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Using key topics from this module, develop an export strategy for an exporter in a developing country of your choice for entry into the European market. Please choose a specific country in Europe that the product or products will be exported to even the UK as it is still part of the EU as of now. Also ensure that this firm is not already exporting this product(s) to that European country.

Write a Board Paper asking the board of directors of the chosen exporter to adopt and implement your proposed export strategy.

Your Board Paper should include an analysis of the proposed strategy taking into account the following issues:

.International trade theory: Why and how firms engage in international trade

.Approaches used by firms to adhere/avoid/bypass instruments of trade protection or to benefit from trade promotion and investment tools (at national, regional and global levels)

.Types of export-related strategies

.Accessing market opportunities: entry strategy, cross-border collaboration and risk analysis

.Logistics, modes of transport and information technology

.Incorporating ethical issues in strategic decision-making

Your analysis and recommendations should also consider the benefits and potential barriers to successful implementation of the future strategy.

Market for Cut Flowers in the United Kingdom

United Kingdom is one of the largest importers of cut flowers in the world with having consumption of more than € 2.5 billion per year. The annual growth rate of market for cut flowers is increasing at the rate of 25 percent per year (Cbi.eu 2017). As of 2015, the annual import of cut flowers in United Kingdom stands at € 182 million. This is due to the reason that the domestic supply of flowers such roses are being outnumbered by the growing demand (Larson 2012). Flora limited is an Indian organization operating in exporting of cut flowers to various countries. They are having competitive advantages due to the favorable weather and natural conditions for floriculture in India. Thus, it will be a huge opportunities for them if their products can be exported to United Kingdom.

Mode of entry

The recommended mode of entry for Flora limited will be direct exporting. This is due to the reason that, they are having expertise in exporting cut flowers in different countries (Gubik and Karajz 2014). Thus, for them, exporting directly to the market of United Kingdom will be easy and favorable. Moreover, the required weather and other natural criterions such as soil characteristics are favorable for floriculture in India. On the other hand, Flora limited may find it difficult to maintain their productivity in the different weather condition in United Kingdom. Thus, direct exporting will be the most favorable and effective market entry strategy for them in entering the market of United Kingdom.

Another market entry strategy that can be implemented as an additional mode with the direct exporting is the direct exporting. This will involve presence of various intermediaries such as trade merchants, exporting agents and importing agents (McCann 2013). With the help of this entry mode, the exporting opportunity for Flora limited will be more. This is due to the reason that, the export intermediaries are having more market data and information than the exporting organizations. Thus, flowers can be exported through them also in addition to the direct exporting. The initiation of these two market entry strategies will help to cover the market of United Kingdom effectively.

For the export of perishable items such as flowers, air transportation will be the only available option for Flora Limited. This is due to the reason that, transportation of flowers should be quick in order to deliver to the customers before they get rotten. Moreover, in the transportation of flowers, accurate temperature and preservation methods should be effectively maintained. Thus, the transportation process should involve less time consumption, which is not possible in any other mode of transport other than the air transportation (Schneider 2013). However, they should initiate intermodal transportation in order to effectively manage the logistics. This will involve using of railroads to transport the exported items from the air port to the logistics hub.

Recommended Market Entry Strategy

Flora limited for the importers will initiate letter of credit (L/C). It will help the importers in having the exported items without going for cash transaction (Wang, Chen and Peng 2013). Moreover, involvement of bank in the case of the issuance of letter of credit will further increase the security in the payment mode in the international business. They should also use cash in advance for payment options. It will reduce the risk of credit for Flora limited. Cash in advance will be received by credit cards and wire transfers. Bank transfers with the help of SWIFT code will also accept as cash in advance (Antras and Foley 215).

Flora limited is having diversified portfolio of flowers ranging from the tulips to roses. However in the initial stage, roses should be traded due to the reason that, rose is having the majority of the demand in United Kingdom. However, various variants of rose will be required for them in order to cover the major portion of the market in United Kingdom (Chang 2012). In addition, the product quality should be well maintained. In United Kingdom, cut flowers are being classified in various groups according to their quality and below a certain level of quality, it will not be traded. Thus, maintenance of the quality of the product should be of prime quality for the organization.

The global business market for cut flowers is rapidly growing with having enormous growth in the recent years. It is being estimated that, the cflower market only in the Western Europe crossed $ 12 billion in terms of sales. Colombia and Netherland are the two most flower producing countries in the world (Cbi.eu 2017). However, with having favorable weather and natural conditions and development of technologies and other resources, India is fast growing as one of the major contributors in producing and exporting of flowers. In addition, the cheap rate of employees and other resources such as fertilizers in India is acting as influencing factor for the growing trend of floriculture in India.

Flora limited is having another competitive advantage by having the access of huge agricultural land in India. Thus, mass production will be easier for them compared to other producers in different countries. The cheap rate of resources is further helping them in providing the products in the international market at much lower prices compared to other competitors.

Figure: 1

Global exporter of flowers.

