Masters in Project Management Building Department Faculty of Environmental Sciences School of Post-graduate Studies University Of Lagos MPM 810:

BUSINESS ENVIRONMENT
LECTURER: DR. O.A. ISIMOYA
A TERM PAPER ON

WOOD CHARCOAL EXPORT

BY

EKWUBIRI, CHIDOZIE E.

099052083

OCTOBER, 2010

ABSTRACT The business of charcoal export is lucrative and this is the reason why many more people should go to charcoal export. The cry for an alternative energy source has put CHARCOAL in the forefront in the global market. A large market exists in Europe, USA and Asia. European importers prefer charcoal produced from hardwood in Africa which is heavy and strong. The charcoal industry is a multi-billion dollar industry and a money spinner for interested investors. The United Kingdom alone consumes more than 60,000 metric tons of charcoal annually, out of which about 70% comes from tropical Africa. Other countries around the world equally consume charcoal in great quantity.

INTRODUCTION Charcoal is mainly produced from tropical hard wood, although there are other sources like coconut shell. The process of production is called PYROLYSIS. This means burning of wood under high temperature in the absence of air. This product is virtually available all over Nigeria as many local communities have perfected the technology of charcoal production. Some known charcoal depots are found in the South Western and some Northern parts of the country. Besides, an individual can produce his/her own charcoal wherever he/she is located. Charcoal has a seasonal market, but the season differs from one country to another. Today, there is increased usage of charcoal. Besides being the fuel that cooks steaks, hotdogs, and hamburgers, a number of companies have discovered that charcoal can be used in certain metallurgical purifying treatments and as a filter to remove organic compounds such as chlorine, gasoline, pesticides, and other toxic chemicals from water and air. There are certain standard requirements to be met in charcoal exports; parameters like fix carbon, Ash content, volatile matter, moisture content need to meet buyers specification. Some of the buyers use their local agents to inspect their product when loading, while others sometimes request for presentation of sample of the product before shipment. Packaging of charcoal is usually done to the specification of the buyer. Some want bulk packaging, in which case, the charcoal is tipped into open high cube containers while others prefer packaging into finished packs. Shipping is done through a reputable forwarding company and the Terms of Trade can either be by letter of credit or Cash against Document. The latter is however easier and less costly than the former. Specifically, the current price of charcoal (bulk delivery) is between $140 to $160 per ton (FOB Nigerian ports). Smaller packs in paper and carton cost between $260 to $280 per ton also FOB Nigerian port. Packaging in bulk into containers is easier for beginners because of low capital investment. Getting capital for the business is easy. All that a prospective entrepreneur needs to do is to source for the orders. Most financial institutions are willing to participate in the business once a valid order is presented. There are also many venture capitalists and individuals with large reserves of fund who will be willing to do the business with you and share your profit at a given ratio. For a diligent entrepreneur, there is a big incentive that comes in form of export expansion grant, which the government normally gives to big time exporters.

LITERATURE REVIEW As the search for alternative fuel grows, the market for charcoal is expected to keep pace. This leaves no dull moment for Nigerian entrepreneurs seeking opportunities for mega growth. The charcoal industry has the engine for meaningful and sustainable socio-economic development at the household and national levels. In Africa, charcoal business is worth more than $1billon a year in terms of employment, rural livelihoods and the wider economy. The government could promote charcoal exports as a means of creating wealth through exports of non-oil products, generating several employment opportunities and engaging a fair level of participation of both youths and adults in the nation. The following conditions should be addressed before an entrepreneur can be involved in charcoal export and they include; Understanding export trade (.i.e. to expose new and potential exporters to the actual process of exporting, identifying key requirements and benefits of export trade). Product sourcing and development (.i.e. to enable exporters understand the concept of product sourcing, development, design and adaptation, market trends, consumer tastes and preferences). Export logistics ( to assist exporters in different sectors appreciate the movement of their exports from one country to another, distribution channels and mode of transport, export documentation, terms of delivery and transfer of risk). Quality assurance in export trade ( to educate exporters on the importance of quality assurance and quality control measures that are crucial to exporting including certifications such as ISO, SON, NAFDAC in various specified sectors). Export procedures and documentation (to educate exporters on the export procedures and documentation).

