Exporting and Importing
Exporting refers to sending of goods and services from the home country to a foreign country. In International Trade, “exports” refers to selling goods and services produced in the home country to other markets. In a similar vein, importing is 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. In the case of direct exporting/importing, a firm itself approaches the overseas buyers/ suppliers and looks after all the formalities related to exporting/ importing activities including those related to shipment and financing of goods and services.
Major advantages of exporting include:
- 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 and managing joint-ventures or wholly owned subsidiaries abroad.
- Exporting/importing is less involving in the sense that business firms are not required investing that much time and money as is needed when they desire to enter into joint ventures or set up manufacturing plants and facilities in host countries.
- Since exporting/importing does not require much of investment in foreign countries, exposure to foreign investment risks is nil or much lower than that is present when firms opt for other modes of entry into international business.