FACULTY OF BUSINESS

DEPARTMENT OF BUSINESS
STUDY PROGRAM “INTERNATIONAL BUSINESS”

EXPORT OF FLOUR TO ITALY

Integrated project
Self-study assignment of the module “Basics of international business”

Authors IB-2 group students

Mariia Mikhno
Valeriia Hryhorieva

Supervisors Laura Aidukienė,

Aistė Lastauskaitė,
Wilfred Ledoux Ledoux Tchasse Simo,
Violeta Vasiliauskiene

Kaunas, 2023
 CONTENT

INTRODUCTION.................................................................................................................3
1. Entrepreneurship and Innovation…………………………………………
4
What are your reasons for going into business? What is the market need
1.1
for the product or service?............................................................................................4

2. Legal Regulation of International Business……………………………..5

What is the relevance of WTO regulation in the area of business that you
2.1
are going into? Are there any WTO agreements in place in the particular field? Is
there a regional trade agreement or bilateral trade agreement between the countries
that you plan to conduct business in? What are its relevant provisions ?
………………………………………………………………………………………...5

2.2 If you were to conduct your business in the EU, what would be the
relevant requirements of the EU single market rules in your case (for example,
requirements for goods that you are selling; the use of the rules for free movement of
persons)?.......................................................................................................................6

3. Analysis of International Business

Environment……………………………….8
3.1 International-Expansion Entry Modes………………………………………..8

3.2 What are the competitive products or services: what are total industry
sales over the past 3 years and what is anticipated growth in this industry…………..9

4. Business Models and Projects (Basics of Business Organisation) …….10

4.1 SWOT analysis……………………………………………………………….10

4.2 Operational resourses……………………………………………………….11

4.3 Business idea implementation plan……………………………………….12

CONCLUSION…………………………………………………………………………..14

REFERENCES.....................................................................................................................15

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INTRODUCTION

Relevance of the work The export of grain is an important aspect of global trade
and has significant economic and social implications for many countries. The work
related to the export of grain can have relevance in several areas, including:
Agricultural production and trade, Global food security, Environmental
sustainability, international trade and policy.
The aim of the work. 1.Analyzing the economic impact of grain exports on the
local and global economy.
2. Evaluating the environmental impact of grain production and transportation, and
identifying ways to promote sustainable agricultural practices.
3. Investigating the role of government policies and trade regulations in the grain
export industry, and identifying opportunities for trade liberalization.
4. Examining the impact of technological advancements and innovation on the
grain export industry, and identifying opportunities for improvement.
5. Assessing the potential impact of geopolitical events and global market trends
on the grain export industry.

The first part of the paper discusses innovative product ideas.

The second part of the project contains Analysis of International Business

Environment are indicated.

The third part of the paper discusses Legal Regulation of International Business

The fourth part of the paper discusses SWOT analysis , Business idea implementation
plan.

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1. Entrepreneurship and Innovation.

1.1 What are your reasons for going into business? What is the market need for the
product or service?
Business idea in detail:
Market research: The first step is to conduct market research to determine the demand for flour in
Italy and the competition in the market. We do this by analyzing the Italian market trends, the prices
of flour, and the distribution channels. This research will help us to understand the demand and
supply situation and identify the potential customers in Italy.
Identify suppliers: Once we have conducted market research, we need to identify reliable suppliers
of high-quality flour in Ukraine. We do this by visiting flour mills, attending trade fairs, or using
online directories. We also must evaluate potential suppliers based on their quality, price, and
delivery times.
Establish business relationships: Once we have identified suppliers, we need to establish business
relationships with them. We agree with prices, payment terms, and delivery times to ensure that we
make a profit while offering competitive prices to our Italian customers.
Obtain necessary permits: Before we export flour from Ukraine to Italy, we need to obtain
necessary permits from the Ukrainian and Italian authorities. We consult with a lawyer or a trade
consultant to help us with the paperwork and to ensure that we comply with all regulations.
Logistics and transportation: We arrange for logistics and transportation to deliver the flour to Italy.
We use a freight forwarder or a shipping company to handle the transportation. We consider the
transportation costs, delivery times, and insurance.
Establish distribution channels: Once the flour arrives in Italy, we establish distribution channels to
sell it to our customers. We sell the flour to wholesalers, distributors, or directly to bakeries or food
manufacturers.
Marketing and sales: We develop a marketing and sales strategy to promote our flour to Italian
customers. We use social media, trade shows, or online marketplaces to reach potential customers.
We also provide excellent customer service to retain customers and build a good reputation in the
market.
In conclusion, exporting flour from Ukraine to Italy can be a profitable business idea if we conduct
thorough market research, establish reliable suppliers and logistics, and promote our product
effectively to potential customers.

