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Content Cow Dairy: Trade in International Business

Scenario:

Content Cow Dairy, Inc. began as a small, family-run dairy farm in Wisconsin in the 19th century, established by a Swedish immigrant, John Swanson. Over the years, the firm has acquired more land and now runs a herd of roughly 1,000 milk-producing cows. The firm is now incorporated for reasons of liability although the Swanson family retains control. The dairy has greatly expanded its production of milk and milk products to the point that Content Cow Dairy has sufficient cash flow to weather most fluctuations in dairy prices. The national Got Milk? campaign run by the industry helped keep consumption of milk products up in the U.S. for a number of years despite popular concerns about cholesterol and saturated fats and competition from other beverages. To maintain the company's growth and decrease its reliance on the mature American market, Karl Swanson, the President and CEO of Content Cow Dairy (and the great-grandson of its founder) is seeking new markets overseas for the company's products, particularly shelf-stable milk beverages and cheeses. Egypt is at the top of the list as a prime market and a focus of Content Cow's future plans.

Currently, no one in the firm has any experience with overseas markets or how to export products. Karl has the idea that countries without the natural endowments needed for raising dairy cattle (ample water and grazing land) might be good markets for dairy products. He is also aware that his family firm is competing for foreign markets with other U.S. firms and firms from leading dairy countries such as New Zealand and Denmark. For these reasons and on the advice of his state's department of commerce, Karl has decided to seek the assistance of a trade consulting firm, Alexander and Kravis (A&K).

A&K, Inc. is an international trade consulting service that has been in operation for the past 15 years. The principals in the firm include attorneys specializing in international trade law, economists, former members of the U.S. Foreign Service, former U.S. customs officials, logistics specialists, and customs brokers. The firm advises its clients on both importing to the U.S. and exporting from the U.S. to various foreign countries.

The firm is especially knowledgeable about business conditions in Latin America, the Middle East, and North Africa although it has access to consultants for other geographic areas. The firm is able to assist its clients in identifying potential markets for its products, developing relationships with foreign distributors, navigating U.S. export and foreign import laws, understanding foreign business practices and customs, and developing a long-term strategy for expansion of the client's business overseas. It provides specialists who can prepare the necessary export and import documents and arrange for transportation and shipping of the exports. Translation services are also available. A&K has a number of large corporations as clients but has identified a niche in serving small to midsize, family-owned firms.

As A&K's account manager for Content Cow Dairy, you are tasked with explaining various aspects of the international business environment and the export process to Mr. Swanson. You will be preparing a series of briefings, memos, and reports to help him understand.

Deliverable Length: 1500-1750 words

Details: Content Cow Dairy has no experience and only limited resources to begin exporting. As a family firm for more than 100 years, Mr. Swanson also wants to maintain control over the production and marketing of its products. You are to prepare a report for him in which you do the following:

Explain the various ways, with examples, that Content Cow Dairy might export to Egypt.
Discuss the pros and cons of the various ways of exporting to Egypt.
Recommend which of these makes the most sense for Content Cow Dairy, and why.

Solution Preview

The response addresses the queries posted in 1734 words with references.
//Before writing about various ways of exporting to the Egyptian market for Content Cow Dairy Inc., we will have the overview of Content Cow Dairy Inc. Then, we will write about the opportunities for the company in the Egyptian market. It will assist in analyzing the different ways of exporting to the Egyptian market and the market environment of Arab countries.//

Introduction

Content cow dairy, Inc., a family owned firm is a mid-sized company in U.S. Engaged in the production of milk products. U.S milk product market is at a maturity stage. So as to reduce its dependence on such a mature market and to maintain the company's growth, the president and the CEO of the company decided to expand their business internationally. But they do not have any experience in the exporting field and also has limited resources to begin the exporting. Egypt is on the top of the list of destinations where the company wants to export and is a focus of its future plans.

Arab Republic of Egypt is located in Northern Africa, bordering the Mediterranean Sea, between Libya, Red Sea North of Sudan and Gaza strip. The climate over there is hot and dry in summers and moderate in winters. Machinery and equipment, foodstuffs, chemicals, wood products, fuels are the major import commodities. Imports are restricted through tariff and non-tariff barriers. The GDP (purchasing power parity) was $ 334.4 billion in the year 2006 and the contribution of agriculture sector was 14.1% (CIA- The World Fact Book, 2007).

Ways of exporting:

Exporting i.e. selling of goods produced in one country to the residents of another country is a useful and easier way to enter in the foreign market. There are two ways of exporting namely direct and indirect. The decision regarding direct or indirect approach is based upon several factors such as the amount of resources the exporter is willing to put in, the size of the firm, the nature of the product, business conditions in the selected overseas market and the past experience. Depending upon the company's level of involvement there is following ways to export:

? Direct exporting

? Indirect exporting i.e. exporting through intermediaries

Indirect exporting is further divided into following ways:

Ø Seeking out domestic buyers who represent foreign customers

Ø Exporting through an Export Management Company (EMC)

Ø Exporting through an Export Trading Company (ETC)

Ø Franchising

Ø Licensing

Ø Piggyback marketing

//Above, we discussed the overview of the company and the ways of exporting to Egypt. Now, we will write about the direct exporting method and also discuss about the pros and cons of the method for entering the market of Egypt. //

Direct exporting:

Direct exporting is found when ...

Solution Summary

The response addresses the queries posted in 1734 words with references.

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