Export Plan for Raleigh Denim
Company overview and export trade prospects
Raleigh Denim was created by Victor and Sarah Lytvinenko who, a couple. The brand, Raleigh Denim has sudden recognition across the United States for its attention to detail and focus on the old and vulnerable American clothing industry. The Americans are known for their tastes on blue jeans. Raleigh Denim has gone out of the ordinary jeans manufacturing. Raleigh Denim has become a darling of the fashion enthusiasts especially after the Barney’s department store from Manhattan displayed Raleigh Denim jeans in its store in 2008. The store had placed an order of 114 pairs of jeans at first and further increased the order with each passing year. Raleigh Denim jeans have received recognition from major fashion stores such as GQ, The New Yorker, WWD and Elle as well as fashionista rags like Nylon, Creem and Foam. Raleigh Denim has been experiencing a high level of growth in the recent times especially after opening a flagship boutique in NYC on Elizabeth Streets in Manhattan’s Nolita neighborhood.
With the kind of success recorded by Raleigh Denim in the recent times within the American market, it is high time for the company to engage into the export business. Indeed, there are profound benefits to be enjoyed by the company through export trade. Currently, the global fashion market is experiencing an unprecedented growth. New markets are emerging especially in the fast developing economies such as China, United Arab Emirates, India, Mexico and many other economies. World Trade Organization reports indicate that the world is more than ever open for business. According to these reports, it has become increasingly easier for companies to undertake international trade than it was a few years ago. All companies regardless of their sizes and nature of goods have an opportunity to massive profits through export trade. Consequently, Raleigh Denim has a great opportunity to expand its business horizons and profits through internal expansion. It does not matter the current size of the Raleigh Denim, as long as the company has been able to make some sales so far. In fact, the uptake of the company’s products has been so encouraging over the past few years. Therefore, there are reasons to expect the international market to receive the company’s products with great enthusiasm.
There is utmost ease in today’s global world in undertaking international trade. The requirements are particularly minimal and therefore there is no reason as to why an exceptional company like Raleigh Denim should not benefit from the global market place. Reports indicate that there are several U.S. firms involved in the export trade currently. These firms are in the category of small and medium sized. In 2005, more than 232,600 small and medium sized U.S. firms participated in the export business. The number was a growth of 3% compared to the number of firms involved in 2004. Statistical reports also indicate that there was a growth of 17 percent recorded from 2009 to 2010 in export trade revenues by small and medium sized firms from the U.S. The value of revenue collected from export trade activities hit $1.8 trillion during the same period. The global market has ready-made shoppers willing to take the products provided by the numerous U.S. firms. Therefore, it is essential that Raleigh Denim engages into the export trade as it stands to make immense growth from its exclusive classy fashion jeans brand. Export trade seems friendly for Raleigh Denim due to the numerous advantages the company stands to enjoy. It seems that currently, web-based marketing does not produce the desired level of export trade for the company. Therefore, it is just prudent that the company seeks alternative means through which it can grow its sales exponentially. The global trading system seems highly favorable to smaller firms like Raleigh Denim. The company can employ more than one sales and marketing channel to reach overseas markets. Raleigh Denim stands to benefit immensely by selling its products in multiple countries.
- Increasing the sales of the company sales revenue by 500% in five years
- Identifying right partners to distribute our Raleigh Denim jeans in our target markets
- Engaging in the global market in order to benefit from the ever growing global consumers outside the United States
- Maximize profits from the international market due to the massive international consumers
- Our company has an annual capital budget of $300,000
- Our staff is dedicated towards the growth of the company’s RD jeans band
- We boast of long-term commitment from our staff for over 5 years
- Our company has benefited from state funds for the promotion of brand growth and maintenance and regional and international expansion
- We have had product purchases from large boutique stores such as Barney
- We have received multiple product inquiries from several countries such as Europe, Canada, Mexico, China and India and the United Arab Emirates
- We boast of exemplary expertise of our staff in designing jeans most of whom have worked with leading companies such as Levi
- The co-founder couple have different backgrounds; Victor a Ukrainian and Sarah a Yarborough
- Some of our staff members have an experience in the international clothing market such as the UK, Mexico, China and India
- Our company is considering the services of a fashion consultant
- We will also hire more employees to exclusively serve in the export planning and execution
- We have obtained orders from individual customers from numerous countries such as the UK, China, India and Mexico
Current Trends and Practices for Raleigh Denim
- Over the past five years, our company has registered a growth rate of above 10 percent annually
- We have a national product sales currently with most leading boutiques selling our Raleigh Denim brand
- We have various promotional strategies such as fashion shows and expos, advertising, and in-store promotions.
