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The goal of this report is to offer the board of directors of the Indian firm ITC all of the information necessary for them to do international business in the Moldovan market. It examines the principles of international trade theory and explores trade protection devices, their relevance, and how they might be circumvented by businesses. Additionally, it discusses the meaning of the word “trade promotion.” Following that, the various export-related tactics open to ITC are addressed in-depth, as are the advantages of the recommended entrance approach and cross-border collaboration. Several hazards that the firm may encounter throughout its initiative are recognised and discussed, as well as the intricacies of the logistical activities involved in the entire process. Following a full analysis of the merits and drawbacks of the recommended export strategy, this paper includes a step-by-step execution plan.
“International trade” hypotheses are just alternate explanations for international business. The notion of commerce relates to the exchange of goods and services between two persons or entities (Boddin and Stähler, 2018). “International trade” is therefore defined as the commercial transactions between persons or firms based in two separate nations (Chen and Guo, 2017). Individuals or companies participate in trade because they feel they will benefit from the deal. They might demand or desire the items or services. Though this may seem to be an easy statement, international trade requires a large amount of philosophy, politics, and business strategy.
There are two primary reasons why businesses participate in international trade:
To gather resources: This is a primary motive for businesses to grow globally. Western firms are drawn to emerging and developing countries because of the abundance of minerals, metals, and agricultural land (Nwandu, Olulowo and Moghalu, 2021). Many multinational firms have operations in “Africa” and ‘South Asia,’ because of the large mineral and metal deposits there.
To reduce risk: Oftentimes, firms expand globally to mitigate the risk of stagnant growth in both their home country and the nations in which they operate. Because Western nations’ growth rates have fallen below 3%, and in some cases have even reached “negative growth,” i.e. “depression,” Western firms have turned their attention to developing economies whose growth rates are more than 5% (Wiedmann and Lenzen, 2018). For this reason alone, firms should want to expand into countries with faster rates of economic development than their own country’s own. A corporation may better handle political, economic and social risks if it has operations in several countries rather than just one or two (Okenna and Adesanya, 2020).
There are several avenues for businesses to enter the international commerce arena, including the following:
(Sources: Watson et al., 2018; Smith et al., 2021; Inaba, 2017; Marinov, 2020)
Thus, it is apparent that if ITC can successfully penetrate the Moldovan market using one or more of the above-mentioned strategies, its business would certainly enjoy multiple benefits.
Instruments of “Trade Protection” are classified into two broad categories. Commodities are affected directly by direct instruments when they enter international trade as imports or exports. While “indirect instruments” are often more concerned with domestic production than with trade, they nevertheless have clear trade effects (Kinzius, Sandkamp and Yalcin, 2019). “Tariffs”, “import” and “export” quotas, “export subsidies”, and “sanitary” and “phytosanitary” restrictions are all examples of “direct interventions”. On the other side, “indirect interventions” include “currency management”, “commodities programmes”, “marketing help”, “input subsidies” and “tax breaks, and “long-term investment aid” (Postnikov, 2018).
According to the partial equilibrium method, “protection instruments” may have an economic influence by determining the effect of shocks such as changes in government policy on the pricing and quantities of a product (Casalini and González, 2019). While tariffs are a significant source of revenue for low-income nations’ governments, they also contribute to inefficiencies and lobbying. Regional trade agreements can help decrease these trade restrictions (Eastland, 2020). A “regional trading agreement” is a treaty struck by two or more countries to facilitate the movement of products and services across national borders. The pact has its own set of rules for countries to follow. Members of the organisation are constrained in their dealings with states that are not part of the organisation by external rules (Islam, n.d.). Other initiatives, such as the elimination of non-tariff barriers and the simplification and harmonisation of regulatory requirements, attempt to ease trade as well.
“Trade promotion,” also known by the name of “export promotion,” is a catch-all term that refers to “economic policies”, “development initiatives”, and private endeavours aimed at improving an economy’s trade performance (Chebet and Thiong’o, 2021). This economic zone may consist of a single country, an area within a country, or a group of nations that are members of an economic trade zone. A certain industry may be singled out for special treatment. The major goal of improvement is to raise exports in “absolute terms” as well as “relative” to imports. When considering specific industries, trade promotion programmes usually favour those that enjoy a comparative advantage over foreign competitors (Gathu, Gichunge and Senaji, 2021). Increased imports can also be used to enhance the supply of vital inputs in a country’s strongest sectors. This plan, if successful, would result in pro-trade growth.
Trade promotion, as an “economic strategy” with the ultimate purpose of boosting domestic welfare, entails a diverse array of “policy instruments”. One noteworthy technique is the providing of “trade intelligence” to domestic firms to cut “transaction costs” and give them a competitive edge over international firms (Gore and Annachhatre, 2019). Numerous governments across the globe have established special agencies, most of which are public, to carry out trade promotion programmes and offer assistance to domestic firms. Certain international organisations assist so-called developing countries in promoting their export activities, most notably the “International Trade Centre” in “Geneva”, which is a “subsidiary” of the “World Trade Organization” and the “United Nations” charged with providing technical assistance to those countries on “trade-related” issues (Smith, n.d.).
