is attainable Indirect Exporting  Risk-free beginning  Can take advantage on existing markets  Less complications in finding sales agents and distributors  In-market experience (Contacts)  Info on foreign competitors & new technologies  Minimal involvement in transaction  In-depth personal handling Disadvantages  Slow Growth  Time and Money consuming  Cultural differences may hinder after sales services/support  May require additional visits in case of  Less control over marketing  Loss of control of foreign sales  Intermediary seeking margin  no direct contact with the end customer  Less control over the actual final transaction

emergencies/troubles  No info on overseas market at hand DECISION: INDIRECT EXPORTING THROUGH AN EXPORT MANAGEMENT COMPANY (EMC)  Need to be physically present in market acting as a Commission Representative.
7

ftp://ftp.fao.org/docrep/fao/010/a1243e/a1243e04.pdf

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http://prosperityinitiative.org/images/stories/Bamboo_International_Markets_Analysis_Pack.pdf Contents of the table/ factor disadvantages and advantages are from http://www.nzte.govt.nz/develop-knowledge-expertise/export-guide/ways-of-entering-a-new-market/pages/direct-and-indirect-exporting.aspx

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Based on the given data, the company has thoroughly weighed the pros and cons of each possible venture. The company has chosen to engage the services of an Export Management Company (EMC) to minimize risk associated with exporting. The EMC shall act as a commission representative, while still bearing the following responsibilities: 1. Gather market information on the United States demand and market for the product 2. Select overseas customer locations that will be served and select a target market (with our concurrence) 3. Communicate and establish relations with distributors 4. Prepare and negotiate for Logistics (Shipping, Freight, etc) 5. Plan avenues for exposure through Trade Fairs, Expos, etc. 6. Report to the company’s. top management based in the Philippines 7. Set up effective and efficient distribution channels This arrangement can help the company learn more about the market by being given access to it through trade contacts, while minimizing expenses by merely allocating a portion of our earnings as payment to the EMC. By doing so, we are still in control of our own name and at the same time, we shall not bear the bulk of financial risks in the sale of goods. We collect payment from the customer, but our actual involvement in the transaction is really minimal. With this approach, the company is still capable of finding foreign markets and buyers for its products. The EMC can still retain considerable control over the process of the sale in so far as to counter check the credit and the financials. As the EMC is expected to have more experience in the market chosen by itself (with our concurrence), strategies for penetrating the market can be more easily devised and implemented, knowledge about the market can be shared with the company (in case the company decides to do direct exporting once the brand has been established), and sales and distribution, as well as other processes involved in logistics, can be expertly planned, arranged, and established to ensure maximum exposure and availability of the company to its target market.

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EXPORTING AND INTERNATIONAL SKILLS
Since exporting is simplest way to approach the foreign market, the company may export the surpluses from the domestic market, eventually comitting to increase the exports to our targeted markets in the US. For our group, we decided to focus first in Boston in the U.S. Since we are producing the bamboo textile products in the Philippines, we chose not to alter the product line since textiles are bought as components of finished goods, rather than as finished goods in themselves. As such, the exporting of our products to the US does not require much change from company as regards product design, company organization, investments, or mission. Being a new exporter, Fibo needs a competent EMC and freight forwarders to ensure the timely delivery of goods and proper, efficient, and effective distribution and sale of its products.

Export Management Company
An export management company is an independent market intermediary that operates as the export sector of the exporting company. They handle two or more manufacturers having different product lines. Fibo will need an export management company because as earlier mentioned, the company still do not fully grasp the American market so it will need the assistance of an independent distributor. The export management company, being a constant player in the industry, have the capacity to market and distribute the product in the market. Although this may cause the company additional costs, the company believes that the benefits that having an export management company outweighs the additional costs. But for the company’s long-term plans, it will have to forego the export management company. The company will just seek the assistance of the export management company during its introductory years.

