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The target market for toilet paper exporting business will be Colombia and specifically the city of Bogota. In this city, the price of toilet paper is relatively high as compared to other cities, such as Santa Fe, Hamadan Balikpapan and Hamburg; therefore, creating the need to provide cheaper toilet paper.
Toilet paper is a mass consumer product in Columbia, though it is not available in most places, especially where there are public toilets. In the city of Bogota, the population is high, and if one needs to use a toilet he is supposed to carry his own tissue paper. Little rubbish bins are also provided where the used toilet paper is placed since the toilets are not flushable.
Provision of toilet paper that can be easily flushed using the existing sewerage system would be a welcomed innovation in Colombia. Most restaurants that offer bathrooms and toilets often do not give tissue paper. However, if they do, they give a small piece of which the customer is required to pay an additional amount. This requires customers to go with their own tissue paper. This means tissue paper is not readily available to most people including hotel and restaurant owners. This creates a market gap in the country, which our business is ready to take advantage.
Why Colombia is a good target for toilet paper exports
Colombia has a high urban population that means there is a high purchasing power for consumer goods in the city of Bogota. Colombia's local market is also among the largest markets in South America. Toilet paper is a daily requirement for the residents since most of them are Christians. This creates a high demand for toilet paper. The business aims at providing high quality toilet paper at affordable prices and also environment friendly so that it can easily be disposed (Giugale, Lafourcade & Luff, 2002).
Colombia’s geographical position is perfect for strategic business activities and joint ventures. This will enable us to outsource other services, such as distributors, and it will also make shipping easier from Canada to Colombia. Colombia has free trade agreements with most neighboring countries in the area including Canada and the rest countries in the world. Therefore, it enjoys preferential tariffs to many markets. This will enable us to expand the market with time.
Colombia has a stable economy which is experiencing sustainable growth. With the continuous growth of the economy, our market will also grow, and our sales will increase with time. The economic stability and growth of Colombia makes it a desirable region for our investment since risks associated with economic instability are low (Giugale, Lafourcade & Luff, 2002).
Political stability and the government effort to create an appropriate conducive environment for foreign investors in Colombia ensure us of low risk, which is associated with political instability. (Giugale, Lafourcade & Luff, 2002)
Factors that could impact the international marketing plan
For ll exported goods, to Colombia value added tax and customs duty will be subjected. The standard rate is 16%, however, Colombia has also provided incentives which include value added tax and customs duties on goods and services brought into the twelve designated free zones of which Bogota is one of them. This business will enjoy these incentives. (Branch, 1994)
Effects of tariffs
Colombian import tariffs have been considerably cut down. Tariff on finished consumer goods is 20%. As a result of signing of Canada-Colombia trade agreement, trade and investment relationships between these two countries have increased. Therefore, we are better placed to engage in business opportunities, in Colombia. The Colombian government has also put in place non- discriminatory treatment policies for both domestic and overstress investors hence will be able to relocate freely profits and capital to our country (Cook & Raia, 2004).
The foreign exchange advantages that we are likely to get include the following: the right to exchange hold and negotiate foreign currency, the right to open domestic bank accounts using foreign currency and several procedural facilities. This reduces the costs, time and inconveniences associated with foreign exchange markets. (Clavijo, 2004)
Consumers expect their products to be packaged in a high quality packaging, which is convenient. The packaging of the toilet paper will be eco-friendly, and we will ensure it complies with the relevant laws and regulations set by the Columbian government, to ensure proper disposal.
Appearance of consumer products has become a crucial factor that is being considered by consumers while purchasing different products in Columbia and also in other parts of the world. This will influence their decision; therefore, it will have to be appealing.
There has been political stability in Colombia, and the government has been trying to create an appropriate conducive environment for foreign investor to attract more foreign direct investments. This makes it a desirable investment region since chances of risks associated with political instability are low.
Colombia is known to be economically and politically stable.. Colombia’s open economy has enabled to reach high levels of consistent and self-sustained economic growth
(Giugale, Lafourcade & Luff, 2002).
Colombia has also been trying to make efforts to ensure improved investment climate in order to facilitate the attraction of long-term foreign capital and guarantee the transfer of new technologies, improve its economy and ensure the efficiency of its local companies. This is a country which has come up with various motivations to promote and revive the economy using a chain of measures which includes creation of tax havens, removing of rigidities in foreign investment and special trade and customs laws and regulations.
Most Colombians are Christians and specifically Catholics. This will not affect the marketing plan since the religion in Colombia is almost the same as that in Canada. This is because the use will generally be the same (Londono-Vega, 2002).
