Strategy for Exporting Jasmine Rice in the UK - Essay Example

? Strategy for exporting Jasmine Rice in the UK Table of Contents Table of Contents 2 2 Export Strategy 3 Product Strategy 4 Business Process Strategy 4 Operations Strategy 5 Financial Strategy 6 Attractiveness of United Kingdom as an export market in 2020 7 References 9 Abstract A firm wishing to enter into export market needs to do a lot of feasibility studies and it requires extensive planning for the export venture to become a complete success. The first issue an exporting firm needs to look into is whether the product it wishes to export has certain unique selling points or not as that is the only sure shot technique of sustained success in foreign markets. This is more so since technological advances have made advent of substitutes almost a routine affair. However, Jasmine rice has no immediate substitutes and it would not be possible also to create any substitute for it in foreseeable future. But that does not automatically guarantee success as there must be in place proper and rational product strategy, business process strategy, operations strategy and financial strategy to augment the unique selling point of Jasmine rice. This paper deals at length on these strategies and how they should be formulated such that success is assured. Further, this paper also tends to look into the future and try to forecast whether United Kingdom would still remain as attractive an export market it is now a decade later. After making a substantive analysis of British economy the paper concludes that though other varieties of rice produced by Siam Rice Co. might face strong competition from indigenous substitutes, Jasmine rice would still retain it unassailable position in British markets. Export Strategy Export is not the same as selling in a domestic market as it involves not only foreign currency but negotiating a foreign market, foreign tastes and preferences, foreign customs and of course foreign rules and regulations. Thus, export can only be successful if a proper export strategy is in place and is executed efficiently. It should begin with the chances of success a product might have in an export market. The thumb rule for gauging the possibilities of success is whether the product is successful in the domestic market. If a product is successful in domestic market then there is fair chance that it would be a success in foreign markets too. But care must be taken to factor in the customs, tastes and preferences prevalent in foreign markets before blindly assuming that domestic success is failsafe proof of the product being successful in foreign markets also. As for example beef from Chicago is famous for its taste across the world but if a beef exporter feels that they would be able to storm the non-vegetarian markets in India they would be in for a rude shock as beef is a taboo for Hindus who form nearly eighty five percent of Indian population. Similarly while pork is an all time favorite in China it does not have any market in Muslim countries where it is a forbidden food. So, an exporter needs to do elaborate market research for accurately gauging the market potential for the product they would like to export (Credit Research Foundation 2007). But before the decision to export is to be made the company must determine in no uncertain terms what it stands to gain from exporting and whether it has sufficient resources at its command to undertake the additional production quantities that would have to be done in order to service both domestic and export markets. The other issue that needs to be clarified is whether the costs related to export are less than the benefits that the company expects to garner from export activity. Only if all these three issues provide a positive answer should a company undertake exporting activities. Else, it would be better off transacting in domestic markets only (World Export Development Forum 2007). Product Strategy As already discussed, the first test of whether a product can be exported is whether it has a stable market within the country. But, as already been discussed, this rule has to be modified keeping in mind the tastes, preferences and food habits of foreign nationals if the product to be exported is an edible substance. The other way to determine the export potential of a product is to identify certain unique properties of a product that would not be possible to replicate elsewhere in the world (UNZ & Co. 2008). A case in point is Darjeeling tea which is supposed to be the best in the world. This product cannot be produced elsewhere in the world because it grows only in certain specific climatic and soil conditions that are available in Darjeeling only. Same is the case with Brazilian coffee or Cuban tobacco. As these products are unique and as there is no possibility of finding any substitutes anywhere else in the world, these products would always have a steady demand in international markets. In the current case, Jasmine rice is Thai Hom Mali Rice (Jasmine Rice) is a specialty of Thailand and cannot be grown elsewhere in the world. Therefore, this product has steady export potential. Business