Introduction to the
International Trade
Operations
Radka Bauerová
International Trade Operations
21. 2. 2023
➢Basic information
➢Definition of trade operations
Content of the
presentation 1. Initial information about the course
2. Definition of trade operations
3. Differences between internal, foreign and
international trade
4. Specification of trade operations type, functions and
process in the internal and international environment
5. Business intermediaries and business agents
INITIAL INFORMATION ABOUT THE COURSE
Lector: Ing. Radka Bauerová, Ph.D.
Office number: B 301
E-mail: bauerova@opf.slu.cz
Consultation hours: Tuesday 15:30 – 17:10
Wednesday 11:25 – 12:10
INITIAL INFORMATION
INITIAL INFORMATION
Requirements for successful completion of the course:
• Attendance at seminars at least 50% participation
• Semester project focusing on the background of business operations - seminar
paper and defence - 30 points
➢ The seminar paper must be submitted to the IS in a template format, which
is available in the IS.
• 10 points for activities at seminars
• Final exam - 60 points
Evaluation based on points earned:
100 - 93 points - A
92 - 85 points - B
84 - 77 points - C
76 - 69 points - D
68 - 60 points - E
59 - 0 points - F
INFORMATION ON ASSESSMENT IN THE COURSE
0 – 59
points
F
60 – 68
points
E
69 – 76
points
D
77 – 84
points
C
85 – 92
points
B
93 – 100
points
A
Success is the sum of small
efforts repeated day after
day
Failure only comes when
you stop trying
QUESTIONS?
MOTIVATION FOR THE SUBJECT
• What do you expect to learn in this course?
• How can you benefit from the course material?
• Why will you attend the lectures?
Source: UNCTAD, 2020
Figure 1:Values and growth rates of world
trade in goods and services
• Definition of international trade
operations
• Classification of business activities
• Advantages and disadvantages of
conducting international business
operations
• Decision criterion for initiating
international trade
Basis of international
business operations
DEFINITION OF TRADE OPERATIONS
Trade = the action of buying and selling goods and services (Mulačová et al., 2013)
Operation = performing an activity
Therefore, the definition of trade operations can be specified as following:
Trade operations are a complex of activities supporting the purchase and sale of products.
This course deals with trade as an ACTIVITY in focus on retailing
This approach is the most comprehensive concept of trade. This is a general view of the subject,
trade is seen as an activity consisting in buying and purchasing goods. Obviously, in this case, the
majority of market participants are involved in trade. Thus, business activity is not the exclusive
activity of genuine traders, but can of course also be dealt with by entities whose main activity is
production or services. Typically, the manufacturing, functional, time, space, organizational and
productive departments of purchasing and sales are involved in manufacturing enterprises.
Similarly, making 'deals' is a normal part of the life of non-business enterprises. (Mulačová et al.,
2013)
How would you define international business operations?
International Trade Operations
International = involving more than one country
Trade = the action of buying and selling goods and services (Mulačová et al., 2013)
International trade = exchange of goods, services and ideas between two or more
countries (Singh, 2009).
Operation = performing an activity
Therefore, the definition of international trade operations can be specified as following:
International trade operations are a complex of activities supporting the purchase and sale of
products between companies from two or more countries.
International trade takes place through a large number of individual trade operations. Trade with
foreign countries is largely influenced by national trade policy. International trade operations, their
course and conditions are predetermined by the commercial policy framework in which they are
carried out.
There are some random events that can hardly be foreseen and that may occur at different stages of a
business operation may also cause business operations.
DIFFERENCES BETWEEN INTERNAL, FOREIGN AND
INTERNATIONAL TRADE
One of the classifications of trade activities is the scope of trade, where we recognize internal trade, foreign trade
and international trade (Mulačová et al., 2013), specified as follows:
Foreign Trade
Foreign trade consists of exports and imports of goods across national borders. Foreign trade is more demanding on
organizational, competence and economic demands, but on the other hand it is a great opportunity for development and
growth, as well as for achieving better results. It may also be a necessary step to ensure sufficient sales in the light of the
domestic market situation.
