The Export Strategies of Ichitan Public Company Thailand - Case Study Example

ICHITAN PUBLIC COMPANY THAILAND by + Brief Synopsis of the Issue This business report discusses the export strategies of Ichitan Group Company Limited, a professional manufacturer of green tea from Thailand to London in the United Kingdom market. The company’s products are competitively priced in the international market. This is especially because the company happens to be the major supplier of green tea particularly in the Asian region. This is made even easier by the fact that the company has its own factory that does a complete processing of the green tea product. Of importance also is the fact that Ichitan company supplier green tea of very high quality. The tea is processed while it is still very fresh from the farm so as to give it a superior flavour. The company equally educated the farmers of the green tea on the best mode of farming the tea so as to achieve superior harvests. This therefore means that Ichitan Group stands a better chance of enhancing its export market. This is especially because of the great reputation that it has acquired across many countries in the world. It is also clear that the company manufactures maximum products with the use of low labor. This means that it can be able to immensely improve its profitability with the expansion of its international market to London. Recommendation Given the background as well as the theoretical analysis given below, the most appropriate export strategy for Ichitan Group Company Limited is the pricing strategy. One such pricing strategy is the sliding-down the demand curve pricing strategy. Under this, Ichitan Group will be required to decrease the prices of its green tea. This is very appropriate if there is no competitor. Ichitan being a major manufacturer and supplier of green, it is envisioned that it will not get any competition. This will definitely see it acquiring a quick market base. A company pursuing this kind of a strategy stands in a better position to quickly establish itself in a foreign market (Smriti, 2015). With this pricing strategy, a company can regain the costs that it invested in launching the new product in an overseas market while at the same time making a firm establishment in the new market. The express courier delivery can be the proper shipping mode of the products from the Ichitan Group to Thailand. This is because green tea is a perishable product and it therefore needs to be delivered to its destination promptly. Late deliveries of the product may occasion losses to the company. For this reason, an express mode of transportation shipping will be appropriate. Direct export strategy should equally be employed. This will make the Ichitan group to be in control of both its brand as well as the pricing of its products. Customer loyalty is also easily established with direct exporting. With a direct export, it is also possible to identify probable novel opportunities in the market that will help Ichitan Group to boost its sales of green tea. Background Ichitan Group Company Limited was first established in the year 2010. Its founder is one Tan Passakomnatee. Its company seat is based in Thailand. The company engages in the sale of green tea and double drink. It has four main products that are available for both the local market as well as the export market. These products are ichitan organic green tea, ichitan dragon black tea, yen yen herbal cooling tea and ichitan UHT green tea. Double drink was the initial product that Ichitan Group came up with when it was founded. The double drink is composed of a mixture of a unique Thai herb and a healthy drink. Through the employment of the yin and yang theory, it has been established that this drink leaves no chemical components on the consumer. The Ichitan Organic Green Tea has received wide-spread recognition that makes it unique in the market. The green tea also has a variety of flavors like honey-lemon, corn; sugar free, midori punch among others. Its brand stands the ever rising competition in the market. This is because the company has gone an extra mile in educating the green tea farmers on the best farming practices so as to achieve high qualities. Ichitan Company Group has a wide export market of more than twenty countries in the Asian continent. For example over the last two years it has been able to export more than two million bottles of green tea to more than fifteen countries globally. On an estimate, it intends to be exporting five million bottles of green tea to overseas markets. The company has been able to maintain its competitiveness in the market through the employment of various innovative ideas so as to improve efficiency in production. Through these innovative technologies, the company is able to make maximum gains while using minimum labor. The UK trade and investment offers custom-made, professional as well as influential help to companies whose business seat is situate in Thailand. This helps the companies to locate and flourish in the sale of their products in the UK. With this help, Ichitan group is assured of quick establishment in the UK market. The embassy of Britain that is based in Thailand ensures that the reputation of UK is constantly boosted as a place to conduct business (UK Trade & Investment, 2013). This creates a friendly business environment for companies to venture into. The embassy has also come up with a number of projects geared towards a large investment that Thailand makes in the projects and companies located in Thailand. Government support from UK is therefore a very significant tool that Ichitan Group, which is primarily based in Thailand, can make use. For effective implementation of this support, the UK government and Thailand have come up with various trade agreements. The most significant is the Free Trade Agreement between Thailand and the European Union (Brussels, 2013). This agreement is intended to primarily cover both the non-tariff as well as tariff barriers among other issues that are related to trade (Brussels, 2013). The amount of imports from Thailand to the European Union in the year 2012 was estimated at 16.9 billion pounds. Thailand is also the third largest trading partner of the European Union (Brussels, 2013). The free trade agreement will therefore be very effective in the trading relations of the two countries. A research conducted by Mintel (2012) shows that the Brits are having a growing fond of green tea. The purchasing rates of the green tea in the United Kingdom have been recorded as 83% over a period of the last two years. Unlike other varieties of green tea in the London market, it is indicated that green tea accounts for the biggest percentage which is roughly given an estimate of 70% (Mintel, 2012). This therefore puts Ichitan Group Company Limited at a better position of improving its profitability in the UK market. This is especially because of the high demand rates of the green tea in the UK. Trading with the UK in the sale of green tea is therefore a very noble idea for the Ichitan group. Research on the Assessment Topic A number of international trade theories exist giving an explanation as to why and how international firms engage in international trade. First, a firm would be interested in engaging in international trade so as to improve its turnover at its national market (Bohuslava, Lubos & Pavol, 2011). A national market is in most cases restricted by the customer base, the purchasing power of the customers, the quality of services or products as well as both internal and external competition. Therefore, if a firm considers to take part in international trade, it will them be able to increase its customers as well as their purchasing power. The firm will also be able minimize on the competition that it receives. International trade can equally be an eye-opener which can