With your colleagues, discuss the following:
1. Does Canada have a comparative advantage in any products?
Canada has the ability of to produce goods or services at a lower opportunity cost than other countries in many products and services:
2. Would our Potato Chip Company (PCC) have a competitive advantage if we were to sell curry pickled potato chips, say, in Turkey?
The Canadian potato production has decreased during the last years, but due to technological advance, the production and revenue have increased in the same period. The order in revenue ($M) per province in 2008 was PEI (249), MB (237), AB(191), QC(153), NB(145), ON(117), SK(49), BC(46), NS(7), NF(3). (http://www.statcan.gc.ca)
This scenario offers to Canada a relative reward in potato production, and it shows that Canada could be competitive in the potato production. In other way, the elaboration of chips potato requires the intervention of other instances of the economy, where Canada usually has not any advantage due to items such as wage, taxes and transportation. Many countries closer to Turkey than Canada could produce potato chips with higher advantages than Canada. Canada is not in the top ten potato producer such as Ukraine and Poland. Turkey has a similar potato production that Canada with the double of population. And closer countries such as Iran, Egypt also have a huge production per capita, similar to Turkey.
As conclusion, higher cost in chip production and transportation do that PCC has not a competitive advantage selling potato chips in Turkey, any taste.
In the case that curry pickled potato chip could become a success in Turkey, quickly will disappear this innovation in the market due to the competence. The investment and effort will be lost in the short term.
Finally, there are several kinds of potatoes, PCC should study if the potato that PCC produces has a different taste that the potato that people in Turkey consume. This could represent a competitive advantage in case that people in Turkey like this different flavour.
3. Using the model “Requirements for Canada to have a favourable balance of payments,” determine the impact of exporting curry pickled potato chips to Turkey.
I suppose PCC could sell curry pickled potato chips in Turkey with relative success, fundamentally without losing money. In addition, each part of the PCC value chain has strong Canadian investor participation.
Under this assumption, the export of curry pickled potato chips from PCC to Turkey will help to Canada in having a positive balance of payments. The flow of money will be:
The balance due to PCC export to Turkey will be positive for Canada.
4. Using the model, “The decision to go global”, determine if it might be feasible to export these curry pickled potato chips to Turkey
We could analyze step by step:
Potato chips looks to be a product that it could be demanded in most of countries where a company could analyze to export production. It is very difficult to define those countries, but it is related with culture and macroeconomics parameters (e.g.: real GDP, unemployment, inflation, growth and their trends).
If we consider specifically curry pickled potato chips, in addition to the standards studies it should be studied the taste of the local people for this classical flavour.
The product can be modified to fit a foreign market, but it looks that this market can not be modified to fit this product; at least in economic terms.
In addition, there are several kinds of potatoes, PCC should study if the potato that PCC produces has a different taste that the potato that people in Turkey consume. This could be understood as a barrier or an opportunity in case that people in Turkey like this different flavour.
Turkey is not part of the European Union; it is considered a candidate country. This could represent a barrier because of the lack of agreements, but also it could represent an opportunity helping Turkey reaching the EU openness requirements.
PCC has worked in the domestic market; so it is mandatory for diminishing risks to acquire skills for going abroad (e.g.: through training, hiring people), receive government training, help and support.
As conclusion, it is not the time for going to Turkey for PCC; the steps 1and 4 are not fulfilled, the step 3 should be study with details. The step 2 represents some concern, but PCC could be flexible.