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Micro cars ltd of sri lanka

1.0 Introduction

Micro Cars Ltd was established in Sri Lanka in 1999 by the guidance of Chairman/CEO of Micro Cars Ltd Dr. Lawrence Perera with the intention of introducing (manufacturing) low cost but high quality vehicles for the county. The intention became reality with the launch of their first car in 2003 which was well recognize and accepted by the society due to lots of hard efforts on Research & Development that put-in over many years to make the company dream reality and in the later stages Micro Cars Ltd positioned as National Car Manufacturer where they earned the patent for small city cars too.

Further with the aim of growing and expanding the businesses, Micro Cars Ltd came up with different type of attractive vehicles which some are purely manufactured in Sri Lanka and others which are assembled in Sri Lanka with the same intention that they had earlier, which is manufacturing low cost but high quality vehicles for the county. So when looking at the types of the vehicles which Micro introduced Tractors, Trucks, Light Trucks, Buses, MPVs, SUVs and Cars can be considered. Out of those product types the SUV segment was the really attracted segment by the most of the people in Sri Lanka where the Micro Rexton II was a hit product in that SUV segment where it created threat for other average SUV's in the market due to its less price (but high quality) compared with the other SUV's that manufactured by the leading SUV makers in the world like Mitsubishi, Hyundai etc.

Further the government of Sri Lanka also gave great support to this company as it is a purely Sri Lankan venture and government in a position to buy more vehicles from Micro Cars Ltd for government needs and it also resulted in increasing the profits of Micro Cars Ltd. As the demand goes up for the Micro Rexton II they increased their production to match with the demand and also with the intention of entering into the Asian markets. For that they expand their workshop areas and recruited more employees and let the employees work on shift basis like one set of people on day and the other set at night.

So with the consideration of the previous track record or the milestones of the Micro Cars Ltd, the company it self in a position to consider on expanding their business to Singapore by exporting the Micro Rexton II with the intention of targeting it to the middle-upper class in the Singapore due to many potential factors in relation to the conditions of Singapore and also with the hope of competing with other average SUV in Singapore due to the less price of the Micro Rexton II.

Therefore in order to find out the viability of exporting Micro Rexton II to Singapore a marketing audit will be carries out where it helps to get an idea about the different market conditions in the competitive market and its potentials where it give clear view about both positive and negative aspects like whether it will be survive or not. So from there, Micro Cars Ltd can decide whether to expand to Singapore or not.

Furthermore it also necessary to conduct Marketing Plan where it support to overcome the negatives that occurred in the marketing audit for the purpose of maximizing profits with the inclusive of some areas like promotional mix, budgets, profit/loss statement and etc.

2.0 The Product

Micro Cars Ltd is the only pure Sri Lankan automobile company in Sri Lanka that goes on continues improvement from the day it starts with increasing of its profits while making the public more satisfy by offering certifiable solutions to the traveling needs of majority of middle-upper class Sri Lankans. Along with their success in the Sri Lankan market their next plan is to enter into the Singapore automobile market by offering their most hit product in their history Micro Rexton II.

Actually earlier the name Rexton was origin from SsangYong Motors in Korea and later they made strategic alliance with capital investment of Mercedes-Benz AG to support Engine & Transmission technologies.

When the time goes on Ssang Yong SUV were introduce directly to Sri Lankan from Korea by Ssang Yong Motors as Ssang Yong Rexton which is the older version without any collaboration with a Sri Lankan venture. Anyway the older version was not that much popular and it was failed in Sri Lanka due to some uncontrollable factors such as customer mind set that having on the Korean vehicles. But later Micro Cars Ltd made joint-hands with the Ssang Yong Motors Korea for the introduction of the Rexton II (newly version of Rexton) which was assembled locally in Micro Cars Ltd workshop.

In relation to the stage of the product life cycle of the Micro Rexton II, it is in growth stage in Sri Lanka. But when considering on the situation in Singapore the other SUV already in the market are in the maturity stage. So as a result of that this will be a good advantage for Micro Cars Ltd to enter into the Singapore market to change the current stage of PLC.

2.1 Evaluate the product as an innovation as it is perceived by the intended market

Basically this is the first time that the Micro Cars Ltd is expanding their businesses out of their boundaries. No matter whether Micro was making huge profits in the local market, but it can get negatively effected in foreign markets as the conditions are not the same as locally which means the competition getting differ from country to country. So it can be risky up-to some extent due to the huge competition that getting to this newly product from major SUV automakers of the world.

With regard to the relative advantage of the Micro Rexton II over the other competitors, the SUV users can perceive the same advantages, benefits and features that available in other average SUVs in the Micro Rexton II as well. But all the things are not for high price like other competition brands but at reasonable price which is lower than the competitive SUVs. Also considering on the fuel consumptions with other brands Micro Rexton II is more fuel efficient SUV with Diesel engine. But most of other SUVs are not in much fuel efficient as those are with Petrol engines. (Other competitive SUVs are available in Diesel engines too, but price is even higher than the standard petrol SUV prices.) The unique design will give more prestigious outlook for the vehicle than other brands do.

Also it's more compatible to the Asians and their beliefs as most of Asians prefer their own country manufactured vehicles or vehicles that manufactures within their region.

In relation to the complexity, there's no requirement to have special skills to drive Micro Rexton II as it is the same way of driving other SUVs.

Further there's another advantage which is the Micro Rexton II can be purchased with minimum risk as it is recognize and certified SUV in Asia.

