The Accompanying Slideshow: http://www.slideshare.net/Stapelmanb/deca-international-business-plan

1. International Business
PlanWritten Event
A Russian-Based Clothing Company
Bellevue High School DECA
Bellevue High School
10416 Bellevue Way
Bellevue, WA 98004-4622
January 2012
Barrett Stapelman
Tayisiya Amplyeyeva
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2. Table of Contents
I. EXECUTIVE SUMMARY ……………………………………………………………...3
II. INTRODUCTION ……………………………….………………………………………4
III. ANALYSIS OF INTERNATIONAL BUSINESS SITUATION………………….……..6
A. Economic Analysis of Russia
1. Economic System
2. Government
3. Trade Laws
B. Trade Area and Cultural Analysis
1. Geographics and Demographics
2. Market Segment Analysis
3. Analysis of Potential Location
IV. PLANNED OPERATION OF THE PROPOSED BUSINESS……………….……..10
A. Proposed Organization
B. Proposed Product
1. Product Details
2. Transportation
C. Proposed Strategies
1. Proposed Pricing Policies
2. Proposed Promotional Program
V. PLANNED FINANCING………………………………..……………………………..24
A. Projected Income Statement
B. Projected Balance Sheet
C. Planned Growth of Business
VI. BIBLIOGRAPHY……………………………………...………………………………..27
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3. I.EXECUTIVE SUMMARY
Introduction:
In Russia, American clothing trends are achieving a newfound hype amongst the
population, yet the industry is plagued by exorbitant prices due to a lack of accessible,
high quality clothing. E-commerce is rapidly growing worldwide-in Russia especially-
while Brick-and-Mortar retail stores are steadily
declining. There is a multitude of online stores being
opened up constantly, however, they all blend together
and none can succeed without standing apart from their
competition. The owner of Alphalife, a fresh and
innovative Russian-based American clothing venture,
Barrett Stapelman, working closely with Tayisiya
Amplyeyeva and the company, will not be selling mere
products but rather the culture that goes behind them.
Our Mission Statement: To provide to each and every customer the “Alphalifestyle:” the
highest quality American fashions with affordable prices and accessibility.
Analysis of the International Business Situation:
Alphalife will be based in Moscow, Russia- the most populous city in Russia- on
Tverskaya Street, one of the busiest shopping streets in Moscow city center and in the
wealthy area of Rublevka. Very recently, Russia has loosened its restrictions on foreign
trade in hope to initiate growth. Russia still does have some laws, regulations, and
taxes, but none of which are too impedimentary. Our primary focus will be on customer
satisfaction and user-friendliness. The majority of our marketing efforts will be put
towards promoting the “Alphalifestyle” and letting our customers grow our business in a
market eager to follow American trends.
Planned Operation of the Business:
With an efficient 24 person workforce, Alphalife will cut
unnecessary labor costs as well as the
expenses from a brick-and-mortar location
because all operations will be exclusively
online for the first year. The company will
differ from the bland multitude of competitors
through unique specialty promotion programs
that involve the customers and make them
feel as if they are part of the company, such
as the Rep Crew and Referral Rewards Programs. Alphalife strives to
emphasize customer service and accessibility overall.
Planned Financing:
In the first year of operation, Alphalife took out a $100,000 business loan to be
paid off in 36 months, and earned a Net profit of $325,034 after all expenses and taxes
from a Gross Income from Sales of $1,500,000. Of that $325,034, 25% shall go to end-
of-year bonuses to reward the hard-working staff, and 75% will go to company growth,
such as opening a brick-and-mortar location on Tverskaya Street.With American growth
trends and Russian E-Commerce being expected to triple in the next three years, we
expect our Net Profit to triple to at least $1,000,000 within three years.
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4. II. INTRODUCTION
Russia has recently eased many of its foreign trade restrictions after moving to a
free market system. Urban American culture is increasingly influencing Russian trends,
yet the market is plagued by exorbitantly high prices due to a lack of accessible high
quality clothing. E-commerce is also beginning to dominate retail sales over the
declining Brick-and-Mortar stores. Alphalife combines all of these factors. By reaching
into a previously untapped and rapidly growing market, Alphalife is grasping the optimal
time to introduce a new and more accessible means of acquiring these well sought after
fashions.
