Foreign trade
Foreign trade is the exchange of goods or services between companies based in separate countries. In practice, foreign trade by definition always occurs when goods are exported from the home country to companies based abroad. Interestingly, foreign trade in Poland does not only include exchange on the line of goods-money, it also occurs during the transfer of labor or non-material goods. Foreign trade is currently used by most companies as a primary source of supply of semi-finished goods or when importing goods from other European Union countries.
What is trade
Trade is the exchange of goods between companies or businesses and consumers, usually for monetary compensation. Trade is generally divided into wholesale and retail. In retail trade, only a small amount of goods are exchanged and usually not for resale because they are priced in such a way as to generate high enough profits for the middlemen and the manufacturer. The consumer is the last link. Wholesale, on the other hand, is by definition dedicated exclusively to entrepreneurs, since at the time of exchange very large quantities of goods are sold, usually at a much lower price thanks to the large volume of transactions. Items sold to consumers through trading companies are usually bought directly from the wholesaler, and the margin is the difference between the purchase price and the selling price.
It is currently one of the most frequently used forms of business activity in Poland, mainly due to easy-to-calculate profit and relatively small investments resulting only from the purchase of an appropriate amount of goods from a wholesale intermediary. However, the investment costs increase exponentially with the higher amount of a single product.
Foreign trade is divided into two stages. The first is export, which is the sale of goods abroad of the country where the company's headquarters and place of registration are located. This stage applies both to products manufactured in a given country in their entirety or those that have been substantially processed in it. The second stage is importing, which is the purchase of goods from abroad by a company located in a different country than the exporter. Among the stages, we also find transit trade, which is divided into active and passive.
Advantages of foreign trade
Foreign trade in the EU has many advantages, which are now being used by more and more Polish entrepreneurs. The main advantage of this economic process is the possibility of reaching new markets for the product, which is particularly important when the home market is saturated with a given commodity. This is particularly important when the home market is saturated with a given product. Many different companies offer a range of products suitable for virtually any age group, which are characterized by long shelf life and durability. Foreign trade also allows prices to vary according to the market. This is an interesting advantage that is used mainly by companies that produce in countries with low labor costs and export their goods to much more developed countries.
It is also worth knowing that foreign trade e.g. between Poland and Germany is very safe. As a rule, companies with headquarters in other countries cooperate with each other on very strict conditions, in which even the smallest transgression of any of the parties may meet with immediate termination of the contract. Among the benefits of foreign trade, it is also worth mentioning the positive flow of money between many economic entities, as well as the transformational and efficiency function. The transformational function is the significant impact of foreign trade in the EU on GDP, the efficiency function, on the other hand, speaks of the impact on improving the efficiency of management.
Foreign trade vs. international trade
Many people confuse the concepts of foreign trade with international trade, which is quite a big mistake from the point of view of economics and logistics. International trade concerns an entire region or group of countries, while foreign trade concerns only one home country, such as Poland.
Read the article in German - Aussenhandel
Read the article in Polish - Handel Zagraniczny
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