Music Explosion - Developing a

"Sound" Global Transport Plan

Music Explosion (ME) produces those reallyannoying car speakers that rattle your windows.A typical set of ME speakers retails for $350and weighs 10 pounds. However, they are a bitbulky at 6 cubic feet per set (2.0 1.5 2.0).The speakers are not overly susceptible todamage, though moisture can be a problem.

The company manufactures their "Blasters"speaker line in San Diego for U.S. distribution.The company's growth is waning and ME ispreparing for expansion into the Pacific Rim,starting with Japan, Taiwan, and Australia, toturn things around. Nick Jagr, companypresident, has negotiated most of the issues tosell Blasters through automotive aftermarketretailers in those countries. You have beenbrought onboard to handle the transportationissues related to the company's initial effort inglobal fulfillment.

During your first day, Jagr holds a fast pacedmeeting that bounces across multiple topics. Heoccasionally mentions the global expansionproject and makes some offhand comments thatare relevant to your new position as director ofglobal transportation. Since you want to make apositive day-one impression, you have taken asmany notes as possible and written downnumerous Jagr quotes. They read:

"The local market for our product is sad,sad, sad. We need to join the globalmarketplace but don't want to play withfire. Let's take a measured approach."

"Our negotiations are going well but theseretailers want to nail down trade termswith those three letter acronyms beforesigning on the dotted line. I tried to tellthem that you can't always get what youwant, but they were pretty insistent onthose trade terms."

"We've got little experience with globalfreight. Still, we want to play some role inthe transportation process or the retailerswill ask for huge discounts. One buyermentioned "Incoterms" and taking onresponsibilities. We better get up to speedon that or they'll put us between a rockand a hard place."

"I think that a middle-of-the-roadtransportation strategy is on target. Weshould manage the transportation processup to a point and then hand it over to ourdistributors and retailers. Somehow thisrelates to those Incoterms."

"We have to tumble the dice and pick amode of transport that balances ser- viceand cost. I like the idea of air freight."

"I think that this international expansionis really going to work out well. Is it justmy imagination, or are we stilloverlooking some transportation issues?One of the carriers vying for the businessmentioned documentation as beingcritical."

After a few more rambling statements, Jagr gotup and began to walk out of the meeting. Beforeleaving, he turned to you and said, "Welcome tothe show. Get your initial thoughts for ourglobal transportation strategy worked out andemail it to me.

Be quick, time is not on our side."

Instructions:

Incoterms Team Project Case:

Your team is to analyze the attached case. Please be thorough in your answers.

Given the information in the case, which Incoterms group (E, F, C, or D) should ME pursue as the exporter? Why?

1.) Based on your response to Question1, what responsibilities and risks will ME assume? Explain.2.) Which mode of transportation should ME use to move Blasters to their new markets? What are the benefits this mode would bring?3.) Why should ME worry about something as mundane as paperwork?4.) Identify and describe other global transportation issues that Jagr may be overlooking.