Foreign trade functions
At its core, trade is a certain type of activity whose task is to exchange goods under certain laws. There are two options for the exchange of goods - direct, otherwise it is called barter, and, accordingly, indirect - using money as a means of exchange. Foreign trade (export) implies a variety of trade relations with representatives of other states. Without a doubt, export plays the most important role in the economic life of any state, since it provides a solution to its three main functions. First of all, effective and competent management of foreign trade allows the state, as a business entity, to stimulate the economical use of national resources, including natural resources, which has recently acquired great importance. The second, positive dynamics of foreign trade, of course, ensures the opening of new industries, which in turn increases the number of jobs in the state, thereby reducing such a social indicator as unemployment. Thirdly, the high efficiency of foreign trade allows the country to receive a sufficient influx of foreign currency, which, in turn, contributes to the development of industries, including import substitutions, the re-equipment of enterprises, the purchase of new technologies, an increase in gold and foreign exchange reserves, and, finally, the creation of favorable conditions for the influx of certain investments into the country. Thus, the quality and responsible management of foreign trade is a priority for any state represented by its government, and Russia is no exception.
Factors for Successful Foreign Trade
Effective management of foreign trade implies analysis and consideration of a certain set of factors that can radically affect the results. The most common factor on which the dynamics of foreign trade depends is various kinds of risks. As you know, risks already appear at the stage of production of a product, more precisely, even at the stage of preliminary research of a market segment. As you know, cases of negative research results are not uncommon, which already ensures the non-return of funds invested in research. Even worse may be the situation when these preliminary studies for one reason or another become erroneous. Based on the foregoing, the foreign trade department should be oriented in such a way as to exclude such risks or, at least, compensate them with other, more successful projects. The risks of the so-called financial nature should not be ruled out. We are talking about a possible non-return of investments related to various force majeure situations, such as hurricanes, tsunamis, earthquakes, etc., changes in the political system in another country.
Profit as a measure of quality
Naturally, the effectiveness of foreign trade is determined by the size of profit, however, as in all types of trade. As known. Exaggerated saying, profit is the difference between the amount received from the sale and invested funds. With an equal and stable price in the foreign market, profit can be increased by cutting costs and expenses. But in this situation, it is worthwhile to understand that the costs and expenses of selling on the domestic market are less than for export options, as a result, profit will decrease, reducing, accordingly, the profitability of production. When managing foreign trade, this aspect should no doubt be taken into account.