Transportation Options

Theory of comparative advantage states the advantage being possessed by a country in terms of producing a particular product in less opportunity cost than the other countries (Cunat and Melitz 2012). India though is still far behind the market leaders such as Netherland and Columbia in terms of the market share, but it is having few comparative advantages over other countries. One of the key advantages that India is having over others is having vast availability of land for cultivation. This will help Flora limited in having more volume of production than any other organizations from different countries. Another advantage that they are enjoying over others is the cheap rate of labors. India is known for cheap labors. Thus, the cost of production will be lower compared to other countries.

As discussed earlier, United Kingdom is one of largest importer of cut flowers in the world. In addition, the growth rate of the flower market in United Kingdom is also much higher than that of other countries. From the below figure, it is been seen that the growth of flower market in United Kingdom is much higher than other countries.

Figure: 2

Growth of flower market in UK compared to other countries.

Yellow=United Kingdom

Blue=Other countries

Various legislation of European Union is there to get comply with to trade the flowers in United Kingdom. Stringent regulations are being laid out to prevent the emergence of harmful organisms (Potter 2013). Plant Health and Seeds Inspectorate is introducing various control and regulatory legislations. Flowers imported in United Kingdom have to be phytosanitary certified. The shipment and transportation mode should also comply with various regulations by National Plant Protection Office.

  • Transportation through airways will incur huge cost, which will eventually increase the price of the flowers in the market (Rushton, Croucher and Baker 2014).
  • Air transportation is having limited access in India and thus it will be difficult for Flora limited to effectively manage the various mode of transportation.
  • It will be difficult for Flora limited to effectively adhere to the stringent legislations of regulatory authorities in United Kingdom.
  • Initiation of export mode of entry will cause involvement of duties and tariffs to be paid (Nimenya, Ndimira and de Frahan 2012). In addition, it is very difficult to export perishable items such as flowers to another country.
  • There is a huge difference between the currency rates of United Kingdom and India. Thus, organizations from India will earn less due to the low valuation of INR compared to Euro.
  • Flora is having diverse range of flowers to offer. Thus, it will be easier for them to cover the market requirement of United Kingdom.
  • United Kingdom is the largest importer of flower in the world. Thus, it will be a huge opportunity for them to tap in this market.
  • Export mode of entry involves less business risk. Thus, associated risk in entering the market of United Kingdom will be less.
  • The market growth rate for flower in United Kingdom is increasing rapidly. Thus, the market potential is further increasing.
  • The export strategies will be effectively evaluated and the most efficient will be chosen in terms of the effectiveness.
  • Effective logistic model will be chosen. In the case of Flora, the logistic model will be: manufacturing > transportation > Warehouse > Port procedures > Air freight > Port procedures > warehousing > transportation > market.
  • In direct exporting mode, Flora will not have any selling agents in the host country. They will not take any responsibility of retailing. Their responsibility will end by transporting the items to the importers. It will help them in reducing the cost.
  • Documentation includes receiving the order id, letter of credit or cash in advance. Afterwards, the items will be dispatched along with bill of laden, bill of origin and required certification.

References

Antras, P. and Foley, C.F., 2015. Poultry in motion: a study of international trade finance practices. Journal of Political Economy, 123(4), pp.853-901.

Cbi.eu. (2017). Exporting roses to the United Kingdom | CBI - Centre for the Promotion of Imports from developing countries. [online] Available at: https://www.cbi.eu/market-information/cut-flowers-foliage/roses/united-kingdom/# [Accessed 19 Sep. 2017].

Chang, W.W., 2012. Monopolistic Competition and Product Diversity: Review and Extension. Journal of Economic Surveys, 26(5), pp.879-910.

Cuñat, A. and Melitz, M.J., 2012. Volatility, labor market flexibility, and the pattern of comparative advantage. Journal of the European Economic Association, 10(2), pp.225-254.

Gubik, A.S. and Karajz, S., 2014. The Choice of Foreign Market Entry Modes: The Role of Resources and Industrial Driving Forces. Entrepreneurial Business and Economics Review, 2(1), pp.49-63.

Larson, R.A. ed., 2012. Introduction to floriculture. Elsevier.

McCann, F., 2013. Indirect exporters. Journal of Industry, Competition and Trade, 13(4), pp.519-535.

Nimenya, N., Ndimira, P.F. and de Frahan, B.H., 2012. Tariff equivalents of nontariff measures: the case of European horticultural and fish imports from African countries. Agricultural Economics, 43(6), pp.635-653.

Potter, C., 2013. The WTO, free trade and the governance of plant health. Biosecurity: The Socio-Politics of Invasive Species and Infectious Diseases, p.123.

Rushton, A., Croucher, P. and Baker, P., 2014. The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.

Schneider, R.J., 2013. Theory of routine mode choice decisions: An operational framework to increase sustainable transportation. Transport Policy, 25, pp.128-137.

Wang, Y.H., Chen, S.C. and Peng, P.H., 2013. Applying service-oriented architecture to construct the banking letter of credit system integration. Int. J. Manag. Res. Bus. Strateg, 2(3), pp.68-82.

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