Table of Contents

From dbnetze.com

At the glance of transportation systems of Germany there seem to be no real obstacles for transportation within the region apart from political and social issues such as workers shortage and strike. This is mainly contributed by Germany’s decline in political stability over the years . However, at the current level Germany political stability is still stronger than that of most low-cost countries manufactured and even higher than the USA (theglobaleconomy, 2020).

There are no major events that have impacted Germany heavily in recent years except a few that affect everybody like the pandemic and political issues that affect the European Union, Brexit. Thus, the outlook of Germany is currently very safe from any wars or social issues within the region that could negatively impact the manufacturing of the supply chain system.

Overall, Germany is a great geographic location for manufacturer, Germany is easily accessible by other countries and with European Union allow the tread between neighbor country a huge advantage in sourcing and supply chain in an emerging Express, Inc. international expansion

Express, Inc. SWOT Analysis

Express, Inc. Strength

Express, Inc. has been operating since 1980 and today they are one of the leading American business apparels in the industry.

Products: Express, Inc.’s apparel are made from quality material on the purpose of it being washed and worn multiple times. Furthermore, they pride themselves in their products unique points being mix and match versatility, new and now, and endure modern tailored products.

Mix and match versatility: Express, Inc.’s apparel is designed for customers to be able to wear it on multiple occasions from going to work, travel, and night out. Customers can mix and match their Express, Inc.’s apparel to suit multiples of their occasions' needs.

New and now: Express, Inc. keep updating their products to reflect the current fashion trend, so the customers always look up to date while paying not to compromise on the quality with the same price.

Enduring modern tailored: Fit and quality are always in Express, Inc. mind when creating a formal business suit.

Awareness: Express, Inc. has demonstrated to be in touch with their ever-changing marketplace especially attention to their customers base need and want. They understand and listen to their customers. For instance, Express, Inc. realizes that most of their customers gravitate toward modern style meaning simplicity in design and overwhelmingly in color black. Express, Inc. respects their customers' demand and continues to feed the demand with new and unique products in terms of shapes and silhouettes while keeping it in colors and style their customers are looking to shop for.

Employee: Express, Inc. pride themselves in having a strong and experienced team working for them which is the reason why they can adapt to the changing environment and keep the business successful. Express, Inc. are looking for people who have experience in the retail apparel industry including depth in fashion design and merchandising, supply chain management, marketing, customer experiences, eCommerce, store operations, technology, planning and allocation, and real estate and other experiences that are valuable to the Express Inc.

Business Model: Express, Inc. operates as Omnichannel as they look to provide the best shopping experience that are distinctive and engaging for their customers. Customers can go from shopping in a physical store to online and still feel like they are at Express, Inc.

Sourcing: Majority Express, Inc. products are created by their own inhouse design team. While the rest are being outsourced to multiple buying agents to find the best factories or manufacturers. They do this to be able to compare the quality and price and stay competitive.

Express, Inc. Weakness

Products: Express, Inc. is an American based fashion store thus majority of their apparel follow American’s fashion trend. This is a factor that prevents Express, Inc. from being appealing to international customers.

Sourcing: Express, Inc. is heavily dependent on third party buying agents, factories, suppliers, and distribution. Thus, Express, Inc. operation costs are higher than companies like Zara who vertically integrate and operate at a lower cost.

Physical store: Majority of Express, Inc.’s physical stores are in malls or shopping centers. In recent years, they have seen a decrease in customer traffic because of the popularity of online shopping.

Transparency and Sustainability: The most aspect of Express, Inc. is their lack of transparency regarding their sustainability issues. Sustainable garments have been a trend that will stay. However, Express, Inc. has not taken much initiative toward the issues.

Express, Inc. Opportunity

Established manufacturer: Germany is a world leader in the manufacturing and one of the top exporters of clothing and textile (BizVibe, 2017). Having already established industry in place that is also continually being supported by the government will make it easier for Express, Inc. to find all the resources, e.g., skill labor, innovative technology, etc.…, needed for starting a factory (World Economic Forum).