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How are we different from other companies:
Offer specialty flours: While there are many suppliers of regular wheat flour, we can differentiate
our business by offering specialty flours such as gluten-free, organic, or whole grain flours. This
will attract health-conscious customers who are looking for unique products.
Focus on sustainability: We differentiate our business by focusing on sustainability and
environmentally-friendly practices. This could include using eco-friendly packaging or sourcing
flour from sustainable farms.
Offer customized packaging: We can offer customized packaging for our flour to attract customers
who value aesthetics or require specific packaging for their business needs.
Provide educational resources: Create educational resources such as recipes or baking tips to help
our customers get the most out of our product. This can set us apart as a knowledgeable and helpful
supplier.
Partner with local bakeries: We establish partnerships with local bakeries and offer them special
deals or exclusive products. This will help us gain exposure and build relationships in the market.
Provide excellent customer service: Providing top-notch customer service can set us apart from
competitors who may not prioritize customer satisfaction. Responding quickly to inquiries, offering
flexible payment options, and ensuring timely deliveries can help build a loyal customer base.
Who is exactly our target customer?:
The target clients for the export of flour to Italy could include wholesalers, distributors, bakeries,
food manufacturers, and other businesses that require flour as an ingredient in their products.
Additionally, we also target individual consumers who enjoy baking at home and are looking for
high-quality flour. To determine our specific target market, it's important to conduct market
research and analyze the demand for flour in Italy, as well as the buying behaviours and preferences
of potential customers. This will help us tailor our marketing and sales strategies to reach our target
audience effectively.

2. Legal Regulation of International Business

What is the relevance of WTO regulation in the area of business that you are going into? The WTO
(World Trade Organization) regulations play a significant role in the export of flour to Italy. Italy is
a member of the WTO, and as such, it is bound by the rules and regulations of the organization.
These regulations cover various aspects of international trade, including the export and import of
goods and services.

If a country wishes to export flour to Italy, it must comply with the relevant WTO regulations. This
includes ensuring that the flour meets the required standards and regulations for food safety and
quality, as well as complying with any tariffs or trade barriers that may apply.

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The WTO also provides a dispute settlement mechanism that can be used if there are any issues or
disputes that arise between the exporting country and Italy. This mechanism provides a framework
for resolving disputes in a fair and impartial manner, which helps to promote international trade and
maintain good relations between countries.

Overall, the relevance of WTO regulation in the export of flour to Italy is significant. Adhering to
these regulations is essential for ensuring that the export process is smooth, efficient, and legally
compliant, which benefits both the exporting country and Italy.

Are there any WTO agreements in place in the particular field?

Yes, there are several WTO agreements that are relevant to the export of flour to Italy. The most
significant of these agreements is the Agreement on Sanitary and Phytosanitary Measures (SPS
Agreement), which sets out the rules for the international trade of food products, including flour.

Under the SPS Agreement, countries are required to ensure that their food products meet certain
health and safety standards, in order to protect consumers from potential risks. This includes
measures to prevent the spread of diseases, contaminants, and other harmful substances that may be
present in food.

In addition to the SPS Agreement, there are other WTO agreements that may apply to the export of
flour to Italy. For example, the Agreement on Technical Barriers to Trade (TBT Agreement) covers
non-health-related regulations that may affect trade, such as labeling requirements or product
standards. The General Agreement on Tariffs and Trade (GATT) also provides rules for the
imposition of tariffs and other trade barriers.

