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INTERNATIONAL BUSINESS PLANNING FOR YOUR PRODUCT OR SERVICE
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HANDS WARMERS FROM JAPAN TO FRANCE

June 2014

ACP IBOM
Ketsia GOLDSCHMIDT
Mai KIYOTAKI
Amber (Yu Wei) LIU
Mariko SUZUKI
Sarah ZINS

Table of Contents

Executive Summary

Company Information
Kobayashi Pharmaceutical Co., Ltd. is a Japanese company that performs headquartered in Osaka. Listing of the shares is a relatively recently in 1999 and (OSE 2 parts), we have listed in the First Section of the Tokyo Stock Exchange today. Kobayashi Pharmaceutical begins hand warmer business that the Group acquired Kiribai chemical in 2001. Kiribai chemical boasts the top share in the domestic market. High marketing power of Kobayashi Pharmaceutical and technological capabilities of Kiribai chemistry are put to good account to create some markets. We are now expanding the sales channels around the world. This section describes about our history, corporate philosophy, and company strengths as well as the form of organization and company objectives. 1. History 2. Management Philosophy
This is management philosophy of Kobayashi Pharmaceutical Group:
Providing people and society with comfort by constantly pursuing new ideas through continuous creativity and innovation.
Kobayashi Pharmaceutical Group provide a variety of products in the fields of medicine, air freshener, supplements, and daily commodities. Providing products in a variety of these areas is the international business activities based on this management philosophy. We believe that to pursue in this business philosophy is the raison d'etre of Kobayashi Pharmaceutical Group. In addition, our dream is to share the small gifts from everyday life with people the world over. We are committed to being on innovate, development focused company that contributes to society, builds lasting relationships with customers, and exceeds all expectations in customer satisfaction.

3. Company Strengths
Our most important strength is expanding the overseas business aggressively and growth of its net sales. The Kobayashi Pharmaceutical Group is aggressively investing in our core products of hand warmers for the forehead primarily in the U.S., China and Southeast Asia in an effort to expand sales from the segment. As a result, overall net sales of the overseas business in the fiscal year ended March 2013 increased 17.2% year over year to ¥9,500 million (about $95 million). We are accelerating overseas business expansion through aggressive investment.

4. Form of Business Organization in the world
The Kobayashi Pharmaceutical Group established a subsidiary in the U.S., China, the U.K., and Australia. As a core base of these area, we sell six brands to the more than 40 countries now. There are 29 consolidated subsidiaries (11 in Japan and 18 overseas), and 2 affiliates in Japan accounted for by the equity method. The Group has 22 consolidated subsidiaries in customer products, 1 consolidated subsidiary and 2 equity-method affiliates in Medical Devices and 6 consolidated subsidiaries in other business.

3. Company Goals and Objectives
We will aim to record the 16th consecutive year of an increase in net income, while also working to increase both sales and income. We will focus all of our effort on developing and cultivating new products essential to the growth of the Kobayashi Pharmaceutical Group and continue with our aggressive investments in our growing overseas business. Our goal is to reach net sales of ¥20,000 million (about $200 million) from our overseas business until 2015 by pursuing a marketing strategy created at local subsidiaries tailored to each market and through aggressive investments including M&A. Therefore, hand warmer business, which is the core of overseas business, is the most important key of growth.

Products and Services

1. Description of Hand Warmer
Hand warmer is used to warm the body when it is cold. It has been used by people since around 1978. This effective use of the heat generating when iron powder oxidize. Hand warmer is made on the combined five components, iron powder, water, salt, vermiculite, and activated carbon. It start the generation of heat on touching with air and can use for 12 hours for mini size, so it is disposable. The package bases on a special film which can block to come air inside. Hot Warmer body has the micropore because iron powder need to touch air to oxidize. In addition, hand warmer in Kiribai, which is subsidiary of Kobayashi Pharmaceutical Group, has a good reputation in quality, such as sustainability of temperature and good feeling.

