Types of international trade and development activities

The international trade and development activities have various approaches on how to conduct the process. Among these approaches we can underline the four most significant ones:

1. INDIRECT CHANNELS

They are represented by companies which based their international trade and development activities with operators that buy the product and resell it in their own market, both to final customers and to other local companies. These operators are for instance importers (who also take care of border and customs management) or distributors (which instead often require the customs management and practices by an importer company).

Indirect channels involve less investment and less commercial risk in the short term, and also represent the ideal solution for a first export phase. However, these channels also have significant disadvantages, largely due to the limited presence of the companies in the foreign market, which makes their exports dependent on the commercial relationship with the foreign importer / distributor.

2. INTERMEDIARY CHANNELS

The international trade and development activities can be focused on international partnership. Thus, in this case companies are selling their products and services abroad thanks to the commercial activities of local partners, intermediary companies, or agents. The trade is usually direct with the final customer, while the local agent gains a fee for the support it gives to the foreign company to enter in the new market and for developing the local network. The international partnership can have various forms, in particular they can have the exclusivity or not. When a local agent has exclusivity means that it is the only company who has the right to sell those products for a certain limited period. In counterpart, the foreign manufacturing company is usually asking to the local agent to reach a minimum number of sales within its exclusive territory.

3. DIRECT CHANNELS

These are the companies that establish their business in a foreign country. Thus, their international trade and development activities are direct and independent. Some of these companies are for instance retail or e-commerce chains which allows the company to manage business relationships directly.

The direct channels, and therefore the decision to directly manage its own customers or even to address the final consumers, has the strategic advantage of consolidating its commercial position receiving direct feedback able to constantly improve its action on the new market and to obtain higher margins. However, even this path is not without its weak points: greater investments, greater rigidity of the structure (disinvesting from a market is more complex and generally much more expensive), post-sales management by the same company.

4. COUNTER TRADE

It is a barter form, used in modern international trade and development activities, whereby the buyer pays for the goods by selling other goods.

It represents a set of specific contractual formulas, modern form of barter, used in international trade, united by the presence of binding agreements between sovereign states (more or less explicit legal framework), which link export transactions to other import transactions. The counter trade consists of a single contract through which supplies of goods, products or raw materials are compensated by the acquisition of other goods. This specific international trade approach is widespread especially in countries that are poor in currency resources and rich in raw materials. In the past it was used in particular in the interchange with Eastern and Third World countries, in order to improve nominal trade deficits and alleviate transfer and convertibility problems related to the different monetary and credit systems.