ITC should consider these facts before jumping into action with its plan of engaging in international trade with Moldova.
The ultimate purpose of export-related strategies is to be promoting of the product or services of the selected company to a completely different region. However, the strategies interrelated to exporting are found to be similar to export marketing trends and to domestic marketing (Samiee and Chirapanda, 2019). Furthermore, exporting to a new country along with having completely different cultures and beliefs is quite challenging. In order to export in the marketplace of Moldova, ITC Limited must utilise these specific exporting theories or strategies. These significant strategies will help them in operating in the marketplace of Moldova without having difficulties.
Direct export: Direct exporting indicates direct sales to a customer abroad. In other words, direct exporting engages in exporting straight to a customer paying attention in buying the product of the selected company. The advantage in selecting direct exporting is that it will provide an advanced return on the investment rather than selling throughout a negotiator or distributor. As a matter of fact, it will impact on setting the lower price as well as gaining a competitive advantage in the foreign market. For example, A Caribbean Food Company might be able to sell its goods directly to end-users in the EU including schools, hospitals, or businesses. Regarding this fact, the manufacturer will be responsible in terms of product servicing, shipping and other important issues. These will be the advantages of implementing direct exporting, in case ITC Limited wants to use it’s in the marketplace of Moldova.
Indirect exports: The ultimate meaning of indirect exporting basically refers to appointing third parties such as distributors or agents in order to represent the company. In other words, indirect exporting indicates selling to an intermediary, who in turn sells the goods or services either unswervingly to consumers or to introducing the wholesalers (Samiee and Chirapanda, 2019). It has been observed that the uncomplicated method related to indirect exporting is to trade to an intermediary in the own country. These are the advantages of implementing indirect exporting, in case ITC Limited wants to use it’s in the marketplace of Moldova.
Among the two modes of export covered previously in this paper, direct exporting generally eliminates the expenses and complications associated with a “middleman” (Ummyiah et al., 2017). Additionally, it enables you to have better control over sales and engage directly with your clientele. This plan must present several opportunities, some of which will be detailed below:
(Sources: Atanasijevi? et al., 2021; Crozet, Hering and Poncet, 2018; Gaur, Ma and Ding, 2018)
Considering these opportunities, it is understandable that ITC should employ this strategy in its international trade with Moldova.
Cross Border Collaboration
The competitiveness of the business environment can be improved by cross-border collaboration. Exchange of best practices, expertise and fresh knowledge may all assist remove administrative barriers and so create a more competitive business climate through cross-border collaboration (O’Keeffe and Creamer, 2019). Consequently, international collaboration may be used extensively to improve the public administration responsible for the regulatory regime, resulting in simpler and quicker administrative procedures for businesses.
Cross-border collaboration facilitates the exchange of information and the solving of regional and local problems (Kozak and Buhalis, 2019). The economic competitiveness of border regions depends on cross-border collaboration, which also raises public awareness of these areas (Miörner et al., 2018). For these and other reasons, large and medium-sized businesses frequently work together across national borders.
Even the highly advantageous strategy of direct export is not free of risks, which, if not identified and prevented in time, may result in a disastrous outcome for ITC. The section below discusses some of the major risks which ITC must take into consideration in the process of getting involved in international trade with Moldova.
These kinds of risks are those that influence a company’s cash flow, earnings, or the viability of its business, such as the following:
(Source: Cepal, 2020)
These risks are present while selling locally, but they increase dramatically when selling internationally. Insecurity and corruption may be to blame, but it might also be a product of a weak economy.
Bribery, human rights abuses, environmental harm, or cyber security breaches are all examples of social risks that can have an impact on both local and global populations (Ibrahim, Said and Hanane, 2020). Commercially speaking, these offences may harm a company’s reputation, brand image, and credibility, decrease sales, and lead to large financial fines, not to mention personal culpability and penalties (Odediran and Windapo, n.d.). While an organization may never engage in such actions on purpose, its business may nonetheless be in danger (Alakbarov, Khudiyev and Dadashov, 2020). Numerous firms have been engaged in corruption without being aware of it; hence it must be careful of this risk.
The international stage might be unexpected at times. In countries such as the “United States” and the “United Kingdom”, renegotiations of trade agreements show that political turmoil may have a direct impact on exports at any moment. Political hazards are classified into the following categories:
(Source: Xiaoxiang and Chengfeng, 2021)
Political violence risks include “terrorism’, “war”, “civil struggle”, and other “political events” that might cause harm to a company’s assets or obstruct its activities (Fadhilah and Ayu, 2020).
Risks associated with conversion and transfer
This form of risk occurs when a “foreign government” or “central bank” prohibits a company from changing local money to hard currencies, that is, “US dollars”, “Canadian dollars”, “Euros”, or other “safe-haven” currencies, or from exporting “hard currency”.
When a foreign government forbids a company from “re-exporting” physical goods brought into the nation, this is referred to as “repossession”; for example, “machinery”, “equipment”, “rolling stock”, an “aircraft”, etc. (Todorovi? and Mrdakovi?, 2021).