According to Colombian culture, used toilet paper is put in trash cans instead of flushing. (Williams & Guerrieri, 1999) This is partly because their sewerage system is old and can, therefore, not handle all the toilet paper used. The use of cans also can be explained by narrow pipes used in plumbing the toilets and lack of water in some cases. This would require the toilet paper to be of high quality, and can be easily flushed using the least amount of water as possible or that can be easily disposed (Giugale, Lafourcade & Luff, 2002).
Risk factors in terms of exporting toilet paper from Canada to Colombia would include:
a) Legal risks
Laws and regulations keep on changing with time and may be applied differently in various countries. The legal aspect of trade in Colombia may change, and this may adversely affect Canada, especially if there is a legal dispute. (Crouhy, Mark & Ebrary, 2000)
b) Political risk
This would come up as a result of political instability in Colombia in the form of war and civil conflicts. This results to massive losses since the central bank of Colombia may not be having enough reserves to pay for the imported goods, especially if the market is open. The exporters will, therefore, lead to risk of non-payment for the exporter. (Cook & Raia, 2004)
c) Exchange of rate risk
This occurs as a result of strengthening or weakening of the exporter’s currency as compared to the importer`s currency. This leads to either the exporter gaining or loosing. (Branch, 1994)
d) Culture and language risk
Misinterpretations in communication and in international business transactions come up in most cases because of difference in culture and language between the importer and exporter. In this case, the national language in Colombia is Spanish while in Canada it is either English or French. Trade practices, such as tax systems, accounting methods and standards and currency controls may also be different (Giugale, Lafourcade & Luff, 2002).
e) Credit risk
It is difficult for the exporter to tell the credit worthiness of the importer due to the long distance and foreign environment involved. This increases the risk of non-payment. (Bass, 1992)
f) Poor quality risk
Poor quality risk occurs, where goods are exported without having been inspected. This results in importers rejecting the goods. The importer may also claim the goods which are of poor quality to pressure the exporter to accept lower prices.
g) Transportation and logistics risks
This is the risk associated with transportation of goods from one country to another. This includes risk of damage and theft. (Cook & Raia, 2004)
Mitigation of risks by our business
The business will draft a contract together with a legal firm to ensure that our interests are taken care of. The exporter should make it clear which law and conflict settlement procedure will apply to the contract. We will also prefer that disputes will be settled using our own country’s laws.
When involving other parties in the trade transaction, such as middlemen, agents and distributors their responsibilities, rights and duties will be clearly stated. This will reduce chances of occurrence of disputes.
We will always try to ensure that we are updated on the political climate of the importing country in order to change the marketing strategies accordingly so as to ensure that losses do not occur. Political issues, such as war and civil conflict lead to instability of the economy. We will also need to establish the level of government intervention in the importing country. The extent of trade liberalization will also be investigated (Crouhy, Mark & Ebrary, 2000).
Exchange rate risk
This may be mitigated by approaching the banks foreign exchange department before quoting any prices internationally so as to be advised accordingly, that is, on the movement of his domestic currency. We will also hedge movements in the foreign exchange by purchasing forward contract (Clavijo, 2004).
Language and culture risk
We will ensure that we understand the culture and language differences well, and a visit to the anticipated country of export will be undertaken. This will tremendously help us in understanding of our intended market place language and the culture differences that we may encounter (Williams & Guerrieri, 1999).
We will try to find out the credit worthiness of the importer through the use of commercial companies that can provide help in credit checking foreign companies. If the buyer is unknown, we will insist on a safe mode of payment, such as irrevocable documentary credit. We will also take an insurance cover to cover insolvency of the buyer, failure to pay within agreed period and failure to take up the goods.
Poor quality risk
Before exporting goods, we will ensure that the goods are inspected, and they comply to the importers specifications. If this is not done before the goods are shipped, there may be losses as a result of rejection of the goods due to poor quality (Crouhy, Mark & Ebrary, 2000).
These inspections will be conducted by an independent party. The cost of inspection may be borne by the importer or it may be included in the contract price. Our business may also send sample of the goods to the importer, if the importer accepts the standard of the sample then the whole consignment is made to the same standard (Bass, 1992).Transportation and logistics risk
This may be mitigated by insuring the goods on transit. We will also ensure that we understand characteristics of international logistics and mostly the contract of carriage. This contract will be written between our business and the transport operator (Crouhy, Mark & Ebrary, 2000).