The observability of this product is high. Because you don't need to educate to feel or experience the benefits of the SUV. One you inside in it, that's all you need and you can feel the difference of smooth driving.

2.2 Major problems and resistances to product acceptance based on the preceding evaluation.

Relative advantage - Quality and the condition of the Micro Rexton II is in competitive position compared with other competitive SUVs. But the price of it is lower than the other competitive brands.

Compatibility - Micro Rexton II is really compatible to the Singapore and with Asian atmosphere as the SUV is from the same region.

Complexity - Actually it's the same way that we have to follow to use (drive) the Rexton II and there no any special skills required as it very easy to drive with automatic transmission.

Trialability - Basically this can be purchases with minimum economic risk in relation to the other brand and also the market value or the used value is at acceptable range.

Observability - actually you don't have to be educating to feel the features of the Rexton II. Because once you got into it, then you get to feel it automatically.

3.0 The Market

3.1.1 Geographical regions

Singapore is one of the best well-developed country in the world as well as in the region with well managed stable economy. It covered by Malaysia from one side and Indonesia from the other side where 50% lands are assumed as urban areas while the remaining part have reserved for plantations and other purposes. The people who live their also experiencing good standard life with majority of acceptable income.

3.1.2 Forms of transportation and communication available in that region

Transportation

Transportation is one of the main component for each and every country no matter whether it is non-developed, developing or developed country. Because it's very important aspect for all countries to move from place to another or to send some stuff from one location to another and it will be mode of easy access to different location where which connects boundaries. Considering the conditions of Singapore in relation to the transportation aspects it is the county that own one of the rich transportation systems in the region. As a result of that, the people from all around the world use Singapore as an easy access place and where they also use Singapore as transit place.

The types of transportation that available in Singapore as follows.

Road transportation

Actually the on-ground transportation or the road transportation is the most common cheapest mode transportation method that available all around the world even in the poor countries as well.

But in relation to the situation in Singapore this common method is using in very advance manner where they own some expressways that length 150 Km and other A-class roads. Basically these 3262 Km's are connecting the Singapore from all around. All the busses, cars including taxies and other ground vehicles are got to use this method.

Rail Transport

Mainly the rail transportation in Singapore can be classified into two segments such as Mass rapid transit (MRT) and Light rail transit (LRT) which totally consist of 138.2 Km. The mass rapid transit (MRT) is currently running as four line transportation system with total length of 118.6 Km with the collection of 70 stations. Further the remaining light rail transit (LRT) is having 14 stations with length of 19.6 Km.

Ports and Harbors

There are totally 8 ports in Singapore and most of the ports which is 7 ports are handling by the PSA International which earlier names as Port of Singapore Authority. Further Singapore is well knows for worlds busiest port “Jurong” which handled 1.04 billion tons per year. (Appendix 2)

Air Transportation

In relation to aviation industry Singapore is assumed as aviation hub by civil aviation authority of Singapore where relatively they names the Singapore “Changi” airport as the air-hub. Further there are 5 air bases in Singapore and also five airlines are currently operating in Singapore leading by the Singapore Airlines where it connects 70 cities around the world. Especially the “Changi” airport is consisting with 4 terminals with ability of handling 64 million people each year.

Communication

As stated before Singapore is a well developed country in most areas and they are very rich in technology wise too. Because most of the technological aspects are born or available in Singapore and all our minds goes to Singapore if we talks about some technological aspect like mobile phone or gaming item. That's because of the picture that they have buildup in technological perspective over the past years. So due the advancement or richness of the technology they are also armed up with communication aspects too as there are direct linkage between the technology and the communication. Because some times we cannot even have the word communication without the technology. So with regard to the communication methods in Singapore following items can be considered.

Telephones

Singapore is one of the best telecommunication providers in the world including SingTel and the Singapore Telecom. Currently they are running with1.857 millions fixed lines. Recently their facilitating their services in excellent manner by adding numerous additional options to their services.

Payphones (Public phone booths)

Basically payphones can be classified into to such a card-operated phones and coin-operated phones. Both local and international call can be taken with the use of card-operated phones but only the local calls can be taken by using the coin operated phones. Mostly these booths are located in busiest public places like railway stations and bus stops.

Mobile phones

This is the most convenient and common communication method in a country like Singapore due to its technological advancement and richness. Not only in Singapore but also in many countries around the world are use to have it or more comfortable with it because of the regular use of it. Further the mobile phone usage is very rich in Singapore where the mobile phone services such as 3G, mobile internet and etc are handling by SingTel or M1.

Internet

Internet also same as the mobile phones where it also frequently use by majority of people in developed countries for their different kind of expectations like business needs, entertainment needs , educations needs and etc. Actually Singapore is the most wired location in Asia. As same as mobile service providers, there mainly three internet service providers in Singapore leading by the SingNet.

Broadcasting

In relation to the broadcasting in Singapore all the media station both Television and Radio are owned by the government. All the 7 television channels and 14 Radio channels are operating by the MediaCorp. In addition to that it also available cable TV and IPTV facility too.

Postal Services

This can be considered as one of the oldest communication methods of delivering stuffs. The authority for these services in Singapore is Singapore post Pvt Ltd where it handles wide range of postal network, postal agents and stamp vendors.