2. Competitive Advantages of the Product
The Kobayashi Pharmaceutic Group has several advantages over its leading competitors: * Started exporting in 1990s * Expanding abroad in 20 countries * No. 1 share of hand warmer in the world * 90% brand recognition rate in urban China * Focus on making habit to use hand warmer in daily life in the world 3. Future Products
As I mentioned, to achieve our goal, reaching net sales of ¥20,000 million (about $200 million) until 2015 from our overseas business, we should focus on Hand Warmer business which is the core of overseas business and expand into new areas on foreign countries.
Outside of Japan, we are striving to expand markets for our hand warmer products in the U.S. And China and our cooling gel sheets for the forehead in Southeast Asia. As a result, we forecast sale will rise 5.7% year on year to ¥67,100 million (671 million)
To ensure more, we will expand into new market in Paris of France. Paris has a large city people gather and has one of the largest GDP in the world in 2011. There is also third most popular tourist destination in 2013. For these reasons, we decided as the target area to expand our strong product, hand warmer, into Paris. We will mention more detail later parts, such as marketing and operations plan.

Market Analysis A. Industry Descritption and Outlook
1. Size and characteristics of the industry
The desire for warmth when feeling cold or to soothe aches and pains is common among all countries. Japan's solution to this need is the body warmer. In answer to the wishes of people throughout the world for a product to meet their needs, Kobayashi Pharmaceutical is developing and marketing disposable body warmers that match the demands and lifestyles of each country. For example, they introduced disposable body warmers to the Chinese market, where they were previously unknown, and quickly raised awareness of these products; and in America and the UK, where body warmers were only used for chill prevention, they began to market them as therapeutic products. Over the past ten years, Kobayashi Pharmaceutical have continued to develop and supply hoped-for products both in Japan and throughout the world.
Heatmax, Inc., manufactures and distributes air-activated warmers for use in outdoor activities. The company provides air-activated warmers for hands, feet, and body. It offers its products through national and specialty retailers, and online e-commerce sites in America. The company was founded in 1988 and is based in Dalton, Georgia. As of October 24, 2006, Heatmax, Inc. operates as a subsidiary of Kobayashi Pharmaceutical Co. Ltd. and enjoys about 75% of the warmer market and is the most recognizable name in the industry.
HotHands, a division of HEATMAX, Inc., Air-activated warming was developed many years ago during WWI. However, they had to use "buckets" of chemicals to achieve the warming. Portability as we know it today couldn't occur until air-tight packaging could be developed. Air "leaking in" and activating the warming cycle pre-maturely was a problem. Now, HotHands has the best packaging in the industry and has a shelf life of 6 years or more.

2. Major customers groups
a. Consumers
Hand warmers are popular with the consumers in the chilling weather; They can be used for; * Golf and other outdoor sports, whether participating or watching * Skiing and snow activities * Camping, hiking, winter walks and the great outdoors
b. Governments
Koyabashi Pharmaceutical is responsible for marketing and selling HeatMax®, Inc. products to the U.S. Military and works closely with Government Research and Development agencies on a wide range of high temperature products with military applications c. Businesses
Businesses such as construction industry also use them on construction sites for example.

B. Target Markets
1. Primary target

* Characteristics
We are targeting tourists in Paris as our primary market. The capital city of France, most popular tourist destination in the world with 30 million toursit a year, is the place to implement hothands. Indeed, sighseeing in Paris implies spending time outside as the the most popular attractions which include the Eiffel Tower, the Louvre, the Notre Dame Cathedral, and the Arc de Triomphe are outdoor.

In December, trees up and down the Champs-Elysées are strung with garlands of shimmering light. An ice-skating rink is set up on the plaza outside of Hôtel de Ville (Paris City Hall). Christmas markets spring up all around the city, enchanting decorations and gifts, and gourmet treats, so tourists spend even more time outside.
The December Thermometer * Minimum temperature: 3 degrees C (37.4 degrees F) * Maximum temperature: 7 degrees C (44.6 degrees F) * Average temperature: 4 degrees C (39.2 degrees F) * Average rainfall: 49 millimeters (1.9 inches)

As we can observe from the December average temperatures above, it is common for tourists to have cold hands when holding maps and cameras. They even have more chance to feel cold if they are from a nice and warm weather country. Moreover, compared to other countries such as Canada or Russia, foreigners coming to discover Paris don’t really expect such cold temperatures. Tourists often have a tight schedule if present in the city for the week end so Hothands is the alternative of having to stop in a coffee to warm up again.

