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Tapping into New and International Markets

University: Regent College London

  • Unit No: 8
  • Level: High school
  • Pages: 9 / Words 2361
  • Paper Type: Assignment
  • Course Code: N/A
  • Downloads: 264
Question :

This sample will let you know about:

  • What is International Markets?
  • Discuss Advantages of imports.
  • Explain the differences between merchandise and service imports and exports.
    Answer :
    Organization Selected : N/A

    INTRODUCTION

    In today's international environment, almost all businesses and organizations want to expand their business operations within international market. Currently the latest technology is most supportive aspects to the businesses which help in enter the new market. New technology has reduced many barriers within various industries, it is the main reason behind last statement. Nowadays, there are great opportunities available to the companies for achieving effective profit by expanding their operations in global market. This report will discuss various aspects of international or global market for SMEs using case example of Prufrock Coffee, small and medium coffee retailer situated in UK, which specializes in the production of different flavours of coffee. There are different opportunities and threats of global market which will also be discussed in this report. These opportunities and threats will impact small businesses in both terms i.e. positively and negatively when they enter the global market. The various Advantages and disadvantages of exporting and importing will also be included in this report. There are various methods available to SMEs like Prufrock Coffee which helpful in tap into global market.

    Determine the advantages and disadvantages of importing and exporting and how to secure a deal

    Foreign trade is conducted by means of imports and exports which facilitate the exchange of goods and services between countries. Import is the process of purchasing foreign goods and bringing them to one's country, while export is the process of selling local goods and services to foreign nations. Different countries have distinct legal processes thus if Prufrock Coffee takes decision to import and export then it must follow in order to import/export goods even depending upon the target destination (Yüksel and Zengin, 2016). But in UK, Prufrock Coffee will required to undergo various basic processes involves procuring an EORI number, TARIC code, SAD documentation from HRMC, licences, custom clearance formalities, Letter of credit, insurance etc. As no nation in the world can remain self-sufficient in the digital age, imports and exports are invaluable for country's functioning and growth. Take online assignment help in UK from the Experienced Experts at the best price.

    Advantages of imports

    Imports provide countries with access to best, newly developed technologies, quality goods and services present in the world. Import will also facilitate cheap resourcing of raw materials for Prufrock Coffee by procuring them globally, decreasing the market cost of products, raising sales. Imports also introduce new and unique products of Prufrock Coffee into the market forcing local industries to innovate.

    Disadvantages of imports

    However there are several disadvantages associated with importing. Most imported foreign products serve as competitors or substitutes to locally produced goods and may cause Prufrock Coffee to lose business or in extreme cases result in collapse of domestic industry. Amount of goods imported also has a direct effect on a country's foreign exchange reserves. Imports also repress local manufacturing and may result in inflation.

    Advantages of exports

    It generates huge employment opportunities as industries work towards expanding production to export goods (Boar, Iovanovici and Ciocarlie, 2017). It also greatly influences a country's cultural and economic development.Exports also help rid businesses of excess production by providing them with a foreign market to sell in, instead of incurring losses by giving deep discounts on excess products.

    Disadvantages of exports

    Although financially profitable, exporting a country's depleting resources such as oil, minerals, gold etc. will ultimately result in the exhaustion of the nation's valuable resources. Exporting can also make local businesses lose focus of their domestic customers and market.

    Recommendations

    Exports of exclusive range of Prufrock Coffee can help them to generate revenues, while importing raw materials from Europe at no tariffs can decrease their input costs and increase product quality. Export will increase total market share of Prufrock Coffee, as foreign markets can now be captured, making businesses less dependent on any single sector and increases a country's foreign exchange reserves. However with export Prufrock Coffee must also assure that quality of exported goods meet global standards as failure to maintain them can result in negative reputation of country's products in global markets.

    Explain the differences between merchandise and service imports and exports

    Merchandises are physical, tangible goods and their manufacturing industries are called merchandising businesses such as retail clothing, book stores, car showrooms, grocery stores etc. Some merchandising businesses manufacture the goods themselves, while others purchase and sell goods wholesale, or a combination of the two approaches. On the other hand services constitute other people undertaking tasks which provide value to customers by achieving customer set objectives and the organizations that provide said services are called service businesses such as schools, hospitals, law firms, hair cut salons etc (Oum, Wang and Yan, 2019). Some service businesses can also sell goods for example hair cut salons selling shampoos, conditioners etc. but they primarily generate revenue by providing their services to others.

    Merchandise importing is the process through which foreign goods and products are purchased and brought into a nation for its use or further trading purposes. While, merchandise exporting is the process through which local goods are sold to foreign countries. Both merchandise imports and exports are done to maximize profits and enter into foreign markets. Alternatively, service imports and exports are the processes through which services are exchanged between two or more countries or between an individual and a foreign country. They both generate international earnings by only trading in services. The organization or individual that receives payment in exchange for service provided is making a service export, while the organization or individual that makes the payment is making a service import. For example when an African family tours London and books a hotel to stay at, the hotel becomes service exporter and the family becomes service importer. Worried for Marketing Essay Help ? Get our experts Help Now!

