Explain the advantages and limitations of exporting/importing as an entry mode of international business.

Advantages :

1. As compared to other modes of entry, exporting/importing is the easiest way of gaining entry into international markets. It is less complex an activity than setting up and managing joint-ventures or wholly owned subsidiaries abroad.

2. Exporting/importing is less involving in the sense that business firms are not required investing that much time and money as it needed when they desire to enter into joint ventures or set up manufacturing plants and facilities in the host countries.

3. Since exporting/importing does not require much of investments in the foreign countries, exposure to foreign investment risks is nil or much lower than that is present when firm opts for other modes of entry into international business.

Limitations :

1. Since the goods physically move from one country to another, exporting/importing involves additional packaging, transportation and insurance cost. Especially in the case of heavy items, transportation costs lone become an inhibiting factor to their exports and imports. On reaching shores of foreign countries, such products are moreover subject to custom duties and a variety of other levies and charges. Taken together, all these expenses and payments substantially increase the product costs and make them less competitive.

2. Exporting is not a feasible option when there exist import restrictions in a foreign country. In such a situation, firms have no alternative but to opt for other entry modes such as licensing/franchising or joint venture which makes to feasible to make the product available by way of producing and marketing it locally in the foreign countries.

3. The export firms basically operate from their home country. They produce in the home country and then ship the goods to the foreign countries. Excepting a few visits made by the executives of export firms to the foreign countries to promote their products, the export firms in general do not have much of the contracts with the foreign markets. This put the export firms in a disadvantages position vis-a-vis the local firms which are very near to the customers and are able to better understand and serve them.