Regional integration refers to a process of states entering into regional agreement in the bid to enhance regional cooperation following regional rules and institutions. Despite the merits that the process may possess, there are extensive disadvantages that go along with regional integration. This element of trade may become exclusively significant through combination with other factors that may enhance performance. Having proper understanding of free trade, various measures must be undertaken.
Free trade is a major policy in international trade. Following the exclusive drawbacks of regional integration, free trade should not be allowed to take its natural course. One of the reasons why free trade should not be allowed to take its natural course is following the political issues that are likely to develop. Political ties between two countries are extremely useful in defining the extent of trade between the two countries. Free trade would not be respectful to the defined political elements and this may develop trade disagreements. Also, free trade may allow entry of substandard products into a given country. This also challenges the reason why free trade should not be allowed to take its natural course. Without proper governing of free trade, it will be extremely difficult to control fair business relationships between countries (Karl, 2006).
Although, an agreement like Outward Processing Trade (OPT) consists exclusive demerits as elements of free trade, their merits should not be ignored. Outward Processing Trade allows trade between companies from different countries as they seek to obtain raw materials from each other. This agreement allows people who cannot manufacture or access certain materials needed in the production to acquire them. This is also, a strategy to acquire close relationship between countries, as well as companies from different countries in enhancement of social cohesion. Enhancement of international trade partnership may be achieved through execution of policies or agreements such as OPT, which is enhanced by existence of free trade among countries. Therefore, OPT elements should not be restricted among countries. On the other hand, apparel traders should be allowed to import from cost effective suppliers. There are extensive merits that with allowing apparel retailers to practice trade with the most cost effective suppliers. The first merit is that it creates excellent international ties that make trade most effective (Moran, 2011). Companies will be in a position to exchange extensive ideas, which would make local trade experience exclusive growth that would enhance their international position in terms of business.
Romania is one of the poorest countries in Europe with extensive poverty and social upheavals amongst its citizens. Although, there are exclusive talents in the country of cloth manufacturing and design the companies in Romania are not in a position to extensively benefit from these skills. OPT would be considered as one of the most efficient strategies to enhance trade among Romanian firms. This strategy would have various advantages, as well as disadvantages to the firms.
The first merit that Romanian firms would be achieve through execution of OPT strategy is easy access to high quality materials. Following the inability to manufacture fabrics, Romanian firms would have a chance to acquire raw materials from foreign firms. This will allow the firms a chance to choose from a range of offers extended by foreign companies. Also, they would have a chance to access the most efficient raw materials that would result from accessing materials from the company that has employed exclusive effort in producing the best raw materials. Also, the firms will be in a position to avoid expensive charges that may be extended to them by locals if they were to hire their expertise for local manufacturing of the raw materials required (Karl, 2006).
Also, there are several demerits that may be experienced by Romanian firms following execution of the OPT strategy. The first one is the inability to benefit from the exclusive talent found in the country. This disadvantage is a result of the inability of the government of the country to tap the talent and make it a reliable platform for economic excellence. The other disadvantage is that the firms may incur high costs in the process of getting goods from other countries to be used as raw materials. Transporting the raw materials from one country to another may be affected by different policies from different countries (Moran, 2011).
The government may also incur some demerits as a result of application of OPT strategy. One of the disadvantages is that the government is likely to lose benefits that may come from exportation of the manufacturing talent found in the country. As poorly performing economy, the country is likely to be affected by economic factors from other countries. Such factors would be poor tariffs, and inflation.
Although, Romania could have wished to be among the most outstanding countries in the apparel sector as it consists of what it entails, it has been impossible. This is following the extensive levels of poverty countered by exclusive competition from the developed countries. This has made it extremely difficult for the government to keep jobs in the apparel sector of the country. However, several steps may be undertaken to control the issue. One of the steps that may be undertaken to keep the jobs is adding value on its already talented citizens. This may be achieved through extending some management training to them. Since they already possess talents on different fields management skills would only add value to them making them equally competitive as foreigners. Also, the government should encourage investments by locals who would in turn employ the citizens of their country thus helping the government to keep the jobs amongst its citizens (Moran, 2011).
It would be advisable for the government to extensively invest in attracting more foreign investments. There are several reasons why this should be a major move for the government. One of the reasons is to ensure that the readily available talent in manufacturing is a source of revenue. Once the employees are paid for their contribution in the success of a foreign company, the government will automatically benefit since the income paid will be circulating in the money market of the country. Also, the government will have direct earnings from the foreign companies. In most cases, licensing foreign companies is expensive. Therefore, the government will gain massive income in terms of license fee and tax revenue. Also, it would be a viable move since it exposes domestic companies to exclusive knowledge pool from foreign companies, which may be high performers (Karl, 2006).
Foreign direct investment in the country may be achieved through execution of various strategies. One of the strategies would be reduced licensing fee for foreign companies. License to operate in the land should be offered at extremely low revenue to attract more companies. Also, the government may extend subsidies to some companies that are likely to cause revolution in the company. The government may use experts to evaluate the most critical sectors that need foreign influence to ensure their success. Also, foreign companies should be assured of their security in the land. This would come through assurance of proper communication infrastructure between the government and the companies. Also, infrastructures such as roads, and social facilities should be enhanced to attract foreign investors (Moran, 2011).
The fashion industry is extremely wide and it needs exclusive strategies to ensure that a company acquires an outstanding market share. However, competition cannot be disregarded in the industry as it builds sense of the industry. In this case, H&M which is a smaller company than ZARA from Spain requires undertaking exclusive measures to counter the competition. The first step that H&M should undertake is investing in market research to identify the most common markets for ZARA. This would help the company in identifying the markets that it should emphasize on in the bid to outdo ZARA in the fashion industry. H&M may invest in production of fashions that are likely to suit a given market. The company may also invest in areas outside Europe where ZARA may have not captured. Although, the company may be manufacturing similar products to those of ZARA, it might charge a little bit lower price to its customers. This may work magic for the company as ZARA customers may also be attracted to the commodities since they are of the same quality but sold at lower price (Keen, 2004).
China has been a major cause of the low-cost apparel that is becoming dominant in the foreign market. This is critically expensive for companies such as H&M. However, the company may undertake some steps that may help it in resolving the alleged trouble. The first step the company may undertake is by ensuring exclusive sensitization of essence of quality among customers. Also, the company may manufacture goods of slightly higher quality than the ones manufactured in China (Keen, 2004). These would help the company in maintain its customers as well as acquire more despite the competition forces from China.
Since H&M is a competitive company in the fashion industry, it needs to undertake exclusive steps that would make it survive for long, as well as help it in extending its sales. The first action would be to invest in exclusively reliable management staff. Exclusive knowledge on fashion should be the priority for the company. This would enhance continuous invention in fashion. Also, the company should ensure that its brand is known globally. This may be achieved through massive investment in global promotions and advertisement for its products (Keen, 2004). The company should also remain conscious of the steps that its competitors undertake so to be informed of the recent fashion trends.
Karl, J. (2006). An introduction to international trade (Centennial ed.). Toronto: Pearson Prentice Hall.
Keen, W. (2004). Competition. New York: United Nations.
Moran, T. H. (2011). Foreign Direct Investment and Development. Washington: Institute for International Economics,U..