For the scope of this term paper, the initial environmental challenges and how to resolve them; and how to market the charcoal business both internally and externally in order to succeed are buttressed extensively on the next section.

RESEARCH METHODOLOGY
1. Understanding Export Trade Mr. X, a successful entrepreneur has been in business for about fifteen years. He is turning out a good product; it is selling well in Nigeria; and he would like to extend his plant and increase his production. But to do this, he needs more customers. He has an idea. Why not look for those new customers in foreign markets as well as at home. This will not only help him, but will bring into his country more of the foreign exchange that it needs. At this point, he is taking the first step towards becoming an effective exporter because exporting begins with a state of mind. It is not, or should not be a casual business. An entrepreneur should enter upon an export campaign with energy and determination and with the intention of persevering in it. If he views foreign markets merely as a place to get rid of occasional surpluses, he is an in-and-outer, who makes no enduring impression. Worse, he can damage his countrys reputation as a reliable international trader. An entrepreneur usually cannot or will not turn into a successful exporter within weeks or even months. It will probably take much longer. But the time and care taken to select the right product and the right place or places for an initial export venture can minimize the risk and make ultimate success quicker and more certain. To start with, the entrepreneur must ensure that export orders always receive the same attention as domestic orders; that money is set aside for research into markets, travel, and promotion; that knowledge about foreign markets is systematically acquired and kept up-todate. At some stage, he/she may even consider allocating a certain amount of production to export, and then prepare to go out and sell. Benefits of exporting. An entrepreneur can gain a lot from a successful exporting venture, including: Increased sales - if domestic sales are good, exporting is a way to expand your market and take advantage of demand around the world. You may also find foreign niche markets where your product is rare or unique. Higher profits -if you can cover fixed costs through domestic operations or other types of financing, your export profits can grow very quickly. Economies of scale -when you have a larger market base, you can produce on a scale that lets you make the most of your resources. Reduced vulnerability -if you diversify into international markets, you avoid depending on a single marketplace. A domestic downturn, for example, will be less damaging if you have other markets where demand remains high. New knowledge and experience- the global marketplace abounds with new ideas, approaches and marketing techniques. Global competitiveness -foreign companies are entering Nigerian markets and Nigerian companies are going foreign. The experience your company gains internationally will help keep you and Nigeria competitive in the global marketplace.

Domestic competitiveness -if your company succeeds in the global marketplace, it means your product can compete with the best the world can offer. This helps you succeed at home and ensures your resilience when faced with foreign competition in Nigeria. Challenges to Export Of course, there are also challenges that accompany these benefits. The good news is that an entrepreneur can surmount them with careful preparation and planning. They include: Increased costs - an exporting venture means youll have to meet many short-term costs, such as extra travel, production of new marketing materials and perhaps hiring additional sales staff. And you may have to modify packaging, or your products or services, to adapt them to markets abroad. Level of commitment - it takes time, willingness, effort and resources to establish and maintain one in foreign markets. Staying in for the long haul - while exporting holds great economic promise for most companies, you can expect months or even several years to pass before you see a significant return on your export investment. Cultural differences - youll need to familiarize yourself with the differences in language, culture and business practices in your target market. If you dont, you risk inadvertently offending your potential customer and losing a sale. Paperwork - youll have to get used to it. Both Nigerian and foreign governments require a lot of documentation from exporters of products and services. Accessibility - you have to be easily available to your foreign clients. Competition - you must be sure youre thoroughly familiar with the competition in your target market. Evaluating your export potential Can your product or service find a worthwhile market outside Nigeria? Getting this right is crucial, if theres no demand for what youre offering, it would obviously be unwise to proceed. But how do you come up with the answer? Here are some factors to consider: Customer profile -Who already uses your product or service? - Is it in broad general use or limited to a particular group? -Is it popular with a certain age group? -Are there other significant demographic patterns to its use? -What climatic or geographic factors affect the use of your product or service? Product modification -Are modifications required to make it appeal to foreign customers? -What is its shelf life? Will this be reduced by time in transit? -Is the packaging expensive? Can it be easily modified to satisfy the demands of foreign customers? -Is special documentation required? Does it need to meet any technical or regulatory

