Saturday, September 23, 2017

Essay on Setting Up a Company in Colombia

Whenever organizing a new company it’s necessary to consider all factors that might influence work of a future company, it’s important to think over every small detail in order for everything to go exactly the way in which it was planned. Our goal is to set up a wholesaling company selling textiles to small Colombian companies. To do that we’ll buy raw materials from Indian company and than distribute it in Colombia. To reach success we’ll have to develop our own strategy of business. The first stage of the future strategy will be of course getting to know about the country and its peculiarities.

Country factors
As it has been mentioned before, first of all it’s necessary to get to know about the country. To begin with we’ll speak about some basic facts of the country. Colombia or the Republic of Columbia is situated in northwestern part of South America, which became independent in 1810. It’s a republic with three separate branches of power. The population of Colombia is 42,954,279 people. Speaking about economy of the country, it’s necessary to say that this country has never been characterized as a country with stable economy. Periods of growth were always replaced by periods of decline. At the moment the economic situation of Colombia is improving due to strict governmental control of state budget and export increase. By the way Colombia was always famous for export of coffee, gold, bananas, coal, and petroleum. In general the economic situation of Colombia started to improve in 1993, because at that time industrial and agricultural sector of economy demonstrated increase in production. In 2001 GDP averaged about $87 billion, while in 2005 it was $303.1 billion. The increase in economy was caused by several reasons, among which are growing prices for coffee and international investments of the USA.

Now let’s say a couple of words about culture of Colombia. The official language of Colombia is Spanish. As for religion the majority of the population of Colombia are Roman Catholic (about 90%), the rest are Protestants (10%). Speaking about education in Colombia, it’s necessary to note that 92.5% of population are literate people. This figure has grown from 88% in 1987. There are several reason of increasing number of literate people, such as urbanization of the country, increasing funding of government and others. Social structure of population is represented by four classes, such as upper class -5%, middle class-20%, lower class-50% and the masses- 25%. This structure was given according to statistics in 1980. In 2001 estimated 59% of the population were below poverty line. Classes in Colombia are determined by life-style, occupation, income and education. And people are very much concerned to what class they belong.

Taking in consideration economic factors of the country we came to a conclusion that due to the instability of economic situation of the country it’s necessary to be flexible enough in our business in order to reach a success. We found out that a lot of people in Colombia are poor, so they won’t be able to buy expansive clothes, that’s why we’ll specialize on cheaper kinds of fabric, otherwise our goods won’t be competitive. Due to the climate and culture of the country it would be better for us to import light textiles rich in different colors.

Business objectives
Entering this country we plan to achieve several goals. The first and the most important one of our goals is to make profit. Business was created for making money, that’s why we’ll do everything possible to get reasonable income. In order to do that we are planning to invest a certain amount of money and buy fabric in large quantities, doing that we’ll have to pay less to the sellers in India, because they have good bulk discounts. If we manage to buy fabric at lower prices we’ll also be able to sell it in Colombia at lower prices and thereby attract more buyers among Colombian companies. Obviously Colombian population won’t be able to buy expensive clothes, so they’ll pay more attention at cheaper variants. Another advantage that we have is rather easy transportation of our goods. Colombia is washed by two oceans Pacific and Atlantic, that’s why we’ll use cheap water transport to deliver our goods, which we’ll also help us to keep up with cheap fabric. We also plan to purchase fabric of different colors and prints. The reason for that is the following. Colombia has warm climate (it’s summer all yearlong there), that’s why clothes made of fabric of different colors and patterns will be always in fashion. To receive a certain share of market is our next goal. We’ll bring new technologies of production of textiles with higher quality and more original design. This will of course attract the producers of clothes who are interested in high quality and originality of their models. High quality of our goods together with large quantities will allow us to compete with other suppliers of fabric, thus receive a share of Colombian market. Our other objective is to create reliable distribution network that we’ll allow us easily distribute our goods among the clients. In order to attract more buyers we’ll develop a wise way of advertising to let everybody know about our firm. Internet and television will be a good resource that will help us do that. We’ll create special slogans and symbols that we’ll distinguish us among other suppliers and help conquer hearts of potential buyers developing brand loyalty.

Ways to enter the market of Colombia
Whenever a new company is being set it’s necessary to consider ways with the help of which this company will enter a new market in future. There are several ways to enter a new market, such as simple export or import of goods. In our case it means that we’ll just buy fabric from an Indian company and then sell it to companies in Colombia. It looks rather easy to do, but it might not bring necessary results. Another way is licensing, which means business agreement between the manufacturer of a product (an owner of a certain technology or trademark) and other company or a group of individuals, which allows the latter to produce that product on special terms. To enter a new market it’s possible to organize a joint venture, which is a union of two or more companies that share risks, cost and income. Another possibility is to develop strategic alliances, which are business unions of different companies that provide important benefits to all partners. But we prefer to use another way, which is franchising. Franchising is a special type of licensing when franchisor (company-owner of a trademark) grants to franchisee (another company) the right to use franchisor’s trademark, thus franchisor gains control over quality of goods of franchisee. It is a type of business with the help of which franchisor (the owner of a product and its trademark) receives distribution of goods by means of affiliated merchants (franchisees). We prefer to use this way of entering Colombian market because it will allow us to develop a safe chain of distribution through other smaller companies dealing with fabric (such as Coltejer and Fabricato), keep full control of the quality of our goods, develop brand loyalty among buyers and receive a certain share of market. The risks of franchising are the following: high cost to train franchisees and organize their work, reduced flexibility of work, which means that it is impossible to cancel the decision to create a franchise or to apply changes very often, because every franchisee will be affected.

It seem like we discussed almost all details of organizing a new company. So, it’s time to make a conclusion. Business is a very risky and unexpected sphere of life, which involves a lot of time, effort and money. To set up a company in Colombia selling fabric has certain advantages and disadvantages. To become competitive our firm is going to sell fabric only of an excellent quality and at reasonable prices. Because Colombia has only one season we’ll be able to sell only light materials, because people there don’t need warm and heavy clothes. But they do like colors. So, we’ll create a variety of goods with the help of different colors and prints. We hope everything will be great.


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