MSMW Case Study: Export Market Assets

MSMW Case Study: Export Market Assets

Assets MSMW might consider accessing through some form of partnership, acquiring or building in Canada would be new manufacturing equipment. Based on the depreciation value of the current equipment it really makes no sense to go to the bank with such old equipment that is currently valued less than half of its original purchase price and claim that as assets or collateral on possible loans. This is especially true in tight fiscal finance conditions such as we have today. For example, even brand new equipment would be tough collateral in a banking environment where 4 out of 10 tangible private assets mortgages are essentially in default.

At the same time if MSMW does not choose to renew its products, packaging and equipment on a regular basis it may fall into the trap of being quickly locked out of its own markets due to obsolescence when the latest trend perhaps moves away from PET bottles which seems to be the case in some foreign markets. However I tend to agree with Gus that there is no current need to purchase hard assets overseas while alliances will assist greatly in ensuring supplier and distributor relationships with preferably direct to corporate client/customer or retail options to minimize handling costs. While I agree neighbouring markets may be attractive such as the US, slow or minimal consumer spending is my immediate concern for new export sales to several western nations (accordingly Canada would also appear somewhat stagnant in terms of growth) I prefer to avoid "standing water" and go "straight to the oil throats" in the Middle East where consumer spending remains lavish and growth retains 15-20% annually. This is the kind of growth we need to encourage bankers to help finance it.

Without major assets purchases our fixed costs risks are minimized even in unstable or politically uncertain nations with large scale consumer spending growth where such sales growth outweighs certain risks. The most we would have to lose, for example, in the event of a dirty bomb attack on Dubai by Iran (God forbid however the British are congregating there) would be our locally situated inventory. If we maintain low sales volume, premium high priced product our potential loss would also be quite low and limited to projected sales profits and growth. In such a case we might easily reorient to the next boom-town market.