requirements? Transportation -How easily can it be transported? -Would transportation costs make competitive pricing a problem? Exporting Services - If youre exporting services, what is unique or special about them? -Are your services considered to be world-class? -Do you need to modify your services to allow for differences in language, culture and business environment? -How do you plan to deliver your services: in person, with a local partner or electronically? Capacity - Would you be able to serve both your existing domestic customers and your new foreign clients? - If your domestic demand increases, would you still be able to look after your export customers or vice versa? Barriers Trade barriers are generally defined as government laws, regulations, policy, or practices that either protect domestic products from foreign competition or artificially stimulate exports of particular domestic products. While restrictive business practices sometimes have a similar effect, they are not usually regarded as trade barriers. The most common foreign trade barriers are government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services. Tariffs A tariff is a tax placed on a specific good or set of goods exported from or imported to a country, creating an economic barrier to trade. Usually the tactic is used when a country's domestic output of the good is falling and imports from foreign competitors are rising, particularly if there are strategic reasons for retaining a domestic production capability. Some failing industries receive a protection with an effect similar to subsidies in that by placing the tariff on the industry, the industry is less enticed to produce goods in a quicker, cheaper, and more productive fashion. 2. Product Sourcing & Development Product Design Product design is about the creation of items that people will buy. It includes appearance function and needs the balance of science and art for its success. Product design can be defined as the idea generation, concept development, testing and manufacturing or implementation of a product (physical object or services). Consideration Factors for Product Design product assessment Handling Hazard of distribution Market requirement (standard & specification) Machinery

Legal & Regulatory aspect Product Assessment/Requirement When a product is considered for market or perhaps requires a radical change based on market requirement. It is important to know what conditions have to meet to ensure the product safety from the production stage to the end use. The nature of the product, history, competing products must be considered on the effect of moisture and temperature changes on the product. Also to know whether the will absorb moisture or Corrode. A cross visual examination might be carried out but these can be more effective in determining the size, shape, weight and density of products to the compatibility of the package. Other factors to be considered are, the state of the product; liquid, gases, odors, microbiological contamination, infestation, etc. Handling The handling entails the measure or the medium of conveying the product from production to consumers. The mode of handling the designed product should not be a burden for the user in terms or consumption, distribution, transportation and other uses. Hazard of Distribution This is what happens to the product on its movement from the production point to the consumer. In product design it is important to know the method of transportation, storage conditions, duration of both journey & storage. Other factors are; the mechanical conditions and climatic hazard i.e. the weather condition. Market Requirement This the question the product designer must have in mind i.e. what the market want! How the market want the product. The designer should be able to adapt to a package that would project out the image of the product for marketability and also integration for advertisement. Other factors for market requirement when designing a product are; stand out compliance with existing market segment, associates shapes, colours, pack styles, storage and in use life, etc. Environmental Issues Product design cannot be carried out without first considering the environmental issues, the legal and regulatory aspect before designing a product for the public. Packaging materials have to be recyclable, converted, and ease of withdrawal after use. This is necessary not only on the ground of pure environmental principles but also to meet legislative and deal with consumer awareness e.g. NAFDAC, SON and other health authorities.

3. Export Logistics Exporting is more complex than selling in a domestic market. You'll know better what's going on if you understand some key trade expressions, techniques and requirements. Among these are:

the laws, regulations and practices governing your product or service in your target market; export documentation, including invoices, bills of lading, certificates of origin and health and safety certificates; tariffs, customs duties and processing fees, as well as taxes payable on your shipment;

export-related services offered by brokers, trading houses, agents, freight forwarders and insurance companies; how to label, pack, transport and store your products; and payment options such as letters of credit, bills of exchange and open account transactions.

CONCLUSION
Charcoal is one area of non oil export which has the potential to generate wealth to many Nigerians who tend to be successful entrepreneurs. It cost no fortune to set up and there is no shortage of market overseas as one can run it from home. The business is simple to start and in huge demand that anyone can make money doing it companies overseas can absorb any volume and that all the companies in Nigeria cannot meet the demand of the Europe market. There is no theoretical training needed but practical which involves where to source for the goods and workable strategies to deploy. The markets are gradually growing and households in Europe prefer it as a relatively clean fuel for their fireplace and furnace if of local carbon content. The charcoal industry is seen as an opportunity and engine for meaningful and sustainable socio-economic development at all levels across the nation.