Barriers and Obstacles

Introduction to Barriers  While doing business internationally may result in higher profits, there are often difficulties or barriers to successful trading  Some barriers include: Tariffs Non-tariff barriers Importing and exporting costs Excise taxes Currency fluctuations

Tariffs  A tax charged on certain imports  Are used by a government to manage trade e.g. charging a tax on an imported item may make it more expensive than its domestic competitor Therefore, people will buy more of the Canadian product because it’s cheaper

NAFTA  North American Free Trade Agreement  Effective January 1, 1994  Removed tariffs on many goods flowing between Canada, the US and Mexico

Non-Tariff Barriers  Standards for the quality of imported goods that are set so high that foreign competition cannot enter the market  Could also be imposed at the border as all goods are inspected e.g. all beef imported into the EU (European Union) must be hormone free

Importing and Exporting Costs Import  A good or service brought into a country for sale Export  A good or service produced in one country and sold in another

Importing and Exporting Price of an item = manufacturing costs + storage + marketing + shipping + advertising + overhead + profit margin of the business

Importing and Exporting Costs  A product shipped overseas to be sold or imported into Canada for sale would be more expensive than a product manufactured and sold here

Importing and Exporting Costs  Shipping is one of the most expensive pieces of total cost Landed Cost  The actual cost of an imported purchased item that includes: Vendor cost Transportation charges Duties Taxes Broker fees

Excise Taxes  A tax on the manufacture, sale or consumption of a product within a country e.g. taxes charged on gas by federal and provincial governments

Currency Fluctuation  A change in the value of one currency in relation to another e.g. the Canadian dollar has been worth more than and less than the US dollar in the last 2 years  Currency fluctuates daily based on a number of factors including the strength of the economy of a country

Obstacles  Two main obstacles: Culture Language

Obstacles – Culture Differences Culture  The sum of a country’s way of life, beliefs and customs  It influences how and what products are bought and sold  Differs from country to country Products that are popular here may not sell in the Middle East

Obstacles – Language Barriers  Different language requirements means that labelling of products must be changed e.g. labelling in Canada must be in both in English and French (bilingual)  Could be expensive for a company to implement