Export plan

Distribution refers to the method through which finished goods finally reach the buyer from the factory or warehouse through transportation. It involves the goods moving from the intermediary to the shelves of the retailers in the market.  There distribution of goods can be through direct channels, where a firm sells directly to other trading firms, distributors and retailers or indirect channels that involve local middlemen who transports the products into foreign markets (Seyoum, 86). There are various reasons for selecting direct channels as the best for distribution for these products. The products, Aluminum Alloys and engines, will be manufactured in the home country and then be exported to the various warehouses that will be rented in Bahrain. The renting of the warehouses will assist in shortening of various supply lines, and this will reduce costs that are incurred during freights and ensure that time involved will also be shortened.  In addition, the major competitor, Alba, has its operations in Bahrain which means that to have a good ground to compete; our base in the country will offer sufficient accessibility to meet the increasing market demand.

 The exportation of any products requires a business plan that is based on an export strategy will help a firm in achieving the set goals and objectives.  The strategy for this export plan is to use direct channels by use Sales representatives as the right channel to reach the Bahrain market and other regional markets. The use of this strategy will offer more control over the processes involved in export , can offer  higher profits and at the same time a close relationship between the marketplace and the oversee buyer(Seyoum, 94).  The use of sales representatives is strategic since such individuals are familiar with the market given that there are residents of that particular country (Seyoum, 95). This is informed by the fact that the Aluminum Alloys and Engines from Boeing are intended to be sold in small markets where there is not attraction for distributor interest and these products may be custom made for specific customers who include the airlines in the region. In addition, these products are heavy so that they cannot be stocked easily be retailers or the selling may involve a private –public bid between the firm and government airlines such as Gulf Airline.

In addition, these agents will be valuable to the firm since they provide intelligence and personal contacts in the airline industry which will assist in reaching Bahrain market which may be inaccessible without them. The representative who will be based in Bahrain will be from the company, and will have knowledge on the products, so that he can use the literatures and samples for the product in familiarizing the product to the any buyer in the market. The use of a sales representative is important for the export strategy for Boeing. The person will work as part of the firm with the assistance of various individuals on board, who can make contact with customers (Seyoum, 95). After they have solicited a sale of the product, they can pass it on to the firm. The merchandise will then be transported from the warehouse to the customers as per the sales agreement.  The rep may work as an agency with basic information and technical knowhow about the products and who can present the product in the right manner to the customer (Seyoum, 95).

Logistics

International logistics refers to a planning that involves the implementation and control of flow and storage of goods from the place of production to the point where they are consumed (Seyoum, 109). There are two types of business logistic that can be used for Boeing Company which includes material management and physical distribution. The material management involves the timely flow of product and materials from their suppliers to the manufacturing, assembling and distributing points. Physical distribution involves the flow of products from the point of manufacturing – at the firm – to the targeted consumers (Seyoum, 109). In case of Boeing Company , the aluminum alloys and engines will be manufactured at the home country and these products will then be distributed to Bahrain , which is the targeted point of consumption especially be the airline firms. This means that for the company, physical distribution is the type of logistics which will be used in the distribution of the products to the intended consumer. To have a successful distribution plan, the physical distribution logistics will have to be management properly while ensuring it works well in combination with materials management logistics. An effective logistic system involves a strategically combining packaging, handling, storage and transporting of various goods   in a way that they are made available to consumers at the appropriate place, when required and in the required condition (Seyoum, 110). 

The plan of this distribution is to ensure that two major functions are performed: the products’ demand is generated and the demand created is served by a sufficient and timely supply of the same. While the sales representative is expected to take part in these functions, the company will bear the primary responsibility.  Given the weight and bulky nature of the aluminum alloys and engines , shipments is the best mode that will be used in distribution , unless such products are urgently needed by the client in which case , they will be transported by air.  In the shipment process, containerization will be important since it allows for bulk transportation of various products in bulk which can greatly reduce the transportation cost. For products like engines whose components may involve rusty materials, it will be specified that such products will be placed below deck so as to prevent damages that may arise during transportation such as humidity and risk of rust. Moreover, containerization is considered because it offers extra protection and allows for more effective handling of shipments even though it may increase cost involved in transportation (Seyoum, 111). Moreover, where the containers are used, the plan will ensure that all space is filled with the company’s products and ensure that only full containers will be shipped. 

