Barriers and Obstacles

Introduction to Barriers

While doing business internationally may result in higher profits, there are often difficulties or barriers to successful trading

Some barriers include: Tariffs Non-tariff barriers Importing and exporting costs Excise taxes Currency fluctuations

Tariffs

A tax charged on certain imports Are used by a government to

manage trade e.g. charging a tax on an imported item

may make it more expensive than its domestic competitor

Therefore, people will buy more of the Canadian product because it’s cheaper

NAFTA

North American Free Trade Agreement

Effective January 1, 1994 Removed tariffs on many goods

flowing between Canada, the US and Mexico

Non-Tariff Barriers

Standards for the quality of imported goods that are set so high that foreign competition cannot enter the market

Could also be imposed at the border as all goods are inspected e.g. all beef imported into the EU

(European Union) must be hormone free

Importing and Exporting Costs

Import A good or service brought into a

country for sale

Export A good or service produced in one

country and sold in another

Importing and Exporting

Price of an item = manufacturing costs+ storage + marketing + shipping + advertising + overhead + profit margin of the business

Importing and Exporting Costs

A product shipped overseas to be sold or imported into Canada for sale would be more expensive than a product manufactured and sold here

Importing and Exporting Costs

Shipping is one of the most expensive pieces of total cost

Landed Cost The actual cost of an imported purchased

item that includes: Vendor cost Transportation charges Duties Taxes Broker fees

Excise Taxes

A tax on the manufacture, sale or consumption of a product within a country e.g. taxes charged on gas by

federal and provincial governments

Currency Fluctuation

A change in the value of one currency in relation to another e.g. the Canadian dollar has been worth

more than and less than the US dollar in the last 2 years

Currency fluctuates daily based on a number of factors including the strength of the economy of a country

Obstacles

Two main obstacles: Culture Language

Obstacles – Culture Differences

Culture The sum of a country’s way of life,

beliefs and customs It influences how and what products

are bought and sold Differs from country to country

Products that are popular here may not sell in the Middle East

Obstacles – Language Barriers

Different language requirements means that labelling of products must be changed e.g. labelling in Canada must be in both

in English and French (bilingual) Could be expensive for a company

to implement