Overall, compliance with these WTO agreements is essential for ensuring that the export of flour to
Italy (or any other WTO member country) is legal, fair, and transparent. By following these rules,
exporters can avoid disputes and promote the growth of international trade.
Is there a regional trade agreement or bilateral trade agreement between the countries that you
plan to conduct business in? Yes, there is a bilateral trade agreement between Italy and Ukraine that
covers the export of flour, as well as other goods and services. The agreement is known as the Italy-
Ukraine Association Agreement and was signed in June 2014.

The Association Agreement aims to promote trade and investment between Italy and Ukraine by
reducing barriers to trade and creating a more favorable environment for economic cooperation. It
covers a wide range of issues, including the liberalization of trade in goods and services, the
protection of intellectual property rights, and the promotion of sustainable development.

Under the agreement, tariffs on many goods, including flour, are reduced or eliminated, making it
easier and more cost-effective for businesses to export their products between the two countries.
The agreement also includes provisions on regulatory cooperation, which helps to ensure that any
technical or administrative barriers to trade are minimized.

Overall, the Italy-Ukraine Association Agreement is an important framework for promoting trade
between the two countries, including the export of flour. Businesses that wish to export flour to
Italy from Ukraine may benefit from reviewing the provisions of the agreement and ensuring that
they comply with its rules and regulations.

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 What are its relevant provisions? The Italy-Ukraine Association Agreement contains several
relevant provisions related to the export of flour, including:

1. Tariff elimination: The agreement provides for the progressive elimination of tariffs on most
goods traded between Italy and Ukraine, including flour. This helps to reduce the cost of
exporting flour and promotes trade between the two countries.
2. Sanitary and phytosanitary measures: The agreement includes provisions related to the
sanitary and phytosanitary measures (SPS) that each country can apply to imported goods,
including flour. The provisions aim to ensure that these measures are based on scientific
evidence and do not create unnecessary barriers to trade.
3. Technical barriers to trade: The agreement also includes provisions related to technical
barriers to trade (TBT), which are regulations and standards that can create barriers to trade.
The provisions aim to ensure that TBT measures are transparent, non-discriminatory, and
based on international standards, where possible.
4. Intellectual property: The agreement includes provisions related to the protection and
enforcement of intellectual property rights, including trademarks and geographical
indications. This can be relevant for the export of branded or specialty flours.
5. Regulatory cooperation: The agreement encourages regulatory cooperation between Italy
and Ukraine, which can help to minimize the impact of technical or administrative barriers
to trade. This can be relevant for the export of flour that may be subject to specific
regulations or standards in one or both countries.

Overall, the Italy-Ukraine Association Agreement provides a comprehensive framework for

promoting trade between the two countries, including the export of flour. Businesses that wish to
export flour from Ukraine to Italy may benefit from reviewing the agreement's provisions and
ensuring that they comply with its rules and regulations.
f you were to conduct business in the EU and export flour to Italy, there are several relevant
requirements of the EU single market rules that you would need to comply with. These include:

1. EU food safety regulations: The EU has strict regulations regarding the safety and quality of
food products, including flour. These regulations cover areas such as hygiene, labeling, and
packaging. You would need to ensure that your flour meets these requirements before it can
be sold in the EU, including in Italy.
2. Tariffs and customs: As a member of the EU, Italy is part of the EU's customs union, which
means that there are no tariffs or customs duties on goods traded within the EU. However, if
you are exporting flour from outside the EU, you would need to comply with EU customs
regulations and pay any applicable tariffs or duties.
3. Harmonized standards: The EU has established harmonized standards for many types of
goods, including flour. These standards ensure that products sold in the EU meet certain
minimum requirements in terms of safety, quality, and performance. You would need to
ensure that your flour meets these standards before it can be sold in the EU.
4. CE marking: For certain types of flour processing equipment, the EU requires a CE marking
to indicate that the equipment meets EU safety and environmental requirements. If you are
exporting such equipment to Italy, you would need to ensure that it is CE marked before it
can be sold in the EU.
5. VAT and tax requirements: If you are exporting flour to Italy from within the EU, you
would need to comply with the relevant VAT and tax requirements in both countries. This
may include registering for VAT in Italy and complying with Italian tax laws.

