Question

You are the manager of the only firm worldwide that specializes in exporting fish products to Japan. Your firm competes against a handful of Japanese firms that enjoy a significant first-mover advantage. Recently, one of your Japanese customers has called to inform you that the Japanese legislature is considering imposing a quota that would reduce the number of pounds of fish products you are permitted to ship to Japan each year. Your first instinct is to call the trade representative of your country to lobby against the import quota. Is following through with your first instinct necessarily the best decision? Explain.

Short answer

If the quota to be established is less than our profit maximizing quantity, the instinct to call the trade representative of our country to lobby against the Japanese import quota should be followed.

Step-by-step solution

Introduction

Japanese companies having the first move advantage will impose a strategy that maximizes their profits and seeks to eliminate the competition. As the only foreign firm that exports fish to Japan, we face a new legislature that seeks to impose a maximum annual export quota of fish to this country.

Explanation

We are faced with a decision- lobby or not against this legislation. The first thing to keep in mind is that lobbying leads to legal expenses that can compromise the firm's profits and there is no guarantee that Japanese authorities will reverse or improve the terms of this new legislature.

Another alternative is not to lobby and analyze whether the proposed annual fee is higher or lower than our export level that maximizes our profit.

For example, the legislature establishes a maximum annual fish export quota of 1,000 tons and our profit maximizing quantity is 800 tons, it makes no sense to establish a lobby with the Japanese government.

Therefore, if the quota to be established is less than our profit maximizing quantity, the instinct to call the trade representative of our country to lobby against the Japanese import quota should be followed.