International Business Plan for Ki-O-Rahi Co.

Ki-O-Rahi sets exported from New Zealand to Spain.

International Business 152.261 2011

Siobhan Wilkinson 08631174

Table of Contents

Section 1.0: Product or Service

1.1 Describing product or service……………………………1

1.2 Business opportunity analysis…………………………….1-2

1.3 The Action Plan…………………………………………..2

1.4 Continuous Improvement……………………………….2

Section 2.0: Competitor Analysis

2.1 Identify Potential competitors……………………………2-3

2.2 Competitive Advantages………………………………….3

2.3 International Strategies…………………………………..3

2.4 Absolute/or Comparative advantage…………………….3

2.5 The Action Plan…………………………………………...4

2.6 Continuous Improvement………………………………...4

Section 3.0: Target Country Market Analysis

3.1 Country Information……………………………………4

3.2 Geographic Influences…………………………………..5

3.3 Major Products and /Industries………………………..5

3.4 Government and Politics………………………………...6

3.5 Current Economic Conditions………………………….6

3.6 Social Facts and Conditions……………………………..7

3.7 Technology and infrastructure………………………….7

3.8 Legal………………………………………………………8

3.9 Environmental……………………………………………8

3.10 Formal Trade Barriers…………………………………8

3.11 International Business Incentives………………………8…

3.12 The action Plan……………………………………………9..

3.13 Continuous Improvement………………………………….9

Section 4.0: Target Market Culture and Business

4.1 Business Culture……………………………………………..9

4.2 Cultural Analysis…………………………………………….9

4.3 Social Institutions…………………………………………….10

4.4 Business Ethics………………………………………………..11

4.5 Informal Trade Barriers……………………………………..12

4.6 The Action Plan………………………………………………12

4.7 Continuous Improvement……………………………………12

Section 5.0: Market Entry Strategy

5.1 Strategic Planning…………………………………………….13

5.2 Entry Mode……………………………………………………13

5.3 Strategic Alliances…………………………………………….13

5.4 The Action Plan………………………………………………..13

5.5 Continuous Improvement……………………………………...14

Section 6.0: Organizational Structure

6.1 Strategic Planning………………………………………………14

6.2 Strategic Objectives…………………………………………….14

6.3 Centralisation……………………………………………………15

6.4 Organisational Structure……………………………………….15

6.5 Integrating and Control systems……………………………….15

6.6 Location of Value Chain………………………………………..15

6.7 The Action Plan………………………………………………….15

6.8 Continuous Improvement……………………………………….15

International Business

Plan part 1

Section 1.0: Product or Service

1.1 Ki-O-Rahi Sets

Ki-O-Rahi is a traditional pre-European Maori ball game. A Ki-O-Rahi set consists

of 1x Te Tupu (a drum), 7 Nga Pou (Field posts) and a Ki (Ball). Both the drum and

field posts have PVC protective skirting with handles for easy transport. The ball or

Ki is a traditional flax ball.

Ki-O-Rahi sets can come in any desired colour and can be purchased with or without

writing. We suggest the sets are printed with the likes or the owner, team or schools

name on them.

Each Ki-O-Rahi set will be approximately 5kgs at and estimated boxed size of 100cm

by 70cm. Each set will be packaged in PVC carry bag and then inside of a cardboard

box for shipping.

Ki-O-Rahi sets will retail at $599.99 NZD without printing, and with printing

$650.00. We estimate shipping per unit would cost approximately $81.00 per unit via

Air.

1.2 Business opportunity Analysis

In September of the year 2010 School Ki-o-rahi teams were given the opportunity to

travel to Barcelona in Spain to perform as part of the Asia Festival held there that

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year. They performed both the Haka and a demonstration of traditional Maori game

Ki-o-rahi.

Kia-o-rahi co. have taken advantage of this educational opportunity and will export

directly to the Spanish educational government ministry. Schooling in Spain is

entirely free and Government run through from nursery school until University level

schooling. Ki-o-rahi co. wish to supply the government with Ki-o-rahi sets for all

public primary and secondary schools. Currently there are approximately 100 state

owned schools in Spain.

