TOPIC 8 INTERNATIONAL LOGISTICS AND SUPPLY CHAIN MANAGEMENT  211

increase inventory must be measured. Firms using air freight as a tool

for aggressive market expansion must consider the cost of the
transportation as it may also affect the price of the product and the need
for the productÊs availability abroad. The firm, must therefore, consider
the effects of its choice of transport on its overall activities in relation to
cost.

(iv) Government Involvement

Carrier companies may be owned or heavily subsidised by
governments. Firms can thus be pressured to use their national carriers,
even if there are more economical alternatives. Such preferential
policies are often enforced when government cargo is being
transported. The United Nations Conference on Trade and
Development (UNCTAD) has recommended, for balance of payment
reasons that 40 per cent of shipping between two countries be allocated
to vessels of the exporting country, 40 per cent to vessels of the
importing country and 20 per cent to third-country vessels (the
40/40/20 guideline). Firms have to adapt their choice of modes within
the international transportation environment they operate in.

SELF-CHECK 8.2

International transportation can be divided to three parts. Explain each

part.

ACTIVITY 8.5

In your opinion, what is the importance of transportation in a firmÊs

decision to conduct international business?

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