Why countries must engage in international trade?
International trade can be termed as one of the most
key foreign exchange attractor’s for an economy. It is understood that sooner
or later a country need to expand its operations to a foreign country and reap
the benefits.
International trade will lift the domestic standards
of a country and thereby, would also lift the living standards of the citizens
in a country because of the high level of domestic competitiveness
international trade create. (Economy Watch, 2010)
Moving into international markets would lift the local
entities as they will be able to utilize the developed technology and
infrastructure which they would’ve not benefitted from if they didn’t move into
and these improved technologies would also move into origin countries where the
business is based. Moreover, there is also a win-win situation a company can
move into by way of international trade as there is the possibility of sharing
technical know-how as well. (Economy Watch, 2010)
International trade could also increase the sales and
profit levels of local businesses which would in turn increase the benefits
which leak into local economies.
At the same time there will be closer relations
between nations as a result of engaging in international trade. (Paggu, 2009))
Engaging in international trade would also bring down
the unemployment levels of a country as there will be newer industries
established to cater to the demands of other countries.
Furthermore, international trade would enable a
country to produce a product at a lower production cost than another country
and gain cost advantages. That is if a country has high quality resources as
well as equipment then this country can engage in production with at a lesser
cost. This theory is referred to as theory of absolute advantage.
(Economics Discussion, 2016)
Moreover, international trade would also ensure
production at the lowest opportunity cost and a country could benefit from it
even though it cannot produce the product at the lowest possible cost. This is
where the opportunity cost between two product types are considered and
resources are shifted to the product with the least opportunity cost. This is
referred to as theory of comparative advantage. (International
Econ, 2015)
The significance of doing international trade for
Maliban Biscuits
Maliban currently maintains its physical presence only
within the Sri Lankan market and has identified the importance of expanding its
operations to overseas markets. Though as at present Maliban also cater to
overseas markets by selling its products to a range of countries across 5
continents. (Maliban Biscuit, 2016)
Engaging in international trade would first and
foremost, enhance the profits as well as sales of Maliban.
Furthermore, Maliban currently maintains an extensive
product portfolio and there will be larger demand for this product portfolio
around the world. Moreover, a global presence would also ensure Maliban obtaining a larger market share in the global market and this would provide the platform
for Maliban to compete globally (Economy Watch, 2010).
Since, the current local market is already flooded
with local manufacturers and front runners such as CBL, Maliban can enhance the
potential of its business and reduce its dependency in the local market.
By expanding operations
into foreign countries Maliban can also utilize the underutilized technologies,
management expertise and knowledge as well as benefit from the lesser
production costs in developing countries which in turn would enhance the value
addition to its current product portfolio and thereby, improve its value
proposition to customers (Economy Watch, 2010).
By engaging in foreign trade Maliban can attract a
large sum of foreign revenue into the country and would thereby, result in
developing the local economy and enhance the living standards and gain tax
concessions and tax intervals from the government as Maliban will be considered
to be a key revenue generator for the Sri Lankan economy.
Maliban could also utilize the multi-cultural aspects
which exist in different economies and thereby cater to different seasonal
market fluctuations which exist in different economies and thereby, increase
the revenue and profitability of the organization.
Additionally, moving into overseas markets would
enable Maliban to embrace ‘globalization’ and adopt global trends and
technologies to its operations and thereby, ensure Maliban adopt to latest
technologies (Economy Watch, 2010).
