Question5: Benefits of trading international businessInternationaltrade is a lawful exchange of products and services between nations. At thepoint when a business in one nation exports (sell abroad) product and serviceto consumer in another country, it’s called international trade. International tradealso occurs when consumers in a nation import (buy from abroad) products andservice from a foreign country.
Internationaltrade is important because it enables national markets to give variety ofproducts and services to their consumers that they would be not able to provideif they were limited to the production of goods and services within theirborders.Theconsequence of international trade is that almost any type of good isaccessible on the global market, from resources, for example, oil, water, andsteel to necessities, for example, food, attire, and building materials toluxury products, for example, precious stones and designer clothing. Numerousservices are exchanged globally, for example, legal, accounting, advertisingand banking.
Another major consequence of international trade is that the moremanufactures that participate in an industry, the greater the competitionbetween manufactures becomes. greatercompetition brings about morecompetitive costs, which means that buyers have access to a number of low costproductsIn1991, the Indian economy was opened up for globalization under the initiativeof then Prime Minister P. V. Narasimha Rao and Former Finance Minister ManmohanSingh for empowering international trade in India. India is currently the eighth biggest economy on the world interms of nominal GDP.
In2016 India exported $256B, making it the eighteenth biggest exporter in theworld. during the most recent five years the exports of India have decreased atan annualized rate of – 1.585%, from $274B in 2011 to $256B in 2016. The latestexports are driven by Refined Petroleum which represent 9.9% of the aggregateexports of India, followed by Diamonds, which represent 9.3%. Basedon statics from the International Monetary Fund’s World Economic OutlookDatabase, India’s aggregate Gross Domestic Product amounted to $8.721 trillionas of October 2016.
Along these lines, exports represented around 3% ofaggregate Indian economic output. Froma continental point of view, 49.1% of Indian exports by value are conveyed toAsian nations while 19.
5% are sold to European importers. India transportsanother 18.1% to North American clients with 8.
7% worth landing in Africa.Thefollowing exports good groups represent to the highest dollar value in Indianglobal shipments during 2016. Also indicated the percentage share each exportcategory represent in terms of overall exports from India.1. Gems, precious metals:US$43 billion (16.5% of total exports)2. Mineral fuels includingoil: $27.
7 billion (10.6%)3. Vehicles: $15 billion(5.7%)4.
Machinery includingcomputers: $13.6 billion (5.2%)5. Pharmaceuticals: $13billion (5%)6. Organic chemicals: $11.3billion (4.
3%)7. Clothing, accessories(not knit or crochet): $9 billion (3.5%)8. Electrical machinery,equipment: $8.2 billion (3.1%)9. Knit or crochetclothing, accessories: $7.
9 billion (3%)10. Iron, steel: $6.4billion (2.5%) Manyof these are significant Indian export organizations. The following is a choiceof some of the greatest Indian companies.
§ Reliance Industries (oil, gas)§ Tata Motors (cars, trucks)§ Indian Oil (oil, gas)§ Coal India (diversified metals, mining)§ ITC (tobacco)§ Bharat Heavy Electricals (electrical equipment)§ Hindalco Industries (aluminum)§ Tata Steel (iron, steel)§ Bharat Petroleum (oil, gas)§ Hindustan Petroleum (oil, gas)§ Sun Pharma Industries (pharmaceuticals)§ Steel Authority of India (iron, steel)§ Bajaj Auto (recreational products)§ Hero Motocorp (recreational products)§ Grasim Industries (construction materials)§ JSW Steel (iron, steel)Thetop 25 export destinations of India :1. USA2. UAE3. HongKong4.
China5. Singapore6. UnitedKingdom7. Germany8.
Vietnam9. Bangladesh10. Belgium11. Nepal12. Malaysia13. SaudiArabia14. Netherlands15. Italy16.
France17. Turkey18. SouthKorea19. SriLanka20.
Japan21. SouthAfrica22. Indonesia23. Mexico24.
Spain25. Thailand In2016 India imported $344B, making it the fourteenth biggest importer in theworld. During the most recent five years the imports of India have decreased atan annualized rate of – 8.912%, from $420B in 2011 to $344B in 2016. The latestimports are driven by Crude Petroleum which represent to 17.6% of the aggregateimports of India, followed by Gold, which represent 6.65%.Froma continental point of view, 58.
2% of India’s aggregate imports by value in2016 were bought from other Asian nations. European trade partners supplied17.5% of import sales to India while 7.4% worth started from North America with7.3% originating from suppliers in Africa.Thefollowing imports good groups represent to the highest dollar value in India’simport buys during 2016. Also indicated the percentage share every goodcategory represents in terms of overall imports into India.
1. Mineral fuels including oil: US$89.3 billion (25% of totalimports)2. Gems, precious metals: $48.
1 billion (13.5%)3. Electrical machinery, equipment: $37 billion (10.4%)4. Machinery including computers: $32.5 billion (9.1%)5.
