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Advantages: A) It is a relatively low-cost activity to get involved in international business and expand profit. B) A firm can further create economies of scale which should lead to lower cost and hence expansion of profit Disadvantages: A) In relation to location economies, a firm may not always be located in the best region for that specific area and is therefore restricted to the cost disadvantages of the current location (if present). B) The firm is further depended on the fluctuation of transportation costs. High transportation costs can make it uneconomical to get involved in the import or export of a certain good. C) Related to point B is the fact that exposure to a foreign market will likely involve government regulations. One of these can be the availability of trade barriers such as tariffs and quotas or other hidden barriers. D) Lastly, an exporting firm will have to work with an agent which is not necessarily loyal to one brand (product). This limited control over the marketing activities or other value added activities will unlikely expose the full potential of a certain market.

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15y ago

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