Process Strategy A business process is a series of well coordinated activities by both men and machines that lead to achievement of corporate goals of a business. Each business has a strategy to attain its corporate goals and how efficiently it can achieve its corporate goals at least cost. As the output is an agricultural product, exporting it requires a specific strategy to ensure that the venture becomes a success. The first issue that the firm has to solve is how much international sales experience the firm’s employees have and would there be any language barrier in transacting in a foreign market. In this case of course, the firm producing Jasmine rice is registered and based in Singapore which has a formidable tradition and expertise in trading. However, as the target country is United Kingdom the issues of cultural differences and language could be some sort of a problem. Language might not be that much of problem as English is a global language understood by all those that engage in international trade but cultural differences, especially food habits, might require some effort to overcome. So, the company must put in place a proper export department that should have adequate staffing and a senior responsible person must be made to head it. The company must also have in place adequate infrastructure in United Kingdom to ensure its export trade is carried on without any legal or administrative hindrance in that country. For that it must employ British consultants and staff so that any frictions arising from lack of knowledge of local laws or ignorance about cultural specifics do not go out of control (SearchCIO-Midmarket.com 2009). Operations Strategy Every organization produces goods and services so that they can be sold to intended customers. Operations strategy is a series of decisions that decide long term productive capabilities of an organization and matching it with market demand, resources at the disposal of the company and overall corporate goals (Slack and Lewis 2001). In the current case, the product that is being discussed is Jasmine rice that grows in Thailand. The country is not very advanced and its agriculture is basically labor intensive. Therefore, producing the extra quantity that would be exported would not require investment in any form of machinery. All that would be required is additional labor which is in abundant supply in that country. So, availability of labor would not be an issue but availability of another factor of production – land which is crucial in this case might pose some problems as the company would need to have the extra piece of land near its main base of operation as getting a suitable piece of land at a considerable distance would frustrate all attempts at proper management and control of the production process. Therefore, as the company firms up its export plans it must first solve the issue of suitable land where it would be able to grow Jasmine rice as much as would be necessary to satisfy the demands in British markets. Another reason for scouting for land near its main operational base is Jasmine rice meant for export must be packed properly so that it does not deteriorate in quality during long sea voyages or prolonged storage. This sort of advanced packing cannot be arranged for in distant agricultural fields and it would entail multiple transportation, and consequent loss in transit, if the company fails to locate fertile agricultural fields for growing jasmine rice for the purpose of export. This also brings into sharper focus the additional requirement of an advanced packing unit that the company would do well to procure and set up for its exclusive use. Though outsourcing packing might seem to be an attractive option, one must remember that agricultural products are not produced in systematic phased manner where daily output can be controlled. Agricultural output is seasonal in nature and the entire quantity is produced during harvesting season. If the company does not have a dedicated packing unit, it might face a lot of problems during harvesting season especially if there is a bumper crop. Financial Strategy Any business requires finance and this is more appropriate for export trade. An exporter needs to have an effective financial strategy that would allow it to expand its trade volume without causing any undue stress on the financial liquidity or stability of the firm (Pavlicek 2009). At this stage one must realize that export trade is generally associated with elaborate banking formalities and any new foreign trader must be willing to offer longer credits than is the market norm if it wants to create a niche in overseas markets. Moreover, the exporter must also be prepared to lock more capital in inventory as higher stocks have to be maintained in order to cater to demand in foreign markets. The costs of maintaining a foreign office and fees that needs to be paid to foreign consultants should also be added to the total costs of export. Transportation will also be one of the major cost factors linked to export as the distance between Singapore and United Kingdom is substantial. Advertisement and promotion that would be