Risk involved in physical distribution

Since the operations will be carried out in a different country, there are political risks involved. This is because of government regulations, taxes policies that place custom duty on exports which may increase the cost of the products in the market (Seyoum, 117). In addition, the country has previously experienced political unrest which can affect the market especially the expanding aviation industry which means the expected sales level may not be attained. Risks may arise from fluctuation in foreign rates of exchange and this can lead to fluctuation in currency values (Seyoum, 118). In case the payment has to be made in U.S dollars, the change in currency value may lead to loss of export opportunities to local competitors especially the major competitor, Alba. These competitors will be willing to accommodate local customers by selling their products in local currency which favors them since Boeing may find it difficult to do the same.  Transportation risks may arises during the distribution of products and these may be related to external security threats, natural disasters and even accidents that may lead to destructions (Seyoum, 118). The transportation risks may arise from the fact that movement of the products involves a long distance over the sea or air which can affect the whole process. There is also the time factor and different changes occurring in transport conditions that can also affect timely distribution of goods to Bahrain. In addition, risks on foreign credit may also arise when the sale of the products is done on credit. A big percentage of exported trade is carried out on credit which may lead to delayed payment risks or non-payment at all.  The risks can have a significant impact on cash flows and profits of Boeing Company.  The delay in payment in developing countries may arise from shortages in foreign exchange and this in turn lead to delay by central banks to convert domestic currencies into foreign exchanges (Seyoum, 118). There is also the possibility of bad debt arising from some customers in Bahrain or regional countries. This is likely to cause difficulties in conducting the marketing and selling of the product in the local market due to default in payments or late payments.  Boeing will have to follow strict procedures to obtain payment from the customers.

Insurance

After assessing the risks the business is exposed to and the available options for insurance, open cover policy was selected especially for the sake of transportation risks. This policy provides the insured with coverage for all the cargo being shipped during the period of this policy. This policy will include insurance for marine cargo and freight insurance for related risks during shipping of the products (Seyoum, 119). The insurance against credit risks is also important and the database held by credit insurers can provide enough support that can assist Boeing in assessing the creditworthiness of customers who are already insured.  The firm is able to differentiate between buyers who have finances for immediate payment for orders and the ones likely to default or even delay payments.

Boeing pricing on export product to Bahrain

For Boeing to be able to compete favorably in the market pricing is a very important aspect and pricing policy will have to conform to the relevant market. The price will have to reflect the value placed on the products so that it is high enough allow for a reasonable profit and also low enough to allow the firm to compete favorably.  Pricing results from a complex calculations set, through research and understanding of the ability of the firm to take in risks (Seyoum, 137).  The strategy on pricing has to take into consideration the segment targeted, the customer’s ability to pay, existing market conditions, actions taken by competitors, input costs and the expected trade margins (Seyoum, 137).  The pricing for Boeing’s products is determined on the basis of target customers and the market prices.  After consideration of the various pricing strategies, competitive pricing has been considered the best due to the level of competition in the market.

The competitive pricing strategy is important considering that the firm has competitive advantage that can allow it to produce its products at a better price that can be afforded by customers. The firm enjoys large scale economies since it produces large variety of products which enables it to lower its price for the same product. This means it can generate more sales with a superior margin than Alba, its main competitor in the Bahrain market. The distribution strategy using the sales representative also forms a strong network that gives the firm a competitive advantage over its followers. The firm also enjoys comparative advantage driven by its innovation and modern technology which gives Boeing the ability to manufacture its products at lower cost than Alba, which means that the prices will be a bit lower than other products in the market. In a rational market, customers will choose the product that is cheaper than other substitutes as long as the quality remain the same or is even better. The superior returns for the firm will work well in ensuring that the goal of expanding operations in the Bahrain market is achieved by the firm regardless of increased competition. The pricing can also enable the firm to expand its market share in the region.