3.1.3 Consumer buying habits

Consumer buying habits is very important factor to be considered in international marketing as the consumer behavior is differing from market to market and also from country to country as well. So identifying different behavior of the different customers will be vital. Because then only the company will be able to deal with them positively in the aim of achieving advantages to the company as the company can come up with different strategies to handle the different people in different manner in a way that satisfy both the customer and the company too.

So in relation to the product-use patterns in Singapore it depend on the type of the product like whether it's a FMCG (fast moving consumer good) or whether its luxurious product. Normally they are using FMCG's on daily basis for their regular needs while they use their luxurious goods occasionally. But sometimes our product like Micro Rexton II can be use occasionally and for the daily purposes as well due to its reliability factors.

With regard to the product features preferences, the FMCG products are prefer by most of the people in Singapore and they tend to buy those in multiple packs. With regard to the luxurious product, majority of them tend to go for new models periodically.

So as we are considering on our proposed product the Micro Rexton II, it will be a luxurious product. So the people in Singapore tend to use this or likes to experience it due to its attractive unique design and other considerable factors like fuel efficiency and the price affordability.

The shopping habits also may differ according to the location. But in Singapore lots of goods are available under one roof. But a product like automobile wont be able to find in common places. Normally those are located in specialized attracted places like showrooms. So we Micro cars Ltd also located the newly Micro Rexton II in our showroom in Singapore which named as Micro Cars International (Pvt)Ltd a fully owned subsidiary of the mother company in Sri Lanka and also fully coordination by Micro Cars Ltd in Sri Lanka.

3.1.4 Distribution of the product

Micro Cars International (Pvt) Ltd is mainly targeting on the end consumers in Singapore that falling under middle-upper class. Basically the business/operations in the Singapore is mostly handle by the mother company Micro Cars Ltd. But due to some factors like less knowledge about ruling, taxing, clearing and other kind of local procedures, we Micro Cars Ltd appoint an agent for Micro Cars International (Pvt) Ltd to get things done in Singapore such as some tasks like vehicle clearing from the ports, taxation, registration and etc behalf of Micro Cars International (Pvt) Ltd in Singapore. But all the important work that affect on the operations or the core value of the business of Micro Cars International (Pvt) Ltd will directly handle by mother company Micro Cars Ltd and with supportiveness of the appointed agent. Considering on the distribution channel Micro Cars International (Pvt) Ltd is not much engage in distributing it in Singapore as it is not FMCG product but a luxurious product. Because people who needs it will come for an inspection and we are inviting them to come and inspect it in our showroom in Singapore.

3.1.5 Advertising and promotion

Advertising and promotion should be there in the action to achieve the customer awareness towards the product. The usage of the different advertising and promotional tools may depend on the type of the product. So as the Micro Rexton II is targeting on the end consumers we directly communicate to the end consumers through our advertisements and other promotional campaigns.

With regard to the advertising methods that can be use to market Micro Rexton II we can advertise in some electronic medias like TV and internet. Further with the print media it can be publish on automobile magazines and sports magazines.

Also in the promotional methods it can propose to give basic first free service for fist 100 customers. In addition to that we are expecting take part in the trade shows and automotive shows by displaying their newly Micro Rexton II.

3.1.6 Pricing strategy

Customary mark-ups

The customary mark-ups will be depend on expectation of the company which means will depend on the amount that they want to earn from each unit.

So Micro cars Ltd also having different mark-ups depending on the project where it will differ from project to project depending on its nature and the expectations.

According to this project of exporting Micro Rexton II Micro Cars Ltd will keep 23.5%.

3.2 Relative competitors to Micro Rexton II in Singapore

There will be huge competition for Micro Rexton II in Singapore at the initial stage of their expanding procedure that will come-in from the other average SUV makers in the world such as Mitsubishi, Nissan, Hyundai and Suzuki. The in detail information or the comparison between each mentioned competitors as follows.

Competitor's products as follows.

Make

Model

Mitsubishi

Outlander

Nissan

X-TRAIL

Hyundai

SantaFe

Suzuki

Grand Vitara

The features of the all above models can be seen at the appendix 3.

Competitor's prices are as follows

Make

Model

Price (USD)

Mitsubishi

Outlander

92000

Nissan

X-TRAIL

100000

Hyundai

SantaFe

78000

Suzuki

Grand Vitara

87000

When we considering about the advertising and promotional methods, all these companies are in the aim of providing luxurious products to the market. So as a result of that majority of the competitors are using general advertising and promotional methods which some advertising methods such as TV advertisements, internet advertisement, bill boards, magazines while using discounting programs and trade show promotions as promotional methods.

Further with regard to their distribution channels most of them are doing their businesses through their agents in Singapore where the agents have the full right to handle most of operations within the country.

3.3 Government participation in the marketplace

Development or the growth of a any kind of company can be achieve easily up-to some extent, if the government of that specific country is supporting on the operation by giving lots of benefits from the government side.

Further especially in the international businesses, basically there will be minimum of two countries engage in that process to get some thing (goods or services) into the country (importing) or giving it out from the country (exporting). So if the both governments are in positive mode to help on these to gain advantages for both countries, then it will be a really good push for a company to operate there businesses in overseas with less obstacles.

In addition to that there should be procedure that should follow by each and every company who enters to the Singapore for their ventures. Some of those briefly explained regulations are as follows.

Any company will come to a conclusion whether to expand their businesses to overseas or not, by looking at the results that they gain through their different studies that they done in relation to specific industry where they hoping to expand.

