China's neo-mercantilism and global energy diplomacy implications

China

Unit 5

A neo-mercantilist trade policy is defined as a situation where the state plays an active role in shaping trade, building a close relationship with the country's businesses. In doing this, the state will take steps to encourage exports, discourage imports, and generally seek to create the conditions where the nation's producers can thrive (Thoma, 2009). Based on this definition, it is hard to argue against the idea that China is employing a neomercantilist policy. The PRC exerts strong control over imports, while providing a wide range of support to exporters. These supports include currency manipulation – not allowing the yuan to float freely is passive manipulation – the provision of financing by the state-owned banking system, and a system of favorable trade barriers.

China's trading partners should take action – the question is what? There are limits to what actions can be taken within the confines of law, and without creating a pointless trade war. But certainly, other nations that so desire should seek to protect their own industries from ones China is supporting, and should be cognizant of ensuring that trade policy with China allows for mutually beneficial trade – where reciprocity is a key tenet.

Unit 6

Ireland has inward trade flows double those of Japan. There are a few reasons for this. For one, Ireland has actively sought out investment. The nation seeks to leverage a particularly advantageous position within the EU. As an EU nation, it benefits from being part of that trade union, and seeks to be an English-speaking hub for companies that wish to operate within the EU. Further, Ireland has a free-flowing land border with the UK, one of Europe's largest markets. Leveraging both of these, Ireland has been able to attract a lot of investment in the form of service industries, software, and simply companies headquartered there whose profits flow through Ireland. The number of greenfield startups in Ireland and Japan are not much different, but on average investments in Ireland are larger (Santander, 2018). This is in part because such investments are not just for the Irish market, but for the entire EU, which is a market twice the size of Japan. That alone appears to have explanatory power for the difference in inbound FDI, but there are political and cultural considerations as well.

Japan, in contrast, has always had an approach of building things internally and then selling to the world. Thus, Japan does not have the same level of encouragement of FDI – it doesn't need to because it has high productive capacity and a large market on its own. Where Ireland needs FDI to have a strong economy, Japan actually does not, because it can produce goods to sell to the rest of the world. So the structure of the Japanese economy is quite different. Further, there are cultural barriers that make Japan a more difficult place in which to invest. Where Ireland has a society more open to foreigners, and is English-speaking, Japan has always been somewhat mistrustful of foreigners, there are language barriers, and again there is also strong local competition. Companies are happy to sell products to Japan if they can, but they have no interest in investing in building businesses in Japan. With lower barriers, Ireland has the structure in place to attract inbound FDI, and it wants to. Japan does not care that much, and thus does not have the structure in place to handle as much inbound FDI.

Unit 7

The Gap's different brands each target a different market, which is usually the reason for differences in branding. Each brand has its own target defined by the products and the market. The Gap is the mainstream flagship brand aimed at the mass market. Athleta is the Lululemon knockoff stuff – women's yoga and athletic clothes. So Athleta targets more of a niche, a subset within the general Gap audience. Banana Republic is pretty similar to the Gap. Honestly, Old Navy is basically the same. Compared with the Gap, they are different shades of beige. All target a broad market with staple clothing items. Each of these three major brands leverages its brand power to cater to roughly the same audience. Searching for points of differentiation between the three is an exercise in mental gymnastics. Theoretically, Old Navy is more for families, and Banana Republic is more upscale, but compared with actual upscale retailers and actual family-oriented clothing retailers these distinctions are clearly superficial in nature. They all target the same markets, and all have very similar clothing. Most people with any fashion sense at all will have difficulty seeing any differentiation between these brands. Only Athleta stands out, for its clear targeting of a single gender, and a particular lifestyle theme.

Unit 8

There are many steps to making an export decision. First, one has to understand what the strategy of the company is, and whether exporting fits with that. Second, why is exporting a better option than expanding sales within the US? In other words, why does it make more strategic and tactical sense to sell internationally than elsewhere in the US? If the company has a broad vision that includes international expansion that might make sense – Starbucks' tenth store was opened in Vancouver, when clearly it had plenty of room to grow in its own home market.

From there, the company has to look at each opportunity through its own lens. It is not enough to say "we're going to export because that's better"; the company actually has to analyze each particular decision (i.e. we are going to sell cowboy boots to Mexico). Then that decision can be analyzed on a "go/no go" basis, for example "The market for cowboy boots is large, but handmade Mexican producers command high prices and are at capacity, so there is room for a foreign player in that market."
Once a decision has been made, there's more steps. First, how will you get the goods across the border? What distribution channels should be used? How will you market your goods in the foreign country? What barriers to entry might exist? What will be the response of existing competitors in the market? I would definitely advise the CEO to answer all of these questions, and others pertaining to things like the different forms of country risk, before proceeding.

Unit 9
Domino's has to acknowledge cultural differences in its strategy. Generally, this is in a superficial way. The company still sells pizza, and it's basically the same, but there are differences in things like toppings, other non-pizza products, and of course there are differences in the operating models in order to sell around the world. But the product attributes strategy is internationalized, as it should be, in order to best cater to local tastes. Every country in the world has pizza, pretty much, and therefore every country has established things that it likes on pizza – Domino's is smart enough to take that existing knowledge into account when it expands internationally.

It is important to know which attributes to change and which not because making the wrong changes will increase the risk that the move into the new country fails. For example, the Domino's brand is built on pizza, so it cannot open as a burger joint in another country. It has to keep its product line familiar to anybody who knows the brand. But it does have leeway with respect to things like toppings, side dishes and drinks, because those are areas where each country will have its own tastes. By taking the basic product, leaving that unchanged, the company can leverage its brand, and its production and marketing strengths. But working with that core, it is recommended that Domino's should change some non-core product attributes to make its offerings more attractive to the populace of whatever country they are expanding into.


References

Santander (2018). Ireland: Foreign investment. Santander Trade. Retrieved April 21, 2018 from https://en.portal.santandertrade.com/establish-overseas/ireland/foreign-investment

Santander (2018). Japan: Foreign investment. Santander Trade. Retrieved April 21, 2018 from https://en.portal.santandertrade.com/establish-overseas/japan/foreign-investment

Thoma, M. (2009) Neomercantilism. Economist's View. Retrieved April 21, 2018 from http://economistsview.typepad.com/economistsview/2009/07/neomercantilism.html