What do you mean by exporting and importing? Discuss its merits and limitations.
What do you mean by exporting and importing? Discuss its merits and limitations.
Exporting & Importing: Exporting refers to selling and sending the domestically produced goods from home country to a foreign country. While importing is the purchase of foreign products and bringing them into one's home country. There are two important ways in which a firm can export or import products: Direct and indirect exporting importing. When a firm itself approaches the overseas buyer/suppliers and looks after all the formalities related to exporting/ importing activities it is known as direct importing exporting and where the firm's participation in the export and import operation is minimum or carried out through middlemen it is known as indirect exporting importing.
Major advantages of exporting/ importing:
(a)Easiest mode of entry into the international trade: As compared to other modes of entry, exporting/ importing is the easiest way of gaining entry into international markets. It is less complex an activity than setting up joint ventures.
(b) Less investment involvement:
Exporting / Importing is less involved in the sense that business firms are not required to invest that much time and money as is needed when they desire to enter into joint venture or setting up manufacturing plants and facilities in host countries.
Limitations of Exporting and Importing:
(a) High transportation cost: Since the goods physically move from one country to another exporting / importing involves additional packaging, transportation and insurance costs. Taken together all these expenses and payments substantially increase product cost and make them less competitive.
(b) Not a feasible option: In situations of import restrictions, firms have no alternative but to opt for other modes such as licensing franchising or joint ventures.
Exporting & Importing: Exporting refers to selling and sending the domestically produced goods from home country to a foreign country. While importing is the purchase of foreign products and bringing them into one's home country. There are two important ways in which a firm can export or import products: Direct and indirect exporting importing. When a firm itself approaches the overseas buyer/suppliers and looks after all the formalities related to exporting/ importing activities it is known as direct importing exporting and where the firm's participation in the export and import operation is minimum or carried out through middlemen it is known as indirect exporting importing.
Major advantages of exporting/ importing:
(a)Easiest mode of entry into the international trade: As compared to other modes of entry, exporting/ importing is the easiest way of gaining entry into international markets. It is less complex an activity than setting up joint ventures.
(b) Less investment involvement:
Exporting / Importing is less involved in the sense that business firms are not required to invest that much time and money as is needed when they desire to enter into joint venture or setting up manufacturing plants and facilities in host countries.
Limitations of Exporting and Importing:
(a) High transportation cost: Since the goods physically move from one country to another exporting / importing involves additional packaging, transportation and insurance costs. Taken together all these expenses and payments substantially increase product cost and make them less competitive.
(b) Not a feasible option: In situations of import restrictions, firms have no alternative but to opt for other modes such as licensing franchising or joint ventures.
