Introduction:

Financial planning is one of the most important elements in the success of any market entry strategy. When a company wants to expand into a new country, financial planning helps to understand how much money is needed, what kind of profits can be expected, and whether the whole expansion is even worth it. It includes careful budgeting, preparing financial forecasts, evaluating risks, and making decisions about how to use the company’s resources in the smartest and most sustainable way (FasterCapital, 2024). Without a financial plan, a company might enter a new market unprepared and face unexpected costs that could lead to failure.

According to FasterCapital (2024), financial planning allows businesses to estimate essential costs such as market research, legal services, product adaptation, marketing, and distribution. It also helps companies project potential revenues and understand when they can expect to become profitable. Financial forecasts are especially important because they provide insight into different market scenarios, optimistic, conservative, and realistic, and allow companies to prepare for each. For example, when Starbucks entered the Chinese market, they used detailed financial planning to understand costs related to real estate, hiring, and customer preferences, which led to successful positioning in that region.

In the case of Sanjo, brand known for sustainability and heritage design, financial planning is key to understanding whether entering the Canadian market through a strategic alliance is a good decision. Strategic alliances involve partnering with a local business that understands the market, shares resources, and reduces the risk of going into a completely new environment alone. But even with a partner, Sanjo must know in advance how much the expansion will cost, how much revenue they might make, and how long it will take to see a return on investment.

In this section of the project, we will develop a complete financial analysis that includes:

• Initial Investment and Setup Costs: What Sanjo needs to pay upfront (legal fees, marketing, logistics, training, etc.)

• Sales Forecast: How many sneakers Sanjo expects to sell in the first year and how much they will earn from each sale

• Projected Revenue: Total earnings for the first year (and optionally the second year to show growth)

• Expected Operational Costs: Ongoing expenses like distribution, marketing, and communication with the local partner

• ROI – Return on Investment: How profitable the expansion is expected to be

• Risk Analysis: What could go wrong and how Sanjo can prepare for it

• Summary and Financial Recommendation: A clear answer to whether Sanjo should move forward with the plan or not

By analyzing each of these parts, we will be able to determine whether Sanjo’s market entry into Canada is financially realistic and how it can be achieved in a cost-effective and sustainable way.

Summary and Financial Recommendation:

After conducting a detailed financial analysis of Sanjo’s potential entry into the Canadian market through a strategic alliance, the results suggest that this move is not only financially viable but also strategically smart — especially for a brand that is still in its early stages of international expansion.

To begin with, Sanjo’s initial investment is estimated to be between CAD 50,000 and CAD 85,000. This includes important setup costs such as legal and consulting fees, customized marketing for the Canadian audience, translation and packaging adaptation (especially for bilingual provinces like Quebec), partner training, and shipping costs from Portugal. Although this may sound like a large investment for a first step abroad, it is actually a modest amount when compared to the costs of setting up a physical store or wholly owned subsidiary.

When it comes to sales potential, our base scenario predicts 5,000 pairs of sneakers sold in the first year, generating approximately CAD 227,500 in revenue. Even in a more cautious scenario, selling just 3,500 pairs would still bring in around CAD 159,250, which means that most — if not all — of the initial investment could be recovered within the first 12 months. With an expected ROI of over 116%, Sanjo would not only break even, but would more than double its initial investment, assuming the market responds positively.

This positive outlook is supported by Canada’s strong market conditions: the country is known for being open to international brands, it has a stable economy, a growing interest in sustainable fashion, and clear legal structures that make business partnerships easier. Thanks to the CETA trade agreement, customs duties are mostly eliminated for EU products, which lowers entry barriers significantly and helps reduce product pricing for consumers.

The choice of strategic alliance as the entry mode is especially suitable for Sanjo. It allows the brand to share costs, knowledge, and responsibilities with a local partner who understands the Canadian market, culture, and customer behavior. At the same time, Sanjo keeps control over its brand values — particularly its identity rooted in Portuguese craftsmanship and sustainability.

Of course, like with any international venture, there are still risks. For example, if the local partner underperforms, or if the EUR/CAD exchange rate shifts unfavorably, Sanjo might face challenges in terms of revenue or operations. Additionally, if sales projections are too optimistic, the brand could be left with unsold inventory, which would increase warehousing and discounting costs. However, all of these risks can be minimized by starting with a small-scale, test-phase launch, careful contract planning, and ongoing market monitoring.

Recommendation:
Based on all the financial projections and potential risks, the recommendation is clear: Sanjo should proceed with entering the Canadian market through a strategic alliance. However, it is advised to start small — with limited product volume and a modest marketing budget — to test the waters. This way, Sanjo can gather market insights, build brand awareness, and develop relationships with Canadian consumers, without risking too much capital.

If the first year proves successful, Sanjo can then scale up operations gradually, increasing inventory, investing in larger campaigns, and possibly exploring physical retail partnerships or pop-up stores. With the right approach, Canada could become a strong and sustainable international market for Sanjo’s future growth.