It is within management decision to establish a new line of product that is aimed at operating in Japan. There are many issues the management must look into before they kick off the project. The trade licenses of the United States and the country where they are going to base their operation. In addition, compliance to international trade laws is also a necessity. Compliance would enable the management carry out the task within the required frameworks of the state and the international body of ruling the government. For a business to start operating, there are rules and regulations the country adhere to. The rules and regulations are known as licenses and permits. In the same light, international trade has set rules and regulation that enhance fairness, integrity and healthy competition in the market. All these are needed to streamline the trade industry. Coca-Cola has been the dominating market when it comes to beverages; they have managed to control the markets over the years and have continued to dominate the market till now (Bowden, 2014).
For the Coca-Cola company to get clearance to transport the Lilikoi flavored Coca Cola products to Japan, they also need a number of licenses and permits to allow them operate within the given frameworks. First they must obtain an import permit from the custom duty department. The importer must declare the goods and products to the director general of the Customs after necessary study. After the goods have been fully examined and declared good, and after payment of the excise tax and custom duty has been made, the importer is issued with an import permit to allow the business start importing their products in Japan. Acquisition of the business permit is in line with requirements that allow control of the foreign exchange and other key regulations concerned with the importation of goods. Japan is among the industrialized countries and they never fall short of this when it comes to technology as their excise and customs duty office are computerized which makes the process smooth sailing (Department, 2009).
Prohibited article license
There are commodities that are prohibited in Japan, especially drugs. The goods to be imported to Japan must, therefore, be verified by qualified personnel whether they have narcotic or other drugs that are prohibited within Japan and outside country. After full analysis of the sample products, the importer is issued with a license that allows the company to start importing the products.
Verification of other laws, rules and regulations
Some of the goods may have a negative effect on the country they are to be imported. For instance, they may hurt the local economy, public health, hygiene, social morals among other considerations. Such goods fall under the import restrictions. The number of permits and license that the products must go through to get a full license to operate within Japan. They are as follows;
- Foreign trade and foreign control act: they import from the Coca-cola must be in line with the following laws.
- License relating to the sale of banned goods such as wildlife products, explosive materials, fertilizers, poisonous chemicals among others
- License relating to quarantine goods, such as animal product with rabies, food sanitation law, domestic animal infection laws and plant quarantine.
- License regarding the narcotic such as cannabis law, stimulant drugs control laws and opium laws
The importer gets the last permit which allows the company to start economic activities within the region, after complying with the above laws. Authorized Economic Operator is the final permit given to the pave way for a business to start commercial activities within Japan.
Section two: International Legal Compliance.
Compliance with International Laws
There is a governing body which works to regulate trade at international level; the body that is given such mandate is called the World Trade Organization. Countries are required to sign an agreement towards the adherence of the stipulated laws. The objective is to maintain a healthy competition, in addition ensuring, that the standards are met. Coca-Cola Company requires a number of licenses that united States have agreed to comply. Among these include; the trade agreements. United States have entered in a trade agreement with other countries. So trade agreement specifies how trade is going to be carried out within the member’s state (Orrick, 2009). It is therefore, necessary that before they start operating in Japan, the company comply with the agreement that the mother country has signed with other countries
Every person has a right to be employed no matter the situation if he or she has the required merit. Non-discrimination against color, gender, disability is against the US laws and is punishable by fines and cancellation of licenses.
Improper Payments to Foreign Officials (FCPA)
American firms should be a good ambassador in the foreign countries. If it is noted that the firm has irregularly or improperly paid a foreign official, they firm may be liable to fines.
Business Activities Affecting Human Rights (ATCA)
The US government is directly responsible for the citizen’s rights. Issues such slavery, wars, genocides among other which results from the American company are paid by the state of US. The company is also held liable for such acts.
Political Risks Insurance
The insurance provides coverage to the company that has invested in foreign countries for political risks that may result from unpredictable political unrest from the host countries. The state contributes to the payment of the individual company so as to start their operations.
Transactions with Countries Facing Sanctions
It is illegal to trade with countries facing sanctions from U.S.A. Company found trading with such person or nations is liable for fines according to the legal procedures which are instituted in a court of law.
Transactions with Declared Terrorist Group
The state of US has a list of terrorist groups that are available to the public. The involvement in terms of trade with such a group is punishable in a court of law.