Location: Germany is part of the United Nation and not too far away from China to source additional raw materials on top of the other raw materials the countries in the United Nation can supply. Being close to so many countries will bring opportunities for Express, Inc. networking their way into expansion of business internationally (Flashglobal).

Transportation Infrastructure: Germany has transportation infrastructure prepared for transport large amounts of goods in and out of manufacturer, train, road, and airway (Flashglobal). The trains are also connected to other nearby UN countries which allow low cost of transport raw supplies or goods into our new international Express, Inc. store.

Worker right: A survey has found that a significant portion of Europe scores a 1 or 2 including Germany, meaning minimal working right violation, opposed to China and Southeastern Asian where the scores of worker violation is between 4-5, 5 being worker has no right. Thus, factories in Germany will ensure that there would be no problem or rumor of Express, Inc. exploitation of laborers (Sewport, 2021). A prevention of bad rumors that could potentially give Express, Inc. bad press.

Express, Inc. Threat

Low-cost countries: Germany is a high-cost country that leverages innovative technology and sustainability to be competitive to low-cost countries like China, Vietnam, India, etc… Thus, low-cost countries are always a threat in terms of better pricing. (BizVibe, 2017) Production in Germany will never be as cheap as in China, this Express, Inc. either must cut the profit or develop additional uniqueness and quality that justified the higher price point.

Online retail: Online retail is double edge, it help audience around the world to be able to shop at Express, Inc., but it also help customers to search for cheaper products that has similar appearance (BizVibe, 2017), thus in order to operate as mid-price retailer we must always be in constant communication and engage our audiences to become loyal customers by showing them our eager to improve our company to be more quality and sustainable.

Law and regulation: Germany scores on the high side of sustainability of their manufacturer and production, higher than the US (Sewport, 2021). There are also standardization and labeling requirements from the UN which every vendor needs to adhere to be able to operate (BizVibe, 2017). This will increase the cost of our production, but it can also be a selling point.

SWOT Summary

Overall, Express, Inc. has a lot of potential and strength to become one of the global international leading brands for working young adult with their apparel styles that appealing. However, like many apparels brand weakness, Express, Inc. must grow with time and become more transparent about their sourcing and ethic to their customers that care. This will help build Express, Inc. brand loyalty. Regarding, manufacturer in Germany, this may be a good opportunity to expanded Express, Inc. brand outside of America and into Europe market, the only downside of manufacturer in Germany is the cost due to high living wage and strict regulation.

PESTLE Analysis

Germany Political and Economic

There are many factors that will determine the viability and success of establishing an oversea manufacturer for Express, Inc. The Politics and economics of the oversea country, in our case, Germany, play an important role as it pertains to regulation and finance to the newly established apparel manufacturer. Political factors that could potentially impact our manufacture are their current government, trading policies, legislation around industry, and war and conflict. Economic factors that could potentially impact our manufacture are GDP, exchange rate, unemployment, and skill labors that are available. These are major factors for Express, Inc. to take into consideration before establishing a manufacturer in Germany.

Germany Political

Germany Government: Germany's government is a federal parliamentary republic; Germany has unique government systems in that the chief of state or president are more about representative and ceremonial obligation with some reserve power to step-in to resolve political instability while power to lead the government are with the Chancellor. Germany's current chief of state or president is Frank-Walter Steinmeier; since 19 March 2017, president held the position for 5 years with 2 term limits. Germany's next presidential election will be held in February 2022 (CIA, 2021). Although the chief of state does have some political power to influence the law, however compared to the Chancellor who is the head of government of Germany that held status closer to the president of the United State, Germany's next president is unlikely to affect the manufacturing establishment in Germany for Express, Inc. The current Germany’s Chancellor is Angela Merkel, she has been the Chancellor since 2005, Chancellor is to serve a 4-year term without limit. Chancellor are elected by the Bundestag or the German federal parliament, who are elected by the German people. The concern is that the current Germany’s chancellor will step down in 2021. Express, Inc. may want to wait until the new chancellor is in office and what their political agenda is before we decide on establishing manufacturing in Germany. However, due to the system of the German government there is unlikely to lead to political instability that would heavily impact the decision to establish the manufacturing now.

