Commerce

What is foreign trade? Types of foreign trade

len Alfred Ajibola - Wed, 04th December, 2019 @ 11:23 AM

Topics in Commerce

Principle of Marketing: People as a marketing mix and their importance Principle of Marketing: Positioning as a marketing mix Principle of Marketing: Packaging as a marketing mix Elements of promotion in marketing mix Principle of Marketing: Promotion as a marketing mix Principle of Marketing: Place as a marketing mix Principle of Marketing: Price as a marketing mix Principles of Marketing: The seven principles of marketing mix Factors necessary for division of labour Disadvantages of division of labour Advantages of division of labour Concept of Outbound Marketing Inbound Marketing explained Types of production in commerce Commerce: Definitions and Scopes of Commerce Differences between balance of trade and balance of payments Balance of payment deficit and balance of payment surplus Disadvantages of foreign trade Divisions of foreign trade Advantages of foreign trade


Academic Questions in Commerce

Please click here to see all Questions and Answers

Whatever is being marketed must always provide value to its potential consumers.

  • A. True

  • B. False

Which of the following is not a branch of marketing?

  • A. Merchandising

  • B. Promotions

  • C. Forex

  • D. Search Media Optimization

  • E. Social Media Optimization

  • F. Copywriting

Which of the following is not a characteristics of commerce?

  • A. The only aim of commerce is to make profit

  • B. It is a discontinuous process after profit had been made

  • C. It is accompanied with challenges and uncertainties

  • D. It is 100% business and economic activity

  • E. Transaction processes are always involved in commerce

  • F. It connects the process of production and marketing

Which of the following is not a function of commerce?

  • A. Unnecessary in times of emergencies like earthquakes and wars

  • B. Facilitates mass production of goods

  • C. Influences transportation network within and outside a state

  • D. Attempts to satisfy human needs and wants

  • E. Improves the standard of living

  • F. Acts as an online business link between buyers and sellers

One of the following is a form of division of labour.

  • A. Agonistic division of labour
  • B. Antagonistic division of labour
  • C. Mutualistic division of Labour
  • D. Advanced division of labour
  • E. Solitary division of labour
  • F. Occupational division of labour

A place where people buy homogenous goods in large quantities is called _____.

  • A. Wholesaler's Market

  • B. Goods Market

  • C. Products Market

  • D. General Market

  • E. Commodity Market

  • F. Forex Market

Any activity aimed at getting people interested in a company's product or service is termed _____.

  • A. Commerce

  • B. Economics

  • C. Financial Accounting

  • D. Marketing

  • E. Production

  • F. Distribution

Which of the followings isn't a characteristics of commerce?

  • A. Commerce is solely aimed at making profit

  • B. Commerce is 100% business

  • C. Commerce is a discontinuous process because it eventually satisfies human needs

  • D. Commerce is accompanied by uncertainties

  • E. Transaction processes are always done in commerce

  • F. Commerce connects the processes of production and marketing


What is foreign trade?

Let me begin this article by asking you a question:

  • Have you purchased a product right within your country, only to observe in its label that such product wasn't manufactured in your country?

If your answer to the above question is a 'yes', then you're already experiencing the effects of foreign trade.


Foreign trade is defined as the exchange of goods, services and capital between two or more countries.

Foreign trade is also termed as 'international trade'.

Please read on the advantages of foreign trade here.


No single country manufactures all the goods and services in our world. This implies that every country of the world relies on certain goods and services imported (or brought in) from other countries.

Please read more on production here.


Consider the instance below.

  • Nigeria as a nation is a major producer and exporter of crude oil (petroleum). Interestingly, Nigeria imports the products of petroleum like petrol, kerosene, diesel and others (as at the time of writing this article in 2019). Meanwhile, understand that a Nigerian named Aliko Dangote had laid the foundation towards building a refinery in Lagos, Nigeria. This refinery is speculated to become the largest refinery in Africa and perhaps, the world at large.

    Please read on the disdvantages of foreign trade here.


From the above instance, we can see that importation and exportation activities are a function of foreign or International trade. Below are some brief explanations on importation and exportation activities.

  • When a product is sold to other countries in the global market, it's termed export or exportation.
  • When products are brought into a country from the global market, it's termed import or importation.

Imports and exports are recorded in a country's current account generally associated with its 'balance of payments'.

Please read more on balance of trade and balance of payments here.


The theory of international trade is guided by the principle of comparative cost. This principle was propounded by David Richards.

The principle of comparative cost states that a country should specialize in the production of goods and services in which they have a greater comparative advantage or the least comparative disadvantage.

David Richards

Please read on the concept and types of cost here.


Below is an instance on the principle of comparative cost.

Now, let us assume we have two countries producing and exporting rice and beans respectively.

If country A produces 100 grams of rice and 300 grams of beans daily and country B produces 50 grams of rice and 150 grams of beans on a daily basis, then according to this principle, country A has an advantage over country B with regards rice and beans production; but better still, country A has a greater comparative advantage in the production of Beans.