Estimated Start up costs are $10,00 for the initial manufacturing of Ki-O-Rahi sets.

1.3 Action Plan

Action 1: Manufacture Ki-O-Rahi Sets for Traditional Maori game Ki-O-Rahi, in

Spain. New market in Spain, with global exporting potential and government

incentives in schooling.

1.4 Continuous Improvement

Strengths include low set up costs and a specific and new market in Spain.

Weaknesses include high distribution costs.

Section 2.0: Competitor Analysis

2.1 Potential Competitors

There is only one level of potential competitors for Ki-o-rahi Co.; Those New Zealand

companies that export internationally to European Countries including Spain. There is

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only one company who is currently exporting Kia-o-rahi sets overseas: Powa-rugby.

However, Powa-rugby does not export directly to Spain and instead offers and online

ordering of the product to any country that wish to purchase the product online.

There are currently no producers of Ki-o-rahi sets in Spain or internationally

exporting to Spain.

2.2 Competitive Advantage

Ki-O-Rahi Co. do not have any potential competitors in Spain or Exporting to Spain

and therefore have a complete competitive advantage and 100% Market Share.

However, if New Zealand local producer Powa-Rugby were to begin exporting to

Spain, Ki-O-Rahi co offers a differentiated product, this is in the form of the flax ball.

A flax ball offers not only a significantly important tool for the game, but a cultural

and educational learning tool for the market segment.

2.3 International Strategies

A lack of competitors means that compeitors international strategies cannot be

compared.

2.4 Absolute and comparative advantage

Ki-O-Rahi Co. will produce and manufacture their Kia-o-rahi sets in New Zealand for

export to Italy. Although manufacturing PVC based products in New Zealand is not

significantly at a lower cost than any other Country, the production of the flax ball in

New Zealand offers elements of both absolute and comparative advantage than

producing it in any other country (Hills, 2008). Harekeke/ or flax is native to New

Zealand and does not grow any where else in the world. When dried out it can be

woven into many tight holding shapes and thus can be used to produce a ball for a Ki-

O-rahi set. Traditional sets in New Zealand were produced too, with a flax ball. New

Zealand is surrounded by water, which means there are plenty of possible manufacturing

locations which are close to ports for shipping internationally.

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2.5 The Action Plan

Action 2: Competition is limited. Ki-O-Rahi Co. needs to research sales made by

Powa-rugby, local Ki-o-Rahi set provider, to European countries if any.

2.6 Continuous Improvement

No competitors provide Ki-O-Rahi co. with a significant advantage. Improvements

need to be made in terms of knowledge of local Ki-O-Rahi provider Powa-rugby and

there potential to become and exporter competitor.

Section 3.0: Target Market Country Analysis

3.1 Country Information

Spain or the Kingdom of Spain is located in Southwestern Europe, bordering on the

Bay of Biscay, the Mediterranean Sea, the North Atlantic Ocean and the Pyrenees

Mountains. (Go Spain, 2011)

Spain has a population of 46,030,052 people. Spain’s Capital city is Madrid and other

major cities are Barcelona, Valencia and Seville. (Go Spain, 2011)

Spain’s currency is measured in Euros and currently 1 New Zealand dollar is equal to

0.578 Euros. (Go Spain, 2011)

Spain has an extensive railway system that runs centrally from Madrid. Spain also has

a highly developed highway system. Spain currently has 49 international and

commercial airports, 2 of which are privately owned. (Go Spain, 2011)

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Spains main ports are located in Algeciras, Barcelona, Bilbao, Cartagena, Huelva,

Tarragona and Valencia. (Go Spain, 2011)

3.2 Geographic Influences

Spain’s Climate is temperate. It is described to have clear, hot summers in interior and

more moderate and cloudy along coast. Spain has cloudy, cold winters in interior and

partly cloudy and cool along coast. The terrain in Spain is a large, flat to dissected

plateau surrounded by rugged hills. (Go Spain, 2011) The Pyrenees are in the north of