possibly make the company to come up with innovative ways of improves the quality of its brands. Secondly, firms engage in international trade so as to acquire resources. This would be through the use of the comparative benefits of the economies of their local nations. Thirdly, firms would engage in international trade in order to diversify their sales. A company or firm can diversify its sales by eradicating the turnover variations by a suitable scheduling of the sales of their brands at the national markets. Lastly, firms would engage in international trade in order to decrease the threat of competition. This can be done by making use of the relative advantage to amalgamate the economic situation of the firm. The use of this technique will improve the profitability of the firm. The firm will be in a better position to take care of the losses that are occasioned to it by the domestic market in its nation. The firm will therefore be able to keep up with the competition that would arise from both the international as well as the domestic markets. Various export related strategies can be put into use in order for a firm to flourish in international trade. The first is an effective action plan for marketing. It is important for a firm engaged in international business to examine its position in the market. After establishing its position, it can then establish appropriate objectives to gain the available targets in the market. Secondly, a pricing strategy can be used. This is especially important for new players in the market as well as for those firms that have few competitors that offer similar products like it does. The internet can equally be used by a firm to market its brands. This is because the world has been digitized and most people have access to the internet. A firm can therefore reach a wider market target through the use of the internet. Traditional marketing strategies like print advertising and billboards can also be used (Kimmons, 2015) There are various modes that can be used to access market opportunities in international trade. This can be through the use of business counseling and advocacy. A business counselor can give a firm effective means of accessing the market opportunities. Market research can equally be used to determine the cost-benefit analysis of accessing the international market. Trade events can be used to enhance the brand of a firm’s brands in the international market. Lastly, the firm can collaborate with other international partners so as to capture the market opportunities availed by the international market (U.S Commercial Service, 2008). There can be potential barriers to the successful implementation of the proposed export strategy. These barriers can be both regulatory as well as import constraints. This can make it difficult for the firm to gain access to the export market. Deficiency of satisfactory market research as well as the incapacity to acquire financing for the export of a firm’s products can be a barrier too (Barker & Kaynak, 1992). Exports can equally be impeded by the costs of transportation. Competition from both the international and local market can make the international trade quite challenging (Naidu & Rao, 1993). Lastly, Sholam and Albaum (1995) equally indicate that the rising awareness of products among the purchasers of the product in the export market can be a great barrier to the firm. The consumers of the products will have a variety of products to choose from and this will increase the competition. This can either make the firm to make profits or losses. Arguments against the Recommendation Despite the many benefits that a pricing strategy can bring to a firm, it can equally be a costly activity to take part in. First, there is the taxation risks involved in the foreign market. The products may attract high customs when crossing the international borders to London. This may mean that the company can spend a lot in its taxation purposes and this will rise the amount of investment that it will have to make. It may therefore lose its profitability in the process. Competition in the foreign market can equally be challenge. The company may lower its prices in a bid of getting an establishment and a customer base in the new market of London only for it to receive stiff competition. The stiff competition may have a negative effect on its profitability. Ichitan may also experience a low return on its investment in the initial years of establishment. Arguments in support of the Recommendation A pricing strategy is very effective for Ichitan Group in venturing into the UK market. The strategy will help to fashion an awareness of price and value among the consumers of the product. It is also easier to do away with competition with this type of a strategy. With a pricing strategy, Ichitan group is able to differentiate its products from those of its competitors. Setting apart its brand will allow the customers to identify the benefits associated with it which might outweigh the benefits of the brand of its competitors. An express carrier delivery strategy is also important so as to ensure that the green tea is delivered to the London market while it is still fresh. It also ensures that the green tea retains its unique flavor once it gets to its customers. Direct export strategy is equally good as it enables the suppliers of the product to establish a customer base and create customer loyalty for its products. Implementation of Recommendations The implementation of these recommendations will have to be consistency with Company’s strategic objectives if it will have to be efficiently implemented. The exporting documents required in international trade are an invoice, bill of lading and an insurance policy. The insurance policy is intended to cover the goods against any losses that may be occasioned to it in the course of transportation. The invoice represents the value of the goods while the bill of lading specifies the goods that have been shipped. All these documents are necessary as they buyer will pay for the goods against the documents. The currency to be used in the trade will depend on the agreement between the trading parties. The parties can agree to use the currency of the buyer or that of the seller. The parties can also agree to use any international currency which has a strong value in the market, for example the US dollar. The bank to be used in the trade can either be the issuing bank or the confirming bank. The issuing bank is in most cases located at the buyer’s country while the confirming bank is located at the seller’s country. A confirming bank is an advising bank that has undertaken to pay for the goods against the documents. The confirming bank is guided by the instructions given to it by the issuing bank. Anything done outside those instructions will be to the confirming bank’s own liability. Signature and Date: Your full name and date of board paper (DD/MM/YYYY) List of References Barker, T. & Kaynak (1992). An Empirical Investigation of the Differences between Initiating and Continuing Exporters. European Journal of Marketing, 26 (3):27–35. Bohuslava, M., Lubos, S. & Pavol, B. (2011). Firm incentives to engage in international trade. Slovensko Brussels, (2013). 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Important export pricing strategies used in international marketing. The Next Generation Library. UNCTAD, (2008). Globalization for development: The international trade perspective. Geneva: United Nations Conference on Trade and Development US Commercial Service, (2008). Accessing global markets is easier than ever. US: Department of Commerce UK Trade and Investment, (2013). Supporting trade and investment between the UK and Thailand. Thailand: British Embassy. Retrieved from https://www.gov.uk/government/priority/supporting-trade-and-investment-between-the-uk-and-thailand Read More