necessary for letting prospective customers know that Jasmine rice is now available in local British markets would also be another major cost item. All these costs have to be financed by the company either through its internal resources or by borrowing from external sources. Singapore is one of the major trading hubs of the world where funds to finance exports are comparatively easier to obtain. So, it would be advisable for the company to go for external sources of funds, at least initially as it prepares to launch its exports in United Kingdom. Though internal sources would be without any cost and financial burdens generally associated with any form of loan, it would be prudent not to overstretch the financial reserves that the company has because a single bad crop or a climatic frailty might put the existence of the entire firm in jeopardy (bizmanuals 2008). Attractiveness of United Kingdom as an export market in 2020 A decade is long time in export business and world economy as technological advancements are sweeping the world in such a manner that what is efficient today becomes completely obsolete tomorrow. Moreover, advent of substitutes has become such a regular feature that a commodity that has no substitutes today becomes completely irrelevant the day after. A case in point is jute which was the prime raw material in packing industry. Thus manufacturers of jute, an agricultural product, enjoyed monopoly for decades together. The major export of East Pakistan (now Bangladesh) had been jute and the country enjoyed a healthy balance of trade on account of it being the largest grower of jute in the world. So, there can always be a lingering doubt whether Jasmine rice would also be faced with competition from a substitute in near future or not. The doubt becomes stronger since food habits of British do not include rice as a staple diet. Instead British staple diet includes meat, fish, potatoes, flour, butter and eggs. So, looking ahead by a decade one might feel that the demand for Jasmine rice might simply dwindle and fade away. But, one must never forget that United Kingdom is essentially a cosmopolitan country where people from all corners of Commonwealth have come and settled down. Thus rice has gradually made its place in British menu and will be there in the foreseeable future. In fact, a survey conducted by Kingston Business School in 1993, showed that rice consumption in the UK was increasing at the rate of 5% per annum. A paper “The rice market in the EEC” published in 1994 indicated that the UK was importing some 247 000 tons of rice a year (Yap 1994). However, demand for other varieties of rice produced by Siam Rice Co. namely, White Rice, Black and White Glutinous Rice, Broken Rice, Cargo and Red Cargo Rice, Parboil Rice and Organic Rice might never take off as British customers have enough disposable income and would not settle for anything other than the very best. Though it might not be necessary but it may be mentioned that United Kingdom has one of most stable societies where democracy has been firmly entrenched for decades (Barrow 2010). So, chances of any social or political upheaval leading to disruptions in trade and commerce can be completely ruled out. Moreover, London is one of the financial hubs of the world and UK economy is very sound as it ranks sixth in the world in terms of export of commodities and services (EconomyWatch 2010). Thus the attractiveness of United Kingdom as an export destination will remain as strong as it is now even in 2020. References Barrow, Mandy. "The British Government." Project Britain: British Life and Culture. 2010. http://woodlands-junior.kent.sch.uk/customs/ (accessed January 18, 2011). bizmanuals. Managing Financial Strategy Means Business Success. October 20, 2008. http://www.bizmanualz.com/information/2008/10/20/managing-financial-strategy-means-business-success.html (accessed January 17, 2011). Credit Research Foundation. Export Strategy. 2007. http://www.crfonline.org/orc/pdf/exportstrategy.pdf (accessed January 17, 2011). EconomyWatch. "The United Kingdom Import and Export." EconomyWatch. 2010. http://www.economywatch.com/world_economy/united-kingdom/export-import.html (accessed January 18, 2011). Pavlicek, Jaroslav. Corporate Financial Strategy in SMEs. Proceedings, London: World Congress on Engineering, 2009. SearchCIO-Midmarket.com. Business process management strategy, terms and tips: Take the quiz. November 23, 2009. http://searchcio-midmarket.techtarget.com/generic/0,295582,sid183_gci1375222,00.html (accessed January 17, 2011). Slack, Nigel, and Mike Lewis. Operations Strategy . Financial Times/ Prentice Hall, 2001. UNZ & Co. Developing an Export Strategy: Determining Your Products' Export Potential. 2008. http://www.unzco.com/basicguide/c1.html (accessed January 17, 2011). World Export Development Forum. Winning National Strategies for Export Development. October 10, 2007. http://www.intracen.org/wedf/ef2007/global-debate/Reporting/Documents/WEDF-2007-Wednesday-0830-plenary.pdf (accessed January 17, 2011). Yap, Chang Ling. The rice market in the EEC. Study, Bangkok: Cahiers Options Mediterraneennes, 1994. Read More