Import Tax Strategy Plan
I would like to begin by saying thank you for the opportunity to provide our company with some ideas on how to make the best of this disappointing situation. My goal is to help us find the best solution to remain a growing, profitable company. After doing some research and crunching the numbers, I have determined four main options for the future of the company. I will outline the advantages and disadvantages for each of these choices for you and give recommendations as well. The first option we have is to simply withdraw from the Chinese market. However, with $50 million in annual total profit, $30 million, or 60% currently comes from this market. This would leave us with a mere $20 million profit. If this option were one that you would consider, I would recommend a strong focus on domestic trade going forward. If we could increase our sales in the United States, it could make up for a lot of this loss without having to pay import or export taxes on our products (Export Gov, 2012). It would also save us from the expenses of entering a brand new market. A five to ten percent increase in sales in each current market should also be a goal if this option is chosen because it would help close the gap that would be created by pulling out of China. In my opinion, this option would be the least attractive because it yields the lowest amount of profit for our company. Another option available to us would be to continue trade with China as normal. Since we do about $30 million in trade with the Chinese market, a 75% import tax would consume $22.5 million of that leaving us with $7.5 million profit in that market. This option would grant our company $27.5 million in annual profit, which is better than the first option stated above at $20 million annual profit. If we decided to continue trade with China as normal, we should consider exploring the idea of sharing the cost of the import tax. (Export Gov, 2012) I recommend reviewing our contracts with the importer and
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