Question.2473 - Current trade environment with the United States. Current trade barriers (non-tariff and tariff). Review the target country through Porter’s diamond model. Review ethical dilemmas of exporting to the foreign target market (see Chapter 5 Emerging Markets, section 5.1 Expanding UK Exports in Russia). Evaluate the foreign direct investment (FDI) environment and potential for ownership, location, and internationalization (OLI) advantages.
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Hello everyone, in accordance with communication with foreign research partner exploring the expansion possibilities of EcoLife in developing nations like India.1. Current Trade Environment with the United States With the ongoing developmental relationship with India, the United States has strong bilateral trade set as a standard that allows both the nations to trade goods and services that totaled an estimated $191.8 billion in the year 2022, with exports from the US being around $73 billion and exporting leading to a $118 billion, the patterns tend to show that the United States has trade deficit on track by %45.7 billion in 2022 ("India," n.d.). Both the trade and foreign affairs between the nations seem to be growing steadily over the last few years with various sectors such as information technologies or even export, but work from India, particularly the service sector, is on the boom, according to the stats from the IndianEmbassyUsa, the year 2018 experienced total bilateral trade of $142 billion and also saw a 13.4% compound annual growth rate from service trade from previous years. Both nations tend to recognize their strategic importance when it comes to trade and work on building a robust trade framework between both nations through various interventions like the US-India Strategic and Commercial Dialogue ("India," n.d.). 2. Current Trade Barriers The data from the National Trade Estimate Report on Foreign Trade Barriers (2024) states that India's average Most-Favored-Nation (MFN) is applied on the tariff rate, which was around 18.3% in 2021, which tends to be the highest of any major world economy, while the average applied tariff rate is around 14.9% for non-agricultural goods, and also on other wide range of goods be it vegetable oils at 45% applied tariffs or motorcycles and automobiles ranging from 50% to 60%; in addition with high basic customer duties that exceed 20% - such higher trends of positioning tariffs serve as a significant barrier to trade. While considering other non-tariff barriers from the National Trade Estimate Report on Foreign Trade Barriers (2024) with varying forms like the banned or prohibited items that deny entry into India, restricted items that require an import license, and items and the tariff-rate quota that are importable only by government trading monopolies which are subjected to cabinet approval in terms of quantity and import timing. At the same time, other barriers include import restrictions (in order to manage their domestic oversupply - India tends to impose restrictions on imports of various pulses to mitigate their local supply and demand conditions, delaying the process of approval), importing licensing which distinguishes the goods among new and the secondhand or manufactured, refurbishes or reconditions, customs barriers and trade facilitation (with varying fluctuations in the tariff rate that is allied with politics, since India only announces its tariff rates during annual budget), medical devices price controls, ethanol import restrictions, and agricultural subsidies (leads to lowering the overall production quality from India that in turn distorts the market supply) ("2023 National Trade Estimate Report on Foreign Trade Barriers," 2024). 3. Porter's Diamond Model (India) Considering Porter's diamond model for India, firstly, factor conditions - India has a distinctive factor with a diverse set of competitive advantages, along with demographic advantage that provides cost-effective labor and supports innovation and adaptability, particularly the skillset that's accessible to India with advancement in growing technologies (Mann & Byun, 2011). India's demographic spreads enable them to benefit from cost-effective labor being open for the gig market, along with the land being abundant in natural resources with arable land and minerals that are exposed to suitable climate conditions that foster various industries - with rapidly growing infrastructure adapting to the standards of developed nations in terms of transportation, communication, and energy aids in enhancing the factor conditions (Mann & Byun, 2011). Secondly, considering the demand conditions of India according to Porter's Diamond Model, the nation tends to have a diverse consumer market that is run by middle and lower socioeconomic classes of people with a higher rate of contributions from the younger generation, which drives the demand trends towards innovations and customization to compete with the western culture (Mann & Byun, 2011). When the purchasing power of the middle class increases, they possess the power to steer the demand conditions with a range of goods and services from domestic industries, which in turn controls the quality of products or services, fostering competition. Lastly, related and supporting industries with renewable energy on the verge in India - resulted in increased competition from local and international players, demanding selling propositions and other differentiating strategies. Indian government's support towards renewable energy and IT sectors has been favorable so far in creating more economic opportunities for expansion, in addition to exploring chances like technological advancements and global climate initiatives (Mann & Byun, 2011). 4. Ethical Dilemmas in Exporting to India In terms of labor practices, it is mandatory for the company to abide by fair wages that ensure safe and secure working conditions in adherence to the existing domestic and international labor laws while also mitigating the environmental impact of manufacturing and transportation; such as, they can adapt to the global market through innovative communication strategies to meet the local cultural values that build a better relationship with the stakeholders. 5. FDI Environment and OLI Advantages Considering the FDI environment - India, being a developing nation, has opened its scope for FDI, particularly directed towards the renewable energy sector, while offering subsidies and other possible incentives in addition to relaxed regulations. Your chosen company or technology would be able to build a reputation that provides them a competitive edge in the Indian market only if they tap into renewable sources of energy and also sustainable operational procedures with an eco-friendly approach - the Indian market will provide the companies with the ability to utilize their abundance in natural resources, while also Indian market is diverse that reduces the dependence on their local market and benefit from new growth opportunities (Azhar & KN, 2012). Based on foreign research partner, I would like to propose the following suggestions, I would appreciate your feedback on the following: How about assessing trade barriers that impact the chosen industry or company within their niche market? Do you have any insights on the competitive landscape in the Indian renewable energy market or the identical operational market? Do you think that ethical considerations compromise the overall procedure and operations? Will it impact FDI decisions and its ability to leverage OLI advantages? References 2023 National Trade Estimate Report on Foreign Trade Barriers. (2024). https://ustr.gov/sites/default/files/2023-03/2023%20NTE%20Report.pdf. Retrieved May 29, 2024,.Azhar, S., & KN, M. (2012). An overview of foreign direct investment in India.?ZENITH International Journal of Business Economics & Management Research,?2(1). India. United States Trade Representative. (n.d.). https://ustr.gov/countries-regions/south-central-asia/india#:~:text=U.S.%20goods%20and%20services%20trade,billion%3B%20imports%20were%20%24118.8%20billion. Mann, M., & Byun, S. E. (2011). Accessing opportunities in apparel retail sectors in India: Porter's diamond approach.?Journal of Fashion Marketing and Management: An International Journal,?15(2), 194-210.More Articles From Business Management
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