Music Explosion (ME) produces those really annoying car speakers that rattle your windows. A typical set of ME speakers retails for $350 and weighs 10 pounds. How- ever, they are a bit bulky at 6 cubic feet per set (1.5 × 1.5 × 1). The speakers are not overly susceptible to damage, though moisture can be a problem.
The company manufactures their "Blasters" speaker line in San Diego for U.S. distribution. The company's growth is waning and ME is preparing for expansion into the Pacific Rim, starting with Japan, Taiwan, and Australia, to turn things around. Nick Jagr, company president, has negotiated most of the issues to sell Blasters through automotive aftermarket retailers in those countries. You have been brought onboard to handle the transportation issues related to the company's initial effort in global fulfillment.
During your first day, Jagr holds a fast paced meeting that bounces across multiple topics. He occasionally mentions the global expansion project and makes some offhand comments that are relevant to your new position as director of global transportation. Since you want to make a positive day-one impression, you have taken as many notes as possible and written down numerous Jagr quotes. They read:
"The local market for our product is sad, sad, sad. We need to join the global marketplace but don't want to playwith fire. Let's take a measured approach."
"Our negotiations are going well but these retailers want to nail down trade terms with those three letter acronyms before signing on the dotted line. I tried to tell them that you can't always get what you want, but they were pretty insistent on those trade terms."
"We've got little experience with global freight. Still, we want to play some role in the transportation process or the retailers will ask for huge discounts. One buyer mentioned "Incoterms" and taking on responsibilities. We betterget up to speed on that or they'll put us between a rock and a hard place."
"I think that a middle-of-the-road transportation strategy is on target. We should manage the transportation process up to a point and then hand it over to our distributors and retailers. Somehow this relates to thoseIncoterms."
"We have to tumble the dice and pick a mode of transport that balances ser- vice and cost. I like the idea of air freight."
"I think that this international expansion is really going to work out well. Is it just my imagination, or are we still overlooking some transportation issues? One of the carriers vying for the business mentioned documentation as being critical."
After a few more rambling statements, Jagr got up and began to walk out of the meeting. Before leaving, he turned to you and said, "Welcome to the show. Get your initial thoughts for our global transportation strategy worked out and email it to me. Be quick, time is not on our side."
CASE QUESTIONS
- Given the information in the case, which Incoterms group (E, F, C, or D) should ME pursue as the exporter? Why?
- Based on your response to Question 1, what responsibilities and risks will ME assume?
- Which mode of transportation should ME use to move Blasters to their new markets? What benefits does it bring?
- Why should ME worry about something as mundane as paperwork? What documents must they prepare?
- Identify and describe other global transportation issues that Jagr may be overlooking.