JKL Trading
Joseph Lehman, Lonay Swanier
MGT/448
May 1, 2012
Jeffery Jordan

JKL Trading
Researchers for JKL Trading, LLC have analyzed Japan as a possible country to export products in order to support JKL’s goal of spreading the company overseas as part of its globalization plan. Our team discovered Japan’s political environment is stable. Most business disputes settle out of court avoiding legal fees. Expropriation is not a problem in Japan. Japan does have regulations restricting the establishment of business facilities. Indirect regulations do influences prices on certain products. The majority of regulations in Japan protect Japanese companies from outside competition. The United States and Japan entered into an agreement in 1971 for businesses conducting trade between both countries that allow companies to avoid double taxation. Last year, Japan was devastated by a large earthquake and tsunami. The Fukushima Daiichi nuclear power plant sustained significant damage leaking radiation into the atmosphere. Fixed-income and emerging markets face the most repatriation risk. The combination of all three disasters cost Japanese insurers 30 billion dollars. Insurance firms may sell domestic assets, overseas equities, and overseas bonds to cover the cost of claims. In the event insurance company’s sell the United States treasuries, fixed-income markets are at risk. The disaster delivered strong support for the yen, considered a safe-haven currency. Repatriation of funds risk is high now but should recover as Japan recovers from the disaster (The Wall Street Journal, 2011). The research team found Fast Retailing is the most competitive company JKL will face in Japan. Fast Retailing owns the Uniqlo fashion chain. Currently Uniqlo has the biggest number of stores in Japan. Currently Uniqlo has 777 stores in Japan. August 31, 2009 the sales rose 16% or about $7.4 billion during a time when retailer stock is down. Shares were trading at a price to earnings ratio of 21.35. Mr. Yanai, founder and the biggest shareholder is at the top of Forbes list of the richest persons in Japan. Uniqlo earns the majority of profits in Japan. Uniqlo provides chic but cheap clothing to customers feeding consumers desire for low cost fashion. JKL must keep prices low in order to appeal to the Japanese consumer; JKL must not compromise the company’s high quality standards to offer cheaper products.
The major risk JKL faces to distribution and supply chains is earthquakes. Japan is located within the ring of fire and earthquakes are common. Natural resources in Japan is scarce, raw materials are often imported to Japan. Labor is not a problem in Japan with a population of close to 128 million people. In 2010 the Japanese labor force was 65.7 million. Japan’s unemployment rate was the lowest among G7 nations in 2010 at 5.058%. The Japanese people are known for their attention to detail and work ethics. The biggest threat politically to Japan is North Korea. The United States has several bases throughout Japan and the Navy has a nuclear power aircraft carrier home ported in Japan. The American presence has successfully deterred war in the region. Japan’s military forces are for defense only and have vowed after World War II to never become aggressive again. The threat of terrorism in Japan is The Terrorist threats to Japan are considerable, due to the fact of the alliance with the United States. This alliance coupled with the United States facilities established in country makes Japan a prime target for terrorist groups like Islamic extremist who have called out Japan as a target. The Japanese Constitution was promulgated in 1946 during the occupation by the United States after World War II. The legislature is made up of a parliament called a Diet. The House of Representatives consists of 480 and members and the House of Councilors is made up of 240 members. The people elect members of the diet. The cabinet is headed by a prime minister. The Supreme Court is the highest court in Japan. Japan also has an emperor who does not have power and is a symbol of the state. The judicial system in Japan is scrupulous in enforcing property and contractual rights. Courts are slow and procedures do not litigate business disputes well. Courts in Japan are slow. The Japanese write contractual agreements in general terms unlike the United States. Risks in Japan are considered moderate (Astricon News, 2005). Because of the trade treaty between Japan and the United States the risks for trade disputes is low. The Japanese people are loyal to their government; culturally civil strife is rare in Japan. Because Japan is an island nation with ports on every end, shipping and distributing our products all over the country is possible. Japan has 1,020 ports and 22 special ports. The physical environment is an isolated island nation, along the northeast Asian coast. The island has four major islands: Hokkaido, Honshu, Shikoku, and Kyushu. Japan’s physical environment in each region differs, which could affect the transportation costs from region to region or island to island. Culturally the Japanese are very adaptive to outside influences. Western fashion has already spread through the major metropolitan areas. The risk of the Japanese people rejecting our product line is low. JKL must meet the Japanese peoples demand for low cost fashion. Our team recommends JKL start exporting to the major metropolitan areas of Japan. Japan has followed a cycle of selectively absorbing foreign culture and institutions. The man religion is Buddhism adapted from India. Japan has adapted to western styles of music. Western dress is prevalent throughout Japan. The young honor the elderly highly and ensure the elderly are taken care of at home (Encyclopedia Britannica, 2012). The Japanese economy is the 3rd largest economy in the world with the United States at number 1 and China number 2. Japan gross domestic product was $4.389 trillion in 2011. The Japanese government created a conductive business environment for private business to thrive. Shipyards and factories are located throughout Japan. After 55 years of Liberal Democratic rule, in August 2009, the Democratic Party of Japan captured both houses of parliament by installing Yukio Hatovama as prime minister. In June 