The difficulty of running a business such as this one is being able to stand out
from the competition. Here at Alphalife, we are not merely selling the products, but
rather, the culture behind them. This ideology will be heavily rooted in our promotional
activities. Instead of simply advertising to the customers, we will involve them and make
them all feel as though they are a part of the company. This will be done by actively
including customers in our operations such as giving away sticker packs with our logo,
introducing the Referral and Rep Crew Programs, holding scheduled giveaways, and
hosting parties, concerts and other events to connect with our target market
communities.
We will start off running exclusively online with offices and a warehouse in
Moscow, with the option of opening a Brick-and-Mortar location on Tverskaya Street,
one of the busiest shopping streets in Moscow after a year in business. This is where
much of our promotional activities will take place such as putting up posters and
handing out fliers.One drawback of holding this location is the level of competition
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5. present, but that will be outweighed by the hype and desire created for our products,
increasing both potential in-store and online sales as well as creating new customers
who can become a part of our business and help to grow it even further.
Our primary focus will be on e-commerce through our main site:
www.Alphalife.ru, and our discount site for the previous season’s merchandise:
www.TheZone.ru.Operating exclusively online will only serve to benefit us by increasing
customer demand and keeping expenses low.
In such a rapidly expanding market, it is the perfect opportunity to start an online
business in Russia while many other mediums and nations are struggling. In a setting of
high product demand, low competition, newly lessened restrictions and a growing
market, Alphalife will thrive.
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6. III. ANALYSIS OF INTERNATIONAL BUSINESS SITUATION
A. Economic Analysis of Russia
1. Economic System
In the 1990s, Russia moved from a centrally planned economy to a
free market system. Currently, Russia’s economy is the ninth largest
economy in the world by nominal value (and sixth
largest by purchasing power parity). As urban American culture
continues to influence and inspire Russia, we believe that these
American-set trends in fashion will strike a lot of attention in the
Russian market.
2. Government
Although previously limited in foreign trade and private business, in
2011 Prime Minister Vladimir Putin announced Russia plans to become
more involved in foreign trade and terminate the majority of previous
restrictions and barriers with foreign trade. Putin claims that "[Russia
needs] to pursue a consistent, predictable, and responsible policy. We
need to improve the business environment." The prime minister
pointed out that Russia needs to lift all sorts of barriers and limitations
with foreign trade. As the barriers start to disintegrate, this creates a
perfect opportunity to start business with Russia and their new foreign
trade policies emphasizing a welcome to foreign trade and less
restrictions on foreign business environments
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7. 3. Trade Laws
Although Russia has a free market system, there are a few trade
regulations currently in effect.
The retail trade policies have a few key features:
Imports are subject to a customs processing fee equal to
0.15% of the value of goods.
Taxes can be charged on imports.
All labels must include Russian text. Where product
packaging is in a foreign language, an additional label must
be attached listing the necessary information in Russian.
Russia applies import duties to most goods. These generally
range from 5 % to 20% of goods' customs value (generally
cost-insurance-freight). Some goods are subject to specific
duties which are calculated by volume, weight or quantity.
B. Trade Area and Cultural Analysis
When advertising, it is important to know your target market and how to reach
them. Because our target market has such a wide age range and a middle-
class income, we will be marketing primarily in Moscow, the most populated
city in Russia.
1. Geographics and Demographics
According to the results of the 2010 Census, the population of Moscow
was 11,503,501; this is the most populated city in all of Russia.
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8. The Russian culture of our target market in Moscow mimics the
trends of urban American culture. There is a vibrant night life in
Moscow. The city is full different kind of clubs, restaurants and bars.
There is an opening every two weeks and the night life scene changes
all the time. There are different levels of venues.
Moscow city center and Rublevka (the richest area of the city) is full
of luxury locations. Tverskaya Street is also one of the busiest
shopping streets in Moscow. This would be an advantage to our
company because advertising American clothing will create a lot of
hype and desire and attract new customers. However, a disadvantage
to such a place for advertising is the level of competitive
advertisement.
2. Market Segment Analysis
Our target market will be primarily young adults and adults up to the
age of 40 with a middle-class income level.
Since we are primarily focusing on advertising in Moscow, with a
population of over 11.5 million people with generally a middle-class
income, our advertisements are bound to easily spark some attention
in the Russian fashion market; and with our Rep program, the
newfound customers will carry on the advertisements themselves and
create desirability for our urban American street-wear among their
personal communities by acting as “Brand Ambassadors.”