International Trade
This type of trade is an extension of foreign trade. It is a comprehensive set of business activities in a larger number of
countries or around the world. A key condition for the effective functioning of international trade is proactive legislation in
this area and the elimination of tariffs, quotas and other protectionist measures.
Internal Trade
This type of activity is active in the national and regional markets. It is a distribution of goods in the territory of one state,
sellers and buyers are entities of the domestic state. This includes both consumer goods and merchandise stores. Despite the
ongoing globalization, it is still a very important segment of the economy. Merchant activities in the internal market have a
number of advantages and are still the least time consuming and economical. Also, a certain degree of national consumer
sentiment is always being recorded in domestic goods stores.
Advantages and Disadvantages of International Trade
Source: Singh, 2009
The following table shows the specific advantages of international trade:
Advantages
Increase in domestic competitiveness
Increase in sales and profits
Increase in global market share
Decrease in dependence on existing markets
Better use of corporate technology and technical know-how
Global sales potential of existing products
Control on cyclical market fluctuations
Better chances of corporate expansion
Using excess production capacity effectively
Better learning curve through information about foreign competition
Advantages and Disadvantages of International Trade
Source: Singh, 2009
The following table shows the specific disadvantages of international trade:
Disadvantages
Arranging new promotional material thereby increasing cost of sale
No short-term gain, long-term financial commitment required
Increase in administrative costs
Increase in human resource cost due to increase in travel
Long gestation period of receiving payments
Modification in product packaging and labelling as per importer country
requirements
High financial cost an delayed returns
Heavy administrative cost due to various export licenses, authorizations
an export documentation
Factors determining the decision criteria for initiating international trade
The decision to
go international
or not
Scanning the
market
Modes of
entering into
markets
Competition in
international
markets
Targeting the
markets
Regulatory
Formalities for
Getting Started
Source: Singh, 2009
The decision element for
getting started
Decision Criteria
The decision to go international
or not
Assessment of international market, keeping in mind the competitive advantages and
synergy with overall competitive strategy in light of local and international competition
compared to domestic opportunities.
Scanning the market
Economy rate of growth and structure, bureaucracy, capital, economic and trading bloc,
legal system, political regime and laws, regulation for investment and operations,
political ideology and stability, type and structure of competition.
Modes of entering into markets Political/Legal – laws, regulations, investment, climate, government ideology, stability
Targeting the markets Competition – type, structure, operations, strategy plans, programs, acquisitions, mergers
Competition in international
markets
Analysing various elements that define the nature of competition in target market
Regulatory Formalities for
Getting Started
Formalities to be completed for getting export import licence, Registration Membership
Certificate, Excise Code.
The following table shows the factors governing decision criteria for getting started to trade on international
environment:
Factors determining the decision criteria for initiating international trade
Elements of Success in International Trade
Success in international trade requires meticulous planning and controlling of activities, some of
them are as follows (Singh, 2009):
International trade is changing due to changes on the global marketplace. The new
challenges that an exporter has to keep in mind while planning to enter international
trade can be follows: increase in global competition, increase in social and economic
instability and change in buying trends (Singh, 2009).