Governments occasionally fail to pay their vendors, exposing a company to “non-payment” occurrences (?ereshchenko and Kuksa, n.d.).
Logistics; Modes of Transport
In terms of logistics in exporting, it basically refers to the procedure of the entire supply chain, specifically transportation and some other services. It is considered to be the most convenient and foremost service above all (The Manufacturer, 2021). In the case of exporting in the region of Moldova, the ITC Limited of India requires having effective logistics. As a matter of fact, having an elevated standard of exporting might be able to demonstrate that it is a trusted company and that the consumers can easily rely on ITC Limited time after time. The appropriate process of logistics will allow the company to operate in Moldova in an effective manner.
Shipping or transportation of the goods is a really important process in terms of business; any kind of interruption in the transportation of goods might create a serious problem in obtaining profitability or maintaining the requirements of the dealers (Sholihah et al., 2018). Therefore, it can be said that selecting appropriate modes of transport is indeed obligatory for ITC Limited to function in the particular European region. Air Transportation can be an appropriate mode of transport due to its unique features and has major advantages. These are the advantages of utilising air transport to export goods from India to Moldova.
Information Technology: It has been observed in an extensive manner that several businesses have to face numerous difficulties due to the poor supply chain management in exporting into different countries (Xing, 2018). Any kind of trouble in the supply chain might directly affect the selling as well as the profitability of the company. Therefore, the role that IT plays in supply chain management is indeed necessary (Harnowo, 2015). The important tools provided by IT have been proved to be extremely accommodating in the process of exporting goods or in the case of supply chain management. These are the following advantages of utilising IT in terms of exporting into a completely different market.
ITC Limited Company should implement IT for tracking their products in terms of exporting into Moldova. It will benefit the supply chain management system of ITC Limited along with making the process rapid.
The rising of the various political issues has been able to pressurize many companies to initiate various ethical considerations during the time of exporting. As a matter of fact, exporting to foreign countries might cause difficulties in case of not preserving the ethics and regulation properly. Therefore, it will directly affect the decision-making process of the suppliers. These are the ethical issues that need to be preserved during the time of direct exporting into Moldova.
The process of exporting goods in a completely diverse region is a complex situation. But the successful completion of this procedure might consequence in the business along with financial enhancement. Therefore, it has been observed that few changes in direct exporting can create problematic situations also. Moreover, there are some barriers and advantages related to direct exporting.
These are the advantages of direct exporting:
These are the potential barriers of direct exporting:
As per the overall demonstration, it has been observed that direct exporting can be the safest way of exporting the products of ITC Limited to Moldova. The company should utilise this specific technique to operate in the marketplace of Moldova. It can face difficulties related reaching to the customers along with verifying several procedures. Tracking can be difficult, but these problems might be mitigated through the implementation of Information Technology (IT). As a matter of fact, it will also help in smoothing the process of management. Thus, it can be said that Successful Implementation of direct exporting will be extremely accommodating for ITC Limited to operate in the marketplace of Moldova.
Implementation Plan for the Suggested Strategy
Steps to be Taken
1. Researching the market
Things to look at include the needs of potential foreign customers, pricing ranges that would give the necessary profit margins, the amount of industry competition, and potential strategies employed by the industry’s major competitors.
2. Executing the export strategy and reviewing the organizational capabilities
As a result of international commerce, ITC needs to examine the various methods in which the firm might expand or develop.
3. Constructing the export plan
It must first determine how it will join the international market, then complete its human resources and marketing strategies and set aside sufficient funds to cover the first costs of exporting.
4. Choosing the sales presence
A direct sales operation or the use of an agent or distributor should be determined. When it comes to the company’s international sales strategy, there are several options.
5. Promoting the product(s)
Developing a marketing and promotion plan that effectively conveys product information to potential customers while also attracting them is a top priority.
6. Getting the customer side right
For the firm to understand the reporting requirements, it needs to contact the authorities. It needs to be the same.
7. Getting timely payment
The business must maintain a steady stream of cash. For future sales, it must ensure that it has the necessary financing in place. It should, if required, get an insurance policy.
8. Choosing the methods of distribution
ITC should take into account the ramifications of selling across national borders and vast distances.
9. Effectively transporting goods
It must choose the most efficient means of transportation and ensure that the items are insured by it or by the importer.
10. Developing an effective after-sales policy
Finally, ITC must communicate with clients, export agents, and banks frequently. It should keep an eye out for political upheaval or other undesirable situations in the destination country, as well as manage routine repairs and warranty claims.
(Sources: Rai, 2021; Sazanets, 2021; Rueangrit et al., 2020; Demchenko et al., 2019)
International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. There is some significant process interrelated to international trade and successful implementation of these theories might be accommodating in the process of exporting. Exporting to foreign countries which is completely different from the home country, might be difficult in operating for ITC Limited. Regarding this fact, direct exporting can be an appropriate medium for the company to operate in the region of Moldova. It has been observed that some issues related to supply chain management can be mitigated through the implementation of IT. However, the maintenance of ethics can be problematic regarding health and hygiene during the COVID-19 era. Overall, ITC Limited might be able to export its goods successfully through preserving some rules and regulations.
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