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The importance of international trade
The importance of international trade
The importance of international trade
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Natural limits and man-made regulations make businessman to look for markets in a foreign country to expand and develop. Globalization is taking away all the barriers between countries offering more successful trading ways with both increased efficiency and decreased costs. Risk involved in doing business with unaffiliated parties puts the parties in unsecured position. Thus, they look for third parties to rely on and to act properly on their behalves in case of unexpected conditions. International Banking stands at the center of these processes by acting as a reliable third party. An International Bank with 6000 offices and many branches UzBank Group, having wide range of information about the global markets, is concerned to help local organizations to manage trading successfully. Trade is an exchange of goods or services while The International trade is when supplier of goods or services performs activities beyond her home country. Nowadays, corporations prefer to trade world widely instead of limiting their performance with local market. The reason is that International trade brings various benefits to both business firms and countries: First of all, International trade boosts development and generates growth by allowing exchanging knowledge, standards, and best practices of skills and techniques globally and using the best that fits well. Moreover, Country’s Shortage and high costs become avoidable. Scarcity in availability of raw materials or expensive labor force in local market is exempted. Obtaining the raw materials at relatively lower price than local market can reduce the cost of doing business. In case of illiquid Local markets clients can benefit by Easy access of acquiring financing by entering into highly li... ... middle of paper ... ... terms and condition which may cause future disputes or Documentation risk • Acknowledge the buyers culture and accept cultural differences to keep friendly based business partner. • Foreign exchange risk can be mitigated as the same way as advised for the Buyers. UzBank overseas branch help by offering forward or option foreign exchange contracts to hedge against the risk. And do the business in one currency. • Obtaining sufficient insurance coverage from the side of Uzbank branches can help clients to decrease the level of transit risk. A representative bank of the Uz Bank Group in buyers country help with insurance of accounts receivables in case of non-payment or non-acceptance • If financing in needed for producing process, seller should use fixed interest rate loans or interest rate swaps in order not have interest rate problems even if hey fluctuate. 5
• A more competitive, efficient and profitable business with less competition in the domestic markets.
The trend toward a more globalized market has become increasingly developed in the latter half of the 20th century. Emphasis on world trade has become a dominant figure in almost every Nation’s economy. Between 1970 and 2000 world trade has experienced an increase of almost 370 percent. Concurrently, world GDP increased by 150 percent. Trade is beneficial to Nations because it allows the creation of avenues that aid in efficient allocation of resources (Canas & Coronado). Countries can gain from trade when they specialize according to their comparative advantage. This is, when they create conditions where goods and services can be produced at a lower opportunity cost than in any other country. Along the same logic, countries can also make large profits by taking advantage of another countries comparative advantage.
The Triangular Trade was the fundamental foundation of many economic and social developments of this nation. However, this historical turning point in America’s history did not develop overnight. In Africa, the practice of enslavement had been occurring internally for centuries, but as the Triangular Trade developed between the Old World and New World, the slave labor system transformed and began to become an integral part of many nation’s economic systems. As the demand for agricultural products, such as tobacco and sugar, increased, the Atlantic Slave Trade also expanded as the need for laborers proliferated. Thus, the Triangular Trade was the building blocks of the United States, economically affected the world, and ultimately impacted racial
International Business Wells Fargo provides international banking for several reasons. Wells Fargo Bank has recognized the potential of providing more choices for consumers and business customers. Wells Fargo believes in the importance of obtaining all of the customers business and strives to provide them with choices. Consumers living in a foreign country can work closely with international personal bankers who have been trained and are available to help with worldwide needs. Services offered are traditional Wells Fargo products as well as those specifically designed for those living abroad.
Thesis: Businesses deem financing necessary when they are just beginning, expanding, or recovering; Debt financing and equity financning have many advantages and disadvantages but also change the entire accounting method that is to be considered while running the business.
The potential decrease in fair value from a 50 basis point increase in interest rates would be insignificant at December 31, 2014 and 2013. Typically, consumer finance receivables purchased by GM Financial bear fixed interest rates and are funded by variable or fixed rate debt. Commercial finance receivables originated by GM Financial bear variable interest rates and are funded by variable rate debt. Variable rate debt is subject to adjustments to reflect prevailing market interest rates.