So by following that procedure Micro Cars Ltd has decided to expand their businesses to Singapore by introducing their unique product Micro Rexton II to the Singapore market through Micro Cars International (Pvt) Ltd especially to the people in middle-upper class who tend to use average SUVs. So initially they need to register their business (Micro Cars International (Pvt) Ltd) as a company under the required authority in Singapore which named as “Accounting and Corporate Regulatory Authority of Singapor (ACRA)”.

Then they need to active their custom accounts under the Singapore customs for relevant monitoring and other processes of the customs authority.

Further they will be able to get a special license (if required) for their own tax benefits in Singapore after complete understanding and finalizing negotiations between the two governments. Then there will be tax benefits for product (Micro Rexton II) under this project in Singapore and the government of Sri Lanka can offer some reasonable tax releases for Singapore projects in Sri Lanka.

In relation to this matter the government of Singapore comes to understanding with the Sri Lankan government to charge 10% of custom tax in Singapore instead of charging 20% while having 2% GST instead of having 7%.

Additionally as mentioned in the earlier stages, the government of Sri Lanka is always behind the Micro Cars Ltd and their proposed subsidiary {Micro Cars International (Pvt) Ltd} by giving them the maximum support and benefits that can offer by the government side due to the nationality atmosphere of the company as the company is fully localize venture where the money will never run out of the county. Especially on that way the government of Sri Lanka will never charge any tax on this project which is exporting the Micro Rexton II to Singapore.

So due to the tax benefits that the Micro Cars Ltd getting from the both government for their export they will be able to offer Micro Rexton II at really affordable price to the Singapore market which will be big headache for other SUV competitors in Singapore.

PART Two

Preliminary Marketing Plan

Executive summary

The preliminary marketing plan is the main part of this report where it covers major areas of the expansion process such as promotional mix, distribution, price determinations and the budgets.

Basically it start with the main objectives that has targeted on specific target market of middle-upper class in the aim of creating brand awareness by fulfilling the stylish traveling needs of the people in Singapore.

The usage of promotion mix is in good stands in relation to operations where the company interest in using such media tools like electronic media for TV advertisements, internet advisements and for the electronic bill boards while they tend to use print media like news papers, magazines and billboards. Further it also interest in personnel selling where they specifically targeting on the corporate customers. In addition to that they are focusing in participating for trade shows by displaying their vehicle too.

The transportation between two countries will be done by the sea transportation method where it starts from Colombo port to the destination port “Jurong” in Singapore.

There are special document to be shown at the destination port such as Exhaust emission test report, Windscreen test report, Vehicle data card, Vehicle registration documents and Manufacture's letter to confirm the date of manufacture as this is an automobile transportation and these document are in addition to the general documents such as bill of lading, dock receipt, commercial invoice and statement of origin.

Basically all the important operations handle by the special internal management team which appointed by the mother company and additionally the company has appointed an agent for the purpose of handling localize tasks.

Regarding the taxes in Singapore perspective the government of Singapore along with Singapore customs charge 10% custom duties based on the value of the product while they charge 2% GST based on CIF value.

Regarding the payment methods, the company focus is to go with consignment method which will be an advantage for Micro Cars International (Pvt) Ltd.

According to the current position of the company they are well establish and strong in their productions, financial, marketing and etc.

4.0 Preliminary Marketing Plan

4.1 Marketing Objectives

Target Market

Unlikely in Sri Lanka, gender will not play a big role when buying a vehicle in a country like Singapore due to their westernization cultural influences and the level of educated people. Therefore promoting even a SUV will not limited to males but will reach every extent possible. After undergoing several researchers & studies it is decided to promote Micro Rexton II to middle-upper income earners in the Singapore. Main assumption to target specially to that particular group is that, it is expected that to those income earners perceive this product as a value for money product. Because buying diesel consumption SUV is perceived as a very prestigious behavior.

Even though target market consists of the customers who are affordable to the product, Micro Cars Ltd thinks on future potential customers as well.

Expected sales and profits

Basically this will depend on the ability of capturing the market and how its capture the market especially in a country like Singapore where in a situation that a huge competition among SUV makers going on. Also it depend on how the Micro Rexton II will promote itself to the market and how it can exceed the others competitors promoting patterns in order to get more concerns of the people towards Micro Rexton II. Capturing the customers at the very fist stage is not enough but need to keep it continuously.

So based on the findings that we made through our studies we expect that there will be 200 units of sales per year and expecting USD 20 millions profit.

Market penetration and coverage

As Micro Cars International (Pvt) Ltd planning to establish their showroom in the capital city of Singapore, it will be much convenient for them to start and continue the marketing process. As most of the merchandising activities are centralized to the capital city, creating the initial demand and maintaining would be benefited from the location advantage. In order to penetrate the market extensive analysis of existing competitors and their core competencies are highly required. Because capturing the market in a highly competitive environment would be very difficult and competitive. Therefore well planned designs and quality control tools also will play a major role when penetrating the market.

4.2 Product adaptation or modification

This is an exclusive product where that the new version of the Rexton which is named as Micro Rexton II was only available in Sri Lanka but no anywhere else. Because the appearance and the other relative stuff of the Rexton II is completely different from the earlier Rexton which is available all around the world. That is because, it's totally assembled in Sri Lanka with locally manufactured items where only the engine and the transmission bringing from Korea. So we can assume Rexton II as a unique product that available in Sri Lanka.

Basically the main advantage to Micro Cars Ltd is the price advantage that they can gain in Singapore markets as the Micro Rexton II can be offered at fewer prices compared to the other average SUV in the specific range.