Freight Forwarders
The freight forwarders shall serve to coordinate and execute the shipment of the bamboo textile products from the Davao del Norte to the United States, particularly Boston and eventually New York. It is the responsibility of the freight forwarder to bring the product from the country of origin to the country where the products will be imported. Fibo will be exporting to the United States of America (specifically Boston and New York) because of the increase in the environmental consciousness and awareness of the people in the said country. Fibo will have to closely work with the Customs and Border Protection of the

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United States of America which is in-charge of regulating the international trade in the United States. The company must be able to do the requirements set upon by the agency such as merchandise clearance from the customs department, declaration of dutiable value of merchandise, and determination of the classification number of the merchandise.10 Decisions on the Global Marketing Organization The first step to exporting would be organizing the export department. We will start our international marketing by shipping out goods to the US. Thus, by organizing the export department, the key personnel would be a sales manager and assistants for stock-keeping and recording of sales. Sales manager will handle the issue involves in export department while sales assistants will provide administrative backup for the department. The exporting sales manager shall be required to personally contact the major buyers for him to serve important buyers. He will also handle the web sites that will lead the buyers the company information easily. As the company at this stage has just begun exporting, the Chief Executive Officer of Fibo or the officer designated Vice President for Sales may act as export sales manager. The main role of assistants would be looking for buyers from not just the U.S but other countries as well. They will be in charge of giving out the company brochure and information to those who inquires and interest to our product. Especially in case of making appointments with buyers, they will make sure that everything will be informed ahead and confirmed by both companies. Through two key personnel, we expect the company to serve customers better and efficiently.

PERSONNEL
Distribution Manager (in the Philippines)
The distribution manager is responsible for coordinating with the EMC in the US to ensure that the distribution of the goods by the EMC is timely and meets current demand patterns. It is the responsibility of the distributions manager to ensure that all of the export requirements will be met by the company, and that demand that has been projected by the EMC is met with supply from Fibo.

10

http://www.americanimporters.org/pages/marketing/USimportrequirements.html

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Delivery Personnel
The delivery personnel takes charge of the logistics of delivering Fibo products from the warehouse in the US to respective distributors, wholesalers, and/or retailers. These personnel must be employed by the EMC.

Warehouse manager
The warehouse manager makes sure that Fibo bamboo textile products are well kept in the warehouse. He makes certain that the warehouse that the company will be using is suitable for storing and maintaining the quality of Fibo bamboo textile products. Being a company, it is very important that it will have written policies from the start of the establishment of the company. Written policies are very important as these will determine the way the people in the organization will act. This will ensure that each and other one in the company will do his/her job in compliance with the rules and regulations of the company.

CONSULTANTS/ ADVISORS
In order to ensure that the export plan is sound before it is presented, discussed, approved and implemented by both Fibo and our EMC, the Bureau of Export Trade Promotion (BETP) of the Philippines shall first be consulted. The BETP’s three functional groups, namely the Trade Information and Assistance Group (TIAG), the Market Strategy and Consultancy Group (MSCG), and the Product Research and Strategy Group (PRSG), can serve to advise Fibo and EMC on possible export strategies, help in streamlining export-import procedures (from the Philippines to the US), and can also provide Fibo and the EMC updated regional and country information so as to help chart the course of Fibo’s bamboo textiles business.

WRITTEN POLICIES
As Fibo is dealing with an EMC, several guidelines have to be drawn to ensure that the transparency of dealings and transactions are maintained. Internally, Fibo can adopt a Code of Corporate Governance to ensure that proper committees (such as the Audit Committee, the Nomination Committee and the Compensation or Remuneration Committee) are established and that relations among employees and management are regulated. The adoption of such a Code will serve to attract other investors to invest in Fibo, thereby hastening its growth and enabling

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its expansion with increased capital. The adoption of such a Code is likewise mandated by the Philippine Securities and Exchange Commision.11

PRODUCTS / SERVICES
Description of Product Bamboo fabrics are created by weaving together pure bamboo fiber yarns that possess several key qualities and benefits derived from the nature of bamboo itself: “wet permeability, moisture vapor transmission property, soft hand, better drap, easy dying, [and] splendid colors.” 12 These qualities and benefits are not found in most fabrics, and thus provides the bamboo fabric adequate differentiation versus other types of fabrics. Currently, bamboo fabric can be made into sweaters, mats, masks, mattresses, “bandages, surgical clothes, towels, robes, and curtains,” among others.13 Benefits14 1.) Anti bacterial- Bamboo produces an anti-bacterial agent known as “bamboo kun” which is unique to the bamboo. This anti-bacterial aspect of the bamboo has been certified by the Japan Textile Inspection Association which conducted a test and discovered that even fifty times of washing the bamboo fiber fabric did not eliminate completely the antibacterial function of the bamboo fiber. Furthermore, it was shown in the same test that up to 70% of bacteria were eliminated by the bamboo fabric.15 2.) Biodegradable- Bamboo textile is considered a “green and biodegradable product.”16 Known as a unique textile material due to the fact that it is biodegradable, it is hailed as “the natural, green and eco-friendly new-type textile material of the 21st century.”17 3.) Protection from Ultra violet rays- It can absorb ultra violet rays at different wave lengths 4.) Breathable and water absorbent- It is filled with micro gaps that allows ventilation to be better than in other fabrics, and enables better moisture absorption. This enables the fabric to quickly absorb and evaporate human sweat, and allows apparels composed of