The current capacity is sufficient to provide for the further sales increase, however, it is requires further expansion to accommodate global expansion practices. We currently have a production capacity of about 300 pairs of pants per week. The company’s employees are about 30 at the moment. A plan to export our pants to global markets will require our production per week to expand greatly to serve the needs of the many customers. Therefore, the current production capacity needs to triple within the next five years to support export. The activities of Raleigh Denim’s owners have revived a craft that was once forgotten by the Americans by making high quality jeans currently being sold across the country in Barneys New York locations. The two entrepreneurs have mastered their art perfectly attracting massive following and consumers who have suddenly fallen in love with the Raleigh Denim brand of jeans. It is no doubt, therefore, that the products are going to do well in overseas markets.
Justification of Countries
This export plan will undertake an initial market screening of five countries namely China, Mexico, United Arab Emirates, India and Canada. The choice of these countries was based on World Trade Organization’s report on global trends towards the consumption of fashion items and other demographic factors such as population, age, gender, consumer trends, and level of appreciation of quality clothing products. The analysis of the target market was also based on several factors such as the level of export levels of U.S products. The five countries chosen for the initial export of Raleigh Denim jeans showed an impressive export history with U.S firms for a long time. They also showed a trend towards increased appreciation of fashion items especially due to their fast economic growth and development being experienced in these countries. As a matter of fact, the justification for the choice of these companies was immense especially due to their high rate of absorption of U.S clothing products.
Justification for choice of China
According to reports from the U.S. Department of Commerce, the Chinese economy has progressively registered a high level of economic growth over the past three decades leading to a boom in urban centers and industries. There are over 171 cities in China today and over 1 million people. On the contrary, U.S has only 9 cities that can be classified under the same level as China’s 171 cities. Recent reports on Chinese GDP growth shows that the country is among the top performing economy in the world. The Chinese economy had a GDP growth of 7.5% in 2012. At the same time, a similar growth level is expected in the year 2013. The continued GDP growth in China continues to make the economy a major target for U.S firms to export numerous products with an aim of cashing in on the good economic environment. Since 2001, U.S firms have increased exports to China by over 468%. China is envisaged to continue being the third largest consumer of U.S products. The top two biggest buyers of U.S. goods are Mexico and Canada. Reports also indicate that small and medium sized firms are the major exporters of goods to China with about 92% of the U.S businesses exporting into the Chinese market. The value of the goods exporting to China by small and medium size U.S firms currently stands at 35%. The leading exports into the Chinese market by U.S firms include transportation equipment, computers and electronics, machinery, scrap and waste.
The Chinese economy has experienced extensive benefits from undertaking investments in fixed assets. The fact that this form of investment is regarded non-sustainable has been addressed by the China’s leadership with the recent address during China’s 12th Five-Year Plan (5YP). The 5YP came out in 2011 and it is to continue up until 2015. The current plan hopes to increase the level of consumer spending to about 50% from the current 35%. Based on comparative reports from other developed economies, the U.S. consumption level is over 70% of the GDP while Brazil’s economy has a consumption level of 63% of the GDP. These economies have a sustainable economic trend as consumption is a continuous activity that guarantees economic growth and development. As the China’s economy goes into the rebalancing towards adopting a consumption model of an economy, it is expected that more U.S. firms will benefit from the transition. In particular, companies specializing in consumer products stand to benefit immensely from the transition of the Chinese market into a consumption based. The current 5YP of the Chinese government has prioritized specific sectors of the economy as the main areas to promote growth including energy efficiency, high-end manufacturing, environmental protection, and biotechnology. These areas are aimed at promoting a consumption based economy that will eventually see a sustainable economic growth.
The exports into the Chinese market by U.S firms were approximately $70 billion in 2012 from January to August. In the year 2012, there was a widening trade deficit between the U.S and China to $295 billion during the year 2011. The United States recorded an impressive increase in various exports to the Chinese market. Agricultural, forestry and fishery exports from the U.S to China recorded a massive growth to $21.9 billion in 2011 regarded as all time high. The increase represented a 13% growth compared to the year 2010. Presently, China is the largest market for U.S agricultural products, forestry and fish. Statistics indicate that China’s uptake of U.S products has particularly increased over the past 5 years. Presently, China is experiencing a massive growth on incomes among its citizens brought about by increased production levels and high level of economic employment. There is also an increasing level of demand for raw, materials as well as finished foodstuffs. Consequently, there are expectations that the demand for U.S exports in China will continue to grow further in the coming future.