Germany Trading Policies: Germany is a member of the European Union state meaning Germany does not have an independent trade policy (Thomson Reuters, 2021). The European Union is a member of the World Trade Organization (WHO). The EU also has many preferential trade agreements with many countries across the world. However, note that the EU does not have free trade agreement with the US. This is very important because in order to send goods from manufacturers in Germany back into the US, many fees will apply such as tariff, quota, subsidies, prohibitions, etc. (Thomson Reuters, 2021). However, if Express, Inc. purpose of establishing a manufacturer to expand the brand into European nations this is not a concern but if the goal was to send goods back to the U.S, Germany is not a viable candidate.

Germany Legislation around the industry: Germany legislation and regulation around the apparel industry is a big factor in establishing apparel manufacture. On top of Germany regulation Express, Inc. will also need to follow the UN regulation regarding the apparel. The overall concern will be the price point of production in Germany as they have very high scores on the sustainability of their manufacturer and production, higher than the US (Sewport, 2021). The UN has standardization and labeling requirements which every vendor needs to adhere to be able to operate (BizVibe, 2017). This will be a big financial factor as it will increase the cost of Express, Inc. production. However, we can also use this as a marketing tactic to be the selling point.

Germany Wars and Conflicts: The concern of Germany ongoing wars and conflicts for Express, Inc. is the disruption that may cause delays in the supply chain. Currently, Germany is participating in two current ongoing wars between ISIL (2015 - present, and Mali War (2017 - present). These two wars are not in the home continent of the UN as ISIL wars are happening in the Middle East, and Mali is in South Africa. There is unlikely to be an impact toward the supply chain and trading route between the U.S. and within the UN. Currently, the countries that Germany has conflict with is Russian due to their increasingly repressive domestic policies, persecution of independent media, Russian secret services in the EU, and conflict in Ukraine (Hofmann, 2021). Although, Germany are still in good term with U.S., due to the last president that has conflict relationship with majority of foreign country causing the Germans views toward their relationship toward the U.S. to decrease, about 73% of Germans said Germany relationship with the U.S. is bad (Poushter, 2019). However, with current President of the United States in seated, there hope to restore the relationship between many foreign countries should remedies the outlook of Germans people toward the U.S. If the Germans viewpoint toward the U.S. are not reversed there may be problems in the operational process of the new established manufacturer due to Express, Inc. being an American business and brand.

Germany Economic

GDP: Germany's gross domestic product or GDP is 3.8 trillion Dollar (2020) fourth largest in the world (worldbank, 2021). A high and continuous growth of GDP for Germany is a good indicator of healthy economy and business opportunities.

Exchange Rate: As Germany is part of the UN, they decided to use the Euro as a common currency. The current exchange rates are 1 USD to .86 Euro (morningstar, 2021). The exchange rate plays a big factor in financial consideration of establishing manufacturing in Germany as the changes in exchange rate can directly affect the profit margin when importing and exporting.

Minimum Wages and Labors Cost: Germany not only has higher currency values than the U.S. they also have higher minimum wage on than the U.S. at €9.35 in 2020. Furthermore, some groups of Germans demand higher wages and continue their campaign pushing for minimum wage to be €12 (salaryexplorer). According to Salaryexplorer, they took a survey of jobs and fashion, and apparel workers typically earn €3,140 per month ranging from €1,130 as the lowest to €6,800 as the highest average. The results for machine operators found their salary to be below this average at €1,070 (salaryexplorer). In the U.S. the median for sewing machine operators is double, thus there are opportunities in the Germany manufacturer in labor costs to be cheaper than in the U.S. despite higher minimum wage (careerexplorer).

Unemployment: The 2020 unemployment rate for Germany is 4.31% (CIA, 2021). This is a good low rate that indicates the good health of the economy.

