Question 1

Damar International Damar International, a fledgling firm importing hands crafts of chiefly Indonesian origin, was established in Burke, Virginia, a suburb of Washington, D.C. Onge- nized as a general parmership, the fim is owned entirely by Dewi Soemantoro, its president, and Ronald I. Asche, its vice president. Their part-time, asalaried efforts and those of Soemantoro's relatives in Indonesia constitute the entire labor base of the farm. Outside financing has been limited to borrowing from friends and relatives of the partners in Indonesia and the United States Dumar International estimates that its current annual sales revenues are between $20,000 and $30,000. Although the firm has yet to reach the break even point, its sales revenues and customer base have expanded more rapidly than anticipated in Damar'song inal business plan. The partners are generally satisfied with results to date and plan to continue to broaden theit operations Damar International was established to capital on Soemantoros international experience and contact. As the daughter of an Indonesian Foreign Service sicer, Soemantoro spent most of her youth and early adult hood in Western Europe and has for the past 15 years resided in the United States. Her immediate family, including her mother, now resides in Indonesia. In addi tion to English and Malay, Soumantoro speak French German, and Italian. Although she has spent the past four years working in information management in the Washington area, first for MCI and currently for Records Management Inc., her interest in importing derives from the six years she spent as a management consultant. In this capacity, she was frequently called on to advise clients about importing doching, furniture, and decorative items from Indonesia. At the urging of family and friends, she decided to start her own business While Soematon handles the purchasing and admin trative aspects of the business, Asche is responsible for marketing and sales Damar International currently imports clothing high-quality brasware, batik accessories, wood ar vings, and furnishings from Indonesia. All of these items are handcrafted by village artisans working in Cottage industry. Damar International estimates that 30 percent of its revenues from the sale of Indonesian imports are derived from dothing 30 percent from bank accesories, and 30 percent from wood carvings with the remainder divided equally between brawware and furnishings. In addition, Damar markets in the case e United States will comparable Thailippine handerafted items imported by a small California firm This firm in tur market some of Damar's Indonesian mports on the West Coast Most of Damar's buyers are small shops and how tiques. Damar does not supply large department stores or retail chain outlets. By participating in gift shows, trade fairs, and handicraft chibitions, the firm has expanded its customer base from the Washington area to many locations in the eastern United States In supplying mall metail outlets with handcrafted Indonesian, Dumar is pursuing a niche strategy Although numerous portes market similar mas produced, manufactured Indonesian items chiefly to department stores and chain ters, Damar knows of no competitors that apply handcrafted artifacts to boutiques Sunal retailers find it dicto purchase in sufficient vol- me to order directly from large scale importers of mas produced hem. More importantly, it is difficult to organde Indonesian artisans to produce handcrafted goods in suffi- cient quan try to supply the needs of large retailers. Damar's policy to carry little if any inventory. Orders from buyers are transmitted by Semantoro to her family in Indonesia, who contract production to anti- sans in the rural village of Java and Bali. Within broad parameters, buyers can specify modifications of tradi- tional Indonesian was Frequently, Soemantre coop crates with her mother in creating designs that adapt traditional products to American tastes and to the speci fications of U.S. buyer. Semantoro is in contact with her family in Indonesia at least once a week by telexor phone to report new orders and check on the progress of previous orders. In addition, Soemantoro makes an annual visit to Indents to coordinate policy with her family and maintain contacts with artisans Damat als fills ders placed by Semantoro's fam sly in Indonesia. The firm, in cience, acts as both an importer and an experter despite its extremely limited personnel base. In this, as well as with its source of financing Damaris highly wypical. The firm's great strength, which allows to fill a virtually vacant market miche with memely limited capital and labor resources, is clearly the Senator family's nexus of personal con nection. Without the use of middlemen, this single bicul mural family is capable of linking U.S. retailers and Indonesian village artisans and supplying products that, while unique, are specifically oriented to the U.S. market. Damar's principal weakness is its financing struc ture. There are limits to the amount of money that can be borrowed from family and friends for such an enter prie Working capital is necessary because the Indone sian artisans must be paid before full payment is received SOURCE. Schall and MG 2 PART TWO C - ffom U.S. buyers. Although a 10 percent deposit is One of the most important less that the firm has required from buyers when an orders placed, the learned the critical role of participating in it shows, remaining 90 percent is not due until 30 days from the trade fairs and craft chibitions. Somstore believes date of shipment FOB. Washington, DC. Yet the simple that the firm's greatest mistake was not attending ty of Dama's financing structure has advantages to trade show in New York. By connecting with potential date, it has been able to operate without letters of credit buyers, both through trade shows and walk out and their concomitant cost and paperwork burdens ing" of boutiques, Damar has benefined greatly from One major importing problem has been the paper helpful references from existing customers. Buyers have work and red tape involved in U.S. customs and quota been particularly helpful in identifying trade fairs that regulations. Satisfying these regulations has occasionally would be useful for Damato ad Here to the elayed folfillment of orders. Furthermore, because the importance of Dama's cultivatie of personal contacts Indonesian trade office in the United States is located in is apparent New York rather than Washington, assistance from the Similarly, personal contacts alter Damer the possi Indonesian government in expediting such probleme has bility of diversifying into new import lines. Through a at times bem difficult to obtain with Damar' limited contact established by a friend is France, Somator personnel. For example, an order was once delayed in currently planning to import handmade French porcelain is customs because of confusion between the US and will be Department of Commerce and Indonesian export Daar is worried about wind expansion of its authorities concerning import stamping and tabeling Indonesia handicraft import business because the firm Several wees were required to resolve the problem. does not currently have the researcs to organise large Although Damar received regulatory information scale cottage industry production in Indonesia Other Birectly from the U.S. Department of Commerce when major concerns are potential shipping delays and began importing, its routine contact with the govern exchange rate fluctuations, en is minimal because regulatory paperwork CD acted to customs broken QUESTIONS FOR DISCUSSION 5. Evaluate alternative expansion strategies for Damar tematical in the United States 2. Ducus Dumar's expansion alternatives in Indonesia and France and their implications for the US 3. How can Damar protectief gainst exchange rate locations? 4. What are the likely effects of shipment delays Damart How can these acts be overcome