«International Trade: Developing and Export Strategy for an Organization» - Free Essay Paper

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International trade is a very rare activity because countries are trying to get maximum benefit from their own resources and production capacity. Yet, there are still many advantages of using the international scale and establishing partnership between economies. These partnerships are based on the comparative advantage, returns to scale, and consumer demand for variety. However, there are many reasons why developed economies may be engaged in the marketing activities with the developing economies. In response, the developing countries should seek more opportunities for entering the international market because they can expand their market base and enhance the economic development in general. When it comes to exporting activities, Bernand, Jensen, Redding, and Schott (2007) argue that “exporters are more productive, not as a result of exporting, but because only the most productive firms are able to overcome the costs of entering export markets” (p. 106). When trade policies encounter challenges, or transportation costs are reduced, the high-productivity firms can export products and survive, or even grow. In contrast, lower-productivity firms can fail in case they exclude the possibility of exporting. When it comes to the case under analysis, the international trade relationship can be established on the basis of comparative advantage theory, according to which the guarantee of heterogeneity is the major purpose of the trade.

Background

European countries are mostly developed economies and the analysis of these issues can be presented with the use of the in-depth evaluation of the production capacity of the developed countries, such as the United Kingdom, France, and Germany. In response, the developed economies should also be taken into consideration as promising markets and partners to ensure the European dominance. There are some products that are absent in certain countries. For instance, there is substantial lack of cereals in Germany. In the light of the trend of healthy dieting cereals, natural buckwheat is an inherent component of daily meals. Therefore, German economy can kill two birds and develop new trade relationships with the developing countries, as well as import new products for the new market. There are several benefits for both of the parties, which will be discussed. Nonetheless, exporting is also a good option for the developing economies, such as the Asian one. The company called Niranjan Deoras Productions located in India can become an effective candidate for exporting natural buckwheat and other cereals. Besides, it is also an excellent way for Germany to increase the range of products at the market. In response, the Indian company should develop an effective exporting strategy that would persuade the European country that these trade relationships are beneficial as well.

Research on the Assessment Topic

As it has been briefly mentioned above, the trade relationship between India and Germany will be based on the comparative advantage. It is evident that both Germany and India differ in their product flows, production capacity, and technological progress. Although Germany outperforms Indian economy in the technological sphere, its agricultural sector is poorly developed because such product as cereals is not manufactured. It has been assumed that agriculture in Germany is a small sector, which still continues to grow. But a great number of firms and businesses are currently in decline (Federal Ministry of Food, Agriculture and Consumer Protection, 2010). Therefore, establishing partnership with the Indian company will help to fill the gap with greater benefits for the German economy.

Currently, the company expands its market and creates partnerships with China, Serbia, Hong Kong, and Turkey (Niranjan Deoras Productions, n.d.) However, its boundaries can be extended by means of focusing on such developed economy as Germany. The point is that the identified countries specialize in the cereals production as well, and, therefore, the price for the export will not be high enough. The possibility to enter the European market should be considered because it can allow the company to increase its influence among other companies and enter the international level.

When it comes to Indian interest rate, it has been estimated that the country was recorded at 7.5 %. But its average interest rates equaled to about 6.69 from 2000 to 2015, reaching its highest rate in 2000 and the lowest in 2009 (Trading Economics, n.d.). However, the interest rate in Germany is much lower and equals to 0.05 %. The average interest rate was 2.35 from 1998 till 2015, reaching its highest rate in 2000 and the lowest in 2014 (Trading Economics, n.d.). The export activities at this point would be beneficial for India because it will have more foreign investments to their bank, which means that its currency will become stronger. In response, German economy could receive products at much cheaper price because the prices for the products are much lower as compared to Germany, where the government has to invest significant resources to develop an agricultural sector.

The company has already arranged the export relations with other countries and, therefore, it does not require loans. When it comes to buckwheat products, it has specific information about the price, packaging, and delivery of the products ordered. The company has an option of making inquiries online and, therefore, Metro AG could also learn more about the export of the product.

The buyer could be the whole sale distributors in Germany who deal with retail stores. For instance, Metro AG could become the major partner that would specialize in distributing cereals delivered by the Indian exporters (Metro Group, n.d.). Located in Dusseldorf, the company is considered an influential leader, which is famous all over the world due to a great number of brands.

In India, there is the Board for Regulation of Payment and Settlement Systems that focus on the new ways of carrying out payment procedures. The net settlement payment includes credit, debit, credit cards, national electronic funds transfer, and remittance facility schemes. There are also immediate payment services. When it comes to exports, the choice of electronic payment is more appropriate because it represents the safest method of money transfer. For exporting the goods, it is highly recommended to use electronic payment, which is much more suitable for the transfer operations.

The bank for the seller, the Indian company, will be the Export and Import Bank of India, which is likely to achieve the most beneficial results. In response, the German company can choose Credit Plus Bank that can also participate in payment transactions.

