IBC01-K42-Group-Assignment-Chap-4-1

Packing: Coffee must be packed in single jute new bags of 50 kgs net each, about 50,6 kgs gross each, hand-sewn at mouth with jute twine thread suitable for rough handling and sea transp

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I/ Export Proposal:

1/ Identify objective:

Our profit if we export 3,000 tons of rice with the price of USD 1,800/MT Profit per unit=1,800 – 32,000,000/23,300 – (32,000,000x0.7%x3)/23,300 =

$397

Exchange rate in case of exporting = 18,151

-> Export

% profit = 397/1,800 = 22%

If we choose our the percentage of profit is R1 = 15% then we can discount 7% for the buyer

Our profit and price after the discount would be:

Profit per unit = $270

Price per unit = $1673

2/ Know the customer

When preparing an export proposal it is a need for a company to understand about the type of customer it is dealing with

Business customer is not only the actual boss in a deal but also responsible for the actually profit for the organization They are the ones who use the products and services and judge the quality of those products and services Therefore, it’s important for an organization to retain customers or make new customers and flourish business To understand customers, organizations should follow some sort of approaches like segmentation or division of customers into groups because each customer has to be considered valuable and profitable By understanding customers and avoiding the risk, firm can have a suitable strategy to approach the clients for a successful partnership business, and to create Win-Win result for both parties

Customers can be of following types:

1 Loyal Customers

These types of customers are less in numbers but promote more sales and profit as compared to other customers as these are the ones which are completely satisfied These customers revisit the organization over times hence it is crucial to interact and keep in touch with them on a regular basis and invest much time and effort with them Loyal customers want individual attention and that demands polite and respectful responses from supplier

2 Discount Customers

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Discount customers are also frequent visitors but they are only a part of business when offered with discounts on regular products and brands or they buy only low cost products More is the discount the more they tend towards buying These customers are mostly related to small industries

or the industries that focus on low or marginal investments on products Focus on these types of customers is also important as they also promote distinguished part of profit into business

3 Impulsive Customers

These customers are difficult to convince as they want to do the business in urge or caprice They don’t have any specific item into their product list but urge to buy what they find good and productive at that point of time Handling these customers is a challenge as they are not particularly looking for a product and want the supplier to display all the useful products they have in their tally in front of them so that they can buy what they like from that display If impulsive customers are treated accordingly then there is high probability that these customers could be a responsible for high percentage of selling

4 Need Based Customers

These customers are product specific and only tend to buy items only to which they are habitual or have a specific need for them These are frequent customers but do not become a part of buying most of the times

so it is difficult to satisfy them These customers should be handled positively by showing them ways and reasons to switch to other similar products and brands and initiating them to buy these These customers could possibly be lost if not tackled efficiently with positive interaction

5 Wandering Customers

These are the least profitable customers as sometimes they themselves are not sure what to buy These customers are normally new in industry and most of the times visit suppliers only for confirming their needs on products They investigate features of most prominent products in the market but do not buy any of those or show least interest in buying To grab such customers they should be properly informed about the various positive features of the products so that they develop a sense of interest

An organization should always focus on loyal customers and should expand or multiply the product range to leverage impulsive customers For other types of customers strategies should be renovated and enhanced for turning out these customers to satisfy their needs and modify these types of customers to let them fall under loyal and impulsive category

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3/ Prepare key points in discussion:

Commodity: Robusta Coffee

Quality: As sample agreed by two parties

Quantity: 3,000 tons

Packing: Coffee must be packed in single jute new bags of 50 kgs net each, about 50,6 kgs gross each, hand-sewn at mouth with jute twine thread suitable for rough handling and sea transportation

Selling price: USD 1,800/MT FOB Saigon port, INCOTERM 2010

Time of Delivery: before 20 December, 2018

Payment: L/C time draft, 03 months after receiving goods

Insurance: To be arranged by the Buyer

Shipping Documents such as:

- Commercial invoices

- Bill of lading

- Certificate of quality, quantity

- Certificate of origin

- Packing list

- Insurance certificate/Insurance Policy

The responsible party shall Cable/ Telex/ Fax advising shipment particulars within 24 hours after completion of loading

Force Majeure:

The Force Majeure (exemptions) clause of the international Chamber of Commerce (ICC publication No 421) is hereby incorporated on this contract Arbitration:

Any discrepancies and/or disputes arising out or in connection with this contract not settled amicably shall be referred to Arbitration accordance with the Rules and Practices of the International Chamber of Commerce in Paris or such other place agreed by both sides

4/ Prepare for the profit and loss of export plan

II/ ZOPA for this case:

At the break-even point, the profit per unit = 0

=> Selling price per unit - total cost per unit =0

⇔ selling price per unit - 32000 000 x (1+0.7 %x6)

⇔ selling price = 1431 USD

ZOPA in this case

The seller’s settlement range

$ 1431 $ 1800

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$ 0 $ 1680

The buyer’s settlement range

To create value in this deal, buyer and seller should agree upon the selling price within the ZOPA range If the price goes above the ZOPA range, an agreement cannot be met and both seller and buyer are at a loss.kim english speaking

III/ Export proposal to get profit at least USD120/MT:

● Export proposal for L/C at sight with the minimum profit equal to USD 120/MT

Total cost per unit= 32 000 000 = 32 000 000 VND

Total profit per unit= 1800 - 32 000 000/ 23 300= 426.6 USD

Re= 17 777 ≤ 23300 Rc

=> Export

Profit per unit proposed at least USD 120/MT

=> The seller can discount maximum 17%

3/ Prepare key points in discussion

Payment: L/C time draft, at sight

- Bill of lading

- Packing list

ZOPA

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Force Majeure:

The Force Majeure (exemptions) clause of the international Chamber of Commerce (ICC publication No.421) is hereby incorporated on this contract Arbitration:

● Export proposal for L/C after 3 months with the minimum profit equal to USD 120/MT

Total cost per unit= 32 000 000 x ( 1+ 0.7%x 3) = 32 672 000 VND

Total profit per unit= 1800 - 32 672 000/ 23 300= 397 USD

Re= 18 515 ≤ 23300 Rc

=> Export

=> The seller can discount maximum 15.4%

3/ Prepare key points in discussion

- Bill of lading

- Packing list

Force Majeure:

The Force Majeure (exemptions) clause of the international Chamber of

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Commerce (ICC publication No 421) is hereby incorporated on this contract Arbitration:

● Export proposal for L/C after 6 months with the minimum profit equal to USD 120/MT

Total cost per unit= 32 000 000 x ( 1+ 0.7%x 6) = 33 344 000 VND

Total profit per unit= 1800 - 33 344 000/ 23 300= 368.92 USD

Re= 18 524 ≤ 23300 Rc

=> Export

=> The seller can discount maximum 13.7%

3/ Prepare key points in discussion

- Bill of lading

- Packing list

Force Majeure:

The Force Majeure (exemptions) clause of the international Chamber of Commerce (ICC publication No 421) is hereby incorporated on this contract Arbitration:

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