Countries that Prompt Trade
Reasons for foreign trade:
1. Many countries are unable to produce certain goods because they lack the natural
resources that enable suh production,hence thet are forced to consume them
through import.
2. Some countries can produce certain goods more efficiently than others. This
happens when they have abundant factors of production which makes producing
goods cheaper than other countries.
3. Some countries produce commodities in surplus. They are successful to produce in
large numbers enough not only to fulfill local demand but it is exorted to countries
where there is a deficit.
Reasons for trade can be divided into push or pull factors:
Push factors are negative factors on the existing market that encourages an organization to
seek international opportunities. They force a business to seek overseas markets in which to
sell its products. Some of the popular push factor includes:
1. The domestic market is saturated and the business is falling to extend their local
sales any further.
2. A rise in competition or a high level of competition in the domestic market might be a
reason for business to expand overseas. Competitors are coming with better
substitides or new strategies making business difficult for some companies so they
can plan to sell products in a less competitive market.
3. A rise in cost of production in the local market will force companes to expand to
countries where cheap factors of production is available.
Pull factors lures firma into new markets. They are the opportunities that business takes
advantages of when selling into overseas markets. The following factors act as a pull factor
for a business:
1. A new or bigger market in terms of size has emerged
2. A new location where factors of production is avalialbe in abundance which will bring
down cost of production
3. Its cheaper to transport goods from one place to another.
4. The reserach facility is more advanced which makes the location more attractive .
By entering a new market due to these factors a business will get the following benefits;
● The total sales and profit of the business will rise as they tend to expand their
operations in a lerger market area
● As the volume of operation increases a business will enjoy economies of scale which
will bring dowm their average cost of production and give more control over price.
● Risk beraing economies of scale, as firms spread their risk to multiple international
location the chances of survivability of the business will increase due to any external
shocks.
Reasons for foreign trade:
1. Many countries are unable to produce certain goods because they lack the natural
resources that enable suh production,hence thet are forced to consume them
through import.
2. Some countries can produce certain goods more efficiently than others. This
happens when they have abundant factors of production which makes producing
goods cheaper than other countries.
3. Some countries produce commodities in surplus. They are successful to produce in
large numbers enough not only to fulfill local demand but it is exorted to countries
where there is a deficit.
Reasons for trade can be divided into push or pull factors:
Push factors are negative factors on the existing market that encourages an organization to
seek international opportunities. They force a business to seek overseas markets in which to
sell its products. Some of the popular push factor includes:
1. The domestic market is saturated and the business is falling to extend their local
sales any further.
2. A rise in competition or a high level of competition in the domestic market might be a
reason for business to expand overseas. Competitors are coming with better
substitides or new strategies making business difficult for some companies so they
can plan to sell products in a less competitive market.
3. A rise in cost of production in the local market will force companes to expand to
countries where cheap factors of production is available.
Pull factors lures firma into new markets. They are the opportunities that business takes
advantages of when selling into overseas markets. The following factors act as a pull factor
for a business:
1. A new or bigger market in terms of size has emerged
2. A new location where factors of production is avalialbe in abundance which will bring
down cost of production
3. Its cheaper to transport goods from one place to another.
4. The reserach facility is more advanced which makes the location more attractive .
By entering a new market due to these factors a business will get the following benefits;
● The total sales and profit of the business will rise as they tend to expand their
operations in a lerger market area
● As the volume of operation increases a business will enjoy economies of scale which
will bring dowm their average cost of production and give more control over price.
● Risk beraing economies of scale, as firms spread their risk to multiple international
location the chances of survivability of the business will increase due to any external
shocks.