The inbound direct foreign investment (FDI) in China stood at $116 billion during the year 2011. At the same time, the first three quarters of the year 2012 recorded an $83.4 billion. At the same time, China’s foreign direct investment into the U.S for the year 2012 was $52.5 billion representing a whopping 28.9% growth. There are expectations of further increase in the ODI of China in the U.S in the coming years to surpass the levels recorded previously. Indeed, the Chinese government expects to have an accumulated $150 billion ODI in the U.S. by the year 2015. China has been experiencing unprecedented economic growth over the past few decades especially in urban areas. There has been a boom in the consumption of high-end consumer services and goods in China such as education and tourism. It is estimated that by the year 2015, China will consume 20% of the global luxury products totaling in excess of $27billion.
Consumption patterns in China based on demographic factors are also highly encouraging. Statistics indicate that the Chinese population consuming luxury products are aged 45 years and below. This is in comparison with the trends in the U.S where just 40% of the people buying luxury products are aged 45 years and below. At the same time, the Chinese middle class is expected to make up over 45% of the Chinese population with an excess of 700 million people. Such an enormous population is definitely too high and presents major opportunities for U.S firms to earn massive profits through export trade. Although there are various positive characteristics associated with the Chinese economy at the moment, it is still important to understand that the economy is still developing and is yet to reach the expected levels of a developed economy. The Chinese economy is therefore regarded as having very high potential for further growth and innumerable opportunities for increased profitability for small and medium firms in the U.S and the world at large.
Population data in China for the year 2011 indicated that the population in urban centers exceeded that in rural areas. The number of people living in Chinese urban areas was 691 million compared to 657 million living in rural areas. The per capita disposable income for the urbanites in 2011 was estimated at $3,454 while that of rural dwellers was $1,105. There are many market challenges associated with the Chinese markets. However, it is imperative for U.S firms planning to export their products to China to undertake an in-depth scrutiny of their partners to prevent chances of failure. The Chinese market is still a major destination for many U.S firms including multinationals, small and medium firms. It is just essential for these firms to carefully consider the target customers and market niche before undertaking any form of export activity. In the case of Raleigh Denim, there is no doubt that the Chinese economy is moving towards consumption owing to the growing level of disposable income by the households. Raleigh Denim jeans have a great chance of being bought by Chinese consumers due to their quality level.
Justification for Mexico
The Mexican economy recovered from a biting financial crisis in the year 1995. The economy underwent very painful measures aimed adjusting the economy to restore it back into a path of recovery through the assistance of the international community. The initial liquidity crunch experienced by the Mexican economy was fully dwelt with leading to a very successful year for the Mexican economy in 1996. For a very long time, the United States and Mexico have had very close economic ties especially through the enactment of the North American Free Trade Agreement (NAFTA) in 1994. Before NAFTA came into place, there were strong protectionist policies observed by the Mexican authorities. However, the 1980s saw a trend towards economic liberalization in Mexico. Although NAFTA has created several terms of free trade among North American economies and the U.S., Mexico has also devoted so much effort towards creation of trade agreements with the U.S with an aim of enjoying the multiple gains associated with the trade. NAFTA therefore accelerated the enactment of trade agreements among the North American nations. Indeed, there was a trend towards economic liberalization among the various economies of which Mexico was part.
The announcement by President Barrack Obama in June 2012 that the (Trans-Pacific Part) TPP negotiations had also included Mexico and Canada further increased the possibility of increased trade activities between the U.S. and Mexico. Success of the TPP agreement will have profound increases in trade activities between U.S and Mexico than currently is the case. Therefore, it is only prudent that U.S firms; multinationals, small and medium sized firms get ready for the looming opportunities for trade with the Mexico economy. It is therefore expected that further barriers to trade with Mexico are likely to be reduced leading to ease of doing business. Since 2005, there have been concerted efforts by the U.S, Canada and Mexico to reduce trade barriers amongst these countries. The three partners have also cooperated on security issues by undertaking diverse endeavors especially through the involvement in the North American Leaders Summits. President Obama hosted the first summit on April 2, 2012 at the White House. Issues were discussed on the well-being of the economy, security and safety of the North America. The meeting also led to the issue of a joint statement indicating a renewed commitment towards cooperation among the three countries in important areas affecting these countries.
Bilateral relationships between Mexico and the United States on economic matters are very important for the two countries owing to the proximity of these nations to the each other. There are high volumes of trade activities between Mexico and the U.S owing to the existence of strong economic and cultural ties between the two countries. As a key trading partner to the U.S, Mexico’s economic wellbeing is highly important for the U.S. indeed, Mexico ranks third among the export market destinations for U.S products. Mexico is also ranked third in U.S net trading partner when imports and exports are accounted factored in. The NAFTA has brought about very strong trade ties between the U.S and Mexico. The largest partners in the NAFTA include the United States, Canada and Mexico. The three countries make up the largest make up the largest free trade area making up over one-third of the total domestic product of the World. The population of Mexico currently stands at 114 million people and thus it is the most populous Spanish country. It is also the third populous country in the Western Hemisphere.