Cashew fruit (cashew apple) was first harvested by the Tupi Indians of Brazil in the wild.

Later on, the Portuguese traders cultivated cashew in different coastal areas. But attempts to harvest cashew tree were failed due to the attack of insects. Some of the abandoned plantation trees grew new trees in the wild forest of India, East Africa, Indonesia, and Southeast Asia. In response to the observed demand for cashew nuts in India, the Cashew processing industry was developed in India in 1920. The processing of cashew nut requires manual labor and low wages are paid to the laborer for their processing work. After processing the workers grade the nuts into 24 size categories where the price varies on the basis of grade quality. India maintained a virtual monopoly position until the mid-1970 for three factors- firstly India is the largest producer of cashew, secondly early demand occurred in India and Thirdly Indian workers became efficient in cashew processing. With the passing of time other factors threaten the Indians cashew business. Shortage of supply developed for increased in demand in USA & UK, at the same time Brazil and some of the East African countries began to supply cashew. From 1950 this competitors began to process cashew by themselves, but their labors were not as efficient as Indians labor. As the competitors reduces their export of raw cashew in India, Indian council for agricultural research, ISHC and Indian society for plantation crops expanded their efforts to increase Indians production of raw nuts. In 1970 with the development of mechanical equipment for processing cashew Indias competitors began to process their cashew in their own country. Although three factors have kept Indias hand-processing industry afloat. First, as the machinery break many nuts so Indian processor still face little competition. Second, as the Indian production has been increased due to use of new technology. Finally, India uses less fertilizer than its main competitor Brazil does which gives Indian nut a better flavor. Indias export consist of higher portion of higher grade of nuts and because of flavor difference India charges 15-25 percent premium on its exported cashew nuts than is competitors. Indian cashew nuts largest importer country is USA (49%). For Indias large internal demand it exports only 50 percent of its cashew production. Cashew business in India is also affected by cold war and Americas strategic planning. For the potential of excess supply of cashew nut India has developed new market by producing cashew related goods like- candy, jams, chutney juice, carbonated beverages, syrup, wine, vinegar and cashew oil from its nutshell. .

1. What trade theories help to explain where cashew tree products have been produced historically?

After researching on the background of the production of a product, we get that it follows some theories. The cashew tree products are not also exceptional. We can also explain the historical background of cashew tree products by the using of the following theoriesAccording to Adam Smith, Absolute advantage theory-each country should produce goods that it is good at. Again the absolute advantage theory can be described in more detailed ways  The country produced cashew which has advantage in terms of climate, natural resources and labor force availability-popularly known as Natural advantage theory  The country produced cashew which has an advantage to produce a unique product, develop a new product, displaced old ones and altered trading-partner relationshipsKnown as Acquired advantage theory. According to David Ricardos Comparative advantage theory- The Country which has absolute advantage for multiple products, it should produce those products for which it is more efficient. For example if a country can produce cashew more efficiently than cherries, it should produce cashew although both are profitable for it. According to Michael E porters Diamond modern Competitive advantage theory-Cashew tree products have been historically produced in those countries where there are a good demand conditions, good factor endowments, available related and supporting institutions and where there are less extranet barriers & less rivalry in existing business. According to Factors proportion theory- Difference in countys endowment of labor compared to their endowments of land or capital explain their cost of production factors. So Cashew tree products differ in its producing countries like India, Brazil, Kenya, Tanzania, etc on the basis of the countries own factors proportion. According to Product life cycle theory- Production location for many products move from one country to another depending on the stage of products life cycle. As well as India developed cashew products because there was an observed need and market for them and nearby. As the demand of the products increased in other countries and competitors began to increase. Now Brazil, Kenya, Tanzania and other east African countries are competing with India.

The historical background of the production of Cashew tree products can be also described from the point of Mercantile efforts, Dependency theory and strategic trade policies.

2. What factors threaten Indias Future competitive position in cashew nut production?

India is the largest producer of Cashew nut, which accounts for 35 percent of world total cashew nut production. India is enjoying natural advantages, acquired advantage and competitive advantages to producing Cashew nuts successfully for long since. But at the same time India is also threaten by some future competitive position for cashew nut productionIncreased in land price: As now India is facing huge population growth; the increased population has also an increased demand on available land for cultivation and other purposes. This higher demand for land bids up price of land. As the lands bidding price is getting higher, the price of raw cashew nut also becoming higher. This may have a significant effect on Indias future price competitive advantage on raw cashew products. Technological effect on lower price in nearer large market: Although India is the largest producer of Cashew nuts, but its production is labor based. On the other hand Indians main competitors Brazil, Kenya, Tanzania, etc are now largely developed in technology. These countries have more future potentiality to develop their cashew cultivation through the use of new technology which will increase the production quantity and reduce the cost. So in future India may be affected by its land crisis and competitors huge production potentiality with lower cost by the innovation of new technology. Competitors Research on Crop to increase flavor: Indians major advantage for exporting cashew nut is its ability to produce higher grade nuts, which is differentiated on the basis of its flavor. This higher grade nut is the highest portion of Indias export of cashew nut. India charges 15-25 percent premium on its exported cashew nut than its competitors charges. The secret behind the more flavor of Indias cashew nut which gave it the unique selling position is Indias less use of fertilizer to cultivate cashew nuts than its competitors does. In future Indias main competitors may use less fertilizer or invent new cashew crop to increase flavor in cashew nut. If this really happen then India will lose its main competitive advantage for exporting cashew products in international market.

