The Export Strategy of Raw silk from China to Italy - Essay Example

The Export Strategy of Raw silk from China to Italy Recommendations Accessing market opportunities: entry strategy, cross-border collaboration and risk analysis There are several market opportunities for organisations engaging in international strategy. However, these opportunities have to take into consideration of the entry strategy, cross-border collaboration and risk analysis (Rivera-Batiz and Oliva 2003). This may help Xinmin to increase China’s export, which totaled to $3.5 in 2013. For example, when Jiangsu Xinmin Textile Science and Technology Co.

decide to export its products from China to Italy, it has to decide on the best entry strategy. For instance, the company may decide to use agents (Markusen 2004). This may increase the opportunity of accessing customers since most agents have direct contacts with customers (Tamer et al. 2009). They would make their work easier because once Xinmin enters into contract with the agent; the agent would help Xinmin in marketing its products in the Italian market. Currently Xinmin has annual sales of $80,000,000 and this means that this figure would increase if it engages the agents.

However, Xinmin may also decide to export its products through a distributor (Parboteeah and Cullen 2014). A distributer would just buy the products and sell them in the Italian market. In another dimension, since Xinmin has decided to also venture into textile and clothing business, it would be an added advantage for the distributor to help in marketing these products. This has an advantage of reducing costs to Xinmin since one the distributor buys the product, they decide on who to sell the product to and incur any other costs involved in the sale of the product (Hillebrand and Lewer 2010).

In regard to cross-border collaboration and risk analysis, Xinmin needs to look into the various ways through which its products enter into the Italian market successfully. There is a need to have a collaborative framework with the market segment and any other government requirements before entering into the market (Morgan 1997). A clear articulation of the risks involved should be looked at in order to design mechanisms that can help it to reduce losses and unnecessary costs. This would also help the company to improve free legitimate flow of its products.

In light of this, the company should have a clear border action plan that would help it in understanding the strengths, threats and opportunities of the Canadian market. This will also help the company identify security systems for its products. 2. Logistics, modes of transport and information technology In order for Xinmin to venture into the Italian market, Wujiang Canhua Imp. & Exp. Co., Ltd, which is mandated by Xinmin for its export and imports would focus on the transport system that can deliver its products safe.

In addition, Xinmin has been involved in technological improvement by using its 38 patent equipments mostly from Italy. This would help in producing high quality products for export. However, several factors must be considered in regard to the best transport means to use. For instance, Xinmin may decide to export its products to Italy by rail transport. For this mode, the company would have saved on extra cost of export if, for example, it opted to transport by air transport (National Institute of Industrial Research 2004).

This is because air transport is expensive than any other mode of transport. In addition, the company may opt to transport its products through shipping. This would also be considered ideal because it is cheaper. It would also be critical for the company to adapt some information technology that would enable it track its products while on transit to Italy. This would reduce unnecessary delays created along the way and if they happen to be, they can look for alternative means of transporting the products (Rauch 2001). 3. Ethical issues in strategic decision making When deciding on the best strategy to use in venturing into the Italian market, several issues needs to be considered.

For instance, the company must ensure that all legal frameworks including Chinese export regulations and Italian import regulations are adhered to without exemption (Ritzberger 2008). It would be unethical for the company to decide to use dubious means to evade paying taxes and other custom duties. This would destroy the image and reputation of the company and can also lead to loss of business which might be accompanied by legal cases. 4. Benefits and potential barriers to successful implementation of the future strategy If the strategy is fully implemented, the company will greatly benefit from it.

For instance, if the strategy becomes successful in enhancing Chinese and Italian business, the same strategy can be utilised for other markets that have similar or close characteristics as those of China (Twitchett 2002). However, it is apparent that certain barriers may emerge in its implementation. For example, either of the two countries may change the modalities of import and export operations with new regulations. In addition, there might be changes on the costs of transport method used, which might affect the business of the company in regard to its exports (Nanavaty and Datta 2007).

If the prices for transport increases or tax increase both locally and in the Italian market, then the prices of the silk will definitely go up thus affecting the volume of sales. 5. Benefits of trade and investment promotion Xinmin is capable of benefiting from trade promotion and investment tools when venturing to Italian market through ensuring that they have a driving force in the market. To begin with, the export business should ensure that China is able to access advanced technologies, material asses and intellectual properties.

Moreover, there should be improvement of regional trade in relation to international standards and business practices (Hanson 2010). Similarly, China should compel the world to use and embrace the supply of raw silk in order for them to reciprocate through financial and material benefits. Of importance to note is that being a sole exporter in raw silk, the trade and investment promotion is likely to be complex. The figure below indicates the volumes of output for Xinmin that stands a chance of increasing if it engages in Italian market.

