Trade Exchange of Goods and Services
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Trade is the term used to generate the business because of the exchange of goods and services between countries. Economics looks all the forms of the trade as equal advantage for all groups. International trade is the process, which analyzes the production technique through the application of efficient technology (Feenstra 2015).
International trade theory in modern business
International trade is the terms of economics, which is concerned to exchange the goods and services along with the foreign countries (Feenstra 2015).
It explains the theory on which the government can improve the economic conditions through the encouragement in exports and stifling in imports.
Theory of absolute advantage
It explains the nations to improve the economic condition through the specialization of the production in a more efficient way.
Factor endowment theory
It seeks to make the export of the products which the country has abundance while they import products where the country lacks in amount.
International product life cycle theory
The theory explains the stages of the production of a product. The first stage is the production from the parent firm second is from the foreign subsidiaries and the third is in the place where the cost is low.
The theories help to promote as well as regulates the trade of the modern business. In many areas of the production countries are there which does not have absolute advantage. It is not clear which theory dominant in the business world. In practice governments or companies’ applies the combination of theories to explain the trend and the development of the strategy.
Organization’s capacity to operate and prosper in the international market
The organization faces challenges in terms of international trade which becomes the barrier in trade. These need to solve for effective application.
Language and cultural barrier
The main barrier is the selling to the customers which speak in the native language. The cultural norms that different markets follow in their country become an obstacle for the organization.
Tax codes and Compliance issue
It becomes difficult to steer different tax codes and the business regulations from different sates through the sale to different country.
It becomes difficult for the foreign customers to purchase the product of the company comparing to the product which they get from the local brands (Hummels and Schaur 2012).
The initial stage of the entrance of organization into international market would enables to involve risk as the foreign market is unknown to the organization It helps the organization to diminish the negative effects of the economic swings through the operation in another country. the another reason is that the growth of the international market for the goods and the service. For example the organizations target of US as an international market The factor which impact the organizations capacity in international market is elimination of transportation cost (Johnson 2013).
Organization’s international expansion plan
The international market can expand with the development of the economic, trade, financial and communication. (Iyer et al. 2015)
Prepare the segmentation of the market analysis to determine the selling of the product in the international market
Preparing the gap analysis of the product against the local brands of the foreign market The demand of the current product the foreign market offer
Development of the strategy and the business plan knowing the economic, cultural and governmental conditions of the market
Overview about the regulations of the government based on the industry
Establishment of the close relationship with the local business or the market
International trade is the concept applies for the exchange of goods and services between countries. There are many theories, which can be applied, in the international trade. The organization helps to operate and prosper the international trade in a number of effective ways. Though there are barriers which the organizations need to overcome for operating he trade
Feenstra, R.C., 2015. Advanced international trade: theory and evidence. Princeton university press.
Hummels, D. and Schaur, G., 2012. Time as a trade barrier (No. w17758). National Bureau of Economic Research.
Iyer, G.R., Grewal, D., Javalgi, R. and Radulovich, L., 2015. Franchise Expansion into International Markets: The Role of Entrepreneurial Orientation and Knowledge Resources. In Cultural Perspectives in a Global Marketplace(pp. 120-121). Springer International Publishing.
Johnson, H.G., 2013. International Trade and Economic Growth (Collected Works of Harry Johnson): Studies in Pure Theory. Routledge.