* Trend and opportunity
Impossible to leave the French capital without buying a traditional souvenir. Souvenir shops, kiosks or themed shops are often located close to the city’s major cultural sites. Indeed, the souvenir is an important component of the tourist experience, with most tourists bringing back mementos and souvenirs as evidence. People like to be reminded of special moments in their lives and to hold evidence of those special moments. However they often end up being the same; among the most common are little eiffel towers, mugs or key rings.

Even if hothands can’t be reused, tourists would be attract by appealing hothands with Paris logo or that have an image of the Eiffel tower printed or embossed on it, especially if we sell it from one of the many souvenir shops anywhere near the rue de Rivoli. These quirky hand warmers will help tourists to keep them nice and warm while displaying their offbeat style for others to see.

In this way, we would sell hothands as a fashion item in addition to the convenience need. We think there is a real opportunity in it. As so many models of the Eiffel Tower are for example on sale: have you ever considered how many billions of them must have been made?

2. Secondary target

Our secondary market segment is the "Working Parisiens." With the important population of the city, the need to commute and wait for public transportation such as buses to go to work, Paris is the haven for waiting in lines, strikes, and many delays in transportation. Commuters would fancy feeling warmer when waiting.

3. Other targets

Finally we will appeal to sportive persons who exercise outdoor, for example many people run along the “Seine” (Paris river), people who walk their dogs.

Marketing Plan
1. Marketing Objective

The Consumer Products Business delivers products that fulfill our customers’ need in Japan and overseas. We owned the huge market share in worldwide but we still working diligently to increase sales in our products, furthermore, to expand our worldwide market. What we are aiming with marketing and sales strategies is to know our target market deeply and satisfying customers by offering products that make people glad. Now we are take a customer-centered approach to finding solutions and meanwhile increase brand awareness.

2. Market Segmentation

a. Target: People who has desire for warmth when feeling cold
b. Segment Characteristics * Geographic and Demographics
The population of central Paris is roughly 2.2 million and the city was visited by 29.3 million people in 2013. When it comes to skiing, France is one of Europe's top destinations. It is on the French-Italian border that the Alps, Europe's greatest mountain range, reach their peak, in the eternal snows at the summit of Mont Blanc, 4,810 m above sea level. An ideal solution that brings people near the resorts is departing from departing from Paris “Gare de Lyon” railway station. * Customer Behavior
Customers’ buying behavior is important for us. Our customers look for a good quality that we offer them. We create a great satisfaction for our client. The profiles of our customer are people who enjoy outdoors sports in cold weather, people who need therapeutic products or people who love to keep warmth in winter.

3. Competition Analysis

a. Competitors
Rechargeable digital hand warmer

Features: * Two temperature settings * Rechargeable battery with up to 500 recharges * Charges via either USB or AC adapter

USB Hand warmers Gloves

Features: * Slip on; cords for both hands plug into USB port * Three Adjustable Heat Temperatures * One Size Fits Most Hands-Best for women and children

Reusable Hand Warmer

Features: * Just snap the metal disc to start an exothermic reaction creating heat in seconds that lasts up to 2 hours * Simply boil to regenerate the warmer to be used again * Reuse hundreds of times

b. Differentiation
Our product is designed for the people who have desire for warmth when feeling cold or to soothe aches and pains. We developing and marketing disposable body warmers that match the demands and lifestyles and also more convenience. We introduced disposable body warmers to our client not only for chill prevention, but also use it as therapeutic products. In addition, our body warmers continuous warm for 12 hours. Hand Warmers are single use air-activated heat packs and very easily fit inside your gloves or pocket to provide long-lasting, soothing warmth. Our products are great for any occasion where long-lasting heat is desired. You can enjoy our products anytime and anywhere you want.