2010, Hatovama abruptly resigned and was succeeded by Minister Naoto Kan, who was replaced by Yoshihiko Noda in September 2011. Large public debt has taken a toll on private sector economic activity that prevents more dynamic growth. The Japanese economy benefits from relatively good levels of economic freedom in all areas. The foundations of economic freedom are solidly in place, supported by an effective judicial framework, a very low level of inflation, and the almost complete absence of corruption (N.K., 2012). The Japan financial markets are characterized as volatility. Japan had spectacular economic growth from the 1960s to the 1980s. Growth was slow in the 1990s and did not accelerate until 2006. The currency of Japan is the yen. The yen is third most traded currency in the foreign exchange (Economy Watch, June 2010). Japan has a high standard of living, which contributes to the general good health of the Japanese people. Most of the Japanese people are middle class. Higher education is highly desired (Encyclopedia Britannica, 2012). Regional alliances and economic integration in 2010, Japan was listed as the fifth largest importer and exporter in the world (Economy Watch Content, 2010). Japan is currently a member of multiple international trade organizations, such as APEC, WTO, OECD, the G-8 and the G-20. Unlike most other countries, Japan is advancing toward Economic Partnership Agreements (EPAs) rather than Free Trade Agreements (FTAs). The countries that Japan currently has EPA’s with are Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, Australia, Chile, India, Mexico, Peru, Republic of Korea, and Switzerland. Japan’s primary export partners are The United States, China, South Korea, Taiwan, and Hong Kong. Rationale for Selecting Japan The research team has concluded that risks in Japan are moderate. We chose Japan over other possible countries to export our products and expand our business globally because we believe JKL has the best chance of success in Japan. With over 1,000 ports spread all over Japan, JKL can spread out products through the core and saturate Japan with our products. JKL expects if our products fail in one region of the country, success will come in others regions. Because the United States is a primary trade partner with Japan, we chose Japan for the low risks of trade disputes. Politically Japan is an ally with our nation. The Japanese government is stable and the risks for war in Japan are very low. Although terrorism is a threat because of their alliances with the United States, the risk of an actually terrorist attack at a scale that could hurt JKL and our ability to do business in Japan is low. Unlike the political correctness that is the standard in the United Sates, the Japanese security forces are allowed and will racially profile potential terroristic threats. Because the majority of the Japanese people are considered middle class, JKL has determined Japanese consumers would not have a problem purchasing our product line. The Japanese people have already accepted the western style of dress of our products; no risks of rejection of the style of our clothing exist. With the 3rd largest economy in the world, the sky is the limit for our products. Japan’s labor market is very promising with so many people in the labor force, high work ethics of the Japanese people, and very low unemployment compared to other major players in the world market. The risk of labor disputes if JKL decides to set up manufacturing plants in Japan is low. Transportation systems are located all over Japan. Products move by train, truck, and ships will make it easy to move our products between all the islands of Japan. Japan has several bridges connecting the three largest islands of Japan enabling the trucking of products. Highways are linked in every direction. Shipping channels exist to transport goods to the out laying islands of Japan. In the case JKL’s products are successful in the major metropolitan areas of Japan; the country has the capability for JKL to transport products to every corner of Japan. JKL found the economy in Japan is stable. Economic risks are low and the risk of corruption in Japan is low. JKL believes in doing business ethically and morally. The leadership team at JKL has zero tolerance for corruption. The Japanese people have the rare gift of honor. JKL looks forward to doing business in the Japanese business world. The Japanese are trustworthy. Because the Japanese government supports private business, doing business n Japan stands out to JKL above all others. JKL believes in settling business disputes out of court to keep legal cost down. The Japanese share the same believe. JKL likes the idea of negotiating business disputes outside the courts to keep revenue and profits high. The leadership team at JKL will welcome the Japanese with open arms. Natural disasters are a risk in Japan. Earthquakes can cut supply chains, damage ports, and hurt local economies. Earthquakes can also damage production facilities and lower the morale of consumers. Although earthquakes can hurt business, earthquakes normally only affect specific regions of a country. JKL must develop a disaster plan to prepare for natural disasters in Japan. JKL believes natural disasters are manageable if the company is properly prepared for a natural disaster. Japan is fully connected to the internet and internet is not censored. Television is available in most parts. Japan has kept up with technological advances. Communication will flow well in Japan. JKL will use television to introduce our products to Japan through commercials. The leadership team believes the profits of doing business in Japan will outweigh the cost. That is why JKL has chosen Japan. JKL believes because of our comprehensive analysis of Japan shows our products have the best chance of success over any other host country. Market Mix JKL’s marketing plan will start with place. JKL will sell clothing at United States Military bases first to introduce our products to Japan. Our troops in Japan will wear our products outside the gates of bases. Next JKL plans to export our products to ports located in the major metropolitan areas of Japan such as; Tokyo, Hiroshima, Fukuoka, Kochi, Fukushima, Niigata, Shimane, Kochi, Hyogo, Kagoshima, and