Spain. Spain is very costal surrounded by both Mediterranean Sea and the North

Atlantic Ocean, making water vessel transportation significantly easy. Spain’s highly

developed highway system and railroad system also allows for easy transportation to

the countries main centres which are all somewhat linked via both transportation

systems. (Go Spain, 2011)

3.3 Major Products and industries

Spain’s main natural resources are coal, lignite, iron ore, copper, lead, zinc, uranium,

tungsten, mercury, pyrites, magnesite, fluorspar, gypsum, sepiolite, kaolin, potash,

hydropower and arable land (used for growing crops). Spanish agriculture products

are grain, vegetables, olives, wine grapes, sugar beets, citrus; beef, pork, poultry,

dairy products and fish. (Go Spain, 2011)

The Major industries in Spain are textiles and apparel (including footwear), food and

beverages, metals and metal manufactures, chemicals, shipbuilding, automobiles,

machine tools, tourism, clay and refractory products, footwear, pharmaceuticals, and

medical equipment. (Go Spain, 2011)

Spain’s Major export commodities are machinery, motor vehicles; foodstuffs,

pharmaceuticals, medicines and other consumer goods. The countries major export

partners are France (18.8%), Germany (10.8%), and Portugal (8.6%) Italy (8.5%), UK

(7.6%) and the US (4.2%).(Go Spain, 2011)

Spain’s major import partners are Germany (15.7%), France (12.7%), Italy (8.4%),

China (5.8%), UK (4.8%), and the Netherlands (4.6%). Spain imports largely the

following commodities: machinery and equipment, fuels, chemicals, semi-finished

goods, foodstuffs, consumer goods and measuring and medical control instruments.

(Go Spain, 2011)

As Ki-o-rahi sets are currently a completely new market for exporting to Spain,

Spanish current importing and exporting statistics are not concerning to the

opportunity Ki-o-rahi co. has. However, the fact that New Zealand is not a major

importing partner may impact the ability for Ki-o-rahi co. to export it’s product too

Spain as there may be trade barriers that surround the low rate of exports from New

Zealand into Spain. It is also concerning that education and sporting are not a major

industry in Spain and may impact the amount of units Ki-o-rahi co. exports depending

on the overall demand within schools.

3.4 Government and Politics

The Spanish government is a Democracy with a constitutional Monarchy. The Cortes

Generales consists of two chambers, the Congress of Deputies and the Senate. Since

2004, José Luis Rodríguez Zapatero of the Spanish Socialist Workers' Party has been

Prime Minister of Spain, with the title President of the Government. Elections are free

and fair. The judiciary is independent. Juan Carlos I, is the reigning King of Spain, he

views his role in government administrative and for the government to take the

initiative without the need for it to involve the king unnecessarily in its decisions,

therefore the King has little involvement in the presiding of the cabinet. (Go Spain,

2011)

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3.5 Current Economic Conditions

Spain and the Euro has been impacted hugely by the global financial crisis. However,

economic growth is projected to strengthen gradually diminishes. As growth picks up,

the unemployment rate will fall slowly to around 19% byend-2012. Consumer price

inflation will tend to fall, once the effect of rising energy and food prices and the

increase in the VAT rates drop out. (Eurochallenge, 2011)

The fiscal deficit is projected to decline from 9.2% of GDP in 2010 to 6.3% in 2011

and to 4.4%in 2012, mostly reflecting measures to lower spending. Current GDP

(PPP) is $1.4 Trillion, the unemployment rate is 180: and Inflation CPI is -3.0%. Total

government spending is currently at 30& of the GDP (PPP).

Although the economy is fragile at present, predictions of future economic growth in

Spain is attractive in terms of future foreign investment and look promising for the

exporting of Ki-O-Rahi sets from New Zealand to Spain.

3.6 Social facts and considerations

Spain is considered a developed country and housing conditions are good. The school

leaving age is 16 and the majority of both men and female continue to this age. 97%

of both male and female at literacy age can read. (Go Spain, 2011)

However, Spain is a very equalitarian society, the birth rate is the one of the lowest in

Europe, and women are present at university and work. Spain is considered similar to

most western countries, much like New Zealand. The fact that majority of school age

students from 6 to 16 stay in school is promising for Ki-O-Rahi Co. as that is our

target market in terms of who the Ministry of Education would provide too.

