Executive Summary
Athletic apparel and accessories are popular items to export from Canada to Spain. However, before exporting, it is important to consider the costs and prices of the products, the risks involved, and the best way to manage and mitigate those risks. This research report provides an overview of the costs and pricing of athletic apparel and accessories, the risks involved in exporting to Spain, and recommendations for best managing and mitigating those risks. The cost of selling athletic apparel and accessories from Canada to Spain is associated with the products themselves, with transportation costs being a relatively small percentage of the total cost. However, some risks are associated with exporting to Spain, including the risk of currency fluctuations and regulatory changes. This research report provides a detailed understanding of the costs and prices of athletic apparel and accessories, the risks involved in exporting to Spain, and recommendations for best managing and mitigating those risks.
Introduction
The athletic apparel and accessories industry is a large and growing sector of the Canadian economy. In 2016, the industry generated CAD 27.6 billion in revenue and employed over 300,000 people across the country. The industry is expected to grow in the coming years, driven by strong domestic and global demand. Canadian athletic apparel and accessories exports to Spain totaled CAD 365 million in 2017, up from CAD 333 million in 2016 (Remtula, 2022). Spain is the fifth largest market for Canadian athletic apparel and accessories exports, behind the United States, the United Kingdom, Germany, and France (Statista, 2020). The initiative to expand the business to Spain is because the country is the fourth largest country in the European Union (EU) with a population of over 47 million people. The Spanish economy is the 14th largest in the world, with a GDP of USD 1.3 trillion. Additionally, Spain is a member of the World Trade Organization (WTO) and has been a signatory to the General Agreement on Tariffs and Trade (GATT) since 1995 (Remtula, 2022). Based on the tremendous advantages stated above, expanding the apparel and accessories business to Spain can be a lucrative venture.
Lack of knowledge about global trade between Canada and Spain, specifically in athletic apparel and accessories is a major problem that must be addressed before implementing the initiative of expanding the business to Spain. There is a need to research and understand the current market conditions to make informed decisions about exporting this product. In addition, there is a need to develop a marketing plan that will allow for the successful promotion and sale of the product in Spain.
Costing and Pricing Analysis
Cost to Be Included
Product Costs
Product costs will vary depending on the type and quality of the athletic apparel and accessories being exported. Generally, costs will be higher for brand-name items or items made with higher-quality materials. The significance of the research on product costs is to ensure that the products being exported are priced competitively in the Spanish market.
Packaging and Export Sales Costs
The packaging and export sales costs for this research project will vary depending on the type and quantity of athletic apparel and accessories exported. Notably, suppose a Canadian company exports many athletic apparel and accessories to Spain. In that case, the packaging and export sales costs will be higher than if the company exports a smaller quantity. In addition, the type of packaging used will affect the costs (Diao, 2021). If the firm uses high-quality packaging, the costs will be higher than those of lower-quality packaging. Finally, the mode of transportation used to ship the goods will have an impact on the costs. If the organization uses air shipping, the costs will be higher than ground or sea shipping.
Export Financing Costs
The main cost associated with this research project will be the cost of Export Financing. This cost will include the cost of research, marketing, and promotion of the product in Spain. Investing in export financing enables the exporting firm to understand the current market conditions in Spain for athletic apparel and accessories (Remtula, 2022). The costs of developing a marketing plan will allow for the successful promotion and sale of the product in Spain.
Incoterm to Be Used
The most appropriate Incoterm for this trade would be FOB (Free on Board). This would mean that the seller would be responsible for shipping the goods to the port of export, and the buyer would be responsible for shipping the goods from the port of import to their final destination. There are several reasons why FOB may be the most viable option for this trade (Statista, 2020). First, it would allow the buyer to control the shipping process and ensure that the goods arrive safely and on time. Second, it would minimize the risk for the seller, as they would not be responsible for any damage or delays that may occur during shipping. Finally, it would likely be the most cost-effective option for both parties.
Pricing of Competing Products in the Target Market
The athletic apparel and accessories market in Canada is highly competitive. Some leading companies in the market include Adidas Canada, Nike Canada, Under Armour, and Lululemon Athletica. These companies compete fiercely on price, product quality, and marketing (Statista, 2020). To succeed in the Canadian athletic apparel and accessories market, the company needs to offer products that are appealing to consumers and priced competitively. The firm must invest heavily in marketing and advertising to create brand awareness and drive sales.
Pricing Strategy to Adopt
The company will have to consider a few things when it comes to pricing strategy for athletic apparel and accessories exported from Canada to Spain. The company must determine Spain’s average price for athletic apparel and accessories (Diao, 2021). They will also have to find out how much it will cost to produce, Packaging and Export Sales, and Export Financing of the product in Canada. With these two factors in mind, the company can come up with a fair price for its product.