Germany Social and Technological

There are many factors that will determine the viability and success of establishing an oversea manufacturer for Express, Inc. The social and technological will determine the viability of workers' force and machinery as a leverage for our manufacture to be competitive in the world market. Social factors that could potentially impact our manufacture are education level, population growth rate, and social classes. Technological factors that could potentially impact our manufacturer are production capability, equipment and automation, internet connectivity, and Infrastructure. These are major factors for Express, Inc. to take into consideration before establishing a manufacturer in Germany.

Germany Social

Education level: Germany current education expenditures is 5% of their GDP or 190 billion in US dollars (CIA, 2021). Germany has free public school and university education which raise their population education levels. According to salary expert, the majority of textile and garment workers have associate degrees, and since education is free for everyone factor that in with recent immigrants, there are plenty of workers.

Population growth rate: Germany has seen stagnant in their population growth rate even though Germany has reached a record high of 83.2 million people. Germany has been recording more deaths and births ever since 1972. However, the immigrants keep Germany's population high as Germany has taken in about 350,000 people in 2019, and 400,000 in 2020 (Reuters, 2020).

Social Classes: Germany seems to have a different view of their social class; many articles suggest that the majority of Germans view themselves as middle class. This is the fact that there is public education available which eliminates the education aspect as a financial problem. However, when looking at the poverty rate Germany has 14.8% in 2018. This is considerably normal when compared to other developed countries (CIA 2021).

Germany Technological

Production Capability: Germany is the 2nd largest textile exporter in the world behind China. Germany has capabilities to produce all kinds of textile, but they are most known for knitted apparel cloth, manmade fiber, synthetic yarn, and machinery (Fibre2Fashion, 2019). Germany has a total export value of $38.99 billion. This concludes that Germany has capability to supply Express, Inc. stores not only with current stores but also future expeditions to the company.

Equipment and Automation: Germany has the 5th largest robot market in the world. Currently Germany utilizes about 20,000 robots in their industries (Trade, 2021). The number of manufacturers that utilize robots are increasing every year as they are more efficient. In 2019, there will be 346 robots per 10,000 employees, making Germany rank 4th behind Singapore (918), South Korea (868) and Japan (364) (Trade, 2021). While specific technologies are not mentioned for manufacturing apparel with some connection Express, Inc. can figure out how much robots are being utilized in apparel manufacturing to determine the advantage of being Germany that is able to transfer knowledge robots from advanced machinery in automobiles to apparel construction.

Internet Connectivity: Germany is “one of the world's most technologically advanced telecom systems with additional security measures; LTE universally available and 5G service to over 80% of population” (CIA, 2021). Germany has an internet user of 72,202,773 or 89.74% of the population, ranking number 10 in the world (CIA, 2021). This data suggested that Express, Inc. would not have trouble communicating between the headquarters in the U.S. to their manufacturer in Germany, as Germany is as much as on par with the U.S. Internet Connectivity.

Infrastructure: Germany is well equipped with infrastructure from roads, ports, railway, and airports. There are a total of 74 ports in Germany but the largest seaport in Germany is the Port of Hamburg in Hamburg, it is also the 3rd largest port in Europe. The Port of Hamburg and the port of Bremen are two major seaports in Germany that play a major role in export and import goods internationally (Kaushik, 2021). Germany has railways totaling 33,590 km that run throughout the country and connect to their neighboring countries (CIA, 2021). Germany has a total of 539 airports, 318 with paved runways, with 20 registered air carriers and 1,113 registered aircraft operated by air carriers. Germany has annual freight traffic on registered air carriers totaling 7,969,860,000 mt-km (CIA, 2021). Germany roads totaling 625,000 km and expressways totaling 12,996 km connecting major cities of Germany and throughout the country (CIA, 2021). There are no concerns over the lack of transportation options as the ground road and railway is covered for transport goods from manufacturers to neighboring countries to sell or to one of Germany's major ports to ship it back into the U.S.