Environmental Pollution Laws
The company should do their production with minimal effects to the environment. The resources should be used sustainably and when the company pollutes the environment, they should pay for the damages through the pollution pay principle.
Remedies for Unfair Trade
Some country subsidizes their products whereby their prices are very low in international markets reducing the value of other products that are not subsidized. According to the law, the market should be on an even playground. Each country should have an equal opportunity of trading with other countries despite the economic power the country has in the international markets.
Imports Safety License
United States has come with an agreement with other member countries to create a have imports safety permits which try tries to curb harmful or dangerous products such as explosive materials and lethal chemicals. The effort is done with the aim of ensuring that whatever the country imports to the country, the security of the product is guaranteed. Coca-Cola will need the import safety license to ensure the safety of the products they will import to Japan.
The Company will also require a trading license which will be collected from the United States customs and border protection department. The license ensures that the correct data on imports and exports is entered to control the foreign exchange trade and enable tax collection. Security issue is also a major concern and hence the need to have import and export data.
Section Three: Finance
Coca-Cola is multi-billionaire business that deals with a large economy of scale. The company makes a profit of close to 2.8 billion. Part of the profit earned will be ploughed back to launch a new product in Japan. Below is the financial summary of the expected project. The daily production is expected to be 100, 000 thousand can of the new brands. The yearly production will range from 30 million cans. Every bottle will have an average marginal profit of 0.1 USD. The total margin profit expected per day will range from 10000USD which translate to 120, 000 USD in the first year. The production is expected to increase with years due to opened markets.
- Startup capital: this is amount of capital require for the acquisition of the trade of the business. The creation of the new brand of the Coca-Cola will require the money that will be obtained from the main company. The startup capital will be a ratio of the profits made from the previous years and Short-term debts of notes payables and commercial papers.
- Direct cost: these are costs that have a direct link to the company projects. The costs can be traced to a particular project. These cost can then be evaluated and their impact on the company known.
- Indirect cost: these costs are associated with the company projects but cannot be traced directly. They assist in the production, processing, and other important aspects of the company that makes it run smoothly. They are pivotal in the running of the business. These include the salary paid to workers among others.
- Expansion cost: the money the company will need to expand their operating activities after the creation of the business. Expansion costs are usually estimated after the one year of operating the business.
- Operational costs: the amount of money the company will require for running the manufacturing, transporting and marketing the products.
Short term debts will consist of commercial papers, loans and notes payable each with an average of 70 Million. Short-term debts will be the finance the company will require to give in the first one year and revolve for the next years. The fund will not be revolving in nature and will have a fixed repayment period. The company will use this to determine the raise funds for the expenditures such as the purchase of the office materials, payment of the miscellaneous budget among others. However, this is not necessary if the company liquidity ratio is good.
Long-term debt of t for Coca Cola will consist of U.S. dollar notes with different maturity dates. They will mature as follows,
The debt will be repaid in long investment period times. It is necessary for the company to use the long-term debt as it avoids excessive use of the liquid cash.
Section Four: Break-Even Analysis
In economics, breakeven is defined as the point where the costs or expenses and the revenues are equal. There is no gain or loss the company is making though the opportunity cost is usually paid in this case. In addition the capital will have received the risk-adjustment. According to the estimated value of revenue to be obtained, it is expected that the company will realize its breakeven point within the first year. This year will be for the introducing and capturing the market and stabilizing the operations. After the first year, sales are expected to grow overwhelmingly.
The Breakeven calculation for the company is as follows,
Breakeven point in units = Fixed Cost/(Sales Price - Variable Cost)
= Fixed Cost/Contribution margin
= 7860000 Units
The company is required to produce 7.86 million units/cans in order to completely cover its fixed costs. At this point of production, the total revenue will be equal to the fixed costs incurred by the business. For Coca Cola to become profitable, it must set its production capacity in excess of 7.86 million cans/units,
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Bowden, G. (2014). The Coca-Cola Company . United States Exchange and Security Commision, 10-56.
Orrick, H. &. (2009). US Laws That Apply Abroad. LLP, 1-6.
Silveira, P. R. (2012). Aiding Compliance Governance in International Trade Business. IGI Global, 500-537.