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9. 3. Analysis of Potential Location
We will be starting off exclusively online for the first year, potentially
branching out later into brick-and-mortar stores on the
aforementionedTverskaya Street, one of the busiest shopping streets
in Moscow city center and in the wealthy area of Rublevka.
In terms of and advertisements, we will use visual channels such as
fliers, business cards, online ads. Leaving much of the promotion to
our specialty programs mentioned in the promotional outlines below.
In terms of competition, there is not much to offer an affordable and
high quality line of merchandise as Alphalife. Stores such as Hugo
Boss will be indirect competitors but will cater to those of the upper-
class. There is a current lack of name-brand merchandise for those on
a middle-class income.
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10. IV. PLANNED OPERATION OF THE PROPOSED BUSINESS
A. Proposed Organization
Alphalife will be run as a sole proprietorship under Owner, Barrett
Stapelman. Because it is such a small business, a sole proprietorship is
advantageous because it is much quicker to become active, there are minimal
legal costs, no corporate tax payments, few formal business requirements,
and complete control and decision-making is in the hands of the owner for
fast responses to adverse economic conditions.There also will be no specific
business taxes needed, just personal income taxes from America and Russia,
although there will be exemptions thanks to the Double Tax Treaty between
America and Russia against paying taxes for both countries.
Start-up Steps to Form Alphalife:
Register as an individual entrepreneur and become a
Russian Tax Resident.
Submit a Russian Personal Income Tax Declaration.
Begin to develop two websites and park the domains:
www.Alphalife.ru and www.TheZone.ru.
Hire staff.
Rent a warehouse and office space in Moscow.
Begin to order base amounts of apparel.
Publish the sites and become active, adjusting purchasing to
match customer trends and exporting out-of-season merchandise
from Alphalife.ru to TheZone.ru on clearance.
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11. Proposed Staffing:
1 Owner/Chief Operations and Marketing Officer – Barrett –
Oversees all promotional activities within the company. Is the “face”
of the company, and manages all day-to-dayoperations as well as
the overall direction of Alphalife. Oversees Rep Crew and manages
promotional events.
1 Chief Financial and Implementation Officer – Tayisiya –
Oversees the company’s finances; is the head of accounting, and is
in charge of handling Human Resources problems and
implementing Alphalife’s business practices in the Russian setting.
1 Logistics Manager – Manages the logistics departments of
reception and distribution. Oversees the logistics workforce.
2 Quality Assurance Associates – One each in assuring the
quality of the goods when receiving and distributing; reports to
Logistics Manager.Keeps inventory to make sure there is no
discrepancy.Reports inventory and loss to Accounting. Must be
able to lift 50 lbs.
15 Logistics Team members – 10 work in receiving
shipments and taking inventory; reports inventory to QA Associates,
5 work on merchandising and distribution. Assist in promotional
activities should the need arise. Must be able to lift 50 lbs.
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12. 2 Web Designers – 1 each in charge of updating and
maintaining either www.Alphalife.ru or www.TheZone.ru. Updates
online inventory and manages online promotions.
2 Accountants – keep track of the company’s finances;
expenses, income, wages, profits, etc. and reports them to the
CFIO. Files taxes and necessary paperwork.
We shall hire a legal consultant on a per-need basis to
minimize expenses.
Our Proposed Organizational Chart
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13. B. Proposed Product
1. Product Details
Our line of products will vary from clothing, to shoes, to accessories
under the umbrella term of “Street Wear.” With partnerships with
companies such as Vans, Skullcandy, Supra, Betsey Johnson, Adidas,
Nike, Goodwood, Kr3w, Kidrobot, and Lifetime Collective, we will be
marketing the lifestyle behind the fashion; the products just come with
it. To a market so vastly influenced by contemporary American trends,
why not make it more readily available to them? This is precisely what
Alphalife will be doing; selling the “Alphalifestyle.” These popular
brands are only getting bigger in America and Russia can now follow
these same trends without spending exorbitant prices on ordering
these long sought after styles from foreign companies. We will be
bringing in our customers to become a part of the Alphalife Family.
Together we shall grow, prosper, and live the lifestyle.
Upon reception of every shipment, our 10 Reception Logistics Team
Members will unpack, sort and take inventory of all merchandise
before reporting that inventory to the Quality Assurance Associates.
The 5 Distribution Logistics Team Members will then make the
products presentable with attractive packaging and effective
merchandising before once more taking inventory of all merchandise
before it is shipped off to the customer. They then give that inventory
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14. information to the Quality Assurance Associates who compile it and
send it to Accounting.
