FUNDAMENTALS OF INTERNATIONAL TRADE (FIT101C)
Case Study
Celebrated North Yorkshire brewers, Theakston, believes their award–winning ales could be a potential winner in locations such as Rio de Janeiro and São Paulo. It has begun a serious investigation to see whether the company can tap into this potentially huge market.
The hope is to sell its bottled rather than cask beers into this South American giant. The Masham–based company is awaiting a response to a recent batch of test samples. “Brazil’s history of trading with British brewing companies is very limited,” says Executive Director Simon Theakston. “But there’s growing world interest in craft brewing of which English brewers are leading exponents.”
“The challenge is to introduce a beer of a different style and heritage to a new market. To begin with it will no doubt have curiosity value and will take time to achieve critical mass. Getting the beer on to the shelves will be the easy bit. The real measure of success will be how well consumers take them off the shelves.”
“It’s early days and we’re just dipping our toes in the market. But Brazil is a big and stable economy so who wouldn’t be interested? We’re very positively orientated towards Brazil. I don’t envisage logistical issues. The key thing is what happens to the product when it gets there.”
“We believe that the market for international premium beers in general is ripe for growth as Brazil becomes more international in outlook with both the Olympics and World Cup football being held there in the coming years. That together with the fact that Brazil’s economy has now overtaken our own to be the sixth largest in the world can only help drive the interest in different beer styles.”
Question 1 (30 marks)
While language, material culture, aesthetics and social organisation are outward signs of culture, it is a society’s religious beliefs, attitudes, values, and norms that dictate the behaviour of its members. Through this the exporter gains understanding of the practical influence that the culture of a foreign market or market segment could have on their export marketing activities. A businessperson should also demonstrate an understanding of verbal and non–verbal communication skills if he/she is to be successful in a foreign market.
Research Brazil and the United Kingdom in relation to the above statement. Explain three differences between the two countries for the following points.
This is not a general discussion; your focus should be on gaining understanding of the practical influence that the culture of a foreign market or market segment could have on their export marketing activities.
1.1 Aesthetics (6)
1.2 Social Organisation (6)
1.3 Religious beliefs (6)
1.4 Sense of space (6)
1.5 Respect (6)
Question 2 (12 marks)
Companies often fail in their early attempts to export because they underestimate what is involved in exporting and do not have sufficient resources. In the case study Theakston is confident that they can their research shows that Brazil is a possible market for their product.
However being able to ship a product does not necessarily make a company export ready.
Explain, in your own words, to the management of Theakston what they need to practically consider in terms of export readiness for the following points.
Refer to information provided in the case study and research done in question 1.
2.1 Production Capacity and Quality control (6)
2.2 Business planning and senior management commitment (6)
Question 3 (5 marks)
Although some products may not require any alterations to sell in a foreign market, several factors may give rise to the need for some modifications.
Taking the case study into consideration, what you have learned in your study guide and by answering question 1 and 2, explain in practical terms to Theakston how the import countries legal requirements may give rise to product modification.
Question 4 (20 marks)
Entering a new country/market means dealing with a different kind of customer in a foreign environment with laws and regulations that may differ radically from those of the domestic market. Explain to Theakston some of the differences that they, as exporters will face when selling across national borders.
You answer should be based on information you have gathered thus far, the case study and your study guide.
4.1 Finance and logistics (5)
4.2 Documentation (5)
4.3 Customs rules and regulation (5)
4.4 Exchange Control Rules and Regulations (5)
Question 5 (8 marks)
Explain to Theakston’s management why exporting is important at an individual company level. Your explanation should be practical and incorporate material provided in your study guide and what you have learned by answering the previous questions.
5.1 Lower unit costs (4)
5.2 Spread of risk (4)
TOTAL MARKS: 75 marks
