Ghirardelli Expanding into Romania

Ghirardelli Expanding into Romania

Introduction

Domingo Ghirardelli founded Ghirardelli Chocolate firm in 1892. Ghirardelli concentrates on high quality chocolate production in both America and other regions such as Germany, Canada, and Switzerland. The company aims to expand in Romania but has to consider factors such as politics, economy, culture, geographical aspects, and nature of other international companies operating there. The analysis of the factors will enable one to understand the challenges that the company may experience while trying to penetrate the market, thus a need to find solutions.

Nature of International Business

International firms always search for markers and opportunities to assure sustainability and increase profits for their businesses. Countries such as Romania have much to offer, therefore, not ignored as an investment destination. There are several major global companies which have expanded into Romania. The companies offer goods and services to European and regional clients from centers situated in Romania. Alvogen, for instance, since making an agreement to buy Labormed a drug producer in 2013, has been performing fairly well in the country. Huawei has a customer care center in Bucharest that provides technical assistance to European consumers. Huawei planned to invest a hundred million Euros until two years ago.

There are also other established companies which have expanded into the nation such as Kellogg, Erickson, Deutsche Bank, Coca Cola, Microsoft, and Oracle. The ability for other international companies to invest there creates confidence for Ghirardelli marketing managers to see opportunities and feel the need to invest. There is also consideration of other factors before seeing the need to establish the company such as Romanians‘ preferences to chocolates compared to candies and the demand

Operating Environment

There are concerns from foreign investors that Romania’s business environment has become worse, also based on the Foreign Investor’s Council’s reports. FIC also noted that companies would anticipate for growth but were worried about the foreseeability of fiscal, legislative, and regulatory environment. There are some respondents who still believe that their business will grow and continue investing, although there are indications that there could be an inverse trend.  Business operate there with expectations that any arising issue could have an impact on their profitability. There is also confrontation of businesses regarding reduced labor forces and capital markets. Ghirardelli could risk and expand into the country while prepared for any worse case scenarios or find alternatives before investing there.

Policy makers view that there has to be dialogues with businesses and adjustments in legislative procedures (Dragan, 2019). Legislation process should not occur before talks and assessments, building of infrastructure, and the digitalization and realignment of administration services. Open dialogues between businesses companies and policy makers could tackle some problems that have an impact on long term development. The Ghirardelli management could meet with Romanian’s policy makers to try address the mentioned issues to enable company to run its business more effectively in the country.

Cultural Environment

Both in social and business relationships, understanding another person’s habits and expectations for better knowledge of Romanian culture. Citizens been a rise of chocolate consumption among Romanians. The market reached a record of beyond one billion euros as of the year 2018.  Romanians eat around two kilograms of chocolate yearly. Western economies, however, have low chocolate consumption. The ability for less people in the Western regions wanting to consume chocolates, encourage s Ghirardelli company to want to expand into Romania because of higher demands there. The National Institute of Statistics portray that Romanians ate approximately 157 grams in a month of sugar-based items such as candies and chocolates. The market is in such a way that the price ranges from economical to premium costs to cater to all types of clients.

Romania has unique culture because of a certain historical legacy and location. Romania is perceived as the meeting place for three neighbors; namely the Balkans, Eastern and Central European countries. The convenience for people from those different parts to meet in Romania increases the chances for them to see Ghirardelli products, thus higher probabilities to purchase. The individuals could then indirectly market the chocolates in their countries through, for example, sharing experiences with their families, friends, and colleagues

Romanians are known to be friendly and hospitable towards foreigners and can easily reveal information regarding their livelihoods. The chocolate company can take this advantage to research and determine whether Romanians love chocolates even with secondary resources having revealed Romanians to love the snacks.  Citizens staying in urban regions can usually speak languages like German, French, and English thus enable better communication with foreigners. Business people are, however, wary about foreign companies taking advantage of opportunities and people therefore companies such as Ghirardelli, have to create trust with the people. The ability to speak English makes it easier for communication between the American firm and Romanian locals.