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3.7 Technology and Infrastructure

As a fully developed western country, Transportation including bus and airfare are

very established. Spain has an extensive railway system that runs centrally from

Madrid. Spain also has a highly developed highway system. Spain currently has 49

international and commercial airports, 2 of which are privately owned. (Go Spain,

2011). Utilities such as phone and water are also well established, with most

dwellings having access to both. (Go Spain, 2011)

The significantly developed infrastructure in terms of transport is extremely beneficial

for Ki-O-Rahi Co. in terms of movement of our product around Spain itself. Easy

access around the country means reduced distribution costs.

3.8 Legal

Spain has a civil law system, based on very detailed set of laws organised into codes

(Hill, 2008). The Spanish legal system has a reputation for being slow and inefficient.

(Spanish Property Company, 1980)

Spain is a member of the Paris Convention for the Protection of Industrial Property

and of the Convention reached by the World Intellectual Property Organization

Specifically, as far as patents are concerned, Spain has signed the Munich Convention

on the Grant of European Patents, the Patent Cooperation Treaty (PCT), and the

Agreement between the European Patent Office, the Spanish Patent and Trade Mark

Office and the Swedish Patent and Registration Office concerning cooperation in

matters of international searches. In the specific issue of trade marks, it is a member

of the Madrid Agreement and its Protocol. (Spain Business, 2011)

Although Spanish law does protect property and patent law, the slow inefficient

reputation of the court system could be potentially problematic in the event there was

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a patent or copyright of Ki-O-Rahi co. product. However, this is not the case as the

game and product are not original ideas of the company and will not be patented.

(Spain Business, 2011)

3.9 Environmental

Spain’s environment is problematic; Air pollution is also a problem in Spain. In 1995

industrial carbon dioxide emissions totaled 223.2 million metric tons (a per capita

level of 5.72 metric tons), ranking Spain 20th compared to the other nations of the

world. Industrial and agricultural sources contribute to the nation's water pollution

problem. Spain is also vulnerable to oil pollution from tankers which travel the

shipping routes near the nation's shores. Spain's cities produce about 13.8 million tons

of solid waste per year. Spain’s extensive forests are now limited in the Pyrenees due

to unplanned cutting. (Go Spain, 2011)

Spain signed the Kyoto protocol in April 1998 with the intention of ratification by

May 2002. Spain is not as clean and green as New Zealand is considered, however

considering Spain is moving toward a ‘greener’ and this means morally we are

comfortable trading with a country that is moving toward environmental friendliness.

(Go Spain, 2011)

3.10 Formal Trade Barriers

Spain is a relatively free country in terms business freedom and Trade Freedom. Spain

has a EU weighted average tariff of 1.2% and in terms of Ki-O-Rahi sets as a product

a Tariff is the only formal restriction for exporting.

3.11 International business Incentives

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Section 4.0: Target Market Culture and Business

4.1 Business Culture

As a general rule business hours in Spain commence from 9am-2pm and then again

from 5pm-8pm with the afternoon siesta occurring in-between. Business days are a

standard Monday till Friday with some trade occurring on weekend days.

When doing business in Spain handshakes are standard as with the rest of Europe.

First-time introductions will be formal; as business relationships conversations

become less formal and more natural. Communication in Spain is on a need to know

basis , defined by a network of relationships. Communication is predominantly oral,

and the written medium and modern use of email is forgone.

Lunch is considered the main meal of the day, therefore business discussions and

deals are often conducted over lunches. Spain does not have a meetings culture,

traditionally when meetings do occur they consist of the boss or manager directing

his/her subordinates. Agendas are rarely used in Spanish meetings as they are seen to

be stifling creativity and free expression. Teams in a workplace also rarely exist.

4.3 Social Institutions

Spaniards are typically family oriented, and therefore family is often involved in

business too. There are strong ties between family and business.

Spain has been a profoundly catholic country for centuries, Most Spaniard’s are

involved in the Roman Catholic church, however there is no official religion in Spain.

