International Business and Trade/Global
Nevertheless, countries imposed trade
Finals
Part 1- EXPORT AND IMPORTS
Export – refers to the process of selling goods outside
the country. Exporting also means goods and services
which are produced in one country are purchased in
another country.
Benefits of exporting product to other countries:
 Increase sales potential
 Increase in profits
when exports exceed imports, the net export figure
would be positive, indicating that the nation has a trade
surplus.
Trade surplus –contributes economic growth. More
exports means, more output from factories and
industrial facilities, as well as greater number of people
employed to keep these factories running.
Import - refers to the process of buying goods from
outside the country for domestic use. Importing also
means that buying foreign goods and services by
citizens, businesses and government of a country.
A key reason why companies all over the world choose
to import goods is to extend their profit margin. High
taxes, wage minimums, and material costs in certain
countries make it more useful to import products from
a country where fees, wages, material costs are
considerably lower.
All countries need to or choose to import at least some
goods and services for the following reasons:
1. Goods or services that satisfy domestic needs
and wants can be produced more inexpensively
of efficiently by other countries and therefore
sold at lower prices.
If a country imports more than its exports, - it runs a
trade deficit.
First, countries import goods or services that are either
essential to their economic well-being or highly
attractive to consumers but are not available in the
domestic market. Oil and natural gas are an example of
this for many countries
Philippines major imports are: electronic products,
mineral fuels, and transport equipment. Philippines's
main import partners are: China , the United States,
Japan and Taiwan
Importance of export and import:
 Export and import are important for the
development and growth of national economies
because not all countries have the resources
and skills required to produce certain goods and
services.
barriers, such as tariffs and import quotas, in
order to protect their domestic industries.
How does importing and exporting affect economy?
 Those exports bring money into the country,
which increases the exporting nation’s GDP-
Gross domestic Product.
When a country imports goods, it buys them foreign
producers. The money spent on imports leaves the
economy, and that decreases the importing nation’s
GDP.
Increase inflation means more imports and fewer
exports.
Which currency is used while importing and exporting
goods?
 Most accepted currency for exchange is
American Dollar. It does not mean that we can
directly do transactions in Dollars. For example,
If someone wants to buy bicyle from China.
Chinese companies would want to be paid their
own currency.
5 Modes of Entry into Foreign Markets
1. Joint Venture
- One of the most popular modes of entry is the
establishment of a joint venture, in which two
business combine resources to sell products or
services.
- It is also a cooperative enterprise entered into
by two or more business entities for the
purpose of a specific project or other business
activity.
- In any case, the parties in the JV share in the
management, profits, and losses, according to a
joint venture agreement (contract). Example:
Vodafone & Telefónica agreed to share their
mobile network. BMW and Toyota co-operate
on research into hydrogen fuel cells, vehicle
electrification and ultra- lightweight materials.
West Coast – joint venture between Virgin Rail
& Stage coach. Google and NASA developing
Google Earth.
2. Licensing Agreement
- In the licensing mode of entry, companies sign
contracts with foreign businesses, called
“licensees,” that allow the foreign companies to
legally manufacture and sell the company’s
products. The foreign companies will either
purchase the license outright, pay a regular
licensing fee or pay a percentage of their
revenue over time in the form of royalties.
 - License agreement - is a deal between the Example of E commerce websites : Online stores like
owner of a patent, brand, or trademark and Amazon, Flipkart, Shopify, Myntra, & Ebay.
someone who wants to use the patented or
trademarked goods and services. 5. Purchasing Foreign Assets
The license grants permission to the licensee - Many companies, rather than launching en
and includes stipulations. entirely new venture in a foreign market, will
- Licensing allows the a company to enter a
simply or invest in a foreign company. While
market quickly and inexpensively, but provides
little control over the product’s foreign often more expensive, direct investment allows
marketing and sales. the investing company to reap profits of a
Example: include a company using the design business that is already well integrated into the
of a popular character, e.g. Mickey Mouse, on local market.
their products. Another example would be a
clothing manufacturer like Life is Good licensing
its designs and brand in a certain country to a
local company.
3. Exporting Directly - means that a producer
or supplier directly sells its product to an
international market, either through
intermediaries – such as sales
representatives, distributors, or foreign
retailers – or directly selling the product to
the end user.
 Some companies will simply sell their
products to distributors overseas, who will
sell the products to consumers.
The advantages of direct exporting is that your
company will include more control over the export
process, potentially higher profits, and a closer
relationship to the overseas buyer and marketplace, as
well as the opportunity to learn what you can do to
boost overall competitiveness
4. Online Sales
- Many companies will attempt to enter foreign
markets indirectly, by targeting foreign
consumers on the internet. Similar to exporting,
companies retain physical operations in their
native countries, but ship product overseas.
However, whereas in exporting, companies
contract with local businesses, with the internet
they take orders directly from consumers.
- One advantage to this mode is that it is
relatively cheap, entailing only the cost of a
website and marketing.
- The downside is that it is often less effective
than establishing a physical presence in the
foreign market. Consumers may be deterred
due to shipping costs, duties and taxes that
maybe levied by their government and the
length of time it takes for their order to arrive.