Marshall Executive Brief #3 Trade Policy Greece

Marshall Executive Brief #3 Trade Policy Greece and France

This brief will discuss critical issues of trade policy, including global trade, global currency exchange, business strategy and operations, R&D, human resources, accounting and finance.

Global Trade and Currency Exchange

Global Trade

Free trade is a system where the governments of two countries do not discriminate between the imports and exports of the other country. In particular, free trade in the modern sense applies to tariffs and other trade barriers, or the non-existence thereof. Ricardo described free trade in terms of absolute and comparative advantage. Usually, this concept is described using a simplistic, fictional world in which there are two countries and maybe only two goods. In this example, countries should produce the good in which they have comparative advantage, and in doing so the two countries combined with have a higher aggregate output than if only the country with absolute advantage produced everything. The reason is because there are tradeoffs in production, and if one country has absolute advantage in two goods and the other in zero goods, the productive country will not be able to meet total demand; thus the country without absolute advantage should produce the good in which it has comparative advantage (Formaimi, 2004).

Trade policy has many instruments. One is tariffs, which impose costs on the importation of goods. Tariffs raise the cost of foreign goods, usually for the benefit of domestic producers. There are no tariffs between France and Greece, since both are members of the internal common market of the EU. Further, goods bound for either country can enter the EU anywhere and move across the EU's internal borders without tariff (EC, 2013).

Quotas are another instrument of trade policy, wherein a nation would put a limit on how much of a type of good can enter that country. Again, as the result of the common market, there are no quotas on goods traded between France and Greece. There may be quotas for the entire EU that are imposed on goods, but once inside the EU there are no limits on the distribution of those goods within the common market.

The European Union, in particular the internal common market, is an example of regional economic integration (REI). France and Greece are both members of this union, and therefore have an internal common market with each other. This means that trade between the two nations is treated as trade within a single country. This policy is meant to foster growth within the EU, in particular promoting the use of comparative advantage to improve efficient distribution of productive resources within the common market.

The import/export activities between the two countries vary by product. In general, goods produced in one country can be shipped to the other freely, so there are times when goods are produced in France and then shipped for sale in Greece, which is a much smaller market. There are also times when France or Greece is used as a point of entry into the EU, though Greece's physical isolation reduces that likelihood. It is possible, however, that goods can enter the EU at Piraeus and then make their way to France via Italy or direct through a Mediterranean French port. In general, however, there is little movement of goods between these countries other than the first scenario, where goods produced in France are shipped to the Greek market, or goods from the UK make their way via France to the Greek market.

II Currency exchange

Both France and Greece are on the euro (for now!). Thus, there is no currency exchange between these countries and all trade between the two is denominated in euros. Until any official word of Greece being kicked out of the euro occurs, it will be assumed that the country will remain part of the Eurozone in perpetuity.

III. Business Strategy and Operations

General Mills has a differentiated strategy based on branding and the quality of goods. There is a high level of standardization in the company's product lines. European products might be different than American ones, but there is a high level of standardization among European goods produced by General Mills. The company owns its own subsidiaries for Europe but relies on local partners in each country or region for transportation, distribution, retail and marketing. The primary entry mode for General Mills in Europe therefore has been to set up its own subsidiary and then export using local partners. The company's organizational structure is actually a convoluted mess -- sometimes based on geography, sometimes based on product, and this is an issue that probably should be resolved. Chains of command are impossible to follow, and an org chart would look more like a Jackson Pollock painting than a pyramid. The following departments are relevant to the French and Greek operations: Marketing; Global Strategy, Growth and Marketing Innovation; Meals; Supply Chain; Global Human Resources; Bakeries and Foodservice; Technology and Quality; Yoplait International; Cereal Partners Worldwide; Europe, Australia and New Zealand; Small Planet Foods; Big G. Cereals; Finance; Snacks; Sales and Channel Development; International; Baking; Frozen Foods; Financial Operations (2012 General Mills Annual Report.. Organizational structure at General Mills is in serious need of streamlining.

IV Business Operations

The product attributes are food, convenient, stable and transportable. The distribution systems are usually by truck, though products also reach Greece by boat from other EU nations to avoid tariffs. Retail can be diffuse in both countries but wholesale is concentrated. Channel exclusivity is unlikely for most products as customers value selection and our competitors are as strong as we are. Channel quality is generally good in both countries.

There are no barriers to international communication. The language within the company is English, and our managerial staff in both France and Greece need to speak it. Communications between the different units is complicated, because of the org chart, but is primarily managed electronically. Advertising tends to be on a product basis, for the entire EU. The unique languages of France and Greece necessitate some adjustments as do cultural norms. Pricing strategy can also vary by local market -- the French respond differently to Yoplait for example (they love it) than the Greeks (they mostly eat Greek yoghurt). Thus, each country has certain local strategies even when the products are standardized.

B. Global Human Resource Management