11 12 13

www.dlsu.edu.ph/research/centers/.../Corporate_Governance.pdf http://www.swicofil.com/bamboo.pdf Ibid. 14 http://www.mybamboohome.com/whybamboo.html 15 http://www.swicofil.com/bamboo.pdf 16 Ibid. 17 Ibid.

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bamboo textile or fibers to be one to two degrees less warm than normal apparels during summer.18 5.) Water absorbent- It is able to absorb three times its weight in water. It also allows faster evaporation of water due to the micro gaps it possess. 6.) Deodourisation- Because of its anti-bacterial properties it kills of bacteria that emits bad odor. 7.) Soft feel- Because of its soft feel it does not irritate the skin of the users. Compared to wool or hemp most people are not allergic to bamboo textiles.

Product comparison Bamboo fibers have always been compared to cotton because of the similarities it has when it is unspun. However, using bamboo fibers is more advantageous than using cotton. The reason for this is that bamboo retains most of its plant attributes when made to fabrics. It means that almost all of the benefits listed above are still found within bamboo fabrics. Also, compared to other natural fabrics such as wool and hemp, bamboo fiber does not irritate the skin of its consumers. To lead our product to successful export, we want to focus on good-value pricing. From the market size and its competition it would be tough for us to compete in the market if our product does not have good-value price. We will continue to produce same quality of product while we try to maintain the low price by minimizing the cost occur during the production. By capturing the market inside first, it will make us to make mass production. Thus we can minimize the over head cost or the fixed cost while production. Eventually after adapting to the market with the increase in sales growth, the company will try to produce better quality of product for the continual competition in the market.

TARGETING MARKETS AND CUSTOMERS
Bamboo fiber is very natural and it is effective in absorbing and evaporating sweat quickly. With this characteristic it is seen that this garment when used in clothing can help ease warmness
18

http://www.swicofil.com/bamboo.pdf

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during summer while prevent users from feeling suffocated during cold seasons. Moreover, it has the quality of being bacteria free and odorless as compared to other kinds of textiles used for clothing. Hence, this product is suitable for customers looking for an eco-friendly, soft and comfortable garment, preferably customers from America, since they are the ones who adore this specific type of textile which is basically manufactured in the tropical regions like China and the Philippines but this does not prevent the product to be sold elsewhere. Several factors were considered in the selection of the target market for the exportation of the bamboo textiles. The size of the markets, national trade laws, regulations, taxes, and standards, demographics, and the like were evaluated to see the opportunities in promising export markets. Primary research, such as population figures and export product standards, and secondary research, such as market reports, country analysis, and historical export data, were conducted to arrive at the decision. With these, country comparisons were employed and as a result, the United States was presented as the country that would render the company the most opportunities as its primary target export market.19 The main factor that was crucial to the decision of choosing the United States as the target market for the bamboo textile was its rank as the top importer of bamboo products.20 The country’s policies regarding trading across borders also provide advantages for the company to select it as its target market. The United States’ evaluation of the length of importation to the country is very positive, showing only five days, compared to the eleven days, which is the average of OECD or the high-income countries, where US is also a part of. The documents required to engage into importation is also at the OECD’s average, which is at five.21 With these, considering the free trade agreements and tariff policies already imposed, the United States can be an efficient location for the importation of the bamboo fiber. For the United States’ economic stability, the period of recession is slowly fading away so this situation does not really pose any problem. With a population of 304,060,000 and a Gross National Income per capita set at $47,576.50, the country is considered as one of the high income and industrial, well-developed countries. In addition to this, the market for bamboo products in the

19 20 21

See Appendix A ftp://ftp.fao.org/docrep/fao/010/a1243e/a1243e04.pdf http://www.doingbusiness.org/ExploreEconomies/?economyid=197#TradingAcrossBorders

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US has reached $899 million as of 2000.22This growing trend might be the result of increasing public awareness of the need to conserve the environment, and the trend towards buying ecofriendly goods.