the Island of Okinawa. Our products will cover every major region of Japan. JKL will keep prices low to comply with the Japanese demand for low cost fashion and to remain competitive with Uniqlo. JKL will release colors of our line based on the fashion color trends the Japanese people prefer based on the time of year. From the month of July through March, JKL will export lighter colored cloths. April thorough July, JKL will offer darker colors to the Japanese market to reflect the demands of the Japanese people (Japanese Streets, 2012). In the case our products are successful in a major metropolitan areas, JKL will distribute fashions to the outlying areas of the metropolitan areas using trucking channels. JKL will develop a Japanese friendly website to sell our products online in Japan. Once our products are in the mainstream of Japanese culture, JKL will seek a Japanese business partnership to set up a manufacturing plant in Japan. JKL will need to find local suppliers for raw materials used to make our products. JKL will use Japanese labor to make our products at our specifications. JKL will promote our products through television commercials and neon billboards. Centralized versus Decentralized Organization If top managers in the organization make decisions with little to no input from the employees lower than them, then that organization is centralized. Decentralized organizations distribute the decision making process throughout the organization. By allowing employees to make decisions they feel vested in the organization. Centralized organizations at times are very proficient concerning business decisions. Decentralized organizations apply expertise from an assortment of employees to run the business. Centralization does have some drawbacks. If one person is responsible making decisions for the company they may need more time. When one person tries to handle all the business affairs it could result in slow business processes. The negative for a decentralized organization is that many people have different views and that can cause a delay in making a decision. As a result, the organization may have a hard time getting employees on the same page. Typically a small business would benefit from a centralized organizational. Small businesses usually benefit from centralized because owners often remain at the head of business operations (Vitez, 2012). Larger organizations usually benefit from a decentralized organization. With a large size organization they generally have several divisions or departments. Business owners need to choice wisely and contemplate changing the organizational structure if the business grows or decreases. JKL organization is a centralized organization. Since we are a business of three we felt centralized best fit our present needs. Communication is one of the most dominant and important activities in organization (Harris & Nelson, 2008). Basically, relationships develop when communication exists, and continued existence is founded on true relationships. Communication is essential to the organizations decision-making process, achievement of goals, and management practices. The chain of command is the official line of authority, communication, and responsibility within an organization. The chain of command organizational chart is listed below. The chart illustrates the superior and secondary connection in the organizational structure. The chart shows the line of authority. The chain of command works best when utilized along with visible authority relationships. Subordinates report to one superior, and that superior has a superior they report to. With the chain of command in place, subordinates report information to their superior, and they will report to their boss which subsequently gets to top management (eNotes 2012).

If a business is not planning to close anytime soon they should still prepare an exit strategy. An exit strategy can take weeks and in some cases years depending on several factors such as the size of the company. The exit strategy is as important as when the business first started. The goal is to maximize the value of the organization prior to exchanging it to cash and minimize the amount of time consumed. In earlier years, ending a business was a sign of failure. In the 1960’s and 1970’s opinions started to change about exiting for many reasons. Markets became more competitive, and complex because of increase production. Professionals advise developing at least one exit strategy in the early stages of a business venture so that management can anticipate and know the signs when it is time to pull out.
Once the organization decides to exit the market or industry they have a few ways to exit. The business could decide to be sold. The advantage of this option is that it allows a company to quickly get rid of that product or service, and it provides an injection of capital that can be invested elsewhere at a higher return (Reference for Business, 2012). The strategy for selling a product, company, or service is easy. Find companies that are structured in such a way that they could make better use of them and make an offer to buy the business or service. Selling to employees is another option. Employee ownership can be very rewarding and can take several ways. Employees may be given appropriate incentives through other forms of equity, such as stock options, stock-purchase plans and performance based bonuses. Basically, these plans allow the founder to maintain control of the company as the employees shares are diluted by those shares made available to employees. Equity compensation as part of a corporate culture fosters a great working environment conducive to a high-growth business.

Shut Down Operation
A few things need to be decided as to whether the business should be shut down. The financial position of the business is vital, and the owner needs to determine the amount of debt compared to the equity. Also the owner needs to look at the rate in which equity is consumed by losses as a huge factor in deciding whether to stay or shut down. An organization with a high debt to asset ratio would not be in a position to absorb operating losses for a long time. The business would need to consider a restructured payment plan or exit strategy.