Also most of the parts of the Micro Rexton II such as body of the vehicle, mirrors, seats, and rubber components including the tires are fully manufactured in Sri Lanka and further they are hoping to add/replace more locally manufactured components to it in order to get more revenue for the country.

The features and the specification of the Micro Rexton II can be seen in appendix 4.

4.3 Promotion mix

In relation to the exportation of Micro Rexton II to Singapore an extensive promotional campaign will be conduct in order to capture the specific target market in the aim of increasing demand by conveying the benefits of this new Micro Rexton II to the customers.

4.3.1 Advertising

The objectives of this advertising campaign will be to create awareness of the people and to make them more attractive by conducting creative methods.

Media mix

There are many types of advertising methods available in the industry, but all are not relevant to each and every product or service, which means the selection of the advertising methods are depending on the nature of the product and specified target market. Because the usage of different media depends on the nature or class of the people.

Therefore a luxurious product like Micro Rexton II where its targeted on the middle-upper class people need to have very professional attractive advertising campaign through out in Singapore. So in order to achieve the specified objectives, Micro Cars International (Pvt) Ltd through coordination of the mother company have decided to use both electronic and print media for its advertising campaign.

In relation to the electronic media it has decided to use TV advertisements especially during prime-time programs (at night) through some of five popular TV channels in Singapore such as Channel 5, Channel 8, Channel U, OKTO, Channel News Asia in the aim of catching the crowd. Because basically that will be the best time to catch most of people who within our targeted category.

Further it also use internet advertisements on some top five busiest web sites in Singapore and this will be one of the most beneficial method due to high internet literacy rate in Singapore.

In addition to that it will be using one of the most popular and attractive method in all around the world which is electronic bill board. This is for the capturing of busiest people in Singapore who always travel especially at nigh. Because this method will be more attractive at nigh due to its high contrast and we are aiming to locate two electronic billboards at busiest locations in Singapore.

We also use some of print media such as news papers and magazines too.

With regard to the news papers we have selected three of most selling professional news papers in Singapore to publish the Micro Rexton II advertisement which are the news papers who most tend to buy by out targeted middle-upper class such as Straits Times, New Paper and Business Times.

Furthermore we are targeting on the people who tend to read magazines and we have decides to advertise on three top automotive magazines like Top Gear, Auto Car and EVO Magazine and two other trade magazines in Singapore such as Stuff Singapore and Life Style.

Also in addition to the electronic billboards which mentioned earlier, we also hoping to located four other different bill boards on most suitable locations.

4.3.2 Sales promotions

We are also in the need of conducting a promotional campaign in customer satisfaction perspective with some objectives such as

According to our discounting program we are offering basic free fist service to first 100 customers and in addition to that we are planning to display our Micro Rexton II in all trade shows and automotive shows in Singapore.

4.3.3 Personal selling

This will be a method that we can use to promote our vehicle personally to some specified group of people while it enabling us to give them the actual experience and feeling of our new Micro Rexton II.

In relation to this method our plan is to engage with the corporate people. So for that our specialized team has decided to go to reputed companies to introduce this vehicle to them and by the time we have plan to brief them about all relevant factors about the Micro Rexton II through power-point presentation. Further we also ready to show them the vehicles physically and keen to give them the test run at the same time to get and feel their own experience about the Micro Rexton II.

4.4 Distribution: from origin to destination

Consideration on the distribution is a vital factor for any businesses even it's a service oriented business as this is where they deliver their services or goods to the required interested party. So it would be more important in international marketing too where a company dealing with the overseas.

When focusing on the current business which is the expansion of the Micro Cars Ltd to Singapore with introducing their Micro Rexton II through their subsidiary in Singapore named as Micro Cars International (Pvt) Ltd, there are two mediums of transportation are available between the two countries such as air transportation and sea transportation. So we need to select either air transportation or sea transportation for the exportation process of the Micro Rexton II from Sri Lanka to Singapore.

After the concerning on most of factors, specially such as the nature of the good (Micro Rexton II) it is vital to go for sea transportation as it is the mode that more suits to carry heavy good and also it will be more cost effective when compare to the other available method air transportation which quite expensive than the sea transportation. So with the use of sea transportation method, the company will be able to gain additional cost benefit which indirectly results in keeping the total final cost of the vehicle low, where they get an opportunity to create price competition among other SUV competitors in Singapore.

4.4.1 Port selection

The origin port will be the Colombo port in Sri Lanka which administered jointly by the Port Authority-Sri Lanka and Sri Lanka Customs. Actually this is the port that use for most of both domestic and international commercialization purposes where located at the heart of Colombo. Basically as mentioned earlier, the work shop of the Micro Cars Ltd is located at Peliyagoda a place where that close by the Colombo port and as result of that transportation cost which have to spend to bring vehicles to the Colombo ports by the car carriers will be minimize.

Concerning about the availability of port in Singapore there are totally 8 ports such named as Brani, Cosco-PSA, Jurong, Keppel, Pasir Panjang, Pasir Panjang Wareves, Sembawang and Tanjong Pajar.

But the most popular, busiest port in Singapore is Jurong where it uses for commercial purposes with the ability of handling huge number of tasks. So Micro Cars Ltd will ship their vehicles to Jurong from the Colombo port.

4.4.2 Mode selection: advantages and disadvantages

Road transportation

Actually this is most general method of transportation and most of companies using this method for their transportation need to deliver their goods to the customers or to any specified location.