1. Coordination in Planning and Results of Firm
2. Understanding Foreign Cultures, Business
Etiquettes and Practices
3. Hard work (smart work), Dedication,
Devotion and Reliability
4. Innovation and Product Adaptation
5. Identifying Customer´s Wants and Needs
6. Planning Financial Resources
7. Positive Attitude and Futuristic Thinking
8. Smartness Required
9. Knowledge of Documentation
• Specification of the type of trade
operations
Basis of international
business operations
SPECIFICATION OF THE TYPE OF TRADE OPERATIONS
Trade operations can be divided according to the following aspects (Singh, 2009):
➢ By subject
• Operations with tangible products
• Operations with intangible products
➢ By territory
• Domestic operations (internal economic
relations)
• Operations with partners of industrialized
countries
• Operations with partners of developing countries
• Operations with partners of the ex-RVHP
countries
➢ By type of a contract
• Sale/purchase operations under sales contracts
• Intermediary transactions under mandate
contracts
• Transport operations under contract of carriage
➢ According to the movement of goods
• Purchase and sale operations
• Export and import operations
• Transit and re-export operations
➢ According to the type of trade
• Traditional operation
• Non-traditional operation
• Countertrade
• Cooperation
➢ In relation to the reproductive process
• Operation in the field of science and research,
production, trade, accompanying services,
standalone services
SPECIFICATION OF THE TYPE OF TRADE OPERATIONS
-according to the type of trade
• Traditional operation
• Non-traditional operation
• Countertrade
• Cooperation
Trade operations according to the type of trade
A common feature of these operations is that their centre of gravity is in the sphere of exchange itself and that they are the
result of production for predominantly unknown consumers. Trade operations can be divided as:
1. Traditional trade operations include operations based on contracts such as purchase, transportation, representative and
insurance.
2. Non-traditional trade operations include counter-purchase, compensation, barter, reciprocal, junktim and deblocation of
receivables. These are explained as follows:
a) Counter-purchase - Based on the buyer's intention to use its own imports to support its own exports. Here the
supplier undertakes to supply a certain counter-purchase. On the part of the original importer this is a counter-
delivery.
b) compensation - It is a type of barter trade and is one of the oldest trading operations.
c) barter - are similar to compensatory transactions, except that they are used in a wider political framework by
agreements between states.
d) reciprocal -they occur in trade relations based on agreements, where, on the basis of the negotiation weight of goods,
they enable the expansion of trade even in consulates already depleted by earlier deliveries.
e) junktim -almost disappeared type of business operations. They realized mutual supplies of goods of the same
negotiating weight.
f) deblocation of receivables - is a type of operation that is forced by a high debt of a business partner.
3. Today, a group of trade operations called countertrade is also expanding.
4. Other (cooperation) trade operations.
Trade operations according to the type of trade
- Countertrade operations
Barter
Barter's trade is the net barter (compensatory) trade of goods for goods in which there is no cash flow and in
principle the whole trade is concluded in a single contract. Within the bartender there are two simultaneous flows
of goods, during which the partners are obliged to take over the goods. Barter's business is mostly concluded
between two partners, the third party does not enter into this operation. Later sale of goods to another customer is
not part of the bartender contract.
Today, a very expanding group of operations that arise in the market conditions of the buyer, protectionist
measures, the indebtedness of many entities (businesses), the lack of convertible currencies and difficult trade
policy conditions (i.e. barriers of trade in tariff or non-tariff nature).
It is common for many countries, mainly in the developing world, to arrange export sales, not for payment in
cash, but for payment in goods or services or raw materials, of near-equivalent value. In foreign terminology,
these operations are often included in the term "countertrade.
➢ Countertrade operations include mainly the following trading operations: barter, compensation, parallel
trade, junktim, buy back, clearing, industrial offset. It includes all foreign trade transactions where an
exporter is committed directly or indirectly to take products from the importing country in full or part-payment
for his exports.
Trade operations according to the type of trade
- Countertrade operations
Compensation
The compensation trade is concluded by a single contract and has 2 stages:
1. With full compensation, the difference is that the export and repurchase are settled separately and the domestic
exporter can transfer his repurchase obligation to a third party.
2. With partial compensation, the importer repays part of the delivery in convertible currency and the remainder
is settled by the goods.
With the compensation it is possible to withdraw from the obligation to repurchase. In principle, however, the
contract is prepared so that the withdrawing party is obliged to pay the business partner a contractual penalty.
Parallel trade
It is one of the most used COUNTERTRADE operations. The difference from the compensatory trade is that
export and import are concluded by two independent contracts. The exporter is paid its receivable immediately
after its delivery and therefore has time (usually 12 months) to meet its obligations under the repurchase of goods.
