International Trade Operations Management
Abstract
The international markets operate in different dimensions and some of the fundamental principles it employs include free and fair trade. Free trade is defined by allowing organizations to trade freely in their products without restrictions. Fair trade is providing viable conditions for marginalized manufacturers in the market to operate without being overstepped by others. The paper focuses on the tenets of fair and free trade and also puts into perspective the corporate strategies employed by companies in the international market and the inherent challenges.
It is an international market policy that intimates that governments should not restrict exports or imports. The North American Free Trade Agreement and the European Economic Area exemplify free trade. These agreements are established under the policy of open markets. The World Trade Organization is the policy maker that establishes the frameworks that guide international trade. However, it is imperative to note that most nations in the international system still employ the protectionist tendencies where they do not allow goods from external forces to infiltrate their markets (Eun et al., 2011). Essentially, such governments apply stringent rules for their markets protectionist propensities as a consequence of enhancing local employment and boosting domestic trade.
In some instances, while subsidies are imposed on exports, heavy tariffs are applied to the imported products. Free trade is built on the premise that goods that are traded on are not taxed in any jurisdiction, and neither are the barriers imposed to hinder their propagation in any economy. Consequently, the services that are offered under the free trade agreement are not supposed to be taxed under any circumstances (Blinder, 2008). Moreover, there should be no manifestations of distorting policies that hinder free trade. Ideally, laws, subsidies, tariffs should not be designed in a fashion that they only support other business entities. Additionally, free trade implies access to markets without any regulations. Consequently, there should be a free flow of information in all economies. The government or multi-national organizations should not employ monopolistic tendencies to further their agenda at the expenses of other business in the market.
Fair Trade
This is a social movement whose agenda is to assist producers and manufacturers in developing nations to trade under better conditions. Consequently, the fair trade is aimed at fostering sustainability. Free trade is established on the premise that exporters should be paid high prices. The movement also advocates for high environmental and social studies (Bowes, 2010). Free trade has a special focus on certain goods and products that are consumed domestically or imported from developing nations. Fair trade agitates for equity in the international markets through transparency, respect, and dialog. Sustainable development is a key principle that is propagated by the movement.
Essentially, it seeks to secure trading rights, promote workers in developing nations and improving conditions for the marginalized producers. Another area of agitation is the alteration of the conventional trading rules. Some of the rule and regulations employed in the international market further alienate some producers to the extent that they are disenfranchised in terms of sales of their products. The organizations that agitate for fair trade create awareness in the respective economies as a measure of compelling governments and WTO to reconsider certain obligations (Bowes, 2010). Trading of goods and services under this concept is aimed at promoting the marginalized entities to ensure they maximize their products. The absence of the tenets aforementioned is indicative of a system that does not guarantee free trade.
Products that are fairly traded
• Cocoa
• Tea
• Bananas
• Wine
• Honey
• Sugar
• Coffee
• Handicrafts
• Flowers
The firms that are engaged in the fair trade movement market the products. The organization's brand and put logos on the products that are supposed to be traded on before exporting them to various markets. Ideally, the fair trade organizations act as the major marketing firms for the products. For example, if the coffee is to be sold in a nation that has limited manifestations of fair trade, the marketing organizations engage in packaging and branding before marketing the product to the prospective markets. The cooperatives undertake to promote the products though the producers of the products have to pay certain amounts as fees. The money obtained is used by the organizations to market the products to the destination markets with relative ease. Exporting cooperatives operate under specific guidelines to ensure that they achieve the basic minimum in terms of marketing. Milk and milk products are not fairly traded products. In the recent past, milk and its products have experienced relative instability in the market. Pricing has been a major issue to the extent that most of the firms have been pushed to the periphery due to unfair market prices.
Corporate Management Strategy
Think Local Act Local
Producers and manufacturers should recognize that the needs of the local consumers are supreme to the other external entities. Case in point is that the domestic market is a major contributor to the well-being of a firm in terms of enhancing profitability index (Kapferer, 2008). Exporting products to global markets in inherent complex and faces some challenges. The sophistications in the external markets in terms of marketing diminish the productivity of the local manufacturers. Focusing on the local market provides leverage for the producers to make products without employing numerous resources in marketing the products. Most of the companies have been forced to rethink their corporate management strategies because of the inherent sophistications.
Challenges faced by organization’s foreign affiliates
The dynamics in the market is not a guarantee that the consumers need the global products. The global markets needed a wider segmentation strategy that targets certain areas of the economy. Such initiatives require heavy financing as a consequence of ensuring that the marketing needs are effectively met. Consequently, international affiliates are faced with a challenge of insensitivity to the markets. Volatility and the inherent instabilities in the market affect the essence organization’s competitive ability.
Recommendations
It is imperative for the firms to recognize that competitive edge can be established in any jurisdiction even at the local level. Organizations should consider the local market as the most viable option towards building a credible market portfolio. The essence of competition in the global markets cannot be overemphasized. Stiff competition in the global markets makes it difficult for companies to realize full productivity. In essence, it is critical for the institutions to confine themselves to the local markets where they can easily gain a competitive edge over other entities. Organizations must realize that the local communities are a credible force in enhancing the profitability index of firms. To this extent, companies should adequately execute their local production and marketing to ensure that they meet the consumers' needs in those jurisdictions.
References
Bowes, John (2010). The Fair Trade Revolution. London, UK: Pluto Press.
Blinder, Alan S. (2008). "Free Trade". In David R. Henderson (Ed.). Concise Encyclopedia of Economics (2nd Ed.). Indianapolis: Library of Economics and Liberty
Eun, Cheol S., Resnick, Bruce G. (2011). International Financial Management, 6th Edition. New York, NY: McGraw-Hill/Irwin.
Kapferer, J.-N. (2008). The new strategic brand management: Creating and sustaining brand equity long term. London: Kogan Page.