Germany Legal and Environmental

There are many factors that will determine the viability and success of establishing an oversea manufacturer for Express, Inc. The legal and environmental factors will determine the viability of manufacture location, laws and legislation that protect the right of the brand. Legal factors that could potentially impact our manufacture are import/export law, health and safety law, employment law, and copyright law. Environmental factors that could potentially impact our manufacturer are climate, climate change, natural disasters, and pollution. These are major factors for Express, Inc. to take into consideration before establishing a manufacturer in Germany.

Germany Legal

Import/Export law: German and EU customs have offered a monitoring service to avoid the import of counterfeit goods. “The German Customs Administration’s online procedure ZGR-online for the application of industrial property rights (mainly trademarks and designs) was established in May 2009 (www.zgr-online.zoll.de). ZGR-online is a comprehensive data processing system to file customs applications to all German customs offices as well as to the customs authorities of other EU Member States if EU rights are concerned. The system allows applicants to amend their applications as well as to submit additional relevant information of the identification of goods infringing intellectual property rights, such as details of the products concerned or risk-analysis relevant information” (Hettenkofer, 2021). Germany and the EU are progressive in protecting intellectual rights against counterfeit goods. The EU also has a law imposed on goods that import / export within the EU to comply with the regulations that are safe for environment and human health, these requirements must be met for Express, Inc. to do business within the EU or export back into the U.S. (trade, 2021).

Health and Safety law: Germany has a very extensive national system for Health and Safety law especially in the workplace that is in guidance with the International Labour Organization (ILO) the Health and Safety laws are administered by the Ministries for Labour and Social Affairs. A relevant example is, “A health and safety committee should be set up in all workplaces with more than 20 employees. It consists of the employer or the employer’s representative, two members of the works council/staff council, the occupational physician/s, the health and safety specialist/s and safety delegates” (worker-participation, 2018). There are also many other basic regulations such as equipment inspection, workplace inspection for health and hazard, etc...

Employment law: German employment law called for minimum wage, good working conditions, and five-day work weeks with the maximum working time being eight hours per working day. However, working time can be extended to ten hours a working day, only if the average working time within six months does not exceed eight hours a working day. German prohibited work on Sundays and holidays unless the government is given the approval. The minimum vacation term is 24 working days. The employer must notify the employer seven month prior to the termination unless there is a valid reason for immediate termination (MTH Partner Lawyers). Overall, there are very rigid rules to protect the relationship between employer and employees in Germany, thus it is important for Express, Inc. to know these rules.

Copyright law: Germany and EU have extensive copyright law and intellectual property including fashion items from trademark to patent. However, the most important to the manufacturer is the License agreements and Non-Disclosure Agreements (NDAs), this prevents a person who has worked for Express, Inc. such as designer or workers to recreate something that are made by Express Inc. there has been a case before from Nike and Adidas against the designer who changes company. Germany would uphold the right and proceed to court for any wrongdoing against intellectual property (Hettenkofer, 2021).

Germany Environmental

Climate: Germany has continental climate meaning Germany has moderate rainfall throughout the year with seasons of warm summer and cold winter. The temperature varies within the countries due to mountains and exposure to the sea, however, the expected summer average temperature is 24 °C (75 °F) and winter average temperature is 0 °C (32 °F). Germany is susceptible to cold air from the Atlantic Ocean, Russia, and the north pole which leads to extreme weather and can drop temperature to -20 °C (4 °F) (climatestotravel). There is snow in Germany especially in the eastern part of the country, however it is rarer to the western and northwestern part of Germany. Thunderstorms are often seen during summer and occasional heat waves; fog also happens during colder weather (climatestotravel). Express, Inc. may want to put the manufacturer in the western or northwestern part of Germany where there is less snow which leads to less weather disruption for the supply chain. Express, Inc. should still be aware of heat waves and cold waves that could delay the work due to employees may be unable to come for work along with manufacturers that fully equip with cooling and heating systems to create a right working condition for the workers.