Since India is located far from Germany, ordering airplane flight is the most appropriate method of transportation. Therefore, it is essential to order cargo airlines. Choosing the services of TransAVIA export could be the best solution at the very beginning because this is the first export activity of cereals between India and Germany. These airlines will be the most promising because they can carry cargos from all over the world.

Documentations Requirements for Export Product and Entry Documents for Product

When it comes to the documents required for export in India, the attention should be paid to such documents as quality control inspection certificate delivered from the Export Inspection Agency. Since the exported good is a food product, this document is an obligatory condition. Furthermore, the shipping bill is also necessary because it is required by the custom authority. Shipping Bill can be of four types. In this case, the attention should be paid to Export duty certificate. There is also a list of other export documents required for the official Shipping Bill processing: GR forms for shipment, 4 copies of the list of products involved, net weight, quantity, and gross; 4 copies of invoice documents which include all relevant information about the above-mentioned facts and inspection/examination certificate (Indian Industry, n.d.).

Arguments against the Recommendations

Certainly, the cooperation with Germany could be a risky business because of the currency fluctuations and lack of guarantees on the part of the German retailers. However, these challenges can be overcome in case all documents and conditions are taken into considerations. Besides, there are many other producers of cereals, particularly buckwheat, which could capture the German market. At this point, there can be a risk of competition that will prevent the Indian company from entering the international market.

Arguments in Support of the Recommendation(s)

In fact, the proposed transaction has more benefits rather than shortcomings. In particular, India has more opportunities for producing buckwheat. The more customer demand it will have, the higher employment rate will be in India. Furthermore, it is a marvelous opportunity for exploring the European market and strengthening its position at the international market.

Implementation of Recommendations

The company focuses on the international markets and strives to expand its international relationship. Currently, it is engaged in the relationship with the Asian clients and, therefore, establishing partnership with German retailers could become a significant shift towards the development of a new economic infrastructure. Agricultural sector, therefore, could become pivotal in managing different financial and economic problems in the country. The exporting activities could also become a continuation of other contracts and partnerships in Europe, particularly in those countries whose technical capabilities are much higher. In response, the Indian economy could gain more experience in communicating and interacting with the developed economies. It could also become a change for an economic breakthrough.

Appendix: A Board Paper for the Indian Company

Dear Board of Directors,

The agricultural sector in India is well-developed, but it can be developed in a much more efficient way. Therefore, the necessity to enter the international trade relationship is a logical continuation of the economic development in India. It can be admitted that India is involved in the export activities in Europe, but not all countries cooperate with your company. Niranjan Deoras Productions could benefit from the partnership with Germany on the basis of comparative advantage. Specifically, Germany as a potential country to which the cereals could be exported is an appropriate choice. In fact, the emphasis should be placed on export-oriented growth policies. In particular, the countries conduct an analysis of their domestic economies for the purpose of entering the global supply change and gasping newly emerging markets. They are also aware of the importance of advancing the product quality. However, if some countries relocate their resources to more efficient activities, others would encounter challenges during such transformations. Hence, it is difficult to decide what kinds of export-oriented policies are the most successful ones. Nonetheless, the decision to enter export relations has many benefits for the developing economies because they can gain experience in quality management and international relationships.

There are many examples of economic breakthrough in the world, when developing economies have managed to capture larger market segments. To be more exact, some of these markets could provide more potential for economic growth, as well as open new economic and financial horizons. More importantly, the interaction at the international level can attract new investors that would gladly invest more money into the Indian economy. There are also potential benefits for the company in terms of quality management. It is well-recognized that the company should adhere to the quality standards at the international level. At the same time, these standards could be improved to increase the product competitiveness at the market. However, the company should get ready for additional inspection on the part of the buyer who will be concerned with the quality of the buckwheat and other cereals. In fact, Indian companies in general have a rich experience in interacting with other companies, but there is lack of experience in interacting with the European market, which could be much more demanding.

Furthermore, the attention should also be paid to the ethical issues. India and Germany are two contrasting countries with completely different cultures, worldviews and traditions. At this point, it is highly essential to take these differences into consideration and adhere to the ethical principles of conducting negotiations and financial operations. Ethical issues play an important role in establishing good trade relationships because they contribute to the overall climate in a business environment.

In general, the export strategy proposed for the Indian company has a number of benefits because of the specific product it is going to transfer. The company has a good reputation and the pricing policy is beneficial as compared to other producers. Besides, after entering the international market, the prices could also be reduced because of the necessity to sustain a competitive advantage. Other than that, the company could solve problems through business conferences and negotiations of the terms of delivery, supply, and shipment. All these aspects are also beneficial because the product packaging ensures a long term of its preservation. Finally, the product is likely to be in high demand among Germans who can rarely find organic cereals in their retail markets. This will be a win-win solution for both parties of the exporting activities.