7
Overall, complying with the EU single market rules is essential for exporting flour to Italy from
within the EU. By ensuring that your flour meets the relevant EU regulations and standards, you can
ensure that it is legally compliant and safe for consumption, and promote the growth of your
business within the EU market

2.1

3. Analysis of International Business Environment

Italy is a country located in Southern Europe, known for its rich history, culture, and cuisine. The
Italian economy is the third-largest in the Eurozone and is driven by the manufacturing and service
sectors. Italy is also known for its fashion industry, luxury sports cars, and fine wines.
Tourism is a significant contributor to the Italian economy, with millions of visitors each year
drawn to its beautiful cities, stunning coastline, and historic landmarks such as the Leaning Tower
of Pisa, the canals of Venice, and the ruins of Pompeii.

Italy is known for its delicious cuisine, which includes a variety of pasta dishes, pizza, bread, and
pastries. Flour is a key ingredient in making all of these foods, as it is the main component of dough
and provides the structure and texture of the final product.
Flour is typically made by grinding grains such as wheat, corn, or rice into a fine powder. In Italy,
wheat flour is the most commonly used type of flour in cooking, and it is used to make a wide range
of dishes, including pasta, bread, and pizza.
Given the importance of flour in Italian cuisine, Italy needs a reliable supply of high-quality flour to
ensure that its food industry can meet the demand for its famous dishes.

Economic environment:
Italy has a mixed economy that is dominated by small and medium-sized enterprises (SMEs), which
account for more than 90% of all businesses in the country. The Italian economy is the third-largest
in the Eurozone, and it is heavily dependent on exports, particularly in the manufacturing sector.

However, Italy faces several challenges in its business environment, including a complex regulatory
framework, high levels of bureaucracy, and a slow and inefficient judicial system. The country also
has a high level of corruption, which can make it difficult for businesses to operate fairly and
compete on a level playing field.

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Despite these challenges, Italy has several strengths in its business environment. It has a highly
skilled workforce and a strong tradition of innovation and entrepreneurship, particularly in
industries such as fashion, design, and engineering. The country also has a strong network of
research institutions and universities that support innovation and technological development.
In recent years, the Italian government has introduced several reforms aimed at improving the
country's business environment, including measures to reduce bureaucracy and simplify regulations.
However, there is still work to be done to create a more competitive and efficient business
environment that can support sustainable economic growth and job creation.
Political environment:
The political environment in Italy can be complex and unpredictable, and this can have an impact
on the country's business environment. Italy has a parliamentary system of government, with a
bicameral legislature made up of the Chamber of Deputies and the Senate. The President of the
Republic serves as the head of state, while the Prime Minister is the head of government.
Italian politics has historically been characterized by frequent changes in government and coalition-
building, which can create uncertainty for businesses operating in the country. In addition,
corruption has been a persistent problem in Italy, and this can make it difficult for companies to
compete fairly and win contracts.
However, Italy is a member of the European Union (EU) and benefits from the EU's single market
and economic policies. The country has also implemented several economic reforms in recent years
to reduce bureaucracy, simplify regulations, and promote investment.
Overall, while the political environment in Italy can be challenging, the country's membership in
the EU and its efforts to promote economic growth and investment are positive factors for
businesses operating in the country. It is important for businesses to closely monitor political
developments and stay up-to-date with changes in regulations and policies that may affect their
operations.
Legal environment;
The legal business environment in Italy is complex and can be challenging for companies to
navigate. Italy has a civil law system, which is based on written codes and regulations, and this can
make the legal framework more rigid and less flexible than common law systems.
The country's legal system is divided into three branches: civil law, criminal law, and administrative
law. Civil law regulates private relationships and contracts between individuals and businesses,
while criminal law deals with offenses against public order and safety. Administrative law regulates
the relationship between individuals and the state, including regulatory compliance and permits.

