There is a point of concern for the countries having deficit in current account since it generates the long term liability for the country (Bartlett and Ghoshal, 2007). It leads more transparency in transaction and purchasing of goods and vendors are responsible for following the real time demand for submitting the transaction details (Hennart, 2007). As we know the export-import of goods appeared early in world history. Considering this view, this assignment report addresses the critical analysis of two primary ways of occurring international business and respective advantages and disadvantages. Any company, before committing its resources to venture in the export business, must carefully assess the advantages and disadvantages of exporting into a new market. You are responsible for handling the market research, foreign distribution, logistics of shipment, and invoicing. In order to govern the pattern of trade the relative factor endowment has a key role ((Jones, 2006). These resources are required in the manufacturing process that have specialized skills and can be sound in certain countries. The sale of services and goods into the foreign market is difficult for them rather serving the domestic market. We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on However as an economist, in my opinion free trade is erosion the domestic players for example if UK government lower down the import duty on sugar then the demand for the imported sugar will increase and domestic player will not be able to compete with the foreign player (Johanson and Wiedersheim-Paul, 2008). You know whom to contact if something isn't working. Button is pursuing a Bachelor of Arts in political science from Memorial University in St. John's. In order to minimize the risk of transaction process of exporting the goods and exchange rate fluctuation, it is essential to have more capacity for managing the financials for coping up the efforts (Nelson and Winter, 2007). A combination of investment risk and market potential is known as the location benefit of the particular market combination. The commanding position in WTO is left with G-7 countries which include US, France, Germany, the UK, Italy, Japan and Canada. In the international equity a country has greater or lesser value transaction over the other country. As against this statement, Wasily Leotieff tested this theory empirically in which he found that the Hecksher Ohlin theory may not always be true. Your customers know you, and thus feel more secure in doing business directly with you. You present yourself as fully committed and engaged in the export process. Reference this. There might be some pitfalls in the organization occurred by some of the management mistakes such as oversea a distributor, an agent or chaos in the global organization (Johanson and Wiedersheim-Paul, 2008). the import is higher than the export. In support of this statement he stated that the export in US is for the commodities which are labor intensive however the country has abundance capital and this example is famous by the name as Leontief Paradox ((Jones, 2008). All work is written to order. Despite this disadvantage, some of the SMEs are still exporting however two third of them sold out to the foreign markets (Jones, 2008). An importer can have the comparative advantage which means lower prices (Jones, 2006). It would help to minimize the cost of production i.e. In the competitive environment, businesses are competing at global level. If the government allows the company's exports to that country to go unchecked, you may risk having the foreign country impose tariffs on your country to protect their own industries. In order to retain the core competencies within the organization and stitching it throughout the country without retaining the license, selling or outsourcing is the international advantage in export (Amatori and Jones, 2003). Disadvantages of Direct Exporting . For example in electronic items, Japanese people are highly efficient and manufacturer in UK use the labor from Japanese market for producing goods. Other times, two countries trading with each other could cause both to fall out of favor with their allies. Whether it is unintentional or a deliberate move companies need to evaluate and carefully assess the advantages and challenges of exporting before committing resources. The transaction may include the import, export, financial capital, goods of services, and the financial transfers of the funds. 15FRIDAY2020 can only be used on orders with a 14 day or longer delivery. Copyright © 2003 - 2020 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. Also the importer can have the much cheaper products from the foreign market due to low labor cost, low taxes etc. Hence there are advantages and disadvantages of both import and export. Company Registration No: 4964706. The customers are becoming advance due to the improvement in the technology and they demand more support and services from the vendor such as startup and equipment installation and startup, delivery service and maintenance which are difficult for the exporter to provide. For example, the deterioration of exchange rates, if the rate of domestic currencies of third countries increases on the markets where the firm exports, it may cause the company to become relatively uncompetitive in overseas markets. In export of goods the managers are allowed to exercise the various operational control however it does not have the option over the control of marketing activities of the company. In contrast the country should import only those goods in which the country is less capable for its means of production factors and also not available in abundance (Nelson and Winter, 2007). Prosperity in the country cannot be achieved through protectionism since it increases only the poverty and also do not protect the domestic industries or jobs but harm the export business and industries which has belief on imports (Hennart, 2007). Based in St. John's, Canada, Andrew Button has been writing since 2008, covering politics, business and finance. A maximum exploitation of workers due to the free trade is also opposed by the socialists. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of There are many governments and economists who believe that the importing goods have numerous disadvantages. The exporting of goods is specifically difficult and disadvantageous for the small and medium size firms having employees less than 250. Heckscher Ohlin theory is some what different from absolute advantage and comparative advantage theory since it emphasizes only on the production factors in which the company has expertise and from that produce the goods. Economics Here are some models that may work for your business. Should you decide to export directly, make sure you have a company-wide commitment, which includes your import/export dream team to ensure the initiative is fully supported. However depending on the need and potential of the business, it is essential to understand whether the company should indulge into the export or import activity (Gupta and Govindarajan, 2008). Looking for a flexible role? in terms of quality, the importer can have the higher quality goods and produce the finished goods with high quality and extend the business profit margins. In some countries, government provides the support to the importer for developing the trade relations (Nelson and Winter, 2007). Sometimes, increased exports can be accompanied by legal and political issues. There are number of benefits in importing the goods, such as high quality, low prices, and benefits related to the international trade. You have a greater degree of control over all aspects of the transaction. In order to maintain the stability and equilibrium among the countries the formation of World Trade Organization came into existence (Hennart, 2004). Some other problems can also be increased due to import of goods such as conflict in the domestic values due to the acceptance of social values. Also due to the government involvement reduces the transaction risk. The receipts of loan, investments receipts and export sources of funds are recorded as surplus or positive items. It is a trading activity on a regional scale (international).; Potential Disadvantages of Exporting; July 2007, New Jersey SBDC: Consider Some of the Specific Advantages of Exporting. This theory stated that a country should export only those goods which are abundance in the country and for which the means of production factors can be utilized more intensively. Copyright 2020 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. The importing of resources includes everything starting from labor to technology (Fortanier, 2008). However, some problems can accompany a dramatic increase in exports, depending on the nature of the goods being exported. In case a company’s products and company’s ownership equipped with the international advantage and ownership advantage, the entry can be made through low risk model known as exporting under the eclectic paradigm.