Factors on exporting & manufacturing overseas

Md. Abdul Ali Student ID :1279 BBA Program (1st batch) Department of Finance & Banking

15th January 2012 Abdullah Al Rahat

Q-1: What advantages and disadvantages does exporting have? Ans: Now a days exporting become a very common and popular way of doing business in foreign countries. This exporting strategy has advantages as well as disadvantages also. Advantages: The major advantages of exporting are This is quite least risky method of selling overseas Exporting helps towards building a market in future It gives a feel for the product and its market potential The marketer are capable to hedge the risk Exporting less the infrastructure cost in some case It allows the change frequently This also helps to cope up with foreign regulations

Disadvantages: The common disadvantages of exporting are Occurs significant transportation and logistic cost International tax issues are also factors Sometimes it is difficult to export the sensitive product The tariff regulation effects the decisions Consumer ethnocentrism may affect directly

Q-2: What advantages and disadvantages does foreign manufacturing have? Ans: This is sometimes become much more profitable to manufacture overseas rather than exporting as there might have some extra benefits. Advantages: The major advantages foreign manufacturing are It helps to launch the sensitive product quickly This reduce the overall total cost It reduce the transportation cost greatly Can easily get the feedback of the customers Helps to realize the local culture

Disadvantages: The very few disadvantages of foreign manufacturing are This is more competitive way to entering into a overseas market Political instability may become major factor Market fluctuation also need to be considered Huge capital cost occurs to set up plants and other things Location planning becomes a difficult factor Q-3: What are the advantages of employing local personnel and managers when operating overseas? Abdullah Al Rahat

Ans: Most of the multiple organizations use the strategy to employ the personnel and managers locally. Because there are some advantages of it. These people can understand the local market and compete very effectively within them They help to understand the local government regulations, which would be tricky They develop a link between the business and the marketplace This gives peace the local consumers and dealers that they are dealing with a local company The manager or personnel feel they are dealing with the decision maker Easy to catch the suitable person for specific place

Q-4: What relevance do currency exchange rates have for foreign trade? Ans: The currency exchange rate has a role in the trade on foreign market it may be a reason for increasing or decreasing the product price. For example; if in Bangladesh the Indian product launch, then there will be a flow of trading. But sudden decrease of the price of TK. May increase the price level and increase the Indian product price also for Bangladesh. But it would not be possible to decrease the Indian cost of production. So the price will be increased that time and the demand will automatically go down, which affect the exporting as well as foreign trade. The profitability may be poor for that region. Q-5: What other factors might be relevant? Ans: With the exchange rate some other factors are also relevant in foreign trade. Like the foreign regulation. Because the decrease in the tariff, inspires for foreign exporting rather than set a plant in that region. Technology improvements and obsolesces also affects the foreign trade. So proper prediction is very important about the technology. Overall it is important to suit with the new economies.

Abdullah Al Rahat

Abdullah Al Rahat