(Go Spain, 2011)

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The Typical business and family relationship in Spain make act as an informal trade

barrier, however as Ki-O-Rahi Co. Are exporting to the Government instead of to

locally owned businesses this should not be an issue.

4.4 Business Ethics

Spain is regarded a relatively ‘clean’ country in terms of corruption, with

Transparency international giving it a rating of 6.1 for it’s 2010 corruption perception.

New Zealand scored a 9.3, which is very clean. Ethically speaking, Spain isn’t corrupt

so business proceedings would continue as desired.

Spain is a country that respects it’s citizens rights and has therefore had few problems

with human rights issues. Spain at present has a minimum wage rate of €641.40 per

month paid 14 times per year, which is low in comparison to New Zealand’s

minimum wage of $13.00 per hour (€7.23 per hour) but reduces the possibility for

unethical working environments such as sweat shops.

Spain is an ethically sound country and therefore trade would be more than welcome.

4.5 Informal Trade Barriers

Limited use of meetings and broken up business hours could present a potential

barrier for trade. However, meetings are generally held during the siesta when the

business day is broken up, and although it is a lease formal occasion then what would

be used to, business negotiations can still occur and trade barriers are likely to no

exist.

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Section 5.0: Market Entry Strategy

5.1 Strategic Planning

To establish a Kia-o-rahi set Manufacturing facility based in New Zealand within 12

months and to secure exports of 200 units and 100% market share in all state owned

schools in Spain. (Hill, 2008)

5.2 Entry Modes

Exporting

Exporting is a low risk entry mode. An advantage of exporting is the ability to

realise location and also experience curve economies.

Exporting has high transport costs, involves trade barriers including exporting

tariffs and problems can with local marketing agents. Local competition is also

a disadvantage.

Exporting is an appropriate mode of entry for Ki-O-Rahi Co. As is it a low

risk mode of entry. Ki-O-Rahi co. Also has no potential local competitors in

Spain and therefore the other barriers are small but insignificant.

Turnkey Projects

A turnkey problem is a project in which a firm agrees to set up an operating

plant for a foreign client. In completion of the set up the client is handed over

key to the plant that is ready for full-operation. (Hill, 2008)

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Advantages of a Turnkey is lower risk if there is instability in the economy,

Government restrictions can be avoided, and the assemble ‘know-how’ is

passed on to another party (Hill, 2008).

Turnkeys are only valid for large expensive projects and can create

competitors. This would not be suitable for the low-key inexpensive

production of Ki-o-Rahi sets. Production also is limited to New Zealand as the

comparative and absolute advantage lies with New Zealand due to production

of Flax Balls.

Licensing Agreement

An agreement whereby a licensor grants the rights to intangible property to

another entity for a specified period. The licensor receives a royalty fee in

return. (Hills, 2008)

Licensing means that there are no investment risks, or political/economic

problems (Hills, 2008)

Disadvantages of licensing are loss of control over manufacturing/marketing,

limited international strategy against ccompetition and loss of technological

know-how (Hills, 2008).

5.3 Strategic Alliances

Ki-O-Rahi Co. Plans to directly import it’s products to Spain. More specifically:

directly exporting from New Zealand to the Spanish governments Ministry of

Education for distribution to state owned primary and secondary schools. There are

currently approximately 1000 state owned schools in Spain.

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As there are no local Spanish distributors or manufacturers of Ki-O-Rahi sets in Spain

or exporting directly to Spain, a strategic alliance is not needed to be established.

5.4 Action Plan

Mission Statement

Our Mission is to provide top Quality Ki-O-Rahi products to the world, and ensuring

great customer satisfaction.

Strategic Objectives

Distribute to 80% of State owned schools in Spain within 2years.

Establish a developed business strategy.

Entry Mode

Exporting is Ki-O-Rahi Companies chosen mode of entry into the Spanish Market.

Exporting provides Ki-O-rahi co. with the ultimate benefit of low risk entry. The

disadvantages of Exporting including Tariffs and distribution cost are relatively

insignificant when weighted against the benefit of low risk.

