Destination Panama

Family Insulation and Cushioning“Where Relationships Matter.”

Presented By: Matthew Benning, Daniel Fashoda, Ryan Gustafson, Jamaal Hamilton, Chase Renwick, April Zimmerman, and Michael Zubrickas.

Team A/Section 10

AgendaIntroduction:

Purpose of our report.Business activity recommendations.Supply chain positionBusiness/ Corporate level strategies.

Analysis:Our product line.Suppliers, customers, and consumers.Transporting.Government incentives and taxes.Panamas economy.Panama culture.Business decision criteria for expansion.

Recommendation:Immediate entry recommendations.Impact on profitability.Expansion issues. Long term approach to Panama.

Welcome to Panama(Introduction)

•Country- Panama•Product – Insulation and cushioning polystyrene foam product manufacturing

(NAICS 3216140)

Country and Business Activity

We plan on gaining a competitive advantage by:•Pursue manufacturing to supply U.S. operations

only, but no marketing activity.•Pursue marketing in the assigned country, but no

manufacturing activity.•Pursue both manufacturing and marketing

activities.

Materials Our role in the supply chain is the manufacturer.

•Polystyrene beads.• Steam chamber.•Block molds and press.•Heated coil slicer• Fire proofer (Hexabromocyclododecane) supplied

from Unibrom Corporation.

Corporate and Business level Strategies

Corporate Level:•Related Diversification by

Horizontal Integration.

Business Level:•Narrow target market.

Decision CriteriaWhen it comes to marketing:•Demand for the Product•Distribution Channel Considerations• Legal Factors• Economic Factors

When it comes to manufacturing:• Suppliers•Distance• Technology• Storage

Decision CriteriaWhen it comes to Strategy:• (Risk)• (Control)• (partners)

How is Polystyrene Manufactured?

Obtain Pellets from Americas Styrenics

Steam Chamber Expands Beads

Heated Coil Slicer Cuts to Size

Poured into a Block Mold

Fire Proofing

(Analysis)

Requirements for working for Family Insulation and

Cushioning.•Degree in science preferred.•On the job safety training priority.• Experience preferred.•90% Panamanian workforce.•Bilingual employees = plus!

Who Do We Sell To?•We sell to:•Distribution Warehouses with

shipping needs (cushioning).•Contractors (insulation).•Retailers (insulation).

Who Are Our End Consumers?• End Consumers Include:•Homeowners (Insulation)•Business Owners (Insulation)•Retail Distribution Centers

(Cushioning)

Our Target Market…• To have expendable income for

insulation.•Maintain a certain temperature

in their home.•Cut costs on heating and

cooling.

How is our product transported?

• Our manufacturing plant is located in Berkeley County, South Carolina.• This allows us:• Truck our product from our

manufacturing center to the Port of Charleston.•We then ship it to the Balboa

Port in Panama.• From there we will truck it direct

to our customers.

Our Direct Competitor•General Insulation Company•Been around since 1982.•Acquired their biggest

competitor “Clark Insulation” in 2008.•Distribute to multiple

manufactures such as 3M, National Fiber, etc.

Panama’s Economy •Growing at an 8.75% average rate•Rapid growth in construction industry •More investors•Panama Canal• Trade deficit

Panama’s Economy •Population 3.868 million (2014) •GDP $46.21 billion (2014) •Average income middle class•66.6% Urban population • Imports $23.27 billion

Government Incentives/Advantages• Law 41 (2007)• Favorable tax agreement • Lower corporate tax rates

Government Restrictions/Disadvantages•Panamanian Law • Lack of laws •Poor Business Management • Low minimum wage •No protection from government • Slow judicial system

Laws that impact Safety/Environment •Panamanian labor law• Employee injuries • Ethical Dilemmas •7% Child labor (59,294)

Import/Export Taxes•Commercial license•Phytosanitary permits• “Panama in transit” Labels • Industrial licenses