According to this project (expansion of Micro Cars Ltd to Singapore) this transportation method is using frequently both in Sri Lanka and Singapore to take the vehicles to the origin ports and also to take the vehicles to the warehouse/showroom from the destination port. Further they are using car carriers for this transportation method.

This kind of method will be best for fast delivery needs within short distance and also it will be really cost effective.

But some times it can be delay of delivering due to bad weather conditions, break-down of the carrier and because of traffic jams.

Rail transportation

Basically rail road are available in Singapore and those rail roads are in supreme standards for transportation needs. But if we take the situation in Singapore as a reality they are not much concern in using rail roads for their goods delivering processes due to the size of their country. Further according to the product that we exporting (Micro Rexton II) we are not in a position to use rail roads as it is not a good mode to transports vehicles.

Sea transportation

This is the mode that use by most of ventures for their import/export purposes. Importing/exporting goods by ships may use containers or else there's availability of sending the good in the ship with out loading it into a container. For that there are ships available specialized for vehicle transportation.

This mode gives lots of benefits to the ventures for transportation of heavy items like vehicles and also it is ideal to transport non-perishable goods.

But there are some disadvantages to like it can get delay due to bad weather and etc.

Air transportation

This mode is ideal to transport the light goods that are in high demand and also it's the best option for ventures that are in need of delivering goods to overseas immediately to their customers or agents within limited time period.

So it can be use to delivers goods to overseas quickly. But this can be change due to flight delays and bad weather.

4.4.3 Packing

There's package contain in most of products in this world except for some welfare products. Because package makes the product better in many ways like it makes the product attractive. Not only it makes attractive but also it leads to easy handling in loading, unloading and storing. But not all packages are same which means all packages are not easy to handle. So the packaging should be a pack that can handle easily. Also the packaging should not be much heavy as the shipping chargers are depending on the weight and the volume of the product. Therefore it needs to consider on that as well in order to reduce the shipping chargers. Further the packaging depends on the nature of the products such as a package can be including with the FMCG product and also with some heavy goods as well.

But it rarely applies to motor vehicle. As a result of that Micro Rexton II doesn't have any special packaging for their vehicles such as wooden box packaging. So Micro Rexton II directly loading into special area of the ship where the area that is specially for vehicle transportation.

Marking and labeling regulations

Marking and labeling regulations is must in most of countries. Because it easy for product identification and handling. Because once the shipment is arrived to the port then the customs and the relevant authority will be able to handle it easily without time consuming and also the receivers will be able to identify their stuff as well. So we use special application/form which named as “DECLARATION OF FACTS FOR MOTOR VEHICLES” to be introducing at the Jurong port Singapore as attached in the appendix 5.

Containerization

Containerization means the process of packing or loading the goods into the container for transportation. But as mentioned earlier Micro Rexton II will not use any special packaging or containers for the transportation while it will load into special area of the ship which is ideal for vehicle transportation where it blocked the vehicle in the specific location to stop the movements that can occur during transportation.

4.4.4 Documents required

All the success of the international marketing including the import/export process is depending on the correct documentation sharing between the relevant parties. In an import/export process, many types of documentation are sharing by the two governments or the relevant authorities like customs. So there should be correct procedure to earn all the required documents by the exporter and also it's a must to show all required documents to the authorities at the destination. Failing to handover those documents to the required authority will result in delays in clearing process and sometimes the stuff can be rejecting by the customs at the destination port.

Actually there's no any clear cut procedure to earn this documents and also no any concrete plan for the required documents. That means the document that required by the authorities may differ from country to country and port to port as well.

But according to this project the following document are required by the Singapore government and port authority including customs for the exporting of Micro Rexton II from Sri Lanka.

Bill of lading

Bill of lading is the document or a contract between the shipper (shipping agency) and the carrier who transport the specific good to the port. This will be hand over by the carrier to the shipper to recognize receipt of the goods including its destination. Some times the carrier or the transporter and the owner of the goods may be two different parties and some times it may be the same. In relation to the Micro Cars Ltd this two parties are the same. Because normally there's separate transport division in Micro Cars Ltd where they use to transport their vehicles by special vehicle carriers here and there. So in a situation like this Micro Cars Ltd engage as both owner and carrier as well.

Dock receipt

Dock receipt is issue by the shipper (sea carrier) to recognize that the goods are received from the domestic carrier to the port. This will transfer the responsibility of goods from domestic carrier to the shipper which goods are ready to export.

Commercial invoice

This is a document that prepare by the owner (seller/ Micro Cars Ltd) to show to the relevant authorities of Singapore about the exact value of the goods for the clear estimation of customs duties and taxes (GST). This will include the unit price as well as the total cost of the units.

Statement of origin

This document is for the purpose of identifying the origin of the product. As stated earlier the government of Sri Lanka and the government of Singapore have come to a final decision (agreement in good faith) to give some tax benefits on this Sri Lankan product Micro Rexton II in Singapore while Sri Lanka giving some tax benefits for some Singapore projects in Sri Lanka. So according to that agreement, the Singapore government has only agreed to give that specific tax benefits only for the said project which is exporting Micro Rexton II. So as a result of that the government of Singapore need to identify whether this product (Micro Rexton II) is truly Sri Lankan manufactured one or not. So for that they need the required certification from the relevant authority in Sri Lanka to proof the originality of the product.

Special documentation

In addition to the above mentioned document the government of Singapore or the Singapore customs need some more documents that regard to the automobile industry as follows.

