Board Paper of GURU Traders

Transcription

1 Board Paper of GURU Traders Prepared by: Shree Hanuman Industrial Estate, Unit No 210 / 211, 2nd Floor, G.D Ambekar Marg, Wadala, Mumbai Maharashtra,India Phone: / Fax: info@gurutradersindia.com Website:

2 Paper Reference : Student ID No : Date of Paper : 15/06/2012 Title of Paper : Board Paper of GURU Traders 2 P a g e

3 BRIEF SYNOPSIS OF THE ISSU UE REGARDING GURU TRADERS International trade can simply be defined as the process of exchanging goods, services and capital through international borders or territories. There are many theories developed under this international trade. Some of them are Adam Smith s model, the Heckscher-Ohlin model, Ricardian model, specific factor model, Gravity model and new trade theory. (Jenny,Martinez,2012). Although there are many models developed for international trade, most of the today s nations practice more than one of those models. This context of international trade can be explained using GURU Traders which is one of the garment exporters in India which was being involving in this field for around 39 years since GURU Traders can be identified as a well-known textilee exporter in India which exports textile items ncluding Ethnic garments for ladies and men, Sarees, made-ups, Jewelry and household linen. GURU Traders has well-established not only in the Indian domestic market but also in the global markets such as UK, USA, Africa, New Zealand, Central Africa, Fiji and Pacific Island. The actual potential of GURU Traders to be succeeded in the UK market is presented in this paper here onwards. When we consider a country like India following are some of the reasons for engaging in international trade; ( Krugman, Maurice Obstfeld,2011) 1.Not having all the resources that India needs within its own territorial boundaries in India. 2.Not having a properr technology for producing some goods 3.It is less cost to import a certain product than producing it in its own locality. 4.Ability to access an unlimited market space 5.Not having a specialization in producing 6.Lower production cost in one country or region than those in another. 7.Lack or surplus of natural resources. As there are many reasons for a country to deal with international trade, those countries involve in international trade based on either absolute advantage or comparative advantage.

4 Whatever the advantage they have based, the simple thing that they do is producing the goods that are less cost and importing the goods that are high cost to produce within their country. Recommendations When analyzing all the above mentioned facts and situations, the following recommendations can be made for the success of GURU Traders in the textile market in UK. Identifying the actual customer preferences of UK customers and modifying the products of GURU Traders in order to address those needs and requirements. Using a well-balanced product portfolio in Garments for exporting with some diversifications in ready-made garments Selecting foreign agents and distributors wisely. Modifying the ready-made garments in GURU Traders according to the changing global customer preferences. Utilizing the most effective and efficient logistics methods that reduce the transportation cost and then increases the profit margin. Identifying future trends in the field of garments and fashion and changing the products in GURU Traders in accordance with those trends in the market. As GURU Traders established in India which is mainly involved in agricultural sector, it can easily collect raw materials such as cotton at a low price and this will result in reducing the operational costs in GURU Traders. Using the options such as market researches and customer insights for recognizing the dynamic customer preferences and buying patterns and developing products for fulfilling those than the competitors do. 2.0 Strategies Used By Firms to Avoid Trade Protection When a country is dealing with international trade, there are many barriers related as well as its advantages. Sometimes these may be tariff barriers or non-tariff barriers. Here non-tariff barriers include government rules or regulations, dumping, quotas, foreign exchange controls, and subsidies. Tariff barriers are the tax imposed by a nation upon certain goods which are exported from or imported to a certain country. (Jenny, Martinez,2012) 4 P a g e

5 This situation can be explained using GURU Traders a real world exporter in India as an example. As an example, when there are these kinds of tariff and non-tariff barriers, GURU Traders has to use certain kinds of adaptive technology for facing those barriers. Some of those kinds of techniques are; By putting these kinds of protective/adaptive techniques into action, firms like GURU Traders can be protected from trade protection instruments (trade barriers). 3.0 Export Strategies Exporting can simply be defined as the process of shipping goods to another place or country. Therefore each and every exporting company should have a well-organized exporting 5 P a g e