2. Transportation
While transportation will vary from company to company exporting
to us, the majority of our shipments will be exported from America via
Ocean Full-Container service. We will make a shipment of
approximately 1000lbs per month of clothing, shoes, and accessories
on seaborne cargo transportation. The transportation costs for those
shipments will be around $5000 USD every time consisting of: $3700
for a 20’ Freight Container, import duties of $300, $500 drayage to
loading area, $150 fuel surcharge, $100 pickup charges, and $250 for
Insurance and Customs processing. All packages must be labeled in
both English and Russian. Benefits of this system are this it is reliable,
able to be scheduled far ahead of time or upon short notice, and is
relatively inexpensive. A disadvantage is that it is slow compared to air
travel. Risks of using this method are losing merchandise, damage to
merchandise, or being delayed behind schedule. While it won’t
compensate for lost sales, insurance will protect us from losing most of
the merchandise’s costs if such a misfortune as a lost shipment were
to befall us.
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15. C. Proposed Strategies
1. Proposed Pricing Policies
Because we are an American business operating in Russia, we will
accept both US Dollars and Russian Rubles. Our costs are relatively
low due to operating exclusively online; we have cut many of the
expenses of running a brick-and-mortar store such as rent, utilities,
displays, and additional sales staff. Since the majority of our
competition is indirect, we will have to worry less about competing with
them and more about staying unique. However, to market our
American goods in Russia, we will markup our products an average of
140% above wholesale, 30% higher than in America, to cover our
transportation fees and taxes. These prices, however, will remain much
lower than similar goods from foreign companies who offer luxurious
products for the very wealthy, and a bit higher than the low quality,
mass-produced, nameless clothing that is quite prominent in modern
Russia. Our prices will effectively place us right in the middle, catering
to the commoner, the working class, so we can fight the cheap and
bland styles of the past and the excessively expensive clothes of the
rich; to revolutionize Russian lifestyle.
For example, a typical shirt from one of our brands would run for
about $15 before discounts, and here it would run for about $19.5.
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16. We too will offer a $5 flat-rate shipping option to make our
customer’s shopping experiences as user-friendly and enjoyable as
possible with no hidden or surprise fees.
2. Proposed Promotional Program
As previously stated, it is Alphalife’s specialty promotional programs
that will set it apart from the rest.
For example, we have our secondary site: www.TheZone.ru, a site
offering our merchandise that is in low stock or out of season to be sold
in timed sales of up to 80% off of retail. This will eliminate waste as our
company will leave no product unsold, and will better serve to promote
our positive brand image of a company that exists to serve.
We too have the Rep Crew program where customers may sign up
and act as brand ambassadors. Upon signup, these “reps” will receive
a six-digit “rep-code” that will get anyone 20% off his or her entire
purchase. Reps are encouraged to create promotional media such as
fliers and business cards to promote their rep-codes, and in turn, our
company. When a customer uses his or her code, the Rep will earn
one quarter of what that customer saves in points. If the Rep chooses
to convert the points he or she earned from the customer’s purchase
into store credit instead of cash, that amount would be 1.5 times as
much. The points go from “pending” to “approved” a week after delivery
to the customer to ensure that points only become approved if the
customer does not cancel the order or return the merchandise. The
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17. Rep can redeem for cash, gift code for themselves, or a gift code for a
friend.
We will unveil our Rep Crew program alongside our launch to assist
in the company’s early growth. This program will not only give new
customers discounts and reasons to shop with us, not only will it give
returning customers money and incentive to continue to shop with us,
but it makes our customers feel as though they are a part of the
Alphalife Family, helping to grow the business that helps them too.
Reps will be incentivized to promote and reps will personally reach out
to new customers with opportunities to save.
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18. - 18 -

19. To work hand-in-hand with the Rep Crew Program, we will also
offer the Two-Tier Referral Rewards Program. Whenever a customer
refers a new customer, be it by signing up with a referral identification
code or clicking on his or her referral URL, he or she earns $10 after
that new customer’s first purchase. If that new customer refers a new
customer who makes a purchase, then not only will that customer get
his or her $10 from the new customer’s purchase, but that first referrer
will get an extra $1 from that secondary referral. Both tiers may be
repeated infinitely to continue to reward our customers for growing our
business.
If the Referral Rewards Program isn’t enough to keep customers
shopping with us, we also offer $10 back in store credit after a
customer’s first purchase. If the first purchase wasn’t enough to keep
them coming back, then they will have an extra reason to come back,
or they would be wasting money.