Climate Change: Climate changes are being experienced all over the world and Germany is no exception, however due to Germany being progressive along with the regulation from the EU, there have been many steps to take care of greenhouse gas emission. Germany's goal is to become a greenhouse gas neutral by 2045 (Appunn, 2021). This is something Express, Inc. will have to consider when building a manufacturer in Germany, as it will be an extra financial burden to build the manufacturer to the standard with no greenhouse gas emission. Climate changes also led to other impacts within Germany such as much more frequent heat and cold waves, flooding along the coast, but these mostly impact agriculture aspects that do not really impact Express, Inc's Plan for manufacturing.

Natural Disasters: Germany has experienced storms, floods, earthquakes, and extreme temperature however natural disasters are not as extreme compared to the other part of the world (Münch). To avoid the impacts of natural disaster that Germany is susceptible to Express, Inc. should consider building their manufacture toward inland away from flooding zone and in a area where there a good public services that could take care of other disaster such as extreme temperature, snow falls, and earthquakes like shelter, food pantry, snow plower, etc… as a prevention and benefit to employees. This means the manufacturer must be closer to the city, ideally still toward the west where there is less snow, and not in the middle of nowhere where if extreme weather happens employees are unable to come to work.

Pollution: The biggest pollution health risk in Germany is the air. Although, compared to the rest of the world Germany is low in pollution, due to EU strict guidelines there has been further attempts to reduce air pollution even more from shift to less polluting cars, driving bans, speed limits, low-emission buses, etc… (Abnett, 2021). Currently there are no concerns toward established manufacture in Germany for Express, Inc. pollution wise as garments manufacturers are not producing any air pollution.

PESTLE Score Card: Germany

PESTLE Summary

Political, economic, social, technological, legal, and environmental factors are critical for Express, Inc.’s decision to established manufacturing in Germany. All the PESTLE factors tell Express, Inc. about what to expected in Germany in regarded to regulation, financial, the viability of workers' force, environment, and machinery determine the success of the Express, Inc. new manufacture. The total weight score for Germany is 2.29 out of 5 meaning there are both good factors that can be leveraged to become competitive in the world market, and bad factors that will increase Express, Inc. operation costs and overall, a financial concern and burden. The important factors about Germany that will play role in Express, Inc. success include the established industry, GDP, political stability, less concerning war and conflict, equipment and automation, and infrastructure, and free education. Germany has established industry as Germany is the 2nd largest textile exporter and 5th largest robot market in the world, this will provide Express, Inc. with all the equipment and technology that they need to established manufacturer in Germany. Furthermore, only 1.2% of total GDP is from Manufacturing: Textiles and Clothing this is roughly around $45.6 billion, this number is very low compares to other countries that known for manufacturing clothes, this may be an opportunity for Express, Inc. to expand that number in Germany. Germany also rather good reputation and relationship with other countries, except Russia, and play part in a war that are not concerning to impact apparel industry. Germany also already well equips with infrastructure to handle goods that will being produces and transports. Lastly, Germany has free education these include trading school which will help Express, Inc. reduce cost in training their operators. On the other hand, there are factors about Germany that will not be idea and potentially financially burden for Express, Inc. include trading policies, strict regulation around almost every aspect from import, export, employment, health and safety, and sustainability, and Germany climate are also not the most ideal for manufacture. The most important aspects that will hindered Express, Inc. operation is that there is no trade agreement between the U.S. and Germany, which will result in higher transportation of goods, strict regulation will also be something that Express, Inc. will need to be on top of, there are extensive regulation surrounded the human and environmental right, what allow to be import and export in and out of Germany. Lastly, Germany often experiences cold that could bring temperature below 0, and a potentially calls for manufacturer to close for the day. There are also flood and snow, this will result in limiting lands that manufacturer should be build in to avoid such weather problems. Overall, Germany is not the best place for Express, Inc to established manufacturing in even thought all the opportunities to be success in Germany, ideally there are other countries that could outperforms Germany in costs and less strict laws. Express, Inc. may need to consider other option from different countries before making decision.