6 strategy in order to be succeeded in exporting. As an example this strategy in GURU Traders may be based either on direct selling strategy or Indirect selling strategy. Direct selling involves exporting or selling goods through distributors, sales representatives or agent who are located out from the domestic region. Firms sell their goods to these intermediary parties directly and then those intermediary parties are selling those goods in their countries. Sometimes GURU Traders can do this direct selling through the internet. Whatever the mode that GURU Traders uses for direct selling, it should confirm the size and the capabilities of the distributor, product mix, promotional strategies and facilities and equipments associated with direct selling. (Krugman, Maurice Obstfeld,2011) Indirect selling involves the process of merely selling the goods to a domestic intermediary party and then that intermediary export those goods to the customers who are in foreign countries. In either direct or indirect selling, following exporting strategies will be helpful for GURU Traders to achieve its success. (Ralph, Michael,2001) Market Opportunities for GURU Traders A company like GURU Traders which has involved in exporting textile items for international or global market has more business opportunities rather than a company which is focusing only on the domestic market. Simply global or international marketing means doing business in a global or worldwide scale taking the advantage of regional differences in operation, resources and opportunities. (Ralph, Michael, 2001) As an example, if GURU Traders wishes to enter into the UK market, it has to consider many other factors associated with it. One of those major factors is the huge competition prevailing in. This competition occurs because of the reasons such as impact of wellestablished global companies, the accelerating pace of changing the market, market becoming more integrated and technological advancement. In today s context completion from countries like China, Malaysia, Brazil and Hong Kong to the international market is being increased rapidly. However this competition eventually relies on consumers favorably by delivering a superior value to them. (Jenny, Martinez, 2012) Another factor that affects the trades of developing countries such as India is the conflicts associated with trade agreements. Some countries or regions which produce the same good or 6 P a g e

7 similar goods with little differences tend to make some trade agreements regarding their production or volume of their supply. These kind of collaborative agreements make a huge impact over the international market because of their ability to influence a large amount of the global demand. As an example OPEC which is the collaborative organization established by the petroleum exporting countries makes a considerable impact over the oil market in the world. As they are supplying a huge amount of the global demand, they have the sole ability to increase the price or reduce the quantity supplied as they wish. In this context small businesses which accountable for a very small proportion in the global demand are unable survive in the market because of this kind of collaborative agreements. ( Krugman, Maurice Obstfeld,2011) At the same time there is a huge risk associated with the UK market. This happens because of the infinite amount of the buyers and sellers in the market. Therefore there is a high risk associated with maintaining the market share. In this context GURU Traders should try to change their products in accordance with the dynamic preferences of the global customers. Logistics, Modes of Transport and Information Technology In the context of GURU Traders, there should be a good transportation mode that facilitates the international trading of GURU Traders. This international logistics deal with production of materials management, distribution and circulation of transportation. Some of the modes that can be used in GURU Traders for international trade are Shipping, Air cargos and Currier services (such as DHL, FEDEX). As this transportation is unavoidable in international trade, it essentially adds an additional cost to GURU Traders. Therefore when selecting a logistic method for GURU Traders, it should be a less cost and effective one. (Jenny,Martinez,2012) At the same time there should be a good source of information for GURU Traders in order to succeed in the UK market. As the customer s preferences and technology is changing very quickly, information technology plays a vital role in supplying those updated information new trends to the parties who require that information. This updated information essentially increases the potential of the exporter and importers by conveying them to the right direction. Here United Nations Global Trade Point Network ( ), International 7 P a g e