Risk Analysis and Management
Foreign Exchange Risks
Spain is a member of the European Union, and its currency is the Euro. This means there is a risk of exchange rate fluctuations when doing business with Spain. If the Canadian dollar weakens against the Euro, the cost of the goods exported to Spain will increase, making them less competitive in the market.
Economic and Political Risks
The political risk for this trade is the potential for changes in government policy that could adversely affect the trade. For instance, the Canadian government could enact policies that make it difficult or more expensive to export to Spain, or the Spanish government could do the same (Hanes & Purpose, 2021). The economic risks are that the demand for the product could decrease in Spain or the Canadian dollar could decrease in value relative to the Euro.
Social and Cultural Risks
One social risk for the trade is that Spain has a different dress code than Canada, so Canadian apparel might not be well-received. Additionally, a language barrier between the Canadian exporter and the Spanish importer could make communication and negotiation difficult. In terms of cultural risks, there is a risk that Canadian apparel could be seen as too casual for the Spanish market (Diao, 2021). Moreover, there is a risk that the Spanish market could be unfamiliar with Canadian brands, which could make it difficult to sell the products.
Recommendation and Action Plan
Based on the findings of this research, there are a few things to consider when implementing global trade between Canada and Spain. The research provides several recommendations for reducing the cost of exporting products from Canada to Spain. They include using a less expensive shipping method, a less expensive raw material, and a less expensive labor source. In addition, to reduce the risks associated with exporting the product from Canada to Spain, the firm should consider using a more secure shipping method, a more secure packaging method, and a more secure storage method. To control Foreign Exchange Risks hedging with currency forward contracts or using a currency option needs to be advocated. While there is always some political risk inherent in any international trade, it can be mitigated by diversifying one’s trade partners and product mix.
The action plan should assess the potential opportunity for exporting athletic apparel and accessories to Spain from Canada. This includes understanding the Spanish market for these products, identifying potential customers and distributors, and assessing the feasibility of shipping and logistics. Once the opportunity has been assessed, develop a plan to best enter the Spanish market. This may include partnering with existing businesses, establishing a new distribution network, or working with a customs broker to navigate import regulations. Finally, implement the plan and monitor results to ensure the export business is successful. This may involve tracking sales, monitoring customer satisfaction, and adjusting the plan as needed to respond to changes in the market.
References and Appendices
Diao, Y. (2021, December). A Systematical Analysis Framework on Lululemon—-High-end Professional Brand Image and Close to life Promotion. Atlantis Press, 2(5), 536-541. Web.
Hanes, R., & Purpose, J. (2021). Canada’s Trade Policy Review. The Norman school of international affairs. Web.
International Trade Administration. (2022). Spain – market overview. International trade administration. Web.
Statista. (2020). Sports & Swimwear (women). Web.
Remtula, S. (2022). Futah’s international journey: a sunny future for a beach towel? Doctoral dissertation. Universidade Catolica Portuguesa. Web.
Bibliography
Diao, Y. (2021). A Systematical Analysis Framework on Lululemon—-High-end Professional Brand Image and Close to life Promotion. Atlantis Press, 2(5), 536-541. Web.
This article discusses the success of Lululemon, a high-end professional brand. The author uses a systematic analysis framework to discuss the company’s brand image and promotion strategy. The author argues that Lululemon’s success is due to its close relationship with its customers and its ability to connect with its target market.
Hanes, R., & Purpose, J. (2021). Canada’s Trade Policy Review. The Norman school of international affairs.Web.
Hanes and Purpose (2021) provide an overview of Canada’s trade policy, with a focus on the recent Trade Policy Review (TPR). They describe the TPR process, including the objective and scope of the review. They also outline the key findings and recommendations of the review.
International Trade Administration. (2022). Spain – market overview. International trade administration. Web.
The International Trade Administration’s “Spain – Market Overview” provides an in-depth overview of the Spanish market for goods and services. It includes information on the country’s economic and political environment, as well as its history, culture, and infrastructure. The guide also includes a section on doing business in Spain, which covers topics such as investment climate, trade regulations, and business etiquette.
Statista. (2020). Sports & Swimwear (women). Web.
This source provides data on the sports and swimwear market for women in Europe. The data includes information on the size of the market, growth rates, and expected future trends.
Remtula, S. (2022). Futah’s international journey: a sunny future for a beach towel? Doctoral dissertation. Universidade Catolica Portuguesa. Web.
This doctoral dissertation looks at the international journey of Futah, a beach towel company. The author, Remtula, looks at how the company has succeeded in expanding its markets and brand internationally. The dissertation includes an extensive analysis of the company’s marketing strategy, growth trajectory, and competitive advantages. The study provides valuable insights into the challenges and opportunities associated with expanding a business into new markets. It also offers valuable lessons for other companies looking to expand their operations internationally.