Import & Export Strategy

Express, Inc’s import and export strategy plays an important role in many aspects of business as it relates to lead time, production calendar, and financial cost and profit. Trading between the US and Germany will be challenging as Germany does not have a trade agreement with the U.S, they are also geographically distant which will make it harder to oversee operations and increase logistic and transportation costs. Germany is also not the cheapest country to produce due to high labor and strict regulations.

There are limited options when it comes to trading between the U.S. and Germany, cost efficient sea freight but slow or expensive and fast air freight. Furthermore, we also need to account for when the shipment arrives at the U.S. port and need for ground transportation to Express, Inc’s distribution centers which are at the same place as Express, Inc. headquarter in Columbus, Ohio. The average sea freight rate from Bremerhaven (DEBRV Port) to Shipping to New York (USNYC Port) during peak season for full container load (FCL) is estimated to be $2,104 per 40’ container and it will take anywhere between 11 to 21 days or more. (freightos). The cheapest air freight average rate from Bremen to New York is estimated to be $1,144 per a load of 200 kg/1 cbm and it will take between 4 to 8 days (freightos). However, the price per kg goes down the larger the shipment weight but still significantly more expensive than sea freight rate, considering that 40’ containers is 56 cbm. This does not account for additional transportation that needed to take the shipment from USNYC Port to Express, Inc main fulfillment centers which will be additional expenses and current circumstances of pandemic and port congestion are not accounted for.

Germany has a government department called The Federal Office for Economic Affairs and Export Control, they are mainly concerned with inspection and control of military goods, weaponry, electronics, machinery, and chemicals. The items and goods mentioned will require licensing however for apparel there seem to be no requirement specifically for exportation (BAFA). The U.S. has a government department called the U.S. Customs and Border Protection that requires import apparel and textile to include Consumer Product Safety Commission (CPSC) requirements for flammability, all apparel must have labels specifying content and instructions for care and country of origin (U.S. Customs, 2020).

Overall, the most challenging step for Express, Inc. is the freight costs and lead time due to manufacturers in Germany. There is not much concern for regulation regarding exporting out of Germany into the U.S. and finally the most economical choices for transportation will be through the sea since air freight can be very expensive which will hurt the company profit margin.

Import & Export Strategy: Foreign Currency Strategies

Letters of Credit is popular for international trade which is essentially a document from a bank promising payment, the bank being the middleman between the trade between us and the supplier to ensure that all parties meet their contract obligation. The issue of Letters of Credits is the fee that Express, Inc. will have to pay to the bank every time we proceed with international trade that can add up, which we will need to weigh against the advantage of having the bank versus dealing with the supplier directly. However, building relationships takes time thus utilizing letters of credits until Express, Inc. builds a solid trading supplier panther. Letter of credit is also the most secure way to trade internationally for both importer and exporter compared to other methods such as cash-in-advance, documentary collections, open account, or consignment (Trade, 2021). Once a relationship has been built with the supplier, Express, Inc. may consider the option listed that is more riskier for themselves in turn for lower trading fee, documentary collections for instances still relies on the bank to be the third party for collection both party payment, however, documentary collections even though lower fee than letters of credit, does not protect the supplier in case of no payment unlike the letter of credit, overall unfavorable for the buyer (Trade, 2021). Open Account is very popular among the fashion industry due to the high turnover rate of the inventory and pushes out the payment date until the goods arrive. However, the open account will ensure that Express, Inc. will receive promised goods from the supplier before we must pay them overall, the most favorable option for Express, Inc. if it can be arranged, as it also does not have a fee because of no third party. Consignment is like an open account except that the supplier will have to wait for sales to go through to the end user until the payment will be received; this will be incredibly hard to negotiate for. Thus, the best option for a new establishing manufacturer might be in the progression of a letter of credit into an open account depending on the relations between Express, Inc. and supplier (Trade, 2021).