Organic chemicals: $14.8 billion (4.1%)6.
Plastics, plastic articles: $11.4 billion (3.2%)7. Animal/vegetable fats, oils, waxes: $10.5 billion (2.9%)8.
Iron, steel: $8.7 billion (2.4%)9. Optical, technical, medical apparatus: $7.2 billion (2%)10. Ships, boats: $5.5 billion (1.5%) India’s top 25 import sources1.
China2. USA3. UAE4.
Saudi Arabia5. Switzerland6. Indonesia7. South Korea8. Iraq9. Germany10. Australia11. Iran12.
Japan13. Malaysia14. Hong Kong15. Nigeria16. Qatar17. Singapore18. Belgium19. South Africa20.
France21. Russia22. Venezuela23. Thailand24. Kuwait25. Canada 1. ExportingIncreasing salesExportcan increase the sales and the sales potential in general.
Businesses thatattention on exporting extend their vision and markets locally,internationally. Rather than gaining money by selling their offerings on thenearby market, these businesses are centered around finding new chances toexhibit their work abroad. Exportingitems is particularly useful for medium and large businesses the ones that havealready extended inside the nearby market. When they have saturated the marketin their nation, exporting items abroad can be an extraordinary chance forthese businesses to rise the business sales potential. Furthermore, exportingcan be one method for filtering chances for abroad diversifying or evenproduction.
Increasing profits Exportingitems can largely contribute to expanding your profits. This is for the mostpart because of the foreign requests, as they are generally bigger than thoseset by the local buyers. While local clients buy a couple of items or a bed,businesses abroad periodically arrange a compartment of items which definitelyleads to expanded profits. Besides, if your items are viewed as unique orcreative abroad, your profits can rise quickly in the blink of an eye. 2. ImportingIntroducing new products to themarket Numerousbusinesses in India and China tend to create products for the European andAmerican market.
This is for the most part because of the size of thesemarket and the purchasing power of thepopulation there. In any case, once a new item is introduced to these twomarkets, it might take a year or more before the item is introduced to other,smaller markets. Ifa item produced in China appears to be attractive/valuable to business peoplein Australia, they can import it and introduce it with their potential buyers.thanks to the web extension, business people can lead market surveying prior toimporting specific item. This will enable them to decide whether there is areal need available on the market for such an imported item, so they can buildup an effective marketing strategy in advance.
Minimizing cost Anothermajor benefit of importing is thedecreasing in manufacturing costs. Numerous businesses today discover importingitems, parts of items and resources more reasonable than producing them locally.Thereare various situations when entrepreneur discover item of good quality whichare low priced even when the general import costs are incorporated. Instead ofinvesting in modern, costly machinery, entrepreneurs choose import products andminimize their expenses. Much of the time, they end up requesting large amountsin order to get a reasonable price and limit the expenses.
Providing high qualityAnotherbenefit of importing is related to the capacity to market items of highquality. Loads of successful entrepreneurs travel abroad, visit factories andother highly professional sellers in order to discover high quality items andimport them into their own nation. Besides, manufactures may give instructivecourses and training, and in addition introduce benchmarks and practices toensure company abroad is well prepared to sell their items. ifyou choose to base your business on importing items, chances are you are goingto get high quality items.
This is because to the fact that manufacturingbusinesses are extremely aware that their reputation depend upon the quality ofthe items they produce. 3. MerchandiseMerchandiseor merchandising is the arrangement and design of products and retail space toinfluence the purchasing to encounter more appealing and a good time for thebuyer. Merchandising comprises of item display, pricing, store layout,promotional, limited time occasions and all way of different sales drivingtechniques went for raising the profile and the profits of your small retailbusiness.
4. ServiceServiceis intangible services being traded. 5. Absoluteadvantage Smith proposed a theory of absoluteadvantage with free trade each nation gains by specializing in economicactivities in which it has absolute advantage. Absolute advantage is theeconomic advantage one nation enjoys that is absolutely superior to other nations.For example, is India’s call center. U.
S. companies buy this service because itis cheaper than locating the call center in America. Indian call centers aren’tbetter than U.S call centers. Their workers don’t always speak professionalEnglish. But they provide the service cheaply enough to make the tradeoff worthit. On the other hand, since United States havethe richest farmland, easier to grow corn and wheat, then United States have anabsolute advantage in the food industry.
6. Comparative advantage British economistDavid Ricardo developed a theory of comparative advantage in 1871. This theorysuggests that even though the united states has an absolute advantage overChina in both wheat and aircraft as long as China is not equally less efficientin the production of both goods, China can still choose to specialize in theproduction of one good (such as wheat) where it has comparative advantage.
Comparative advantage is therelative (not absolute) advantage in one economic activity that one nationenjoys in comparison with other nations. India is a comparative advantage inthe global information technology market.