However, payments are also made separately. The exporter may pass on its obligations to a third party or may
withdraw from the contract, again at risk of contractual penalty.
Junktim
Business operations less known and used. It is currently losing its importance. The essence of junktim is the
reverse parallel trade. The initiative to carry out this operation is based on the importer (import company), which
receives its contribution from the exporter for the implementation of the trade.
Trade operations according to the type of trade
- Countertrade operations
Buy back
This is a take-back business. In this chosen business operation, the exporter accepts full or partial payment in
products produced on its exported technology, equipment or machinery. Buy back is a very risky business for
exporters, as it may take a long time (even several years) between the export and the first payment in the form of
products. During this time, the market of supplied production may change completely and it may become
unsalable (obsolescence of moral, sales difficulties, fall in prices, reduced demand, political changes, ... etc.).
Withdrawal from this contract is only possible by agreement between the partners.
Industrial offset
Business operation based on compensation of large volume of exported goods, e.g. military equipment, aircraft,
technological equipment, etc. Compensation can be done in two ways:
1. directly in the form of investments 2. indirectly in the form of products
Clearing
Settlement of claims between two or more states. Payments do not cross individual borders. States, receivables
and payables are settled at the time of the so-called clearing peak, i.e. at the time of the maximum imbalance
agreed in the trade balance between the designated national banks. The debtor (the state) settles its commitment
in the agreed convertible currency.
COUNTERTRADE can be associated with operations financial, e.g. factoring, forfaiting, leasing. In the specific case, the
lease payments may be repaid in the form of delivered production.
➢ Re-exports
• are used in foreign trade, where goods purchased in one country are re-exported to another country. It is possible to
distinguish between direct and indirect re-exports.
➢ Framework trades based on long-term contracts
• are used in the raw materials trade to stabilize supply and consumption.
➢ Stock and auction trades
• Stock trades can be divided into effective operations (the buyer is a real delivery of a certain good) and differentiation
operations (business partners are mainly price differences between purchase and sale price and the resulting profits).
Highly substitutable but absent commodities are traded.
• Auction operations are closed at auctions with present goods according to detailed auction practices.
➢ Switches
• is a special business operation whose essence is in the conversion of foreign exchange in the form of re-export of
goods. A switcher is involved in the shop as a specific type of mediator.
➢ Track - side (transit) operations
• they are based on a modified sales contract where the supplier does not send the goods sold to the buyer who is
merely an intermediary but on his behalf directly to the final customer of that intermediary.
➢ Foreign exchange arbitrage
• it belongs mainly to foreign trade and belongs to many types of banking operations. The aim of this operation is to
achieve a favourable price difference in exchange rates and thus profit by buying or selling foreign exchange in
different markets.
Trade operations according to the type of trade
- Other trade operation
• Functions of business operations
• Trade operations process
Basis of international
business operations
SPECIFICATION OF TRADE OPERATIONS FUNCTIONS
Internal
trade
Foreign
trade
International
trade
SPECIFICATION OF TRADE OPERATIONS FUNCTIONS
– internal trade
Trade operations fulfil important trade functions such as (Pražská and Jindra, 2002):
1. Conversion of production (supply) assortment to commercial (buyer) assortment forcing
the manufacturer to adapt production to the needs and buying habits of customers.
2. Overcoming the differences between the place of production (supplier) and the place of
sale (customer) - the shop ensures the sale of goods in the required place or its delivery to
that place
3. Closing the gap between production time and purchase time - the store ensures the
availability of sales or supplies and must therefore maintain a certain range of inventory
4. Ensuring the quantity and quality of goods sold - the right choice of supplier, the right
stock management regime, the appropriate facilities and equipment are important.