    Different methods SMEs can follow to come into international market.

    Prufrock Coffee should look into three basic factors before entering international market, i.e., which market to enter, when to go that is correct time for entering, and the scale. A firm can enter market at large or small scale depending on the commitment a firm wish to have. Exporting, Licensing, Franchising etc. are some methods by considering which SMEs can enter into international market and highlight their presence (Dominguez, 2018).

    Exporting

    it is considered to be the first step of launching oneself in international market. In future there are several scopes of expansion on this platform. Exporting is most widely accepted strategy as can be followed even when company lacks resources and doesn't have sufficient knowledge and experience.

    Turnkey projects

    It is a project where two organization or firms are responsible for putting up a plant or equipment is regarded as turnkey projects (gilli, gunkel and nippa, 2018). Among the two firms, first possess the resources needed for production and other have technology to proceed with the production. SMEs which are part of construction, metal, chemical and pharmaceutical tap international market this particular strategy.

    Licensing

    This is an arrangement where licensor permits the right over non-physical property to another company for a specific period in return of a loyalty fee from the licence. This sort of agreement is common in pharmaceutical industry.

    Joint ventures

    When two or more independent companies work together, they form a joint venture. Both the firms’ shares revenues cost and jointly control of the new firm. The strategy is seen as very viable business as individual companies involved can tribute their skills and make international presence. All the agreements in the venture are stated in contract with proper mention of role and kind of participation of individual firm.

    Wholly owned subsidiaries

    In a wholly owned subsidiary, organization owns 100 percent of the goods. There are two ways to shine in international market by using this entry mode, either by setting up a new project/firm/ in the host country often mentioned as Greenfield venture or by acquiring established organization in the host nation and use it for promoting products. This is the most expensive method of going abroad. A firm can wholly buy enterprise in the market it is willing to expand.

    Recommendation for Prufrock Coffee to enter into new market

    The above choices for entering into new market are not feasible from cost and risk factor. Thus cafe can choose franchising option. Franchisee involves long term commitments. It will involve getting rights from Prufrock Coffee which allows receiver to do particular business activities such as selling the good or service on the name of Prufrock Coffee. Franchising is a specialized form of licensing which includes strictly going along with rules by franchisee. The rules cover what business activities to carry, how to carry, setting of physical space, etc. Selling the franchisee will allow Prufrock Coffee to receive royalty payment. If Prufrock Coffee enters international market at franchise model it can build a large presence worldwide in short duration of time.

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    Mention difference between methods discussed for SMEs to enter international market.

    Various methods discussed above have, their own pros and cones that has to be discussed so that respective Prufrock Coffee can choose which method to bring in practice to outshine as an international brand (Stoian, Rialp and Dimitratos, 2017).

    Method

    Advantages

    Disadvantages

    Exporting

    • Exporting avoids cost of manufacturing in the host company.
    • Most used strategy as it requires the least knowledge and resources.
    • Reduced cost of production can also be a disadvantage as it results in cheaper goods in the host country.
    • Exporting firms have to bear cost of transportation.
    • Addition of tariff barrier by the host country can make the method expensive.
     

    Turnkey projects

    • Useful method when foreign direct investment (FDI) is limited by the host country's government.
    • The contractor doesn't have long-term interest in the foreign country which affects it negatively if the country proves to be a bigger market for its business.
     

    Licensing

    • Enterprises which lack capital to production in abroad, this method can be useful for them.
    • Licensing prove limited control over production, marketing and methods used in the development and sale of the product.
    • There are limitations to the company's ability to synchronize planned moves across different countries by making profit from one.
     

    Franchising

    • Franchisee puts up great presence all over the world in short period and relatively includes low cost and risk in comparison to other methods discussed.
    • The most frequently faced problem using franchising is quality control (Kaul,2019). Quality must be the major goal when acquiring this method. Customer demands same type of services throughout the world wherever they go.
     

    Joint ventures

    • An organization benefits from the local partner's (of foreign country) knowledge of the place, culture, language, business and political system as in some countries joint ventures is the only way to tap international market.
    • This method can lead to conflicts and battle as no form control over subsidiaries both local and international is established in the relationship.
     

    Wholly owned stores

    • This mode of entry to international market reduces the risk of losing control over the competence.
    • Organization establishes a global production system with solid control over operations in different countries unlike licensing.
    • 100 percent share in the profit is gained by the firm in wholly owned stores.
    • It is the most high-priced method of entering international market.
     

    CONCLUSION

    In this report it has been analysed that SMEs before entering the international market have to make strong plan considering the three basic factors discussed in introduction which is the initial stage. Secondly, as per the description perfectly suitable method should be applied. Also, the method should be eligible with respect to the country the organization wants to enter in.

    In this report diverse information about the method has been provided with their suitable advantages and disadvantage which will efficiently help SMEs chose one among them and surpass all the difficulties and excel in their goal (Villar and Pla-Barber,2018).

    After this extensive study about different methods, it could be recommended that using exporting and wholly owned stored is a better option to launch a firm in international market considering there advantages discussed which indicates higher rate of success and lower risk of failure.

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