China is Canada’s second largest export partner, only behind the U.S. . Few years ago, there was a major food scandal in China involving substandard baby formula and skepticism remains high regarding the quality of Chinese baby formula products . This presents a great opportunity to export Canadian baby formula products to China because food quality standards are more stringent in the west. Thus, it may be easier to convince Chinese parents to pay premium prices for Canadian baby formula products due to quality assurance.
Chinese market may be different from Canadian market but fortunately government offers several information sources on the web one of which is Canada Business Network . The website offers guidance at each stage of the business from planning to operations. While it is never possible to eliminate all risks involved in international business, following the guidelines on the website will significantly increase the prospects of a successful Chinese venture.
First of all, I will do a personal market research on the Chinese market.
In addition to doing research on my own including personal trip to China, I will also hire the services of a local research company that understands Chinese market for baby formula products.
The findings of the research process will also make their way into the business plan which I may present to prospective investors.
Business plan will make it easier for me to convince investors to fund my idea because it will demonstrate I have done my homework and have a detailed plan of how the funds may be utilized.
I will find a local Chinese partner who has a strong distribution network and may also help me obtain necessary permits and licenses.
Since my Chinese partner will be responsible for marketing and distributing the product, I will not need any substantial capital investments in China.
My main responsibility will be to develop a reliable logistics network to ensure timely delivery of products to the Chinese partner.
One of my funding sources will be equity.
In addition to seeking equity funding from the private sector, I will also apply for grants and loans from government agencies.
In order to ensure favorable loan terms, I may offer the company’s assets as loan guarantees.
About twenty five percent of the capital funds will come from my personal assets and almost similar amount will come from family friends.
This strategy will help me maintain control over company’s direction and competitive strategies and may also improve company’s liquidity and profitability position.
Loans require interest payments which negatively affect profitability and liquidity and similarly, outside investors may seek influence and control over company’s operations. This is why about half of the capital funds will come from my personal funds and family friends.
Once my company has commenced operations, I will place a special focus on ensuring liquidity, even more than profitability.
Liquidity is extremely important in the early years of the business because a new business has limited funds. In addition, mistakes are more common as new entrepreneurs learn.
I will ensure liquidity by keeping expenses as low as possible and keeping credit sales to the minimum.
I may also seek extensions from suppliers, especially during the early years of the business.
As my business grows, I will reinvest the earnings into expanding to other areas in China instead of distributing profits as dividends.
As my sales grow, I may also be able to reduce costs through larger orders from suppliers and qualifying for trade discounts.
I may also accept suppliers’ offers to take advantage of discounts from early payment which is also why liquidity will be extremely important, specifically in the early years of operations.
- Canada Business Network. (n.d.). Home Page. Retrieved November 5, 2013, from http://canadabusiness.ca/eng/
- CIA. (n.d.). Canada. Retrieved November 5, 2013, from https://www.cia.gov/library/publications/the-world-factbook/geos/ca.html
- Yan, A. (2013, July 2). Memories still too raw for Chinese parents to trust baby formula. Retrieved November 5, 2013, from http://www.scmp.com/news/china/article/1273375/memories-milk-scandals-still-too-raw-chinese-parents-trust-formula