From the above instance, it can also be said that country B is at a disadvantage with regards to the production of rice and beans. Infact, it has a bigger comparative disadvantage with regards to beans production.

The point to note here is this: A country utilizing the principle of comparative cost will always produce quality goods and services at a cheaper cost.

Please read on supply here.

 

Types of foreign trade

Foreign or international trade are classified into two types. These are:


1. Bilateral Trade

The word 'bi' means 2. In a bilateral trade, two countries are involved.

Bilateral trade is defined as a trade agreement in which two countries exchange goods and services. The trade between Nigeria and India is an example of a bilateral trade.

In a bilateral trade, the country involved balances its payments and receipts separately for each country it trades with.

Please read on the meaning, scope, functions and characteristics of commerce here.

 

2. Multilateral Trade

In a multilareral trade, a country does business with more than two countries.

A multilateral trade is defined as one in which a country trades with two or more countries.

As an instance, Nigeria trades with India, China and South Africa simultaneously.

Please read on the divisions of foreign trade here.

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Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 10 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.

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Amazing facts in Commerce

With Amazon Smile, you can donate 0.5 percent of your purchases to a charity of your choosing

Check it out here

The brewery, Sankt Gallen in Japan, produces a beer called Un Kono Kuro from elephant's dung

North Korea and Cuba are the only countries in the world where you can't buy Coca-Cola

Amazon is an e-commerce website launched in 1995. It did not make any profit for its first seven years.

Amazon's first profit was in 2003. Its founder 'Jeff Bezos' is the richest man in the world as at 2018/2019


NOTABLE POINTS IN Commerce

Marketing is a broad field of study. Below are branches or divisions of marketing:

  • Advertising

  • Search Engine Optimization (SEO)

  • Merchandising

  • Branding

  • Promotions

  • Copywriting

  • Social Media Optimization (SMO)

  • Event planning

  • Customer Relationship Management (CRM)

  • Graphic Design

  • Internet Marketing

Marketing is defined as any activity or process aimed at getting people interested in a company’s product or service.

The processes utilized in marketing can take place via posters, public relations campaigns, handbills, social media, radio and television, buses, walls along the streets, the internet or just anywhere.

Below are some of the branches of marketing:

  • Advertising

  • Search Engine Optimization (SEO)

  • Merchandising

  • Branding

  • Promotions

  • Copywriting

  • Social Media Optimization (SMO)

  • Event planning

  • Customer Relationship Management (CRM)

  • Graphic Design

  • Internet Marketing

Please read more on marketing here

Commerce can be defined as the exchange of goods and services, usually for money and on a large scale that will require the transportation of such goods and services.

Commerce is crucial (important) to the life of any nation for the following reasons:

  1. Commerce facilitates the exchange of goods and services which everyone can enjoy, regardless their location or whether the goods is produced within or outside their country.
  2. Commerce creates an awareness of the existence of goods and services through advertising.
  3. Commerce offers employment to a very large number of people in a nation.
  4. Commerce promotes rapid transfer of both oral and written messages through communication.
  5. Commerce determines the standard of living in a nation. This is because the extent of commercial activities is crucial to wealth of a nation.
  6. Commerce makes for the protection against risk in day to day business operations.
  7. Through commerce, there is a steady supply of goods in a nation. This is because commerce ensures that goods produced are stored until needed.

Please read on the functions and characteristics of commerce here

A public company is not owned by an individual; rather it's usually owned by groups or a large number of people.

The shares of a public company are traded freely on the stock exchange.

Below are some features of a public company:

  1. A public company must receive it’s training certificate to commence business.
  2. The minimum membership is two while the maximum membership is limitless.
  3. A public company has a legal status. It can sue and be sued.
  4. A public company files and publishes its annual reports, including its accounts.
  5. The liability of its members is limited.
  6. The shares are easily transferrable through the stock market.
  7. A public company can issue debentures to be secured as its assets.

Please read on limited liability company, its advantages and disadvantages here

There are seven elements of the marketing mix. These are:

  1. Product: Anything thing that satisfies a consumer’s need is referred to as a product. Product may come in the form of manufactured goods, raw materials or services.
  2. Price: Price is defined as the exchange value of goods and services supplied. In simple terms, it serves as a mechanism of exchange.
  3. Promotion: It involves all the processes that concerns with how business organizations should inform their customers about its product. If done properly, the demand of product will be increased. Promotions can take the form of advertising, search engine optimization, social media marketing, trade fairs exhibition and so on.
  4. Place: The place as a marketing mix concerns variables such as location and transport facility where the distribution of goods and services take place.
  5. Packaging
  6. Positioning
  7. People

Think of marketing mix as the set of marketing tools that an industry or company uses to drive or accomplish its marketing objectives in the target market

Please read on the principles of marketing mix here