COMPETITIVE ANALYSIS
The popular eco-friendly garments that are being manufactured and distributed are made from sources such as Lycocell, Ingeo, Hemp and Soy. Companies that export these mentioned sources are the main competitors since it offers almost the same qualities and purposes for the users. All are natural, soft and light to wear. The company in order to sell its product and gain profits must allow differentiation in their product and operations. For instance, the company can create unique and innovative ideas for promotion such as interactive booths which will be set-up during conventions and trade fairs. The company can also stand out by giving away freebies and offering other products that go along with their main product, bamboo fiber.23

SUPPORT FUNCTIONS
Ensuring the availability of bamboo for export is supported by the Ecosystems Research and Development Bureau (ERDB) with the assistance of the United Nations Development Programme – Food and Agricultural Organization Bamboo Research and Development Project, which effectively established fifty-seven hectares of bamboo pilot plantations in six different areas in the country, averaging eight to eleven hectares per site. The said plantations are located in Regions 1, 3, 6, 7, 10 and the CARAGA area.24 To date, there is at least 39,211 to 52,711 hectares of production area for bamboos, with an estimated 29 to 52 million bamboo poles harvestable in the Philippines per year.25

Product
Bamboo fabrics are created by weaving together pure bamboo fiber yarns that possess several key qualities and benefits derived from the nature of bamboo itself: “wet permeability, moisture vapor transmission property, soft hand, better drap, easy dying, [and] splendid colors.” 26 These qualities and benefits are not found in most fabrics, and thus provides the bamboo fabric
22 23 24

ftp://ftp.fao.org/docrep/fao/010/a1243e/a1243e04.pdf http://www.ayushveda.com/magazine/eco-friendly-clothing/ http://www.inbar.int/documents/country%20report/Philippine.htm 25 Ibid. 26 http://www.swicofil.com/bamboo.pdf

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adequate differentiation versus other types of fabrics. Currently, bamboo fabric can be made into sweaters, mats, masks, mattresses, “bandages, surgical clothes, towels, robes, and curtains,” among others.27 The fabrics

Price
The pricing strategy for Fibo bamboo textiles is directed towards emphasizing its difference from other brands in terms of quality, benefits, and prestige, with due regard to the lifestyle and spending pattern of American consumers. According to the International Marketing by Suplico, Garcia and Esguerra, companies should avoid constant fine-tuning of prices in the international market and that many problems which are from the company or their target market and environment should not be addressed by pricing action.Hence the company should be able to set a standard price for the distribution terms of their product and the product itself. In comparison with the prices of other bamboo textiles such as Bambrotex (US$11-US$13/kg)28, Fibo bamboo textiles shall be priced from US$14 to US$15 per kilogram, 30 percent higher than the Bambrotex textiles, to lend it an image of higher quality and greater prestige, taking into consideration that the target market in the US are fashion institutions and schools that put a premium on the quality, and not exactly the price, of the fabric with which they make clothes. To maintain the stability of the price of the product, Fibo bamboo textiles supply shall be maintained at a level that is sufficient to meet demand by ensuring that shipment of the products is done in accordance with the Free Carrier (FCA) international commerce term, whereby the chosen EMC shall be held responsible for all transportation costs associated with a.) obtaining the finished goods from the manufacturing plant of Fibo in Davao del Norte, and b.) transporting said goods to the final destination (i.e., the United States), with Fibo only bearing the responsibility of a.) making the goods available for pick-up by the EMC’s agents and b.) of clearing Fibo products for export. This effectively minimizes the cost of selling and distributing the products, at least with respect to Fibo.

Place
As mentioned already, the company will be targeting the United States as its export market for its initial years of operations, particularly states where there is fashion consciousness and awareness about the latest trends (e.g., Boston and New York). Given the country’s demographics, economic,
27 28

Ibid. http://www.bambrotex.com/bamboo-textile/bamboo-knitted-fabric.htm

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political and legal environment, geographical factors, and market characteristics, as well as the existing, yet relatively small competition, the company deemed the United States as the country with the most potential for exporting the bamboo fiber.