4. Positioning Statement

Our mission is to not only making products that our customers want now
but to also develop new and innovative products for our customer’s future needs. We could always satisfy customers and establish our brand loyalty. We aim to position ourselves as a customer-centered company. To people who have desire for warmth, body warmers provide people with an instant, quick and easy way to satisfy their need for warmth and also relax their painful.

5. Market Mix

a. Product
The highly portable body warmers are a use-anywhere solution to the frigid cold. Body warmers keep you from shivering for up to 12 hours with warm, natural heat. Just open each pack, and the warmer is activated by contact with the air and quickly generates warmth. Body warmers are perfect for any cold-weather activities, including skiing, hiking, hunting, fishing, or working outdoors. You can even use them as therapeutic products. Body Warmers provide safe, comfortable warmth in the coldest of temperatures. Each box gives you 3-5 packs that are easy to take on the go. The small packets can be placed in pockets, between layers of clothing, or directly where you need them.

b. Place
We chose Paris as our entry market for some reasons. First of all, Paris is the capital of France, has an annual 30 million foreign visitors, and also is the most visited city in the world. The public transport including Metro, buses and trains to help you move around the city with ease and visitors or residents could reach ski resorts from Paris railway station. For these visitors and outdoors lover, body warmer is the best choice for them to against cold weather in the easiest way. We will sell our product in the convenience stores, supermarkets, public transport stations, resorts, hotel, souvenir store and stands. To make sure people could get our product very easily whenever they need it.

c. Price
The price of product is very important for entering a new market. It is determine the success of your product. Since we had entered United Kingdom market very successfully and our sales are keeping growing. We did the research more deeply to compare the Europe market. The consumer prices between London and Paris is almost the same, the difference is less than 1%. For Groceries prices in London are 10% lower than Paris but for sports activities are the opposite. Paris is 10% more expensive than United Kingdom. We decided to keep our price the same as United Kingdom to enter France hand warmer market. Since the average price in both markets are very similar. Prices range for one pack from 1.2 to 3.7 Euros depending on the size of heat pads. Our price is very economically that will be encourage Paris consumers to buy body warmers as a way to keep warm in order to further grow the market.

d. Promotion * Advertisement – Website Website is one of the important roles to introduce our company. The website emphasize our mission” You make a wish and we make it happen” to make our customer glad and know we are developing products of customer’s wish. We designed a user- friendly website to help people get information very easily. * Advertisement – Sportswear store Our Brand is trusted all over the world by professional athletes, outdoor sporting enthusiasts, spectators, skiers and outdoor workers. Advertisement in sportswear store will help us to improve our awareness and help people to enjoy their activities in cold weather conditions. If famous athletes use our product, we could inspire our customer to try our body warmer. * Advertisement – TV Advertising on television offers the chance to reach mass audiences because watching TV is the nation’s most common leisure activity. The widespread appeal of TV may make consumers more receptive to TV advertising compared with other media, such as direct mail or telemarketing, which some people find annoying, according to Power Home Biz. Many audiences are interested in and attracted to creative, well-made TV advertisements. We will hire famous entertainers to appear in television commercials to attract our customer and make them fell more reliable about our products. * Social media- Facebook, Twitter Social networking is very useful tool for a company to keep in touch with customers. A significant 89% of all marketers indicated that their social media efforts have generated more exposure for their businesses. Through the social media, we could not only increase out brand awareness and also update our information or introduce new product to customers. Moreover, our customer could communicate with us from social networking platforms

6. Package

Hand Warmers are single use air-activated heat packs that provide everyday warmth and are ideal for keeping your body and hands warm when the temperature gets cold. We have variety of package that includes 2 packs up to 40 packs of hand warmer. It’s a Great Convenience and value package. The color of our package orange radiates warmth and happiness, combining the physical energy and stimulation of red with the cheerfulness of yellow. The color psychology of orange is optimistic and uplifting, rejuvenating our spirit. Orange brings spontaneity and a positive outlook on life and keeping us motivated and helping us to look on the bright side of life.