Political Climate/Currency• Progressive Government•Rapidly expanding economy• Panamanian Balboa• 1904 Switch from Peso• 1:1 Fixed with USD

http://i.ebayimg.com

Current Events• Panama Canal Expansion• Slower Traffic•Delays 2014 to 2016

http://www.mb.com.ph

Cultural Issues•Majority speak Spanish•USA created canal• Free trade zone 2012

http://pictureorphoto.blogspot.com

Location• Panama City Manufacturing

• Canal and Supplies

• Panama City Marketing

• Half in Panama City

http://www.mappery.com/map-of/Panama-Population-Map

Infrastructure• Excellent Transportation

• Technology is available

• Import 80% of energy

http://presstv.com

Decision Criteria- Manufacturing

1. Opportunity for access to supplier in Panama2. Manufacture within 50 miles from majority of customer

base3. Panama location has capacity for technology and

materials needed for manufacturing? Or import?4. Will we be able to have a warehouse close to Panama City

to increase distribution efficiency?

Opportunity for Access to Panama Suppliers

Pro’s -Lower costs to transport goods-Orders delivered more frequently-Delivery arrives within 48 hours-Ability to react quickly to Demand

Con’s-Quality risk by switching suppliers-Possibility of supplier offering more expensive pricing-Lose relationships with our current domestic suppliers

Manufacture <50 Miles From Our Customers

Pro’s • Quicker response to

demand• Ability to deliver rush orders • Just in time delivery

Con’s• Increased operating costs for

real estate near city• Trucking is only option of

transportation

Technological & Resources Capacity Pro’s• Faster production process

with up to date technology• Ability to maintain real-time

communication with U.S. operations• Decreased start up costs

Con’s• Importation of supplies

and/or machinery• Increased start up costs• Increased time to begin

manufacturing• On-site training of Panama

staff

Capable of Finished Goods Warehouse close to Panama

CityPro’s• Faster distribution to

customers• Hire Employees who are

knowledgeable of area• Allows us to keep additional

inventory for rush orders and new customers

Con’s• Increased operating costs

from second building• Real estate cost may be

higher • Increased risk of loss

Marketing Decision Criteria• Is there a demand in Panama for insulation & cushioning?• Are we capable of getting our product there efficiently?• Is our product legal and is their any foreign policy barriers to

entry in Panama?• Is the Panama economy stable and what is the risk of failure?

Panama’s Demand of Insulation & Cushioning

Pro’s • Growth in construction drives

demand for our product• Our product is affordable for

our target market(Wealthy, contractors, government)• Demand will continue to

increase as population increases

Con’s• Rapid growth of economy

will eventually plateau • Alternative forms of

cushioning exist

Capability To Efficiently Transport Our Product

Pro’s• Strong Bonds with Existing

Suppliers• Strong logistics will increase

satisfaction of customers

Con’s• Delays in delivery will lead to

rush orders and loss of customers• Cost increases by multiple

modes of transportation• Increase in transportation

distance increases cost

Panama Legal and Foreign Policy RestrictionsPro’s

•Our product is legal and abides by foreign policy•Added value to

customers by fireproofing our product

Con’s• Possibility or auditing and

testing by regulators•May have to modify product

to adhere with legal standards if policies are updated

Is the Panama Economy Stable Enough?

Pro’s• Panama is currently growing

and has construction projects• Panama Canal growth

increases ability to import and export

Con’s• Growth will eventually reach

maturity• Panama has a bad trade

deficit

Expansion Strategies for Destination Panama•Establish a Foreign Subsidiary

•Exporting

Three decision criteria:

1. Moderate risk tolerance2. Management control >60%3. Establishing partners with cultural expertise

Immediate Entry Plan(Recommendation)

•Marketing in Panama

•Manufacturing has too high costs

Expansion Implementation Plan

•Wholly Owned

•New entity

Profitability Impact•Higher profitability

•Net Profit Margin

How Do We Support This Claim?

•Marketing will not have high initial costs

•Growing housing market

Possible Expansion Problems

•More expansion means higher costs

•Manufacturing in Panama has high costs

Long-Term Plans•Manufacturing and

distribution centers

•Wholly owned

Questions?

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