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CHAPTER 3

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Export and its effect on economy

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Exporting: Principles and practices

 Exporting is the sale of goods or services produced
by one country to customers that reside in another
country.
 The idea of exporting manufactured goods presents
a clear situation.
 Technically, a service need not physically leave a
country to qualify as an export. Rather it need only
earn foreign currency.

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Who are exporters?
Types of exporters include:
Non-exporter:
– Little or no knowledge about exporting.
– No interest in international trade
Sporadic exporter
– Fills an unsolicited order from the occasional foreign buyer
– Understand the basics of the export process but assign low
priority.
Regular exporter
– Aggressively involve in international trade
– Highly experienced in technicalities of international trade
– Look to international market for growth and invest resource

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The matter of advantages(Decision

factors)

 Ownership advantages
 Manager bundle resources and capabilities to develop
core competencies

 Location advantage
 Combination of high sales opportunity and low
investment risk

 Internalization advantage

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Characteristics of exporters

A firm characteristics moderate its export activity.

The largest companies are the biggest exporters.
SMEs, however, are steadily expanding export activity
Size matter, but often management skills, efficient
production, competitive price and effective marketing better
predict export activity

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Exporting: motivation and method

 Exporting helps companies

• Increase profitability
• Improve productivity
• Diversify activities

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EXPORTS OF BANGLADESH, TRADE, BUSINESS

 Like many other third-world countries, Bangladesh relies quite heavily

on exports to provide for the needs of its densely populated nation.

 The same products sold locally will generally fetch a much lower price
than they would on the international market. This means that it is far
more profitable for the country to engage in exportation than it is to
engage in local trade.

 While this may mean that a large percentage of the countries GDP is
sent off abroad as Bangladesh exports instead of being enjoyed by the
country’s own people, it also allows for a steady inflow of foreign
currency.

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Cont…

 Bangladesh had a total export of 31,734,162.42 in thousands of US$.

The majority of the country’s trade is conducted with the USA but a
small portion of exports also sees its way to Germany, the UK, France
and Italy.
 Though earnings can at times be quite high, the country still faces
widespread poverty and it is struggling to free itself from this. Some
progress has been made, but there are still many people living below
the breadline in Bangladesh.

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Major exporting sector

 Frozen food: 1. Fish 2. Shrimps 3. Others

 Agricultural products: 1. Raw jute 2. Vegetable 3. Tobacco 4. Cut
flower 5. Fruits
 Manufactured products: 1. Petroleum bi-products 2. Chemical
products 3. Plastic products 4. Leather & Leather Products (Other
than Leather Footwear) 5. Cotton & cotton products 6. Jute goods 7.
Specialized textiles 8. Knitwear 9. Woven garments 10. Home textile
11. Footwear 12. Engineering products 13. Ships, boats & floating
structures 14. Others

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Export Receipts from major trading
partners

(In million US$)

U.S.A. 1178  Netherlands 251
Germany 1129  India 227
U.K. 771  Japan 211
Spain 543  Denmark 201
France 463  Belgium 170
Italy 358  Sweden 155
Poland 300  Australia 154
Canada 255
 Other Countries 1236
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Frequently traded commodity

       Readymade Garments

       Fish, Shrimps and Prawns

       Home Textile & Terry Towel

       Jute Manufactures

       Raw Jute

       Leather and Leather Manufactures

       Handicrafts

       Others

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Import and its effect on economy

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Importing: Principles and Practices

 Importing is the purchase of goods or services by a company
based in one country from sellers that reside in another.
 Service imports, given their intangibility, take various form.
 Ex: Financial service provided by foreign banks to Bangladeshi
customers qualify as service imports.
 Installation of nuclear power equipment in Sweden by French
firm qualifies as service import for Sweden.
 Jamuna Multi-purpose Bridge has been built by Hyundai
Engineering and Construction (Korea) as a 'design and build'
contract qualifies as service import by Bangladesh.

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Importing: motivation and Method

 Various factors spur a firm to start and sustain

importing.
 Importance of high quality products, lower prices,
locally unavailable product etc. push importers to
scan foreign market.

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Import Drivers
 Specialization of Labor
– Ex: Nike buys shoes manufactured by companies in several Asian countries,
where local companies make higher quality of shoes for lower cost.

 Input Optimization
– Ex: Industrial consumer goods, such as aircraft and cars, rely on thousands of
parts produced in factories around the world.

 Local Unavailability
– Ex: Bangladesh import around 1.42 million tons of petroleum from eight state-
owned companies of different countries.

 Diversification
– Ex: US automobile companies, diversified their purchases to include Chinese,
European, Indian and South Korean suppliers.

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Who are importers?

There are three types of importers:
Input optimizer
– This types of importers uses foreign sourcing to optimize, in terms of quality and
price.
– A company scours the globe for optimal input, then direct them to various
production point. Its various factories then assemble them into finished goods
that are imported by markets worldwide.
Opportunistic
– This types of importer looks for products around the world that it can import and
profitably sell to local citizens.
Arbitrageurs
– According to theory a good sold in one market should sell for the same price in
another.
– Market imperfection by creating supply gaps, create the basis for import arbitrage.

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