International Trade Assignment: International Expansion Of Federation Artisan Chocolate

Question

Task:
Write a report on international trade assignment for a national business on opportunities in international trade and how these can inform strategy and how risks can be mitigated. Present your rationale and recommendations to the Board.

Answer

Executive Summary
The report on international trade assignment emphasizes on Federation Artisan Chocolate, a medium sized Tasmanian chocolate company which has been gaining increasing popularity in the country for being an ethical and sustainable brand and also for their vegan chocolates. The report tries to assess the opportunities and risks existing in the domain of international expansion for the company, thereby trying to provide robust recommendations for improvement of the trade competitiveness of the concerned company, based on the existing trade theories. The findings of the concerned report indicate towards the presence of considerable scopes for the Federation Artisan Chocolate company of Australia, in expanding their businesses in different parts of the globe and especially in the emerging economies like that of India and China.

Introduction
Businesses in almost all industries in the present global commercial scenario, operate in a highly dynamic and prospective environment, where there are considerable chances of expansion of their market presence as well as their business and production activities in different parts of the globe. Much of this can be seen to be facilitated by the factors like Globalization, liberalisation of commercial activities and also by the constant development of technologies and innovations in the present period. However, for expansion of operates in international market, it is important for businesses to assess the existing opportunities and the possible risks in concerned domain (Goldfarb and Trefler 2018). Keeping this into consideration the concerned report emphasizes on Federation Artisan Chocolate, a medium sized Tasmanian chocolate company which has been gaining increasing popularity in the country for being an ethical and sustainable brand and also for their vegan chocolates. The report tries to assess the opportunities and risks existing in the domain of international expansion for the company, thereby trying to provide robust recommendations for improvement of the trade competitiveness of the concerned company, based on the existing trade theories.

Federation Artisan Chocolate: Company Overview and Goals
Established thirty years ago in Tasmania, Australia, the concerned company is known for making their chocolates from scratch and the process, from growing cacao beans to the production of different types of chocolates can be seen to be conducted and administered by the concerned company itself. In the present period, the Federation Artisan Chocolate Company can be seen to be gaining immense popularity in all parts of Tasmania and in Australia for their handmade and organic chocolates of superior quality (Federationchocolate.com 2021). The company has developed a new range of vegan chocolates which are of the same taste and diversities, to satiate the needs of an increasing vegan population in the country. The company can also be seen to be emphasising on the growth of their workshops and facilities to increase their capacities and production in the coming years. In 2019, the company has also opened a Hobart City CBD Artisan factory, café as well as chocolate shop to give the customers a tour of the entire process of making chocolates. The goals of the concerned company can be seen to be as follows:

• To make the brand more popular in Australia
• To venture in the chocolate markets of different nations, developed and developing
• To increase the customer share for their chocolates and especially the vegan ones
• To develop their own supply chain and independence in production
• To operate ethically and emerge as the leading brand for vegan chocolates in different parts of the globe
• To specifically emphasize on business expansion in developing nations (Federationchocolate.com 2021)

SWOT Analysis of the company and business risks
To identify the opportunities and the risks for the concerned company in the international trading environment, especially for the business expansion of the Federation Artisan Chocolate company, it is of immense importance to have robust insights about the strengths and weaknesses of the company and also about the opportunities as well as threats or risks faced by the same, in the domestic market (Abbott et al. 2019). This can be seen to be discussed in this section of the report, with the help of the following SWOT Analysis for the concerned company:

Table 1: SWOT Analysis for Federation Artisan Chocolate

Thus, it can be seen that there are both prospects as well as business risks experienced by the Federation Artisan Chocolate company not only in Australia but also in their potential international ventures. The prospective markets of the developing nations can be seen to be appealing for the rise in customer awareness as well as purchasing power. However, the market volatilities have to be kept into consideration (Cowling, Mroczkowski and Tanewski 2017).