Americas strategic trade policies: As the United States is the largest importer of the Indias cashew nut, so Americas strategic trade policy to develop its own cashew industry and making it competitive for international market may affect the Indias cashew production in future. Although Indias future competitive position is threatened by the above factors, but there are still some strengths and opportunities in India to sustain their current position and grow in future. Indias main strengths are-

India along with its competitors is researching on its cultivation technology of cashew and trying to invent new hybrid cashew crop to increase its cashew production than in the present.

India has a large domestic demand of cashew nuts and products, which will help it to survive in future.

India has a long reputation in world market for cashew products, which help India to capture a foreign market easily.

India is a politically stable country. This helps India to maintain a good relation with foreign countries and to maintain a smooth foreign trade of cashew.

To maintain the current market position and grow it, India is developing new cashew related products like candy, jams, chutney juice, carbonated beverages, syrup, wine, vinegar and cashew oil from its nutshell.

Indias cashew nut have better flavor which make India to differentiate their market from others.

Although India have the above strengths for cashew production which help it to maintain a profitable cashew product industry from a long since may be threaten in its Future competitive position if it does not consider the threaten factors carefully and efficiently.

3. If you were an Indian Processor, what alternatives might you consider to maintain your future competitiveness? As an Indian cashew processor, I need to consider the following alternatives besides my present strategies to maintain my future competitiveness in cashew processingMove to a more mechanized process: Indian cashew processing is depended on efficient labor force, which is much time consuming for cashew processing. So cashew processing system should be more mechanized to save time and increase the quality of processed cashew nut. Improve production and use technology: To provide the excess demand of quality cashew nut, production of cashew nut need to be increased by the use of new cultivation technologies. A greater production of raw nuts will minimize the price of processed cashew nut, which will increase international competitiveness. Further Differentiate Indian cashew products: As well as differentiating Indian cashew nuts by flavor, Cashew nut can be further differentiated by ensuring a greater quality. Control on foreign distribution channel: As an cashew processor I should exercise a greater control on foreign distribution channels. This will help me to continuously trade with foreign countries by providing the cashew products on time on a continues basis on a acceptable price. Stimulate demand in India and nearby countries: As India is a large country and it has a huge domestic demand, so I can stimulate demand in India and nearby countries like China to minimize trading cost and ensure a certain future market. Promote the low graded cashew products in international market: India has lost its market for low graded cashew nuts, as Indian cashew processing is manual labor based which cost high than the mechanized processing( Has a low cost on low graded cashew nut). So to survive in the future we should also be mechanized to reduce processing cost and use more fertilizer to increase raw nut production to reduce average cost. In this way we will be able to reduce the price of low graded cashew nut and will get an international competitiveness.

Being an Indian Cashew processor by considering the above alternatives, I think I will be able to maintain future competitiveness.

Pizza Hut first entered in Brazil in 1988 through a Franchisee agreement. In 1994 Pizza Hut celebrated its opening of 10000th restaurant in Brazil. But over the next six years Pizza Hut in Brazil was a indecision whether it should continue to operate there or pull it out and invest in other countries due to economic instability in Brazil. In 1997 Pizza Hut the part of the PepsiCo spin off its restaurant division into a new company Tricon Global Restaurant Inc. At that time Pizza Hut had more than 7200 units in USA and 3000units in more than 82 countries. It operates through franchise of 51.3 percent, company owned stores of 25.9 percent, joint ventures of 16.7 percent and licensing of 6.1 percent. Pizza Huts 10 years worldwide plan in the mid 1990s would put Brazil as the second or third largest market in the world by 2005. Up to 1990 Pizza hut did not have any specific strategy for Brazil. In 1991Pizza Hut set up an office in Brazil to establish target for all franchisees inters of how they must grow the business in order to maintain the franchise. Besides Pizza hut - KFC was also operating in Brazil at that time, where KFC expanded through unit by unit franchising and Pizza Hut expanded through corporate franchising. Brazil had a huge potentiality for Pizza Hut as it has a mass market and some location specific advantage. Since 1993 Pizza Hut pad no equity interest at any of Brazils stores management and that is why it buys UFCs 35 stores to develop operating knowledge and expertise that it could share with its franchisees. Management found out that the restaurant were not cost efficient but they could get away with their inefficiencies due to the high prices they charges. They got several problems like- store managers rebelled against the outside control, staff at the stores was more numerous than Pizza hut management realized and third major problem was inflation. Since the military took over in 1964 to 1973 inflation was increasing at an average rate of 20 percent per annum. For a huge corruption and scandal of the government inflation had been out of control 2938 percent in 1990, 441 percent in 1991, 2148 percent in 1993. In 1994 with the election of new president Fernando Henrique Cardoso and his instituted new Real Plan inflation began to slow down. At that time he also pegged the Brazilian real to U.S dollar which devalues the Brazilian real against the U.S dollar. In 1995 inflation came out in a single digit. Now the slowdown of Inflation and implementation of real plan affected Business in many different ways. The slowdown of inflation made consumers more knowledgeable about the price of different products. As a result sales in Pizza Huts Sao Paulo units dropped by near one half from December 1994 to December 1995. To stimulate sales Pizza hut firstly reduces price and secondly putted more money to marketing than dropping price. In 1999 Real collapsed again and government control the position by allowing to freely floating its currency and rising interest rate to control the value of real.