5.5 Continuous Improvement

Ki-O-Rahi Co. ha a very powerful advantage being able to export directly to the

Ministry of Education and therefore gaining 100% of market share. The non-existent

competition means that Exporting is a significantly more appealing mode of entry as

one of the modes weaknesses has been completely eliminated.

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Section 6.0: Organizational Structure

6.1 Strategic Planning

To establish a Ki-O-rahi sports manufacturing operation based in New Zealand and to

penetrate 50% of the identified segments in the Spanish market. To expand this to 80% by

year 2.

6.2 Strategic Objectives

To pursue a high quality, effective strategy that provides a valuable product to

the customer.

To achiever this through international Strategy, where competition does not

existent and low pressure for cost therefore does not exist. (Hill, 2008)

To penetrate 50% of the identified segments in the Spanish market. To expand

this to 80% by year 2.

6.3 Centralisation

Centralisation will exist for core competencies, this will mean strategy, investment

and R&D decisions will be managerial based (Hill, 2008). Initially all decisions will

be Centralised, but as growth occurs, operating decisions will become decentralised.

Operating decisions include such things as marketing decisions, production and

manufacturing decisions will be that of the lower levels, based in the international

areas. (Hill, 2008).

6.4 Organisational Structure

The structure of Ki-O-Rahi Co. will be very simple in the form of a worldwide Area

structure, in-line with an international strategy. The advantage of a worldwide area

structure is it’s advantage to facilitate local responsiveness and allowances for

diversification is necessary (Hill, 2008). Issues such as fragmentation may arise

however.

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As Competition arises, Market strategies and organizational structure may move to a

more complex form.

6.5 Integrating control systems

Utilising an international strategy will mean that integrating mechanisms, both formal

and informal, are of only moderate importance. The Strategy is not very complex and

therefore the need for coordination is only moderate. A centralised decision making

scheme will allow for all the necessary coordination, this will also be helped by the

fact the organisations size is small and therefore direct contact between management

levels and lower levels will initial be present.As the organisation grows, and potential

competitors begin to exist, both movement from and international strategy and

organisational structure may be necessary.

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Headquarters

North American Area

South American Area

SpainArea

Australian Area

6.6 Location of the value chain

All areas of the value chain will exist in New Zealand. This is because Ki-O-Rahi co.

is exporting to the Spanish government and therefore any kind of negotiation that may

have existed in Spain such as marketing and sales and customer service, only exists

between the two parties and therefore is not necessary. If the product were to be on

sold and therefore sold in a retail store in Spain the value chain would be different.

Research and

Development

New Zealand

6.7 The Action Plan

Strategic Objectives

To provide a top quality product to at least 50% of the recognised market

segment without one year, and increase this to 80% in the second year.

Organisational Structure

Ki-O-Rahi co will use a international Strategy for the export of their product. The

organisations structure will based on a worldwide area structure and will integrate

both centralised and decentralised forms of decision making.

Integrating and Controlling systems

International Strategies adopted by Ki-O-Rahi Co. mean both integration mechanisms

and control systems are not needed. The strategy provides a very simple structure

being coordination is not needed.

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Customer Service

New Zealand

Production

New Zealand

Marketing And Sales

New Zealand

References

EuroChallenge. (2011). Euro Challenge. Retrieved from:

http://www.euro-challenge.org/doc/2011/

FactsheetTheCurrentEconomicSituationMarch2011.pdf

Go Spain. (2011). Go Spain. Retrieved from:

http://www.gospain.org/facts/index.htm

Heritage. (2011). 2011 Index of Economic Freedom. Retrieved from:

http://www.heritage.org/index/country/Spain

Hill.C, Cronk T, Wickramasekera, R. 2008, Global business Today and Asia Pacific

Perspective. 1st Edition. North Ryde, New South Wales, Australia: McGraw-Hill

Australia Pty Ltd

Spain Business. (2011) International Property Laws. Retrieved from:

http://www.spainbusiness.com/icex/cda/controller/pageGen/

0,3346,1549487_1561831_1598687_0,00.html

Spanish Property Company. (1980). Spanish legal system. Retrieved from:

http://www.spanishpropertyco.com/Spanish%20legal%20system.html