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Factors on exporting &

manufacturing overseas

Md. Abdul Ali

Student ID :1279

BBA Program (1st batch)

Department of Finance & Banking

15th January 2012

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Q-1: What advantages and disadvantages does exporting have?

Ans: Now a days exporting become a very common and popular way ofdoing business in foreign countries. This exporting strategy hasadvantages 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 manufactureoverseas 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 factorQ-3: What are the advantages of employing local personnel andmanagers when operating overseas?

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Ans: Most of the multiple organizations use the strategy to employ thepersonnel and managers locally. Because there are some advantages ofit.

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 aredealing with a local company

The manager or personnel feel they are dealing with the decisionmaker

Easy to catch the suitable person for specific place

Q-4: What relevance do currency exchange rates have for foreigntrade?

Ans: The currency exchange rate has a role in the trade on foreignmarket it may be a reason for increasing or decreasing the product price.For example; if in Bangladesh the Indian product launch, then there will bea flow of trading. But sudden decrease of the price of TK. May increase theprice level and increase the Indian product price also for Bangladesh. Butit would not be possible to decrease the Indian cost of production. So theprice will be increased that time and the demand will automatically godown, 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 inforeign trade. Like the foreign regulation. Because the decrease in thetariff, 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.

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Abdullah Al Rahat