Political Environment

There has been the practice of corruption, abuse of power, money laundery, and bribery, among prime ministers, minsters, and mayors in Romania. America’s goals for the country has been to enhance stability and minimize Russian influence. Anti-corruption endeavors are also ways of making sure that Romanians dedicate mostly to Western countries such as America and persuade migrants to remain in the country. The outside powers also played crucial roles in facilitating and encouraging anti corruption in Romania.

The Romanian Intelligence Service and the National Anti-Corruption Directorate, being on of the key players during he campaign, also have significant ties with the West particularly with problems such as organized crimes, corruption, cyber security, and terrorism. The American government supports the campaign by the Embassy awarding Laura Kovesi, the Directorate’s head (Stratfor, 2015). The government also banned corrupt Romanian officials from entering America. The ability to build relationships with Romanians enables the United States to create solid political systems with European countries including Romania. The relationship between the two countries would make it easier for Romania to want to reward the initial favor by agreeing for Ghirardelli company to expand into the country. There would be convenience in receiving the favor if corruption ends in Romanian government and the latter acknowledges and appreciates American support throughout the journey. The Romanian government could then decide to establish favorable trade policies for America.

Geographic Aspect

Romania is one of the most populated countries in European Union. The country’s capital city, Bucharest is one of the biggest cities compared to other European cities. The ability to be densely populated increases the market for Ghirardelli products. There would be more people wanting to buy the product unlike if the country was less populated. Ghirardelli company control each phase of the manufacturing process of chocolate, declining most cocoa seeds while looking for the quality ones. Statista’s reports indicate that there has been a decline in the number of sugars, chocolate, and coca industries thus possible market opportunities for Ghirardelli. Romania also has dense forests, making it more manageable for the company if it were to consider growing cocoa in the country which thrives well with rains.

Economic Environment

According to Heritage’s Economic Freedom Index (n.d.), Romania is ranked forty second place compared to America at twelfth position meaning that America has more labor and trade freedom unlike Romania. Ghirardelli Chocolate company, being based in America, encourages the company to either export or import goods without much restriction unlike Romania. Trade freedom is the lack of imposition of tariffs that would, otherwise, have an impact on the exportation or importation of services and goods. Romania’s position shows that the country can be restricted towards importing chocolates from the company to support local chocolate industries, thus male it somehow difficult for Ghirardelli firm to penetrate Romania’s market. According to the Observatory of Economic Complexity (n.d.), Romania mostly imports from Poland, France, Hungary, Italy, and Germany.

The less chances of Romania importing from America compared to the top countries, makes it hard for Romania to import chocolates from America unlike for example Hungary. Hungary borders Romania, thus could be the reasons for preferring to trade with the country. The importation costs would also be less compared to importing from Ghirardelli company. There is also no mention of Romania exporting to America but indicates those trading countries such as France and Germany.

Conclusion

The challenges that Ghirardelli may experience is the declining trade freedom in the country and the operating environment having been worse in the past few years. The company can create better relations with the government and research on ways of operating better in the country for faster penetration into Romanian’s market.

References

Dragan, A. (2019). Survey: Most foreign investors say Romania’s business environment has worsened. Business Review. Retrieved from https://business-review.eu/business/survey-most-of-the-foreign-investors-say-the-business-environment-in-romania-has-worsened-199491

Heritage (n.d.). 2019 Index of Economic Freedom. Heritage. Retrieved from https://www.heritage.org/index/ranking

OEC. (n.d.). Visualizations. OEC. Retrieved from https://oec.world/en/profile/country/rou/

Stratfor (2015). Why the West wants Romania to be less corrupt. Euractiv. Retrieved from https://www.euractiv.com/section/central-europe/opinion/why-the-west-wants-romania-to-be-less-corrupt/