If a customer were to make a purchase, become a Rep, refer a
large number of new customers who make purchases and refer
additional new customers who make purchases all with the rep-code,
that original customer not only would have grown Alphalife a great
deal, but he or she will also have earned a substantial sum of money.
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20. - 20 -

21. While the Rep Crew Program, the Referral Rewards Program, and the
Money-Back Program are always going to be running throughout the year,
we will also hold three types of additional promotional activities.
The first, we will be sponsoring a concert at Moscow’s Olympic Stadium
where we will be disseminating our promotional fliers and stickers. This will
be right after launch in January and will help to kick off our business strong in
the communities of our target market.
The second, we will hold 4 giveaways of 64gb iPad 2’s; one on March 1st,
one on June 1st, one on September 1st, and one on December 31st. An entry
will be given to every customer per amount of new customers referred that
have made purchases. This will help to stimulate our Referral Rewards
Program in both awareness and actual acquisition of new customers.
The third, we will offer double points to Reps during the months of
November and December. This will effectively take advantage of the two
busiest shopping times of the year: Black Friday/Cyber Monday and the
Holiday Season. People will already be looking for discounts and places to
shop, so the Reps’ job will be even easier, and this will once more increase
awareness of both our store and our multitude of programs. Holding these
promotions on the last two months of the year will help us finish off the year
confident and strong in sales.
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22. SAMPLE FLIER IN ENGLISH
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23. SAMPLE FLIER IN RUSSIAN
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24. V. PLANNED FINANCING
A. Projected Income Statement
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25. B. Projected Balance Sheet
C. Planned Growth of Business
After starting up with a bank loan of $100,000 USD, with an annual interest rate of
6.59% we expect to make monthly payments of $3069.00 and pay off the loan in full
within 36 months. We will use the $325,034 of net profit to be split to have 25% go
towards end-of-year bonuses to all the employees, and 75% to go towards company
growth and start-up capital for a brick-and-mortar Alphalife location on Tverskaya
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26. Street. With the Russian E-Commerce market expecting to triple within the next 10
years and the 80% growth seen by online American store: Karmaloop, we expect
sales and profits for Alphalife and The Zone to at least triple to $1,000,000 annual
net profit in the next three years.
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27. VI. BIBLIOGRAPHY
"Advantages and Disadvantages of Sole Proprietorships." The New York Times.
AllBusiness.com, 5 June 2007. Web. 17 Jan. 2012.
<http://www.nytimes.com/allbusiness/AB4113314_primary.html>.
"Bureau of European and Eurasian Affairs." U.S. Department of State, 2 Nov. 2011. Web. 16 Jan.
2012. <http://www.state.gov/r/pa/ei/bgn/3183.htm>.
Bush, Jason. "Russia to Set Investment Rules." Businessweek. Bloomberg, 19 Mar. 2008. Web.
16 Jan. 2012.
<http://www.businessweek.com/globalbiz/content/mar2008/gb20080319_484201.htm>.
"Business in Russia." Russia Ukraine Travel. Web. 17 Jan. 2012. <http://www.russia-ukraine-
travel.com/business-in-russia.html>.
East-West Digital News. "Russian E-Commerce." EWDN. East-West Digital News, 8 Dec. 2011.
Web. 17 Jan. 2012. <http://www.ewdn.com/2011/12/08/russian-e-commerce-now-a-hot-
item-on-global-it-map-say-expert-at-techcrunch-moscow-conference/>.
"Import Regulations - Russia." Doing Business Abroad. Aug. 2009. Web. 16 Jan. 2012.
<http://www.tradecommissioner.gc.ca/eng/document.jsp?did=19665>.
"Income Tax Convention with the Russian Federation." Web. 17 Jan. 2012.
<http://www.irs.gov/pub/irs-trty/russia.pdf>.
" International Business Web Hosting." 101domain. 19 May 2009. Web. 17 Jan. 2012.
<http://www.101domain.com/business_hosting_plan.htm>.
"Russia Welcomes Foreign Investment." CNC World, 25 Oct. 2011. Web. 16 Jan. 2012.
<http://cncworld.tv/news/v_show/19263_Russia_welcomes_foreign_investment.shtml>.
Warehouses of Moscow and Russian. Web. 17 Jan. 2012. <http://eng.skladno.ru/warehouses/>.
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