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Impact of External Environment On Export Trade

The document discusses the impact of external factors on a country's export trade. It identifies key external factors such as competition, socio-economic factors, technological factors, trade policies, exchange rates, demand, political and legal factors, and cultural factors. Competition from other exporting countries, socio-economic conditions and attitudes in importing countries, trade barriers imposed by other nations, currency exchange rates, global demand for certain products, and differing cultural preferences can all influence the volume and value of a country's export trade. Technological advances may also create new opportunities for exporting goods while lowering trade costs. Political decisions regarding national security or retaliation can restrict certain imports and exports between nations.

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VIJAYADARSHINI VIDJEAN
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60 views4 pages

Impact of External Environment On Export Trade

The document discusses the impact of external factors on a country's export trade. It identifies key external factors such as competition, socio-economic factors, technological factors, trade policies, exchange rates, demand, political and legal factors, and cultural factors. Competition from other exporting countries, socio-economic conditions and attitudes in importing countries, trade barriers imposed by other nations, currency exchange rates, global demand for certain products, and differing cultural preferences can all influence the volume and value of a country's export trade. Technological advances may also create new opportunities for exporting goods while lowering trade costs. Political decisions regarding national security or retaliation can restrict certain imports and exports between nations.

Uploaded by

VIJAYADARSHINI VIDJEAN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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IMPACT OF EXTERNAL ENVIRONMENT ON EXPORT TRADE

Export Trade
Export trade is the transaction in international trade where the manufactured goods
and services from one country are purchased by residents of another country.
External Environment
A business entity depends both on internal and external factors to function
smoothly. While an organization may try its level-best to continuously improve its
internal factors, it cannot possibly alter the course of events occurring outside its
horizon. These factors are referred to as external factors and have a major bearing
on the fortunes of an organization.
Here let us see the external factors that affect export trade of a nation. The
following are the external factors which have an impact on export trade;
Competition
Socio-economic Factors
Technological Factors
Trade Policies
Exchange Rates
Demand
Political and Legal Factors
Cultural Factors

How Do They Impact?


Competition
One of the most critical external business factors is competition. Whether you
operate in a concentrated industry with a few major competitors or a large industry
with many competitors, you need to know the competition. Many companies do
competitive analysis to compare their offerings and prices to those of competitors.
When developing business philosophies and products, it is helpful to use your
strength in quality production, customer service or operational efficiency to build
competitive advantages that benefit your customers.
Industries with more intense domestic competition will export more. When the
competition increases the companies will try to find new places and for this they
will export
Socio-economical Factors
Socio-economic factors relate to the values, attitudes and concerns of your target
customers and their economic abilities to afford your products. It varies from
country to country. So the export may be impacted by these social values,
economic stability, attitudes etc. Because the products are exported ultimately to be
consumed by the customers.

Trade Policies
Trade policies impact a country's balance of exports and imports. Policies that
restrict imports or subsidize exports impact the relative prices of those goods,
making it more or less attractive to import or export. For example,
agricultural subsidies might reduce farming costs, encouraging more production
for export. Import quotas raise prices for imported goods, which reduces demand.

Nations that restrict trade through high import tariffs and duties may run larger
trade deficits than countries with open trade policies. This is because impediments
to free trade may shut them out of export markets.

There are also non-tariff barriers to trade. A lack of infrastructure can increase the
cost of getting goods to market. This increases the price for those products and
reduces a nation's global competitiveness, which in turn reduces exports.

Investment can work to reduce these barriers. For example, investments in


infrastructure can increase a nation's capital base and reduce the price of getting
goods to market.

Technological Factors

The effects of technological changes on the global economic structure are creating
immense transformations in the way companies and nations organize production,
trade goods, invest capital, and develop new products and processes. ... All this
has both created and mandated greater interdependence among firms and nations.
In some industries, technological evolution drives the need for companies to adapt
and constantly research for improvements. With technological advancement the
export becomes less complicated.

Exchange Rates

Each country’s currency is valued in terms of other currencies through the use of
exchange rates, so that currencies can be exchanged to facilitate international
transactions. A domestic currency that has appreciated significantly raises the cost
of exported goods and can leave exporters priced out of global markets. This may
pressure a nation's trade balance.

Demand

Demand for particular products or services is an essential component of


international trade. For example, the demand for oil impacts the price and the
trade balance of oil-exporting and oil-importing countries alike. If a small oil
importer faces a falling oil price, its overall imports might fall.

The oil exporter, on the other hand, might see its exports fall. Depending on the
relative importance of a particular good for a country, such demand shifts can
have an impact on the overall balance of trade.

Political and Legal Factors

The legal, ethical and political environments generally relate to your need to abide
by business laws and to meet the ethical or social responsibility standards of your
customers and communities. Politically, a country’s government may seek to
protect jobs or specific industries. Some industries may be considered essential for
national security purposes, such as defense, telecommunications, and
infrastructure—for example, a government may be concerned about who owns the
ports within its country. National security issues can impact both the import and
exports of a country, as some governments may not want advanced technological
information to be sold to unfriendly foreign interests. Some governments use trade
as a retaliatory measure if another country is politically or economically unfair.
On the other hand, governments may influence trade to reward a country for
political support on global matters.
Cultural Factors

People from different countries may have different tastes and preferences for
products, foods, product/food quality levels, and even brands. The meaning of
shapes, colours and iconic features can also have different cultural significance.
These cultural differences must be taken into account to determine whether
products are suitable for a country and the same have an influence on the export
trade of that country. For example, Fanta soda is orange flavored for the North
American market. However, the Coca-Cola company, which produces Fanta, has
adapted the flavoring for certain markets to take cultural taste preferences into
account. Fanta is peach flavored in Botswana, tastes of passion fruit in France and
is flavored to taste like flowers in Japan.

AMAL N WILSON

20397010

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