What you will be able to do
- Build a landed-cost and channel-margin waterfall with explicit bases.
- Estimate net currency exposure and its effect on domestic contribution.
- Design an export pilot linking buyer evidence, payment, delivery and expansion gates.
Before you begin: Comfort with margins, percentages, currency conversion and basic cash-flow schedules.
Turn market attractiveness into a buyer hypothesis
Start with a narrow buyer hypothesis: which customer has what problem, why would this product solve it, and through which channel could they purchase? Country-level import growth is background evidence, not proof that your offer will win. Separate the importer, distributor, retailer and end user because each may make a different decision. Interview actual purchasing roles and request evidence of comparable sales, reorder cycles and service requirements. Compare your product with the buyer's next best alternative on a delivered and usable basis. Packaging, installation, certification or after-sales support may matter more than the factory price. Record what observation would reject the hypothesis, such as an unavoidable retail price above buyers' tested willingness to pay.
Build the shipment cost before dividing by units
For one thousand units, assume goods cost ten thousand dollars, freight one thousand and insurance one hundred. Our explicitly hypothetical customs base is their sum: eleven thousand one hundred dollars. A ten percent duty on that assumed base adds one thousand one hundred and ten. Add local charges of three hundred and ninety, and the landed shipment cost becomes twelve thousand six hundred dollars, or twelve dollars sixty per unit. The order of calculation matters because duty applies to a stated base, not whichever subtotal is convenient. Check whether all one thousand units remain saleable after damage, inspection or sampling. If saleable volume falls, the effective cost per saleable unit rises even when the shipment invoice is unchanged.
Map cash dates alongside shipment milestones
Build a dated cash schedule rather than assuming payment follows shipment immediately. Include supplier deposits, production costs, freight, duties where applicable, and the buyer's actual payment obligation. Payment arrangements redistribute commercial risk: advance payment reduces seller credit exposure but can deter buyers, while open account creates a collection period and default risk. Documentary arrangements require careful attention to the specified conditions and bank involvement; they are not a substitute for understanding the buyer and the transaction. Check the feasibility and cost of any proposed payment security with the relevant provider. Model a delayed-payment scenario and the maximum cash tied up before collection. An export order can show an attractive gross margin yet exceed the organisation's available working capital.
Make expansion conditional on sell-through and cash
Design an export pilot that tests the full commercial chain. Limit the initial commitment, verify the buyer's authority and capability, and agree how you will observe sales beyond the first intermediary. Track delivered unit cost, damage, lead time, actual shelf price, repeat orders and payment timing. Set expansion gates before shipment, including acceptable contribution after all channel costs and evidence that customers reorder without exceptional discounts. A distributor's initial inventory purchase is not the same as final customer demand. Review failures with a named owner and an operational remedy. If a pilot succeeds only through unpaid founder time or emergency shipping, recalculate the scalable economics. Expansion should follow repeatable performance and funded cash needs, rather than the excitement of entering a new country.
Apply the method
Work through each task before opening the model answer. Compare your reasoning with the review criteria. Written answers stay on this page and clear when you leave or reload it.
Applied task 1
Show model answer and review criteria
Shipment cost remains USD12,600. Cost per saleable unit = 12,600 ÷ 980 = about USD12.8571. Distributor price = 12.8571 ÷ 0.8 = USD16.0714. Retail price = 16.0714 ÷ 0.7 = about USD22.96 before tax. Investigate the cause of loss and test market acceptance; do not silently divide by shipped units.
- Uses saleable rather than shipped units.
- Applies selling-price margins at both stages and rounds only at the end.
- Connects losses and revised price to an operational and buyer-evidence decision.
Applied task 2
Show model answer and review criteria
Show the baseline GHS80,000 contribution and stressed GHS62,000 at rates 12 and 10.8. Present USD15,000 eventual net exposure separately from the earlier USD5,000 funding need. Add domestic cash dates, buyer checks, payment controls, responsibilities and measurable sell-through/reorder/collection gates before expansion.
- Correctly separates contribution, currency exposure and timing.
- Identifies funding for early foreign and domestic costs.
- Sets observable expansion gates with owners and documentary evidence.
Method references
- International Trade Administration — Pricing Strategy
Background on export pricing considerations; all numerical landed-cost and channel-margin examples are hypothetical original IDER calculations. / Repères tarifaires ; calculs originaux hypothétiques.
- International Trade Administration — Know Your Incoterms
Scope of delivery responsibilities and the distinction from payment timing and transfer of ownership. / Périmètre des responsabilités de livraison, distinct du paiement et de la propriété.
- International Trade Administration — Methods of Payment
Background on allocation of payment risk; actual arrangements require transaction-specific verification. / Répartition des risques de paiement à vérifier pour chaque opération.