Calculation of export prices

 

Export Price Calculation

Itemized cost                                                                                                       $

Ex-works price                                                                                                            50,000

Freight from Boeing to Bahrain                                                                                     5,000

Insurance                                                                                                           1,000

Landing charges

Import duties                                                                                                  10,000

Marine tax                                                                                                            800

Warehousing tax                                                                                               1,000

Terminal handling tax                                                                                         700

Custom fees                                                                                                      2,000

Bank costs                                                                                                             750

Landed cost

Cost to Bahrain distributors                                                                            65,000

Cost to retailer                                                                                                              80,000

Prices to Bahrain consumers before local taxes                                                       135,000

Local taxes                                                                                                                  7,000

 

 

 

 

CISG- the Vienna Convention

 

In the calculation of prices, this export plan highly considers the existing trade terms that provide the required uniformity in the products exportation and importation contract practices. Such trade terms are important since they define the delivery methods for goods and the attendant responsibilities assumed by the involved parties. The United Nations Convention on Contracts for the International Sales of Goods is one such term that relates to goods sales contracts that involve parties to whose business operations are based in different countries. The CISG is a 1988 treaty and involves uniform terms of international sales (Flechtner, 1). It makes up a considerable percentage of World Trade and includes sales of products from national legal systems of different countries. The aim of entering into the treaty was to regulate how contracts of international sales could be formed, and establish the obligations and rights of parties entering into such contracts. The provisions of CISG are largely similar to those of U.S Uniform Commercial Code. The contracts that relate to this commercial term are those that involve trade between parties whose business operations are based in placed deemed to mean the country with the closest relationship to the contract and closest to where the trade will be performed. Moreover , the CISG  cannot be used for some specific contracts like consumer goods sales , securities ,  electricity, labor services , aircraft , ships or other vessels or to manufacturing goods supply if the party buying the goods offers a significant portion of materials required for  this kind of manufacturing(Flechtner, 2).

 

The adoption of CISG by Boeing is important since it makes it easy to carry out business operations in the Bahrain market and the entire Middle East region. This treaty has various benefits that Boeing can tap into during its operations. Among the tremendous benefits arising from its success is that it has created a uniform international sales body that has largely been accepted by different countries including Bahrain. It is a good law since it is a reflection of what the parties involved in a sales contract expects (Le, 9). The law also enhances fairness and effective solutions so that there are no hidden advantages to either of the sides involved in the trade. The parties involved in sales contract can also create and conclude their contract that is guided by rules that are even to them (Le, 11). In addition, in case the Boeing and its trading parties cannot agree on whether to use United States or Bahrain laws, they can chose a common law to which both agrees. The adoption of CISG may help the movement of products in an easy and free manner buoyed by effective interaction of various business interactions in Bahrain.

Documents for Export

There are many documents required in conducting Export- Import trade and which Boeing needs to complete and submit. The completion and submissions of such documents is important for the distribution of products through shipment and discharging of any cargo at the destined port. The documentation is necessary and normal for custom brokers and freight forwarders and can be gotten from embassies of foreign governments, oversee customers, consulates or different reference books (Seyoum, 179).  The following list is the documents required for Boeing exports to Bahrain.

• Air Waybill – refers to carriage contract between air carrier and shipper and aren’t particular to a certain airline.
• Bill of exchange – written communication between a debtor and creditor on payment to the creditor or another third party
• Bill of landing – Boeing needs this to communicate with trucking firm to ascertain that transportation of goods from US to Bahrain.
• Consular invoice – should be obtained from Bahrain consulate and prepared in Arabic, the country’s language
• Certificate of Origin – it is required to show whether the Boeing products qualify for preferential treatment in terms of import duty
• Inspection certificate – it is an attest to specifications of products shipped though a third party
• Insurance certificate – shows the terms, type and insurance coverage amount for Boeing’s products
• Dock Receipt

 

• Destination Control Statement

 

• Shipper’s Export Declaration

 

• Proforma Invoice

 

• Manifest

 

MODE OF TRANSPORTATION FOR BOEING

The main modes of transport that Boeing can use to export its products include water, air and land through truck and rail. Given the nature of Aluminum Alloys and engines products, the firm will majorly use water and air mode of transportation given the long distance between U.S and Bahrain. The use of shipment will be effective for the firm since it will enable for bulky transportation of products which will reduce the transportation cost. The use of containerization is specifically important since it offers the protection for the products. The use of air transport will assist the firm in delivering products on time when they are urgently needed and this will have effect on cost and speed. However, the use of air transport can be very costly but such can be offset by shipment.

Works cited

Seyoum, Belay. Export-Import theory, practices, and procedures. Routledge, 2013. 86

 

Le, Thu Minh. Measuring the Success of the United Nations Convention on Contracts for the International Sale of Goods (CISG): A Case Study on Vietnam. MS thesis. 2016.9-11

 

Flechtner, Harry M.THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS. (2009).1-3. Available at: http://legal.un.org/avl/pdf/ha/ccisg/ccisg_e.pdf