Perspectives on International Trade and Finance - Case Study Example

Perspectives on International Trade and Finance Executive summary International trade approaches has become an inevitable venture among various multinational companies. For this reason, several countries are striving to reduce trade blocks with the aim of easing the process of international trade. “Nike Inc. is an international company based in the United States of America that deals with importing and exporting sportswear and equipment” (Smith, 2002). It is the chief manufacturer of sports attire and equipment in the world. Nike Inc. imports footwear from outside countries. Examples of countries that Nike Inc. imports the products from include those in parts of Asia and Taiwan. These products are imported to the United States after which further processing is carried out before exporting them to international markets. These processes involve strategies and marketing processes worth researching. This paper discuses import and export strategies of Nike Inc. that has made it successful in its business gaining fame as a leading multinational company in the world. Table of Contents Executive summary 2 Introduction 4 Import and export strategies 4 Labor specialization 5 Global competitive rivalry 5 Diversification of operating risks 5 Trademarks and patents 6 Product’s Market Potential 6 Brand image and reputation 7 Consumer preference in receiving country 7 Technical innovation 8 Evaluation, promotion and product authenticity with consumers 8 Compliance to the code of demeanor, native laws and ethics 9 Concentration of retail market share 9 Tax laws and unexpected Tax liabilities 9 Conclusion 10 Perspectives on international trade and finance Introduction International trade consists of exporting and imports. Import and export ventures have gone up for the last few decades because of the ever-declining trade barriers between nations, improved transport and communication systems and improved trade security making importing and exporting processes efficient. This paper focuses on the reasons why firms export and import with an insight into the strategies employed in exporting and importing goods. It will also seek to give an understanding of the processes involved in exporting and importing. Finally, the paper will discuss steps followed in designing import and export strategies and associated processes. This paper mainly borrows the ideas of import and export strategies form Nike Inc. of the United States of America. Import and export strategies Domestic producers in a foreign country produce goods for export. The export of these goods normally involves permission from custom authorities in the producing country as well as the consuming country. There are many import and export strategies having differing level of risks and legal requirements. In order to get an insight into these strategies it is worthwhile discussing import and export processes. Import processes are of two types. These include: Trade and consumer goods and services Intermediate services and goods that form part of the consumer’s source chain. There exist three categories of importers: Those who seek for a product to import then later sell the same product. Importers who source for products at cheaper prices “Importers using external sourcing as part of their supply chain” (Zampetti, 2006). Labor specialization It is worth noting that importing products has advantages such as labor specialization which makes export to and import from countries efficient than manufacturing all products within a country. “A good example is Nike Inc. that buys shoes form foreign companies in Asia, Taiwan, Korea and China” (United States, 2007). Nike Inc. does so because companies in the aforementioned countries have the ability to manufacture shoes that are of high quality at low cost than they can do as Nike Inc. Global competitive rivalry Companies all over the world always compete for market superiority. “This competition spurs companies and industries to import goods of higher quality at a lower cost for purposes of boosting quality and lowering prices of their finished goods” (United States, 2007). Nike Inc. faces stiff competition with other athletic and leisure wears companies. This competition contributes to risk factors in its operations. The company adopts a strategy of ensuring production of export products that of high performance and reliability, marketing and promotions, customer support services and responding swiftly to consumer preference and taste. In addition, Nike Inc. adopts a strategy of marketing by contracting high profiled teams, sportsmen and women, coaches and sports confederations with the aim of marketing their products worldwide. Diversification of operating risks Corporations or companies import products from producer countries due to unavailability caused by under development or impeding policies. Importers and exporters through their activities spread their operating risks by seeking foreign markets to get products they want. In fact, many companies develop alternative sources of products by avoiding single sourcing or supply. Nike Inc. for instance cannot source for shoes from a single supplier in Asia alone because they will be vulnerable to risks of single sourcing. Trademarks and patents The use of trademarks and patents is a good export strategy. “A company, which endeavors to produce and export products, must ensure that all its products poses distinctive marks that readily identifies with the exporting company” (Smith, 2002). Nike Inc. fully utilizes this tool as a marketing strategy to create a steady market for their products and achieve a competitive advantage. The company uses NIKE and Swoosh Design trademarks in all their products. The company has registered these trademarks in over 150 jurisdictions protecting them against misuse from their competitors. Product’s Market Potential It is important to determine the market potential of a product for import. In this regard, several factors are considered. First, the potential market size needs to be researched. This will help the firm know the volume of good that the market can call for. Secondly, an exporting firm needs to know the customers and competitors in the market. This will aid in formulating marketing strategies to deal with potential competitors in the market. “In addition to these factors, the firm requires knowledge on details such as tax implications, duties and import quotas. Discount policies, licensing and delivery opportunities and expenses are some other factors that need consideration before importing goods” (Neto, 2012). Nike Inc. specializes in manufacture of products such as sportswear for sports men, women and children training. In addition, they offer action sportswear for