4.4.5 Insurance claims

In relation to the insurance claims the responsible party for insurance claims either may be importer or exporter which depends on the term of sale. In international marketing all the processes such as exporting and importing has to be done in an uncertainty environment. So because of that reason the company doesn't know what will happen next which is beyond their reasonable control. So the best way to get rid from those uncertainties is by having a relevant insurance policy. Because it's a great weapon for both importers and exporters to get rid from the losses that they occur due to the uncertainty which beyond their control. Especially in the processes of loading, unloading and storing, the products can be damage due to rough handling. Further the product also can be damage due to bad whether or else some time the product may totally get lost in situation where ship get sunk due to bad whether conditions. So in a situation like this having and insurance policy will be vital for exporters/importers continuity and for their own protection.

With regard to the project of exporting Micro Rexton II to Singapore, the company Micro Car Ltd is goes for the marine insurance as the company only using sea transportation for their exporting.

Focusing on the insurance companies in Sri Lanka there are many in both private and government sector. But the most experience insurance company with a great track record is in government sector which names as Sri Lanka Insurance Corporation. Also Micro Car Ltd from the day its start they are consulting with the same company (Sri Lanka Insurance Corporation) where the company is exclusive insurance client that handling all the insurance tasks of the Micro Car Ltd. It's because of their (Sri Lanka Insurance Corporation) flexibility in many areas specially in their rates and also due to the Sri Lankan nationality of the Sri Lanka Insurance. So Micro Car Ltd consulting the Sri Lanka Insurance for this project as well with their marine insurance.

4.4.6 Freight forwarder

Freight forwarder is an agent who works behalf of the exporters for the transportation of the goods from the origin port to the destination port. Having a freight forwarder will be an advantage for the companies as all the companies doesn't know the whole import/export process perfectly. So in a situation like that it is ideal to hire and freight forwarder as they are well experience with the whole import/export process perfectly including the required documents and the cost for import/export processes.

So basically as same as the insurance, Micro Car Ltd using their existing shipping client (McLerens Shipping Limited) as shipping needs provider for this project of exporting Micro Rexton II to Singapore due to their flexible rate and etc.

4.5 Channel of Distribution (micro analysis)

Import export agents

As mentioned in the earlier most of the important operations of the overseas company (Micro Cars International (Pvt) Ltd) is directly handle and coordinate by the mother company (Micro Cars Ltd) by a specialized internal management team of the mother company which directed by the Chairman/CEO of the Micro Cars Ltd Dr. Lawrence Perera which was appointed by the director board of the mother company.

But some tasks with regard to the local system of Singapore will feel inconvenient for the management team. Sometimes it may be able to get the things done by a local's person very easily with les obstacles as the locals are convenient with their own system in Singapore. So as result of that an agent will appoint with limited authority to handle the localize tasks such as company registration, obtaining relevant approvals, emphasizing localize rules & regulations, taxation policies, vehicle clearing processors at the port media handling for the advertisements and promotions.

4.6 Price determination

4.6.1 Cost of shipment

Regarding the shipping cost that the Micro Cars Ltd has to incur for the exporting of Micro Rexton II will depend on the charges of the shipping agencies as their charges may vary from company to another. But as mentioned in the previous times, Micro Cars Ltd in poison to deal with their existing shipping agent of the company McLarens Shipping Ltd. So according to the shipping chargers of the McLarens Shipping Ltd it will cost USD 500 per each unit/vehicle for the marine transportation from Colombo port to Jurong port in Singapore.

4.6.2 Transportation cost

In relation to this project, transportation cost will occur in two times where initially transportation cost that incur when the vehicles are delivering from the work shop of Micro Cars Ltd at Peliyagoda to the Colombo port by transport division of the Micro Cars Ltd with the use of special vehicles carriers. Then again a transportation cost will incur in Singapore to take the vehicles from Jurong port in Singapore to the showroom of Micro Cars International (Pvt) Ltd.

Actually the special vehicle carriers are in the ability of transporting vehicles in very safest way with the capacity of carrying five vehicles at a time.

So for the delivery process of vehicles to the Colombo port from the Micro work shop, the transport division of Micro Cars Ltd has make an estimate where it will cost USD 100 for each trip. As mentioned earlier these carriers are with the capacity of carrying five vehicles at a time. So based on that information, Micro Cars Ltd estimate that it will cost USD 100 to deliver every five vehicles which means each vehicles cost USD 20.

Regarding the transportation cost in Singapore (Jurong port-Singapore to showroom of Micro Cars International (Pvt) Ltd) the process will be same and it will cost USD 200 for each trip with the collection of five vehicles which means each vehicle cost USD 40.

4.6.3 Handling expenses

Basically here the handling expenses mean the collection of loading, unloading and storing charges at the ports. As same in the transportation here also occur two handling expense where one at the Colombo Port and the other in the Jurong port-Singapore. Based on the chargers of both ports Micro Cars Ltd will incur USD 150 per unit/vehicle in Sri Lanka while incur USD 300 per unit/vehicle in Singapore.

4.6.4 Insurance cost

Considering on the insurance cost Sri Lanka Insurance Corporation Ltd, an exclusive insurance client of the Micro Cars Ltd has proposed a reasonable rate in relation to their marine insurance for the automobiles that exports to the Singapore. The rate is 0.5 % based on the Sri Lankan Value of the vehicle. So it will be nearly USD 225 insurance cost per vehicle as the vehicle values in Sri Lanka is USD 45000.