5. Provision of rational supply routes to reduce the selling price in relation to the supply level
6. Ensuring timely payment to suppliers
SPECIFICATION OF TRADE OPERATIONS FUNCTIONS
– foreign trade
The functions of foreign trade operations can be described as follows (Štěrbová et al., 2013):
1. Transformation function - foreign trade transforms the structure of domestic production into
a structure desirable in terms of production and commercial use within the national economy
2. Market balancing function - ensures consistency between total supply and total demand in the
economy
3. Harmonization function - ensures the efficient running of the national economy, eliminates
imbalances between the domestic economy and foreign countries and aligns the economic proven
of the domestic economy with more developed foreign economies
4. Factor of economic growth - foreign trade enables participation in international division of labour,
expands its sales opportunities, enables comparison of product quality on the international market
and labour productivity. It allows the purchase of modern technology - accelerates economic
development
5. Comparing the efficiency of the domestic economy with the world (transmission function) –
an objective comparison of the maturity of the economies (e.g. labour productivity level, price
level, GDP growth, purchasing power etc.) contributes to increasing the international
competitiveness of the economy due to information transfer
SPECIFICATION OF TRADE OPERATIONS FUNCTIONS
– international trade
The function of trade operations in international trade represents an aggregation of the
functions of trade unions and is similar to the role of trade in the national economy.
Among the features of international trade are the following (Štěrbová et al., 2013):
1. It ensures consistency between the structure of global aggregate supply and aggregate
demand
2. It transforms the world production (supply) assortment into an assortment for further world
production and consumption (customer assortment)
3. It contributes to balancing markets and eliminating regional disparities in the world
4. It transmits information, technology, criteria and incentives between economies
5. It is an important part of international economic relations - it is closely linked
to international finance, namely the international movement of capital and the international
monetary system
SPECIFICATION OF TRADE OPERATIONS PROCESS
Each business transaction in the international relations has a certain specific course, which can be influenced by
these aspects (Machková et al., 2014):
➢ Type of goods.
➢ The character of the relevant market.
➢ The commercial policy situation.
➢ The chosen distribution path.
➢ The extent and frequency of trading with the given business partner, its legal and financial status.
➢ The manner of its commercial conduct.
Some accidental events that are difficult to predict and which may occur at different stages of the development of
a business operation may also affect business operations.
The subject of business operations may be both tangible goods and various services, the granting of certain rights,
the execution of a work, etc. In some international operations, it may be a combination of these components. For
example, a supplier of machinery may undertake to grant rights of use for a particular production process, to
install supplied equipment, to cooperate on the construction of an investment unit. In addition, in trade in tangible
goods, there are other operations that are necessary for export and import, such as transport, insurance,
inspection, financial, storage. (Machková et al., 2014)
SPECIFICATION OF TRADE OPERATIONS PROCESS
-example of an export order processing
The exporter has to carefully examine the contents of the export order otherwise he may have to face some problems while
receiving payments in ways such as quality disputes, specifications disputes, discrepancy in documents while negotiating
letter or credit, or other situations beyond his and the importer´s control, i.e. exchange regulations of importing country,
sanitary phyto-sanitary regulations. Processing of an Export Order (Singh, 2009):
1. Item (product) – check the order and comparison with per forma invoice/quotations
2. Sizes and Specification – the exporter shall check that size and specifications are same as quoted. A minor difference may
create havoc
3. Pre-shipment Inspection – buyer-nominated agency or exporter´s agency (depends on the legislative environment of the
country)
4. Terms of payments – the exporter has to check whether the terms of payments are the same as mentioned in the quotation
he has given.
5. Special packaging, labelling and marking – look into any kind of special packaging requested by importer
6. Shipment and delivery date – examined if that date is comfortable for exporter and partial shipment is allowed, transshipment
is permissible/not permissible, port of shipment/destination is same or modified
7. Marine insurance – the exporter shall examine the shipping terms and responsibility of availing insurance cover for the
goods.