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One of the challenges for businesses operating in Italy is the slow and inefficient judicial system.
Court cases can take years to resolve, and this can create uncertainty and add costs for businesses.
In addition, the country has a high level of bureaucracy and a complex regulatory framework, which
can be difficult for businesses to navigate.

Italy has a mixed economic system that combines elements of both capitalism and socialism. The
country has a market-based economy, with private enterprise playing a dominant role in production
and consumption. However, the government also plays an active role in regulating and supporting
the economy, particularly in areas such as healthcare, education, and infrastructure.
Analysis of The trading country:
The Italian economy is heavily focused on the manufacturing sector, with industries such as
automotive, machinery, and textiles playing a significant role in the country's exports. Italy is also a
major producer of wine, olive oil, and other agricultural products.
Italy is part of the Eurozone and uses the euro as its currency. The country is a member of the
European Union and benefits from the EU's single market and economic policies.
While Italy has a strong tradition of entrepreneurship and innovation, the country faces several
challenges in its economic system, including a high level of bureaucracy, a slow and inefficient
judicial system, and a complex regulatory framework. In addition, corruption and organized crime
can create challenges for businesses operating in the country.
The business idea of exporting flour to Italy would require an analysis of Italy's economic system,
as well as key economic information related to the product.
Italy has a mixed economic system that is heavily focused on the manufacturing sector. The country
is the third-largest economy in the Eurozone and is heavily dependent on exports. As a major
producer of pasta and baked goods, flour is a crucial ingredient in Italy's food industry, making it an
important product for trade.
In terms of foreign investment, Italy has a significant amount of foreign direct investment (FDI) in
its economy. In 2020, Italy received a total of €33.9 billion in FDI, with the majority of investment
coming from European countries.
A PEST analysis can be used to identify macro-environmental factors in Italy that could impact the
export of flour:
Political factors: Italy has a parliamentary system of government, and the country's politics can be
complex and unpredictable. Corruption is also a persistent problem in Italy, and this can impact
business operations.

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Economic factors: Italy's economy has been impacted by high levels of debt and low growth in
recent years. However, the country has a strong tradition of entrepreneurship and innovation,
particularly in the manufacturing sector.
Sociocultural factors: Italy has a rich cultural heritage and a strong national identity. Italian
consumers place a high value on quality and authenticity in food products.
Technological factors: Italy has a well-developed telecommunications infrastructure and a strong
network of research institutions and universities that support technological development.

1. Business Models and Projects (Basics of Business Organisation)

4.1 SWOT analysis

Strengths:
High-quality Ukrainian flour can be competitive in the Italian market due to its favorable price and
quality ratio.
Ukraine is among the largest exporters of flour in the world, which can be leveraged to establish
reliable supply chains.
Flour is a staple ingredient in many Italian dishes, which means that there is a strong demand for
flour in Italy.
There is an opportunity to differentiate the business by offering specialty flours or focusing on
sustainable practices.
Weaknesses:
Shipping and logistics costs can be high, which can eat into profit margins.
There may be significant bureaucratic hurdles to obtaining necessary permits and complying with
regulations.
Italian customers may prefer locally sourced products, which could make it challenging to establish
a market presence.
Opportunities:
The Italian market for flour is relatively large and diverse, which creates opportunities for niche
products or specialized flours.
Financial Plan:

Cost of goods (prime cost):

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The cost of goods for exporting flour from Ukraine to Italy will include the cost of flour,
transportation, packaging, permits, and other administrative expenses. Based on market research
and supplier evaluations, the cost of one ton of high-quality Ukrainian flour is estimated to be
around $300. The transportation costs will depend on the mode of transportation, but for the
purposes of this financial plan, we will assume an average cost of $50 per ton. The cost of
packaging will depend on the type and quality of packaging used, but for the purposes of this
financial plan, we will assume a cost of $10 per ton. Other administrative expenses such as permits
and legal fees are estimated to be around $5 per ton. Therefore, the total cost of goods is estimated
to be $365 per ton.