1. Do you think it makes sense for Pizza Hut to get out of Brazil, or should it try to weather the storm and stay in? Justify your position.

From my point of view, I would say, Pizza Hut should stay in Brazil and to weather the storm.

Pizza Hut could have a serious long term consequences if it withdrawing from Brazil, as the Brazil plays a part of strategic role of Pizza Huts worldwide strategy. Brazil was able to control its rampant inflation and currency revaluation, so Pizza Hut should carefully consider the nature of Pizza business in Brazil. Pizza Hut should set a one set of price for all pizza a customer can eat, as it is made up of small entrepreneurs in Brazil. To attract the local market and manage efficiently Pizza Hut should adapt the local taste and operate in local style in some extent. Moreover the corporate and management strategy problems should be resolved. Although there were economic instability in Brazil but it was successfully controlled by its government which reassurance the foreign attraction for direct investment and portfolio investment. So Pizza Hut in Brazil can be successful by efficiently manage it , as Brazil has a big potential market ,proven taste for Pizza and Brazilians attachment for American product. Finally I want to say problems in Pizza Hut in Brazil should be figure it out and fix their issues.

2. Where does the Brazilian real fit in the exchange rate regimesinTable10.1? What does that Imply in terms of how you would predict future values of the real?

Since 1964 Brazil experienced a high inflation which weakened its currency for many years. In June 1994 the Brazilian government instituted the real plan, and inflation begun to slow down. According to the plan, the new currency Real was pegged to the U.S dollar. In the pegged exchange rate system Brazils currency was pegged to U.S dollar at a fixed rate where exchange rate fluctuates within a narrow margin of at most +/- 1 percent around a central rate. After the Brazilian government implemented the real plan in June 1995 the real depreciated steadily against the dollar. In January, 1999 keeping the real within its band was costing the Brazilian government billions of U.S dollar per day; therefore the Government decided to let its currency to be freely floating. In a flotation exchanging rate system, exchange rate is determined solely by market factors. In January 1999 it was the political payback period of debt which collapsed the real and its value depreciated highly against the dollar at that time. Later in fall 1999 there was a pick in inflation but freely floating exchange rate controlled it in a good way. Now the Brazilian Government is ready to intervene in the foreign exchange market when necessary to support the real by controlling the macro economics factors (Interest rate, Inflation rate, Income level, etc)

3. Discuss whether or not you think the Brazilian government should dollarize its economy and get rid of the real.

Dollarization can be play a significant role against Brazils high inflationary pressures but at the same time there will be a huge speculative pressures on Brazilian real adopting dollarization. Some strong arguments against the adaptation of dollarization is given belowy If Brazil dollarize its currency or even fix the exchange rate between real and U.S dollar, the Brazilian government would not be able to take its own monetary policy to manage its economy. y Keeping the Brazilian real within its band against the dollar may cost the Brazilian government billions of U.S dollars per day.

Speculators may chance to capitalize from dollarization of Brazilian real, which may diorite the economic situation of Brazil.

In dollarization system real value will be affected by the economic condition of USA than its own condition.

Full dollarization would not sit well with Brazilian patriotic and nonrealistic sentiments.

So for the above factors, I think Brazilian government should not dollarize its economy, rather than it can allow to freely floating its currency to get rid of the real.

4. What are some of the ways that instability in the real might be affecting Pizza Huts operations in Brazil?

Instability in Real may affect the Pizza Huts operation in the following waysDemand Condition: The products of Pizza Hut are relatively high, so its demand depends on growing number of higher middle class people. Vast gap between the rich and poor was widened in recent years for economic instability in Brazil. This reduces the number of middle class people in Brazil. Moreover consumers are less likely to spend money on luxury items during the economic crisis. As a result there is huge demand decrease for Pizza Huts product in Brazil. Input cost: An undervalued real makes imported products more expensive, which in turn increases pizzas price. In this case local products are cheaper and encourage Pizza Hut to source locally. On the other hand an overvalued real makes imported products cheaper and thus encourage Pizza Hut to export inputs and supply to its Brazilian operation which will cheaper its Pizza and discourage to local product input. For these reasons instability in the real make it difficult for Pizza Hut Business to plan efficiently in Brazil.