Advantages of Foreign Trade

len Alfred Ajibola - Thu, 05th December, 2019 @ 18:30: PM

Topics in Commerce

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Academic Questions in Commerce

Please check out our Test Your Knowledge page to see all Questions and Answers

The followings are principles of marketing mix except _____.

  • A. People

  • B. Positioning

  • C. Pressure group

  • D. Packaging

  • E. Promotion

  • F. Product

The followings are advantages of division of labour EXCEPT _____.

  • A. It promotes the use of machines in production industries
  • B. There is an increase in profit
  • C. It saves time and expenses of training
  • D. It fosters the spirit of division
  • E. It increases the production of quality goods and services in the market
  • F. It increases a country's economic growth

Which of the following statement is incorrect concerning division of labour?

  • A. It is the specialization of works
  • B. It can become monotonous
  • C. It is the specialization of processes
  • D. The nature of a job is not a condition for division of labour
  • E. A person performs only a part of the job
  • F. Division of labour has some of its drawbacks

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Foreign Trade:

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

Please read on Foreign Trade and Types of Foreign Trade here.

In this article, we will look into the importance, advantages and disadvantages of foreign trade.

Advantages of Foreign Trade

The advantages of foreign trade can also be considered as the Importance of foreign trade.

You can read on the Disadvantages of Foreign Trade here.

Below are explanations on the advantages or importance of foreign trade:

1. Commodities become cheaper and available in most Country

Using the sale of phones as an instance, some phones may sell for over $400 while others with a similar operating system could sell for less than $100; all thanks to foreign trade.

In short, imported commodities are approved into a country because of their relative cheapness and quality when compared to locally made commodity of similar value.

Please read on the Scope and Importance of Business Studies here.


2. Utilization of Mineral Resources

Some developing countries are blessed with numerous natural and mineral resources but ironically, they lack the facilities and machineries to make them into finished products. Foreign trade becomes important in regards to the utilization of these resources.

As an instance, Nigeria is one of the world's largest exporter of petroleum. They generate a lot of money from this very process (through foreign trade).

Ironically, Nigeria still import the products of petroleum like petrol and kerosene.

The point is: Without foreign trade, petroleum may not have been properly utilized by Nigeria.

Please read on how Petrol is generated from Petroleum via Fractional Distillation.


3. Consumption of variety of Goods

When you check out some of the goods and products you enjoy, you will observed that they aren't manufactured by your country. 

The point is: You enjoy these  imported products; and all thanks to foreign trade.

Please read on Commodity Market, Types and Importance here.


4. Price Reduction and Stability of Products

When certain products are produced in limited or insufficient amounts within a country, the price of such products will be inflated.

Through foreign trade, countries that manufacture a surplus of these products can export them at a cheaper price to those with deficits.

Please read on Supply, Law of Supply and Elasticity of Supply here.

Note: The above process will bring about price stability of the limited products manufactured within the country of deficit production.

Please read on the Divisions of Foreign Trade here.


5. Improvement in the means and modes of Transport

Air, water and land mode of transportation have been constantly improved on.

For instance, speed trains are constantly being developed while larger and advanced ships have been built for the sake of foreign trade.

Please read on the Means and Modes of Transportation here.

Note: Some countries have excellent road and rail networks that connects to neighboring countries for the purpose of improving foreign trade.


6. Means of Payment

A country indebted to other countries may pay off her debts by exporting their products to these countries.

Note: This is ideal because such indebted country may not have the cash to pay off their creditors.

Please read on the Methods of Payments here.


7. Specialization and Division of Labour

Foreign trade has brought about division of labour and specialization of production in various countries of the world. 

For instance, Nigeria, Saudi Arabia and Qatar are specialized in petroleum, mining and exportation. This singular act has generated trillions of dollars for the respective countries. In fact, this is the major source of their national revenue.

Please read more on Division of Labour here.


8. Alleviation of Poverty and Provision of Jobs

Foreign trade has proven to be crucial in poverty eradication especially in developing countries.

For instance, Nigeria imports various agricultural machineries and these have proven to boost it's economy, alleviate poverty and provide more jobs. This is true because Nigeria now has more active commercial farmers, more people managing these machines and ultimately, more jobs.

Please read on the Characteristics, Functions and Importance of Government here.


9. Resort in times of Natural Calamities and Wars

Shortage of food and other resources are the aftermath of wars and natural calamities like earthquakes and flood.

The above calamities will negatively and temporarily affect production within these periods. To this end, foreign trade serves as the last resort to stabilize the economy of the affected nations.

You can read on the Problems of Agriculture in Nigeria here.


10. International Ties and Cooperation

Foreign trades have brought the people of various countries together.

For instance, Nigeria has a good business and civil relationship with China; all thanks to foreign trade.

Note: Some Nigerians are beginning to speak the Chinese language while others have married Chinese men and women as a result of the Nigerian/Chinese trade relationship.

Please read on the various Forms of Marriage here.


11. Reduces Monopoly and Inflation in an Economy

Monopoly exists where there are only few producers of certain goods and services. This will directly lead to inflation of such goods and services.

Through foreign trade, citizens are free to import similar products thereby increasing the availability of such products in the market.

Please read on Scale of Preference and Opportunity Cost here.

Note: When we have a variety of similar products in the market, consumers will have the option to choose. Also Monopoly of these products will be eradicated and prices will fall accordingly.


12. National Well Being

Without foreign trade, the citizens that make up a country may not enjoy some of the basic necessities of life, for instance food and drugs. 

As an instance, in Japan and UK, almost half of their food are imported from other countries.

In developing countries, certain drugs must be imported and this can be critical for national well being.

Please read on Drugs, Types and their Side Effects here.

Note: The term national well being relates to the good health of the citizens of a country.

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Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 7 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

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


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