During the 1990s, Japan has been exposed to one of the most difficult structural transition periods in its post-war history, in terms of social and economic conditions. There have been two major changes: one is a substantial decline in economic growth in real terms, and the other is a changing social structure characterized by the declining birth rate and the ageing population. Under the pressure of changes in the economic environment caused by globalization and innovations in information technology, Japanese business corporations are forced to adapt to the new situation. While companies faced with fierce international competition, it became more critical to understand the basic knowledge of complicated legal, cultural, economic, and social issues. Engaging in international trade also requires attention to international regulations, international business planning, international market research, funding, distribution and other areas that must be considered separately from domestic business issues. The paper suggests some of the basic tools that can apply to solve the problem or to bring the business opportunity to fruition in today's Japanese business environment
Buy and sell in same currency to minimise foreign exchange risk. Alternatively, the buyer can hedge against foreign exchange risk by entering a forward or option foreign exchange contract with a bank.
International investing is something that many investors find that they can benefit from for many reasons. Two of the main reasons why investors choose to invest in foreign markets are growth and diversification. Growth allows investors the potential to take advantage of new opportunities in foreign emerging markets. International markets can potentially offer opportunities that might not be available in the United States. Diversification allows investors to spread out their risk to different markets and foreign companies other than those just in the United States allowing them to potentially create larger returns on their investment as well as reducing risks. (U.S. Securities and Exchange Commission, 2012) While investing internationally can be a very lucrative and rewarding decision, there are also extra risks involved with investing internationally. One of the main risks that international investors encounter is foreign exchange risk also known as currency risk. Currency risk is a financial risk that is created by contact with unforeseen changes in the exchange rate between two currencies. These changes can cause unpredictable gains or losses when profits from investments are converted from a foreign currency to the United Stated dollar. There are precautions that can be taken by investors to potentially lower their risk of currency value fluctuations and other risk factors that are present in international investing. (Gibley, 2012)
Other types of exchange rate risks are translation risk and so-called hidden risk. The translation risk relates to cases where large multinational companies have subsidiaries in other countries. On the financial statement of the whole group, the company may have to translate the assets and liabilities from foreign accounts into the group statement. The translation will involve foreign exchange exposure. The term hidden risk evolves around the fact that all companies are subject to exchange rate risks, even if they don’t do business with companies using other currencies. A company that is buying supplies from a local manufacturer might be affected of fluctuating foreign exchange rates if the local manufacturer is doing business with overseas companies. If a manufacturer goes out of business, or experience heavy losses, it will affect all the companies it does business with. The co...
Borrow long-term loans from local banks – These are a common way of financing major purchases of an organization. An advantage is that it is directly linked to an organizations operating capacity. Another advantage of long-term loans from local banks is that it enables a firm engage in large projects. Although its disadvantage is that the banks charge high interest rates.
With the opening of global markets financial institutions have been playing a key role in globalizations. From securities, stocks, investments, financial institutions have opened markets. For instance in Europe, financial and governmental agencies have established a currency, electronic foreign exchange trading. The World Trade Organization, (WTO) has established markets that are constantly debating ethical issues. World-wide tragedies make financial institutions a key player in relief efforts, such as hurricanes, earthquakes, and other natural and world-wide conflicts. The World Bank plays a major role in debt relief as well. There are many roles that financial institutions have on the global economy.
Globalization can not only affect a company opening an office in another country but it can affect a small local business as well. As the internet brings the world closer together it becomes far more likely that a business that opened with no intention of selling internationally will have customers form different parts of the world asking for their product. For instance a steel company located in Pennsylvania may suddenly find orders coming in from South American factories. How the steel plant chooses to handle this new international customer could mean ...
The foreign exchange market is one of important mechanism in the international business because foreign exchange is an intermediary for all nations in term of the growth of the economy. There are many functions of foreign exchange market in the global economy. In the international business, it uses the foreign exchange markets in four ways. First, the pay...
Sources of finance are the different methods for a business to earn and obtain money. There are lots of ways to obtain money but two large basic sources of finance, which are the “owner’s capital” and “capital borrowed”. They are also called internal sources of finance and external sources of finance. In those sources, they are mainly divided in two groups, which are short-term sources of finance and long-term sources of finance.