International Trade Problem

Trading Home-made Traditional British Sweets (Sweet Treats)

Characters:

Head of Marketing (1 or 2 people)

Head of Strategy (1 or 2 people)

Head of Operations (1 or 2 people)

You are the board of a Medium sized (50 employees) British Sweets company that gets 90% of it s income from Exporting to Canada and Europe. It has been announced that COVID restrictions are to be released in the next 3 weeks and your sweet shop will be able to open and continue trading. You have gathered to identify some risks that you may face over the next 12 months and create mitigation plans for them accordingly. As a team you must identify your top 3 risks with mitigation plans and top 2 opportunities and how you plan to take advantage of them.

Below is some further detail on the International Trade Climate in the time of your discussion.

Background

International Trade Climate:

The COVID-19 pandemic has created an economic imbalance in the world, as the health crisis unfolds the international trade is witnessing a sharp decline. World trade is expected to fall by between 13% and 32% in 2020 as the COVID 19 pandemic disrupts normal economic activity and life around the world (WTO, 2020).

Countries like the USA, Australia, Canada and Europe have been hit with disturbance in supply chains as the flow of trade from China has been disrupted from China forcing them to look for alternate trade partners. The coronavirus has revealed the vulnerabilities of our current economic model, the lack of preparedness of our economic structure to deal with crises and shocks. The current crisis has shed light on the need for modernisation of our trade practices, to adapt to a more sustainable economic model. Risk assessment has now become more important than ever, for companies to design a rational plan to deal with unexpected future economic disturbances.

Increasing role of Digital trade

Technology is going to be a key player in terms of international trade post-COVID-19 era, as it will enable countries to form a more dependable and smarter supply chain system. Economic Forum has emphasized that digital trade is crucial for economic recovery. As the physical movement of goods and people is restricted, digital trade has played a crucial role in keeping trade flowing virtually (Ziyang Fan, 2020).

As the crisis unfolds, the dependence on digital trade is increasing. Nationwide lockdowns and social distancing norms have changed the consumers demand approach, the current demand patterns have shifted to a more minimalist app with e-commerce demand witnessing a surge. Consumers around the world are relying on digital platforms to procure essential items as well as on OTT media platforms for source of entertainment.

Digital payments are preferred mode of payment for domestic trade as well as cross border e-commerce transactions. With technologies like artificial intelligence and the Internet of Things, supply chains could quickly switch to alternative providers when regular suppliers face disruption (Jesse Lin, 2020). The trend is envisaged to continue even after the pandemic ends given the fact that is much more efficient and reliable and economically profitable.

Cross-border digital connectivity is proving to be a major platform for supporting multinational corporations to function. All businesses are running through digital communication, people can connect while sitting in different parts of the world from the comfort of their homes. It has served as a smart solution for businesses while following the social distancing measures accurately. Along with maintaining connectivity, it has also proved to be an economically smart option by reducing the running costs such as office premises maintenance costs for businesses currently failing to make high profits, it has helped sustain global businesses in this uncertain time.

Diverse sourcing

International trade is struggling partially because of irrational and not long-lasting supply chains wherein the countries rely on a single source to obtain materials. It is important to form diverse sourcing with multiple suppliers in order to form supply chains that are more robust and sustainable.

The economic stimulus packages announced by various nations around the world have special provisions for SMEs and MSMEs such as tax reduction measures and the advancement of loans at a low rate of interest to help with their economic growth. In the absence of trade with previous trade partners domestic industries are the major suppliers and in order to correct the supply imbalance, they are the most reliable option for nations in the current times.

Managing cross-border supply chains

As a consequence of increased public health controls in the wake of the pandemic, and also the adjustment of customs arrangements after the 1^st January, companies are looking at the management of supply chains across borders between the UK and EU and other markets.

In some cases, adjustments to new arrangements (particularly unexpected restrictions caused by, for e.g., increased restrictions/testing on delivery drivers crossing borders) have impacted on the management of just in time supply chains, particularly for consumable (perishable) goods.

Expanding into new markets

Substantial economic growth is expected over the next decade in markets in Asia, East Asia and Africa with growing middle classes in these countries driving demand for imported goods. Facilitated by a growth in digital (online) retail, this opens the potential for new markets for UK exporters although to take advantage of this opportunity, companies will have to manage the challenges of breaking into and operating successfully in new markets (with new customs/retail regulations for e.g.).

Background ref from: https://diplomatist.com/2020/07/10/international-trade-in-post-covid-19-scenario/