Question

A common pitfall that novice exporters come across involves

A. increased economies of scale.
B. an ineffective distribution program.
C. low interest rate financing.
D. low unit costs.
E. poor understanding of the domestic market.

Answer 1

A common pitfall for novice exporters is an ineffective distribution program, which neglects local market complexities and distribution logistics, hindering market penetration and sales.

Step-by-step explanation:

A common pitfall that novice exporters come across is an ineffective distribution program. Novice exporters often neglect the complexities involved in entering a foreign market, such as local regulations, cultural differences, and establishing reliable distribution channels. Neglecting these aspects can lead to problems in effectively reaching the target market and may impede the business's ability to successfully sell and distribute its products.

International trade allows for small economies to reap the benefits of economies of scale as they can specialize in producing goods for which they have a comparative advantage and then trade for other goods. This not only increases efficiency and lowers unit costs but also invites competition, leading to a greater variety of products and potentially better prices for consumers. Without international trade, local economies may suffer from a lack of choice and competition, resulting in higher prices and less innovation.