002127:CH Advanced Stock Chart (2014) Source: Jiangsu Xinmin Textile. Retrieved from: http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=002127:CH 6. Export Strategies It is imperative to understand that exportation is more complex particularly when it involves exporting products to other countries. As such, there must be proper strategies to ensure that the export works effectively (MacLean 2006). Nevertheless, there are two crucial export strategies that have been used in export.

One strategy is the Pricing strategies that entails the changes of prices especially to exporters in order to woe or persuade customers into buying their products. The strategy is mostly used where competitor are few. On the other hand, there is effective marketing action plan which dictates that there must be planned stages in marketing to influence the growth of export sales. 7. Developing E-business It would also be indispensable for the company to engage in E-business in order to effectively market its products.

The company can utelise its website in marketing its products. Specifically, Xinmin can engage in online communication with other businesses such as transport companies, export agents and distributers to enhance its business operations (Topik 2006). This would ease its business operations in the Italian market. The company can also utelise its website to communicate with its product consumers. This helps the company to have necessary feedback that would help it to improve the quality of its products.

Background Chinas exports of natural silk merchandise in 2013 calculated $3.5 billion, up 3% compared with 2012 (ChinaDaily, 2014). Chinese raw silk volume recorded for 70% of world production, and 85% accounted for international export (China Silk Corporation, 2009). China Silk Corporation (2009) also shows that the Chinese silk fabric export volumes calculated more than 40 % of the global. China become a leader in international silk trade and gains a distinguished reputation worldwide.Italy is one of the biggest importers of silk merchandise in European countries.

Since 1997, Italy imported nearly 3200 tons of raw silk and more than 700 tons of silk yarn mainly from China (International Trade Centre, 1999). China is one of the largest economics international and a major trading partner with European Union (EU), and China is also an increasingly important political power. In December 2001, China joined into the WTO (World Trade Organisation) that asked for China to take brave reformations and liberalise major sectors of Chinese economics (European Commission, 2013).

Fabric Output in China, 2002-2011 (Unit: 100M meters)   Source: National Bureau of Statistics of China; ResearchInChina It is rather obvious to argue that has great impact in the growth of economies in the give countries. As such, economist have argued that trade has favour in relation to three aspects. Firstly, trade is able to increase the total amount of products available to the national population also known as increased consumption argument (Raia, et al.2012). Secondly, there is diversity of goods and service that are made available to the population also known as diversification argument.

Finally, there is stability in the supply and prices of goods and services that have been brought about by trade also known as stability arguments. Research on the assessment topic Firms engage in International trade can create value, there are three principal operating purposes that become the motivations for engaging in international trade: expanding sales,acquiring resources and reducing risk (Daniels,Radebaugh and Sullivan,2013a).When attempting international trade, a firm need to choose one of the fitting methods of operations, export and import are the most common methods of international trade (Daniels,Radebaugh and Sullivan,2013b).

Italy has been part of the European Union (EU) since 1958, as all members of the European Union, Italy adapts a common trade policy. Of importance to note is that International trade is characterized by trade barriers. As such, Xinmin should be in a position to understand both illegal and legal trade barriers (Bade and Johnson 2010). Moreover, been an export company and the largest one in the world, it is crucial that it conforms to the EU and other trade barriers that are capable of making the exportation deals.

Consequently, any restriction or barrier that may occur during exportation should also be dealt with appropriately. Apparently, the international trade is one the most crucial trades in the global economy with numerous countries involving themselves in the trade in order to improve the current and future economies of their countries. Furthermore, the rationale underlying the relationship between international and economic theory argue that there must be export of goods and services so as to ensure there is sufficient revenue for the importation of the same.

Argument against the recommendations The indirect exporting strategy while not as profitable as direct exporting, indirect export produces fewer demands (Daniels, Radebaugh and Sullivan,2013c).In addition, indirect exporting may expensive because of high distribution costs. Arguments in support of the Recommendation(s) Indirect exporting is usually a transition phase by means of which the beginner can get awareness about international customers and rivals. Implementation of Recommendations The recommendations can be implemented in different phases.

However, it is crucial to research on the most indispensable recommendations that the company should start with. For instance, it would be critical to first start by researching on the market structure of Italy. Then, the company can investigate the laws governing imports and exports. As time goes by, the company can decide to implement other issues such as E-commerce. Appendix 1 Consistency with Company’s strategic objectives Signature and Date: (08/04/2014) Bibliography: Bade, D. and Johnson, T., 2010. Export/Import Procedures and Documentation.

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