7. SWOT analysis * * a. Strength * Air-activated, ready and easy to use * Each warmer provides up to 12 hours of heat * Light and small packets can be carried easily * Non- toxic ingredients * * b. Weakness * Not reusable * Poor brand recognition in France * * c. Opportunities * Familiar with Europe regulations * Large number of tourists * Average temperature in winter: 4 degrees * Enthusiastic about outdoor sports * * d. Threats * The rise of competitors * Burn risks

* 8. Barriers and Regulation * * a. Import Duties and Tariffs * Member states of the European Union have established a Community Integrated Tariff (TARIC) system, where duties are applied to imports from non-EU countries. TARIC was established by the 1958 Treaty of Rome as part of the European Economic Community (EEC). It focuses on the consolidation of an integrated European market. Import to country | Product | HS commodity code | MFN duty rate | Sales tax | Additional duties & taxes | France | Hand warmers | 3824.90.9799 | 6.50% | 20% | NO | b. Product Certification
To sell products on the EU market of 27 Member States, U.S. exporters are required to apply CE marking whenever their product is covered by specific product legislation. CE marking product legislation offers manufacturers a number of choices and requires decisions to determine which safety/health concerns need to be addressed, which conformity assessment module is best suited to the manufacturing process, and whether or not to use EU-wide harmonized standards.

* c. LABELING REQUIREMENTS * Product type Trademarks, brand names or fanciful names may not substitute the generic/product name, but may be used in addition to the product name * List of ingredients preceded by the word "Ingredients"; must show all ingredients (including additives) in descending order of weight as recorded at the time of their use in the manufacture and designated by their specific name. In the case of those products that may contain ingredients liable to cause allergies or intolerances, a clear indication should be given on the label by the word "contains" followed by the name of the ingredient. However, this indication will not be necessary provided the specific name is included in the list of ingredients. * Net quantity in metric units (liter, centiliter, milliliter) * Date of minimum durability not required for wine and beverages containing more than 10% alcohol by volume * Special conditions for keeping or use * Name or business name and address the manufacturer, packager or importer established in the European Union * Country of origin or provenance * Alcohol content for beverages containing more than 1.2% by volume * Lot identification with the marking preceded by the letter "L". *

Operational Plan * Location

Heatmax is the company which produces our product Hothands. It is a subsidiary of Kobayashi Parmaceutical which is the original company where the concept comes from and which is located in Japan. Heatmax is located in the USA and the products are made there. In order to import the product in France (Paris), we will create a subsidiary there which will be in charge of the reception of the products and then its distribution to souvenirs shops, kiosks, public transportation places etc. We will have an office in Paris and send people from our company in the US to France who will be in charge of this new market. The hands warmers will be manufactured in the US and send from there to the office in France.

* Inventory and Stock
Assuming our fixed demand quantity holds true, calculating Reorder point is a lenient task. There are only two parameters one needs to know – annual demand quantity and a lead time. Lead time stands for a time difference between placing an order and receiving it, measured in days. The most appropriate model to manage our inventory is described by this graphic:

The lead time from the day of order to the day of delivery in France is 4 days. Since our product is not perishable, we can proceed to economies of scale by ordering each time a large quantity of products. However, we have to check our stocks and to forecast our sales to know how much we have to determine what is going to be shipped and the quantities to balance the stock.

* Delivery Process

* Process the order and ship: 1 day * International Transport: 1 day * Customs clearance: 1 day * Reception and storage: 1 day

* Major Suppliers

HEATMAX (Principal supplier)

Name of the company: Heatmax (subsidiary of the company Kobayashi Pharmaceutical)
Website: http://heatmax.com/
Website language: English
Location: P.O. Box 1191 Dalton, GA 30722-1191 - USA
Contact info: (800)432-8629

KOBAYASHI PHARMACEUTICAL (Parent company)

Name of the company: Kobayashi Pharmaceutical
Website: http://www.kobayashi.co.jp/
Website languages: English, Japanese
Location: 14/F, Yat Chau Building, 262 Des Voeux Road Central, H.K
Contact info: (852) 2543 2289

Management & Organization

Financial Plan

Appendice