The cost of the business is also an important deciding factor as whether to shut down or continue doing business. The business will lose less money (in the short term), if they continue to operate producing enough revenue to cover variable expenses. Shutting down the business will get rid of depreciation, interest, property taxes and insurance only if the assets are sold. If revenues are adequate to cover variable costs and contribute something to the fixed expenses that will be incurred irrespective of whether the facility is or not operated, the best decision is to continue operating the enterprise. Another consideration in closing down is the cost associated with closing the business. A major cost for the business would occur if they have lagoons or livestock waste containment structures amenities associated with the production element. Generally, the lagoons and containment facilities cannot be abandoned without clean up costs (Boehlje, Dobbins, Mille, n.d.). Our organization does not have those issues specific issues but we may have some costs with closing.
Contingency Plan
The need for a contingency plan stems from a thorough analysis of the risks that an organization encounters. A contingency plan is like a Plan B, a backup plan. Plan A is the primary plan for doing business, and when it fails the business moves to Plan B. A complete business plan addresses all critical operations of the business. The plan should also outline suggest avenues to reduce losses. The business plan must identify the risks involved. The first part of an effective risk analysis is to identify the various risks that the organization may face. The organization must ask the question, “What has the potential to significantly disrupt or harm your project or business operations?” The conclusion or result of a risk analysis is generally a large list of potential threats. If a contingency plan is created for each one it may become overwhelming. It is important for the organization to prioritize. A big challenge of the contingency plan is not to plan too much. The person constructing the contingency plan should ensure they carefully balance between over preparation for something that may never occur. Also with adequate preparation the organization can respond timely and effectively in the event of a crisis situation. Risk Impact and Probability Charts aids in finding that balance. The Risk Impact and Probability Chart the organization analysis the impact of each risk, and the person over the plan assigns the probability of it occurring. It is a little easier to determine which risks require the expense and effort of risk justification. Business processes that are fundamentally long-term survival such as: maintaining cash flow, staff support, and market share are generally at the top of the list. Be mindful that contingency planning is not the only action that emerges as a result if risk analysis. The organization can manage risk by using existing assets more effectively or by investing in new resources or services that assist the company manage it like insurance. Additionally if a risk is particularly unlikely to materialize, the business may decide to do nothing about it and manage around it if the situation arises.
Contingency Plan Challenges
The organization should be mindful of some common roadblocks as they begin their contingency plan. When developing the contingency the developers should invest an effective Plan A and Plan B. People sometimes devote all their efforts into Plan A, however it is imperative that their Plan B be thoroughly thought out as well. A contingency plan often times gets put at the bottom of the pile to complete as people do not see an immediate need for a backup plan. When an organization does not believe a sense of urgency to complete a contingency plan, regrettably the assignment never gets done.
Developing the Plan
The key to preparing the contingency plan is following a guideline as explained below. The main objective of the business is to maintain business operations ("Mind Tools", 1996-2012). Be sure to look closely at what the organization needs to do to carryout a minimum level of service and purpose. Outline time periods such as: what should get done the first hour of the plan being implemented, the first day, the first week. Once the plan is broken down, the organization is less likely to leave out important factors. The plan should identify the start, what exactly will cause the organization to carryout the contingency plan. The organization must decide what actions they will take and when they will take them. A decision is needed to determine who is in charge at each stage and what type of reporting process they must adhere to. The contingency plan will be read by a variety of people so keep it plain and simple (use clear plain language). The plan should consider resource restrictions. Will the organization be able to maintain the same way if they use Plan B, or will they have to reduce proficiencies ("Mind Tools", 1996-2012). Make sure the plan identifies every employee’s needs. Have all the people in the organization identify their minimum needs to continue operations. Determine what the business needs to do to return doing business as usual. Include contingency plans in standard operating procedures. Be sure the organization provides initial training on the plan, and keeps the employees in touch with any changes along the way ("Mind Tools", 1996-2012). Seek ways to minimize risk if at all possible. By doing this, it may reduce or eliminate the need for full contingency plans in set spaces. Look for ways to improve the contingency plan. Identify operational inefficiencies, and provide occasions for performance improvement. Once the contingency plan is organized, the plan has to be implemented. The plan has to be review and update periodically.

Final Recommendations
Our organization decided to expand our successful business to Japan as we saw a market for our clothing line in Japan. We did our research to determine that the Japanese system and who specifically we needed to link up with to make the operation successful. We know our costs, benefits, as well as the risks. We believe our business in Japan makes good business sense so we will continue doing business. We have also decided if at any point it does not make sense to continue doing business we will make provisions to stop operations in Japan.

Conclusion

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