Revenue forecast for 12 months:

To estimate the revenue forecast for 12 months, we will assume an initial shipment of 50 tons of
flour to Italy. Based on market research, we will assume a selling price of $500 per ton, which is
competitive but still allows for a reasonable profit margin. Therefore, the estimated revenue for the
first 12 months is $25,000.

Revenue forecast for 3 years:

Assuming a growth rate of 20% per year, the revenue forecast for three years is as follows:

Year 1: $25,000
Year 2: $36,000
Year 3: $51,840
Cash flow forecast for 12 months:

The cash flow forecast for the first 12 months is as follows:

Initial investment: $20,000

Revenue: $25,000
Cost of goods sold: $18,250
Operating expenses (marketing, transportation, etc.): $4,000
Net cash flow: $2,750
Cash flow forecast for 3 years:

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Assuming a growth rate of 20% per year, the cash flow forecast for three years is as follows:

Year 1: $2,750
Year 2: $3,942
Year 3: $5,688
Break-even point for first year - graph:

To determine the break-even point for the first year, we need to calculate the contribution margin
per ton, which is the selling price minus the cost of goods sold. The contribution margin per ton is
$135 ($500 - $365). To break even in the first year, we need to sell approximately 136 tons of flour
($20,000 divided by $135). The break-even point is illustrated in the following graph:

[Insert graph here]

Commentary:

The financial plan indicates that exporting flour from Ukraine to Italy can be a profitable business
idea, but it requires an initial investment of $20,000 to cover the cost of goods and administrative
expenses. The revenue forecast for the first 12 months is $25,000, which allows for a net cash flow
of $2,750. Assuming a growth rate of 20% per year, the cash flow forecast for three years is
positive, indicating that the business is sustainable in the long run. The break-even point for the first
year is approximately 136 tons of flour, which is achievable given the strong demand for flour in
Italy and the potential to establish partnerships with local businesses. It's important to note that the
financial plan is based on certain assumptions and may need to be adjusted based on actual market
conditions and business performance. Therefore, regular monitoring and evaluation of the financial
plan is necessary to ensure the success of the business.
Establishing partnerships with local businesses in Italy can help create a more robust supply chain
and build a customer base.
The growing interest in sustainable and environmentally friendly products could be leveraged to
build a positive brand image and attract customers.
Threats:
There may be competition from other suppliers of flour in Ukraine or other countries that have
established relationships with Italian buyers.

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Changes in import/export regulations or tariffs could disrupt the supply chain or increase costs.
The COVID-19 pandemic or other unforeseen events could disrupt the market or supply chain.

Conclusion
In conclusion, exporting flour from Ukraine to Italy can be a viable business opportunity,
given the strong demand for flour in Italy and the relatively low production costs in
Ukraine. However, businesses that wish to export flour to Italy will need to comply with
relevant regulations and requirements, both at the national and international levels.

At the international level, businesses will need to comply with WTO agreements and
regional or bilateral trade agreements, such as the Italy-Ukraine Association Agreement,
which provide a framework for promoting trade and reducing barriers to entry.

At the national level, businesses will need to comply with relevant regulations related to
food safety, labeling, packaging, customs, and taxation. This includes complying with EU
single market rules if the business is based within the EU.

Overall, exporting flour from Ukraine to Italy can be a lucrative business opportunity, but
businesses will need to conduct thorough research and ensure that they comply with all
relevant regulations and requirements to succeed in this competitive market.

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 REFERENCES

1. https://www.consilium.europa.eu/en/infographics/ukrainian-grain-exports-
explained/
2. https://www.bbc.com/news/world-61759692
3. https://www.reuters.com/markets/commodities/ukraine-grain-exports-
down-296-236-mln-t-so-far-202223-2023-01-09/
4.  The World that Trade Created by Kenneth Pomeranz 1999
5. Global Trade Policy: Questions and Answers by Pamela J. Smith
6. https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-
sales/
7. Service growth in product firms: Past, present, and future, 2017
8. https://www.hubspot.com/marketing-statistics
9. https://www.shopify.com/enterprise/global-ecommerce-statistics
10. International Trade Law by Peter Stone, 2005

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