4.6.5 Custom duties

Focusing on the custom duties it will cost USD 50 at the Colombo port per unit/vehicle while it will be 10% in Singapore which based on the valuation by the Singapore customs.

4.6.6 Import taxes and value-added tax

Concentrating on the additional taxes, there are no any additional taxes that has to be incur by Micro Cars Ltd in Sri Lanka for this project of exporting Micro Rexton II to Singapore due to the encouragement of Micro Cars Ltd by the government and also to give greater opportunity for this Sri Lankan venture to create better price competition among others. As a result of that Micro Cars Ltd get an opportunity to export their units for the very same price decide by them in Sri Lanka as there's no taxation specifically for this exporting units.

But in Singapore there will be cost of 2% for the CIF value.

4.7 Terms of sale

FOB

Technically it means “Free on board” where the compilation cost of goods, transportation and insurance cost from the manufacturer to the origin port with inclusion of storing and loading charges.

This term of sale can be an advantage for the seller as he only has to incur the cost up-to the operation in the origin port which means he will not be responsible for loss or damages after that.

But in buyers perspective it will be a disadvantage for hi as he has to incur cost if the goods are loss or damaged.

CIF

This means “cost, insurance, freight” where the seller will incur all the cost from transporting goods form the company to the destination port. Any kind of cost regarding the losses or damagers will transfer to the buyer. But in CIF sellers are armed with the marine insurance to reduce the buyer's risks.

This will occur an advantage for the seller from one side as he protects from the losses and dames by the help of marine insurance. But it also will be disadvantage for seller as he has to spend some additional cost for the risks that can happen during transportation.

C&F

This means the “cost and freight” where it includes the total cost of the goods and transportation chargers to the destination port.

In relation to the said project of exporting the Micro Rexton II to Singapore there's specific taxation procedure which control by the government of Singapore and Singapore customs. Further according to the understanding and the agreement between the two governments there's flexible tax procedure is maintaining for Micro Rexton II.

So there will be a custom duty of 10% for the value of the vehicle while having 2% GST on CIF including unloading and storing cost.

4.8 Methods of payment

There are some payment methods that can be chosen depending on the nature of the business and as well as depending on the ability of paying to the other party. So there can be methods such as cash in advance, open account, consignment sales and letter of credit.

Basically according to the nature of this project, this is a business or deal between mother company (Micro Cars Ltd) and its subsidiary (Micro Cars International (Pvt) Ltd) where the subsidiary also handling directly by the management team of the mother company. So there will be no mistrust between the two companies for their payments.

Therefore it is good to go for the consignment method where the Micro Cars International (Pvt) Ltd in Singapore only has to pay to Micro Cars Ltd after they sold the vehicles and the payments should be done on monthly basis.

5.0 Pro forma financial statement and budgets

Marketing budget

Cost of the Micro Rexton II in Sri Lanka = USD 45000

Cost of the Micro Rexton II in Singapore after incur all the costs in Singapore as follows

Description

Cost in USD

Total cost of the vehicles (At Sri Lanka)

9000000

Research & Development

5000

Transportation cost

12000

Handling cost

90000

Insurance cost

45000

Shipping cost

100000

Custom duties

910000

GST on CIF

182900

Salary

72600

Promotion cost

32020

Showroom charges

60000

Electricity & water

9000

Telephone

1800

Other

1000

Total

10521320

So based on the cost of the unit in Singapore the company has decided to sell it at USD 65000 which is a really good rate compared to other average SUV prices in the market where other SUV starting there prices minimum at USD 78000.

Annual profit and loss statement for Micro Cars International (Pvt) Ltd for the year ending 31st December 2010

Description

USD

USD

Sales

13000000

Cost of the goods

9000000

Gross profit

4000000

Expenses

Research & Development

5000

Transportation cost

12000

Handling cost

90000

Insurance cost

45000

Shipping cost

100000

Custom duties

910000

GST on CIF

182900

Salary

72600

Promotion cost

32020

Showroom charges

60000

Electricity & water

9000

Telephone

1800

Other

1000

Total expenses

-1521320

Net profit

2478680

Promotion cost (Advertising, Promotions, Personnel selling

So the final cost promotion will be

TV advertisements

3500

Internet advertisements

6000

Electronic billboards

8000

News papers

1440

Magazines

1080

Billboards

8000

Free servicing cost

3000

Trade

1000

Total

32020

6.0 Resource requirements

Micro Cars Ltd is a company with lots of great milestones that headed with great track record with their operations in Sri Lanka where they capable in engaging with international markets with the exportation of their products due to the strong goodwill those they earned through out their operations in the past.

Financial requirement

Financial requirement for this project in Singapore will take from the companies own money where they are still able to spend on this project from the money that they earned in the past due to high sales and high margin that they gain.

Personnel requirement

The personnel requirement for the said project will gain internally from the company where it has appointed specialize management team of five (General Manager, IT manager, Sales & promotion manager, Finance manger and head of automobile engineering) which directed by the Chain/CEO of the company. So all the related task of this project will cover by this team.

Production capacity

The company itself in a good position from their production perspective and there's no need of more expanding the production capacity as the current production capacity is more than enough for this project as well. Actually that's because they expand their capacity along with the demand that they got earlier with the launch of Micro Rexton II where they made it (increase production capacity) also with the aim of expanding to overseas in future.

7.0 Sources of information

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