Identification of opportunities in international trade
There has been considerable increase in the demand for different types of chocolates across the globe, over the years and this can be shown with the help of the following figure:

Figure 1: Rise in the demand for different types of chocolates across the globe
(Source: Maxizemarketresearch.com 2021)

As evident from the above figure, there has been considerable rise in the demand for dark chocolate in the present period and the demand for dark chocolates across the globe is expected to rise even in the coming years. Much of this can be attributed to the rising health consciousness and the demand for healthy food products among the general global population in the present period. This can be considered as a considerably prospective opportunity for Federation Artisan Chocolate Company which already produces a variety of dark chocolates (both vegan and non-vegan) for the consumer population in Australia (Maxizemarketresearch.com 2021).

On the other hand, there has also been a substantial increase in the aspects of veganism across the globe in general and also in the developing nations and emerging economies in specific, much of which can be attributed to the increase in awareness regarding sustainable consumption, prevention of animal cruelty and also due to the rigorous Veganuary campaign and this can be shown as below:

Figure 2: Rise in demand for vegan products in the present period
(Source: Bbc.com 2021)

This can also be seen to be one of the prospects of international trade and business expansion of the concerned company, which is gaining considerable popularity in Australia for its vegan chocolates. On the other hand, the developing nations can be seen to be experiencing substantial economic growth over the last few years, with the growth rates of the emerging economies surpassing the growth rates of the economies of the developed nations, as can be seen to be evident from the following figure:

Figure 3: Economic growth rates of the developed and the developing economies
(Source: Bhandari 2021)

This in turn indicates towards the rise in the purchasing power of the general population of the developing economies in the present period, and thereby the presence of considerable opportunities for the concerned company to incorporate the components of international trade (Bbc.com 2021). The emerging economies like India and China are appearing to be more prosperous markets for the products of the concerned company, due to the relatively less market saturation, and more scopes of exploring the niche segments like vegan population and population preferring dark chocolates in these nations.

Developing strategies based on the opportunities
Based on the above discussed international trade opportunities, the following strategies can be taken by Federation Artisan Chocolate company in the domain of international trading operations:

• The concerned company should emphasize on the chocolate markets of developing nations with high economic growth like India and China, to ensure entry in a market with substantial demand
• The products like dark chocolates, vegan chocolates and other signature products of the Federation Artisan Chocolate should be primarily considered by the concerned company for their international business expansion (Atkin and Khandelwal 2020)
• The company should also develop penetrating pricing strategies in the initial period, to enter in these markets and this can help in development of competitive advantages for the concerned company
• Extensive social media marketing has to be incorporated by Federation Artisan Chocolate company to capture the attention of broad segments of potential customers and especially the young population
• In the long run, the company can aim to set up manufacturing units in these countries, keeping into consideration the abundance of cheap labour in these nations, which can contribute to the cost efficiencies of the concerned organization (Bhandari 2021)

Application of risk management in international trade
There are certain risks that can be seen to be associated with the initiatives of the concerned company to venture in business expansion in developing nations like that of India and China. The primary risks in this domain are as follows:

• There are considerable fluctuations in the economies of the concerned nations and this can hamper the stability of the business operations of Federation Artisan Chocolate company in these nations
• Being culturally and economically different than Australia, the demand and preference patterns of the people in the targeted international markets can differ from those in the home country of the concerned company, which can affect the relevance of the products and services (Sokhatska et al. 2018)
• The company can also face legal and compliance risks, due to the variations in the business laws and labour market regulations as well as consumer laws in the concerned nations

All of these indicate towards the requirement of the presence of robust risk management policies and techniques for the concerned company. For the concerned company to venture profitably in the domain of international trading activities, it is important to identify the characteristics of the markets where Federation Artisan Chocolate company aims to venture. Based on the analysis of the demand and preference trends and also the competitive threats present in the concerned target markets, the organization needs to develop its market entry strategies in accordance to the business environment and market dynamics in the emerging economies (Broll and Mukherjee 2017). There should also be steps taken to develop and modify the products of the concerned company, as per the demands and preferences of the general population in the target market and this can help in reduction of risks of low satisfaction of the potential customers.

