Concepts of Free and Fair Trade and the Existing Differences Between the Two Essay

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Free trade is considered part of globalization since it ensures existence of fairness in international trade. The concept basically involves removal of most trade barriers for the benefit of all consumers within the society. Fair prices are provided for the purposes of enabling consumers gain access to sensitive and important commodities. Free trade agreements are reached after negotiation processes are done and ultimately sealed by legislation and signing of text of agreement (Krugman and Obstfeld, 2011).

In most cases signed agreements assist in opening markets that were previously inaccessible to companies from specified countries. Trade agreements usually determine a company’s possibility of operating within the foreign markets. This is because free trade agreements have the capacity of directly influencing company’s export costs which eventually determine prices charged within these foreign markets (Carbaugh, 2004).

Fair trade encompasses trade of goods and services with the focus of creating equity and partnership within the global market system. In addition to farmers and producers receiving money, they also commit to work under long-term contracts for the future benefit of businesses and entire society.

Fair trade producers are characterized by small cooperatives of workers using environmentally friendly methods for the purposes of sustainability. Standards within fair trade highly considers human and animal welfare hence no abuse to labour is found within this system.

Fair trade guidelines demand that producers sign up and be accountable for the quality of their products (Krugman and Obstfeld, 2011).The basic concept of fair trade is that it is meant to guarantee minimum price for traded commodities either industrial or agricultural. This is done for the purposes paying workers in developing countries more than expected earnings such that in case of price fluctuations, there is still basic safety net salary for workers against tough situations.

However, fair trade also has got drawbacks such that goods fairly traded can at times be costly. Good example can be drawn from the fact that fair trade clothes or household items are always priced higher than goods traded in normal and usual ways. This makes it difficult for the low-income earners to perform their normal purchases (Carbaugh, 2004).

Examples of products that are always fairly traded include; coffee, tea, sugar, clothes, food, furniture, personal accessories amongst other products. If ordinary coffee or free trade coffee is bought and sold at relatively high price, the guaranteed fair trade price is automatically exceeded. When such scenario is considered under fair trade rules, the coffee growers are compensated with prices almost the same as free-trade price.

The payments ensure that the growers neither loses nor gains in times when prices fall or rise respectively. In this case the beneficiaries are basically importers and those in the middle of the chain while the losers are growers and consumers. The consumers ultimately pay more for quality no different from basic commodity good (coffee). Milk and milk products are also considered in the category of fairly traded commodities (Albaum and Strandskov, 2005).

Preferred corporate management strategies recognizable in the organization’s foreign operations

Corporate management strategies plays vital role in the success of businesses within the international market. The nature of the entry mode the business adopts in foreign countries plays an important role since it ensures that the business internalizes market imperfections and at the same time minimizes the various transaction costs. Higher degree on market imperfections gives opportunity for the company to adopt lucrative strategies.

The social network perspective demands that the company integrate formidable networks with buyers, suppliers as well as competitors since this will grant them privileges in accessing foreign markets. Cooperation with other firms promotes channels used in market entry and at the same time reduces risks and overall costs. Mimicking strategy should be adopted by the company since it is its first time to enter such unfamiliar host country.

The management should identify referent firms to imitate. The referent firms to be considered should be those from the United States already in successful operation in Egypt. Management should utilize host country firms for evaluation purposes, whereby major configurations and network compositions required in the host country are drawn from (Bartlett and Ghoshal, 1998).

The degree of conformity to internal pressures should also be considered. Such include existing organizational structure, corporate mission and vision, organizational culture, management norms and values. For the purposes of reducing internal pressure, the entry strategies should involve peripheral activities and decisions. This is since the core business activities holds the company’s resource base valued as company’s mantle for progress.

Higher percentage of revenue is obtained from core business which in this case may include packaging, branding and distribution processes. Therefore, less internal pressure is realized when foreign entry decisions made are not based on the company’s core businesses (Bartlett and Ghoshal, 1998).

Corporate management strategies adopted in the foreign market plays an important role in determining the company’s success in the long-run. Operations strategy demands that new ways should be adopted for the purposes of adding value to customer in the commodity and services provided.

This calls for the need to harmonize firm strategies with various functional areas and overall business objectives. Challenges faced by other affiliate firms are basically technology oriented. The rise in technology has resulted into hyper-competitive environment, hence management required to create innovative strategies which can enable the firm focus ahead of the prevailing competition.

One of the incentives used to deal with such shortcoming is ensuring that managers understand basic firm capabilities. This grants them the opportunity and capability of focusing their resources appropriately in maintaining and improving firm’s performance. Overall strategies adopted should not only focus on sales but capable of integrating goods and services into single package capable of meeting consumer core needs (Bartlett and Ghoshal, 1998).

Conclusion

The various strategic choices made by international firms are usually influenced by global institutional pressures. Such pressures include push for quality standards as well as making use of the consulting firms. The firm should operate under strict strategic business principles, goals and objectives.

Such strategies represent hallmarks which can be utilized by the company in the event of reinforcing their brand position within the international food industry. The hallmarks normally assist in integrating the strength of the business operations. It is also important for the company to focus on international business ethics and regulations. These are instrumental when it comes to restructuring and realigning business operations within the host country and at the same time winning consumer trust.

However, the company should consider drafting short-term measures instrumental in reviewing marketing performances, revealing knowledge on prevailing market situations and at the same time assist in consumer differentiation. The need for intensive investment and good performance in potential market segments may guaranty the firm competitive advantage over other host firms.

References

Albaum, G., Duerr, E., & Strandskov, J. (2005). International marketing and export Management. Upper Saddle River, NJ: Prentice Hall.

Bartlett, C., & Ghoshal, S. (1998). Managing across Borders: The Transnational Solution. Boston, Mass.: Harvard Business School Press

Carbaugh, R. J. (2004). International economics (9th Ed.). Mason, OH: Thomson/South Western Educational Publishing

Krugman, P.R. & Obstfeld, M. (2011). International Economics: Theory and Policy. (9th Edition). New York, US: Pearson

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IvyPanda. (2018) 'Concepts of Free and Fair Trade and the Existing Differences Between the Two'. 20 November.

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IvyPanda. 2018. "Concepts of Free and Fair Trade and the Existing Differences Between the Two." November 20, 2018. https://ivypanda.com/essays/concepts-of-free-and-fair-trade-and-the-existing-differences-between-the-two/.

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