When dealing with suppliers into a new established manufacturer in Germany, Express, Inc must consider what currency they will use to exchange with suppliers. This is all dependent on where Express, Inc. will get their materials from if within the European Union members, Express will have no trade barrier or tariff fee which is ideal, however if trade outside of the EU, then foreign exchange risk will have to be addressed. However, Express, Inc. investment into establishing a manufacturer in Germany will not have big risk regarding the currency exchange due to both U.S. dollar and Euro being within the top 10 of strongest currency in the world, meaning there are very low possibilities that the values between U.S. dollar to Euro will significantly fluctuate. The current currency exchange rate is 1 USD to 1 Euro (exchangerates, 2021).

Import & Export Strategy: Harmonized Tariff Schedule & Tariffs

Express, Inc. carries a variety of merchandise from woven and knit apparels, footwears, accessories, towels, blankets, candles, etc.…. The harmonized system is an eleven-digit code number to uniform classification of goods by the World Customs Organization (WCO) (Zoll, n.d.). The harmonized trade schedules will be complicated and challenging as getting HTS codes wrong could result in incorrect fees being paid, delayed shipping, and even getting fined by the U.S. Customs and Border Protection. Express, Inc. Express, Inc. will be expected to pay 12.00% for exporting knit or woven apparel that fall under HTS chapter 61 & 62 from Germany to the U.S. Some other HTS chapters that are relevant from what Express, Inc. has in inventory is chapter 63 for towels and blankets, chapter 64 for footwear, chapter 65 headgear, etc...

HTS codes can get very specifics thus Express, Inc will need a team of logistic experts to oversee the shipment from the manufacturer in Germany and make sure the HTS codes are accurate to export back to the U.S. The first two digit is the “Chapter” going over the type of goods, following by another two digit is “Heading” going over the usage of the goods, follow by two digits of “Sub-heading” going over the materials uses, another two is combined nomenclature of nation in Germany case is of the European Communities, another two digit of community rule such as regulation, and last two digit is of electronic customs tariff/national use. The HTS system can get very complicated thus needing experts to label various type of Express, Inc. goods will import will be needed.

The biggest drawback from having manufacturing in Germany is the tariff that Express, Inc will have to pay. There are a couple options that Express, Inc. can do to lessen their tariffs such as country of origin adjustments, strategic sourcing, and lobbying. Changing of origin adjustments is a tedious process that may further complicate the supply chain due to the increase in handling of the products, sourcing from other countries is an option but that requires giving up plan for manufacturing in Germany for cheaper tariff countries that has preferred trade agreement with the U.S., which left the only option of lobbying for lower tariffs, which is also complicated and takes enormous amounts of time and resources, so giving up the plan in Germany might be more financially wise. Tariffs has been an ongoing issue for apparel industry, “statistics from the US International Trade Commission (USITC) show that between 2017 and 2018, apparel and textiles together accounted for only 5% of total US merchandise imports in value – yet they contributed almost 40% (or US$33bn) of total tariff revenue collected by US Customs” (Dr. Lu. 2019). These were essentially paid by the American taxpayer, raising awareness on these issues may create a wave of changes from American consumers and apparel companies seeking cheaper tariffs from oversea trade, however not guaranteed and takes time and resources to do.

Conclusion

There are a lot of barriers of entry to established manufacturer in Germany from strict rule and regulation, higher wage and standard of living, no preferential trade agreement, and entering in new market. Germany is very variable countries to operate in due to their geographic advantage in Europe nation, equip with infrastructure from road, railway, and port, strong economy and industry, politically stable, advance technology, and availability of workforce due to free education. The downside of Germany is high standard of living and wages, high tariff, strict rule and regulation regarding environment and human right. The decision of establishing manufacturer lies within Express, Inc. readiness to expand their brand by entering European market and vertically integrated the supply chain, otherwise, current strategy of sourcing finished products from Asian countries is plenty viable and no need to changes. Overall, it will not be financially wise to establishing manufacture in Germany unless there are planning to open Express, Inc. international store in European countries.

References

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