International Trade Closing Cases and Discussions

1.Developing Export Markets A recent survey by Babson College and the London Business School on entrepreneurship noted that middle-income countries have a larger share of individuals engaged in business ventures with high growth potential than high-income countries. The study also notes that these middle-income countries have higher percentages of people starting businesses. This is partly attributed to the deployment of existing technologies to exploit their comparative advantages. High rates of early-stage entrepreneurship, however, do not necessarily translate into high rates of established business. Rich countries such as Japan, for example, have low levels of early-stage entrepreneurial activity but a large number of established businesses. This is because the start-ups are opportunity-driven companies with lower rates of business failures than those in middle-income or poor countries that are largely motivated by the necessity to earn a living. In rich countries, there is also a tendency for entrepreneurial activity to shift from the consumer such as retailing to business services. Export of luxury tea from Argentina. During the worst financial crisis in Argentina (2001), three young entrepreneurs founded a luxury tea business with just $10,000. They focused on quality with a view to selling in high-value export markets. The bags are a hand-tied sack of muslin (which does not alter the flavor of the tea) containing one of five types of organic tea: cedron, black-leaf tea, peppermint, Patagonian rosehip, and mate, lightened for the overseas market. They traveled to different parts of Argentina to locate the best growers. After finding suitable suppliers, the partners agreed to create a premium product to be sold in up-market outlets and trendy stores. Over 75 percent of the output is sold in overseas markets: in the United States, United Kingdom, Continental Europe, the Middle East, and Asia. Over the last few years, the company has registered substantial increases in sales. The partners note that 1) exporting maximizes the benefits of selling from countries with weak currencies, 2) it is necessary to focus on quality materials, production, and packaging to charge premium prices, 3) high quality products should be sold in high quality outlets, and 4) it is important to disprove national stereotypes such as lack of punctuality, honesty, etc. with buyers and distributors. Exports by Rwandas nascent entrepreneurs. Rwanda is a small landlocked country with a population of eight million and located in the Great Lakes Region of East-Central Africa. Despite the legacy of genocide and war, the country is showing signs of rapid development. J. Nkubana, one of a number of women entrepreneurs, sells over 5,000 Christmas ornaments and baskets to Macys in New York. Another rising entrepreneur, Beatrice Gakuba, founder of Rwanda Floral, is the nations largest exporter of roses. She sells over five tons of flowers a week at auctions in Amsterdam. Exporters, however, face a number of challenges in Rwanda: 1) regular electricity outages resulting in lost productivity, 2) Rwandas landlocked status requires the use of ports in neighboring countries and this delays shipments and delivery of exports, 3) borrowing costs are high (17 percent interest on loans) and banks require 100 percent collateral. Public funding is almost non-existent to promote exports.

Questions 1.Comment on the statement that exporting maximizes the benefits of selling from countries with weak currencies.

2.Based on the information provided, what is your advice to the government of Rwanda to increase exports?

2.Strategies for Entering New Markets

A.Picking the right country Select a country that understands the value of your product Target a country with growth potential Start with homogeneous markets or markets of strong trading partners Target a country where you can sell at a competitive price

B.Understanding the overseas market Be flexible and open minded in establishing the needs of overseas consumers, i.e., unmet needs that can be satisfied by your product Determine the skills you require to meet customer needs Position your company to deliver superior value to your consumers Design products tailored to each market

C.Dealing with the competition Pick the right market segment Invest in product attributes that will keep you ahead of the competition Build an effective global supply chain

D.Enhancing capabilities Identify core capabilities that enables you to compete overseas Partner to augment your capabilities

E.Bridging the cultural gap Establish rapport before getting down to business Learn about societys concept of value, time, punctuality, taste, dress code, etc.

Question Think of any additional advice for the exporter who plans to venture into a new export market in Central America.