athletics; basketball, soccer and volleyball just to mention a few. To ensure a steady market for export and import, the corporation undertakes the following strategies: Brand image and reputation A successful company should maintain a good reputation and brand image failure to which taints the company in a negative way. This is because a success of a company relies on a company’s ability to enhance their brand and quality of products. This further depends on design and marketing strategies and efforts as well as product innovation. Failure to sustain the image and reputation of the company, the products receive negative publicity, which negatively affects reputation, and brand image hence undermine customer confidence. Nike Inc. seeks to promote customer confidence by guarding quality brands and image through insightful maintenance, extension and expansion. “The company does so by adapting to rapidly shifting media environment such as increased use of social media and online dissemination of information” (Maneschi, 1998). Consumer preference in receiving country Net revenues and profit maintenance is maintained and increased through development of new products which are in line with consumer preference. “This is vital in future success of an importing or exporting company and therefore the company should identify, originate and anticipate trends in products and changing customer demands” (Luks, 2011). Nike Inc. endeavors to develop new products designed in a unique manner in style and category. They are also involved in aggressive marketing in export countries and within the United States of America. This way they are able to realize high sales and consequently high profit margins. Technical innovation Nike Inc. is devoted to technological innovations guiding designs and the overall manufacturing process of their products. This is important in maintaining their market size and commercial success. To achieve this goal, the incorporation invests heavily in research as a key component in realization of technical innovation. “Nike Inc. employs consultants in fields such as biomechanics, engineering design, and exercise physiology” (Lee, 2011). In addition, the incorporation has in place research committees charged with the responsibility of conducting market research for purposes of expansion. “There are advisory boards that comprise of former athletes, managers, coaches and other experts who are responsible for developing and operating performance of manufactured products by ensuring that they are up to the required standard and quality” (Baker, 2003). Through these efforts, a company maintains its customers and volume of products availed for transport. Evaluation, promotion and product authenticity with consumers A corporation that does not endeavor to preserve a working rapport with its clienteles may not live long enough to achieve its objectives. “It is therefore paramount to acquire the approval of eminent supporters in marketing its products. If backers fail to approve products of a firm as per the authorization treaties, the corporation development will drop drastically” (Grath, 2012). Nike Inc. understands the need to establish and uphold decent relationship with clients. The corporation particularly continues to identify with performance through its association with sports men and women. This is important because the corporation enters into cost effective ratification strategies with either prominent sports personnel. This results in increased sales of its products. The strategy works for Nike Inc. in all parts of the world promotion of its export volumes. Compliance to the code of demeanor, native laws and ethics Importing and exporting products involves working with several contractors in and outside the country. Nike Inc. works with large number of servicers to manufacture their goods. This means that the company requires licenses or permits that allow them work with such parties and manufacture of their products using Nike’s trademarks and patents. The license agreement requires the licensed to adhere to certain code of regulation on health, environment and safety of workers. “Nike Inc. is also keen on product safety and as such; the regulation requires compliance with the license agreement” (Fatemi, 1988). The corporation understands the importance of full compliance with the laws and standards as a compromise on them would mean a bad reputation of the company in markets abroad. Concentration of retail market share There is a need to consolidate retailers since this will increase market share in their respective countries. Nike Inc. deals mainly with few sportswear and equipment retailers with many stores. “These retailers have continued to expand Nike’s market share through acquisition and construction of more retail stores that call for more volumes of products” (United States, 2007). Tax laws and unexpected Tax liabilities Corporations and firms in the United States need to comply with income tax regulations and other foreign jurisdictions. Nike’s income tax rate may in future face adverse effects due factors such as changes in tax laws. To combat this, Nike Inc. does regular assessment of tax matters with a view of determining suitability of various tax jurisdictions and provisions. Conclusion In conclusion, imports and exports for a firm require a careful assessment of strategy. “It is important to know that firms or corporations such as Nike Inc. export in for various reasons that include among others: increase the amount of revenues, achieve economies of scale, lessen excess capacity of goods produced, minimize risk and market diversification” (Cohen, 2005). These are the reasons as to why exports should be encouraged. However, without a smart strategy, the process may deem to failing the company. The company intending to export or import certain items should design a strategy that assesses a company’s potential to export through export counseling and market selection before a final formulation of a strategy. The entry mode into export will depend on whether a company stands to gain strategically in company, market location and internalization of integrating transactions within the company. “When designing an import strategy an importing company requires undertaking, a critical look into procedures and strategy issues involved” (Baker, 2003).References Baker, J. C. (2003). Financing international trade. Westport, CT: Praeger. Cohen, B. J., & Kenen, P. B. (2005). International trade and finance: New frontiers for Research: essays in honor of Peter B. Kenen. Cambridge: Cambridge Univ. Press. Fatemi, K., & Laredo State University. (1988). International trade and finance: A North American perspective. New York: Praeger. Grath, A. 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