8 Trade Administration ( and Trade Information Center (TIC) can be identified as the useful and updated information sources for GURU Traders. Ethical Issues in International Trade Although there are many economical advantages in international trade, there are some ethical issues that all the countries and organizations should pay a greater attention. Most of the Developing regions such as South-East Asia and Africa export their agricultural products as primary goods to developed countries. As an example GURU Traders produce garments which can also be considered as a primary product. But when those primary products come back to India as secondary products, they have to pay a huge amount of money over them. Therefore there should be some mechanism to reduce this huge burden over the developing countries which export agricultural product as primary products. At the same time most of the developing countries such as India thinks that international trade is a good solution for the economical problems in their countries. But the thing that is happening practically is they are highly exposed to the competition of the developed countries. As the developed countries do their production in large scales and using machine intensive methods, the production costs of their products are very lower than those in developing countries. Therefore firms like GURU Traders in developing countries are unable to compete with those goods because of this cost difference. Therefore there should be an involvement of an international trade organization such as the World Trade Organization (WTO) in order to reduce this unfavorable effect over the developing countries. ( Krugman, Maurice Obstfeld,2011) Another ethical issue is Dumping in which most of the developed countries which produce certain goods with economies of scale put their goods into the markets in developing countries at a price which is less than its production cost. This will result in creating a huge disadvantage for the domestic producers such as GURU Traders which are in developing countries and they will be unable to sell their good because of this process of dumping done by the developed countries. Arguments against the recommendations 8 P a g e

9 Arguments for putting the above recommendations into action can be summarized as follows. When GURU Traders is involving in diversification its garment products, obviously it will create an additional cost for the firm and eventually will reduce the profit also. For evaluating and selecting the most appropriate agents for selling its goods in UK, GURU Traders have to establish a separate mechanism and this will expand the administration activities of the firm. If GURU Traders wishes to expand its market portfolio by exporting products to several countries and regions, then it has to use a comprehensive transportation and informational system for serving such kind of a geographically separated market space. Arguments for supporting the recommendations Following facts supports the above recommendations. When GURU Traders is dealing with market diversification, it will reduce the risk because if GURU Traders was failed in one market that loss can be covered using other markets that are still profitable. If GURU Traders produce goods according to the changing needs of the customers, it will give a distinctive competitive advantage for GURU Traders in the market. Because of the geographical conditions in India, GURU Traders can use its own cultivation of cotton which is one of the major raw materials of their garment products. This will be less cost rather than purchasing that cotton from outside suppliers. Implementation of Recommendations For the proper success in implementing the recommendations, following facts will be helpful. When GURU Traders is involving in product diversification and expanding its exports, it should have the ability to bear that production volume within the production capacity of GURU Traders. As GURU Traders involves in the field of garments and fashions which is closely attached with number of ethical and cultural issues, a greater attention should be paid on those actives not to harm the social and cultural norms of the society. 9 P a g e

10 Signing of Board Paper Chief Executive Officer Date References Van den Bossche, Peter (2008). The Law and Policy of the World Trade Organization - Text, Cases and Materials. Maastricht University: Cambridge University Press Paul R. Krugman, Maurice Obstfeld and Marc Melitz,International Economics (9th Edition)(2011) Ralph H. Folsom, Michael Wallace Gordon and John A. Spanogle,International Trade and Economic Relations in a Nutshell (In a Nutshell (West Publishing) ( 2008) James R Markusen, James R Melvin, William M Kaempfer and Keith Maskus,International Trade: Theory and Evidence,(1994) Maritza Manresa,How to Open & Operate a Finanacially Successful Import Export Business: With Companion CD-ROM, (2010) Ralph H. Folsom, Michael Wallace Gordon and John A., Jr. Spanogle,International Business Transactions (Hornbooks),(2001) Jenny S. Martinez,The Slave Trade and the Origins of International Human Rights Law, (2012) 10 P a g e

11 international Trade Administration (U.S.),Basic Guide to Exporting: The Official Government Resource for Small and Medium-Sized Businesses, (U.S.) ( 2011) Leefrancesemery. The importance of international trade. [Online]. Available from: [Accessed on: 10th June 2012] Moneyinstructor. Importance of international trade. [Online]. Available from: [Accessed on: 10 th June 2012] Nber. Firms in international trade. [Online]. Available from: [Accessed on: 10 th June 2012] 11 P a g e