Question

Scenario 2 In December, 2014, President Obama announced that the United States were restoring diplomatic ties and in July 2015, the United States re-opened its embassy in Cuba after more than 50 years. This may signal a possible end to the US trade embargo against Cuba. Consider the potential of normalized trade relations with Cuba. What industries or companies would do well in this new trade environment? Which strategies would make the most sense for these industries, e.g., importing and exporting, licensing, joint venture, direct investment etc.?

Answer 1

In the given scenario, still, a lot has to be done to create confidence and friendship between the two countries. Thus the businessmen will do the investment in other countries gingerly. Therefore mostly the agricultural exporters and importers and small consumer product manufacturing companies will be more successful as they can use the export mode of international business. This can be done by the following methods:-

Direct exporting can be seen as a situation in which the company sells its products directly to the customers situated in the foreign country. In this type of exporting no other organization, intermediaries or organization is employed.

On the other hand, in case of indirect exports, an intermediary is employed by the organization to sell the products to the customers of other country. This intermediary can sell the product either to end user or to the wholesaler. The most simple method of indirect exporting is ro sell the products to an intermediary who is located in the domestic country.

Direct Export Intermediaries:-

A foreign distributor can be seen as a foreign firm which is given the exclusive rights to perform the distribution activities for an organization in a certain area or a foreign country. The merchandises are sold to this distributor at a discount and then these products are sold or distributed to retailers or the final consumers.

State-controlled trading company is mainly an organization which has a complete monopoly in the sales and purchase of goods. As these are authorized by the government for trading some specific products, a lot of influence of their governments' trade policies and politics is experienced by the buyers.

Indirect Intermediaries:-

An export management company is an organization which is authorized by a firm to manage the entire export-related activities and process for a certain firm. It can act as an export department of different allied but non-competition producers.

A cooperative exporter is mainly the producer which has its own export infrastructure which is retained by the other producers so that these firms can sell their products to other countries.

A purchasing agent is the representative of a foreign buyer. This person is situated and operates in the same country as of the producer and try to find out those products which can match with the requirements of the foreign customers.