Promotions
The company will mainly use conventional means of promotions (such as print advertisements directed at wholesale buyers and retailers), personal selling through electronic mail, and participation in fairs for its bamboo textile product. Aside from this, the company will also push for endorsements from institutions or schools of fashion that promote the use of environment or eco-friendly materials, particularly textiles, to acquaint a wider market of the usability and benefits from using the said textile. The company will also participate in trade shows, capitalizing on the unique properties and benefits of the product. Aside from this, given the emerging consumer demand regarding environment or ecofriendly products as a trend fuelling the continuing growth of the bamboo products and textile industry, the bamboo textiles will be packaged in such a way as will highlight its quality: one which is ready to be used by the customer and which benefits can actually be felt upon use.

International Overhead Expenses
The following are pertinent international overhead expenses to the Fibo bamboo textiles corporation. These expenses will be incurred partly by Fibo and partly by its partner EMC.
Overhead Expense Consumption Entry Fee Classification Fee (1 line free) Additional Invoice Single transaction Bond per Entry minimum Forklift Fee Documentation Fee Handling Fee Rate $150 per shipment $6 per line $10 $60 or $5 per $1,000 $200 per CBM $50 per shipment $100 per shipment

Projected Financial Statements
2011 Net Sales 9,675,000.00 2012 12,577,500.00 2013 16,350,750.00

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Cost of Goods Sold Gross Income % of Net Sales Selling and Delivery Advertising and Promotions General and Administrative Total Expenses % of Net Sales Net Income % of Net Sales

768,000 8,907,000.00 92.06% 967,500.00 2,418,750.00

822,000 11,755,500.00 93.46% 1,257,750.00 3,144,375.00

892200.00 15,458,550.00 94.54% 1,635,075.00 4,087,687.50

5,111,040.00 8,497,290.00 87.83% 409,710.00

5,111,040.00 9,513,165.00 75.63% 2,242,335.00 52147.33

5,111,040.00 10,833,802.50 66.26% 4,624,747.50 ($107,552.27) 29.92%

4.23%

17.83%

The first year net sales is derived from 5% of the total number of bamboos produced by Davao del Norte (taking into consideration the waste expelled, and using only the most pristine of bamboos from among those produced in the province) multiplied by Fibo bamboo textile’s Php645 selling price per kilogram spread throughout the first year of production (Php645*15,000kg). A 30% increase in supply occurs each succeeding year. Raw materials, delivery of raw materials, and direct labor make up the Cost of Goods Sold. The cost of raw materials is based on Php12 per pole of class A bamboo poles multiplied by the 15,000 poles (and kilograms) sold each year. Direct labor is based on the minimum wage rate in Davao del Norte multiplied by 10 personnel working for 20 days per month in a year (Php225*10 personnel*20 working days*12 mos.). A Php48,000 transportation cost incurred in transporting the raw materials to the factory is likewise factored in. Since supply increases each year, the raw materials cost increases by 30% per year while the direct labor cost remains the same, assuming minimum wage does not change within the timeframe. A fixed selling and delivery expense is based on 10% of net sales. This serves as the commission for the export management company. Fibo allotted 25% of its net sales for advertising and promotions for trade shows. As for the general and administrative expenses, 2

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managers will be paid $58,080 per year under the assumption that a US Dollar is equivalent to Php44 ($58,080*2 managers*Php44). General and administrative expenses are constant for the given 3 years. The first year shows a 4.23% gain from net sales based on this projected income statement, and reflects consistent gains in the two years following the year 2011. Financial Strategy As regards credit investigation on the EMC to ensure its financial stability and a good credit standing, the United States is home to a host of private firms and nonprofit organizations that keeps records of the “creditworthfiness” of both business entities and individuals, which can be utilized or consulted by Fibo to select the right EMC to partner with (as regards credit standing) so as to ensure sustained operations and growth of the export business. As the United States has a 100% private credit bureau coverage29, meaning private firms and nonprofit organizations have a database on all adults regarding their credit standing (including “repayment history, unpaid debts or credit outstanding from the past 5 years), Fibo will not be hard-pressed to evaluate possible EMCs based on their credit standing, and information regarding how to obtain credit from banks and financial instutions can easily be obtained.

Breakeven Analysis
Break-even Point (in units) = Fixed cost/Contribution Margin = 5,111,040/(645-12) = 8,074.31 kilograms (24,000 yards) Break-even Point (in sales) = Break-even point in units x Selling price = 8,074.31 kg x Php645 = P5,207,931.75 The Fibo bamboo textile company will achieve its break even point in units after selling 8,074.31 kilograms of its bamboo textiles. As for its break even sales, the company needs to sell at P5,207,931.75.

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http://www.doingbusiness.org/ExploreEconomies/?economyid=197

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