Discussion of outcomes and policy recommendations based on trade theories
The initiatives to be taken by the Federation Artisan Chocolate company, based on the above analysis of risks and opportunities and also the strategic approach to the same, can help the company in achieving profitable outcome in terms of robust brand positioning in the targeted international markets (Broll and Mukherjee 2017). However, based on the trade theories, the policy recommendations are provided for ensuring strong market entry of the concerned company in the short run as well as in the long run:

• As highlighted by the international trade theory of Comparative Advantage, a nation or an entity should produce those commodities in which it has comparative advantage when compared with the competing countries and entities and this should be exported or sold by the same. In this context, it can be seen that Federation Artisan Chocolate has gained immense popularity for its vegan chocolates and in the international markets of the emerging economies like China and India, there are very few producers of vegan chocolates. Thus, it will be profitable for the company to sell their vegan products in the identified international markets (Krugman, Obstfeld and Melitz 2018)
• As per the Heckscher-Ohlin Theory, a country should emphasize on the industries which use the resources that are present in abundance in the concerned country to gain economies of scale. Keeping this into consideration, the concerned company can shift or open its manufacturing units in India and China in the long run, taking into account the abundance of cheap labour in the concerned countries. This can help the company to reduce the costs of transporting chocolates every time to the foreign markets and can also help it in reducing its overall costs of production (Krugman, Obstfeld and Melitz 2018)

Conclusion
The above discussion and the findings of the concerned report indicate towards the presence of considerable scopes for the Federation Artisan Chocolate company of Australia, in expanding their businesses in different parts of the globe and especially in the emerging economies like that of India and China. Depending upon the opportunities as well as the challenges to be faced by the concerned chocolate producing organization in their international trade ventures, policies have been recommended and strategies have also been developed for the Federation Artisan Chocolate Company accordingly. Different international trade theories have also been considered in the development of the policies for the international trade activities of the concerned organization.

References
Abbott, M., Barraket, J., Erin, I., Castellas, P., Hiruy, K., Suchowerska, R. and Ward-Christie, L., 2019. Evaluating the labour productivity of social enterprises in comparison to SMEs in Australia. Social Enterprise Journal. https://www.emerald.com/insight/content/doi/10.1108/SEJ-09-2018-0064/full/html

Atkin, D. and Khandelwal, A.K., 2020. How distortions alter the impacts of international trade in developing countries. Annual Review of Economics, 12, pp.213-238. https://www.nber.org/system/files/working_papers/w26230/w26230.pdf

Bbc.com, 2021. Veganism: Why are vegan diets on the rise? [online] BBC News. Available at: [Accessed 10 April 2021].

Bhandari, J., 2021. Exaggerated Economic Growth of the Third World. [online] Acting-man.com. Available at: [Accessed 10 April 2021].

Broll, U. and Mukherjee, S., 2017. International trade and firms' attitude towards risk. Economic Modelling, 64, pp.69-73. http://dspace.iimk.ac.in/xmlui/bitstream/handle/2259/925/Article.pdf?sequence=1&isAllowed=y

Cowling, M., Mroczkowski, N. and Tanewski, G., 2017. Job Creation and Innovation among SMEs in Australia. In ICSB World Conference Proceedings (pp. 1-25). International Council for Small Business (ICSB). https://search.proquest.com/openview/f8a006120ae0d07d677f77084a9e6c6e/1?pq-origsite=gscholar&cbl=39996

Federationchocolate.com, 2021. About Us. [online] Federation Artisan Chocolate. Available at: [Accessed 10 April 2021].

Goldfarb, A. and Trefler, D., 2018. AI and international trade (No. w24254). National Bureau of Economic Research. https://www.nber.org/system/files/working_papers/w24254/w24254.pdf

Krugman, R.P., Obstfeld, M. and Melitz, J.M., 2018. International trade: Theory and policy. Pearson Education Limited. http://nuir.nkumbauniversity.ac.ug/handle/20.500.12383/1333

Maxizemarketresearch.com, 2021. Global Chocolate Market - Industry Analysis for Forecast Period 2027. [online] MAXIMIZE MARKET RESEARCH. Available at: [Accessed 10 April 2021].

Sokhatska, O., Bashynska, I., Stepanova, T., Malanchuk, M., Rybianets, S. and Sobol, O., 2019. Modelling the risks of international trade contracts. http://dspace.wunu.edu.ua/bitstream/316497/36841/1/Modelling%20the%20risks%20of%20international%20trade%20contracts.pdf