8. Documents – export documents are same as per quotation, particularly those documents that are required with the bill of
exchange (for example: commercial invoice, consular invoice, certification, type of bill of lading (straight, to order,
received for shipment, direct, through, etc.), certificate of origin, packing list/Cargo manifest, Marine insurance
9. Export based on previous steps
• Business intermediaries and business
agents
Basis of international
business operations
BUSINESS INTERMEDIARIES AND BUSINESS AGENTS
The basic models of business relationships between individual articles are called business categories. There are
two business categories that are specific to the movement of goods throughout the chain, the principles of transfer
of ownership to individual entities and the financial mechanism of transactions. The business categories include:
➢ Business intermediaries
➢ Business agents
In practice, these two models also exist in different mutations, and in practice there are also combined ways of
ensuring the movement of goods throughout the entire chain from the manufacturer to the final consumer. The
complexity of economic relationships and the modification of the legal environment Even business practices in
individual areas make it necessary to find optimal models for specific situations. (Mulačová et al., 2013)
Figure 1: Types of business intermediaries and business agents
BUSINESS
CATEGORY
INTERMEDIARIES
AGENTS
Retail, Wholesale, Foreign Trade
Sales Representative, Business intermediary (broker),
Commissioner, Freight Forwarder, Stock exchanges, Auction,
Fairs and/or Exhibitions
Source: own illustrated adapted from Pražská and Jindra, 2002 and Mulačová et al., 2013
BUSINESS INTERMEDIARIES
Intermediaries are business companies of the classic type. They carry out the purchase and subsequent sale of goods. At the
time of purchase of goods from its suppliers, it pays for its purchase price and the goods are transferred to their ownership.
Therefore, they carry full business risk, in the case of non-subsequent sale of goods and their devaluation (spoilage,
obsolescence, breakage) is the financial loss to them. However, given the often unbalanced power of these intermediaries with
their suppliers, this risk is often passed on to the supplier in practice. They are obliged to accept the obligation to take back the
goods in case they are not sold, as they could be replaced by another supplier. Intermediaries are classic intermediaries of
exchange between seller and buyer. Business intermediaries include (Mulačová et al., 2013):
RETAIL WHOLESALE FOREIGN TRADE
‒ Purchase of goods from a
wholesaler or manufacturer
and their subsequent sale to the
final consumer.
‒ There is a “transformation” of
the production assortment into
the sales assortment.
‒ Intermediate in the information
flow between manufacturer
and consumer.
‒ Purchase of goods in large
volumes and its subsequent sale
to other business entities.
‒ Suppliers are either
manufacturers or other
wholesalers in the case of a
multi-stage chain.
‒ It is an important link between
the manufacturer and the
retailer.
‒ It consists in the export of goods or their
import from abroad.
‒ It is also the activity of wholesalers, but it has
to overcome not only the temporal and spatial
divisions, but also many added activities
beyond the scope of normal domestic trading.
‒ In the field of consumer goods, foreign trade is
very often carried out by wholesale elements of
large retailing companies.
Retailing
From the very inception of their business, retailers have been involved in international trade, with their
involvement primarily centering around the procurement of merchandise. Today, however, retailers
from all over the word are venturing beyond their own borders to establish stores even in other
countries. In fact, the business of retailing can clearly be defined as a global business. (Lamba, 2003)
A lot of definitions of retailing exist, but the most important element of retailing is the
international character of operations.
“Retailing is the set of activities that markets products or services to final consumers for their own
personal or household use. It does this by organizing their availability on a relatively large scale and
supplying them to consumers on a relatively small scale” (Newman and Cullen, 2002).
“Retailing is an internationally understood retail system fully equipped with all logistics facilities
and highly qualified information system with professional management” (Szczyrba, 2006).
Online international retailing is called as international e-tailing is related to the growth of the internet
audience across countries and continents. International e-tailing providing 24/7 online shopping
opportunities, offers to retailers to sale via potentially limitless shelf space, unconfined by store size,
shape and location. (Fernie et al., 2015)
The World's Top 10 Retailers of
2019 was:
Retailing
Joint retailing
The term denotes a situation where two normally separate organizations combine to create a synergistic
offer to their customers. Examples include the joint offering of Burger King, Little Chef and Travelodge,
offering accommodation and a selection of fast food or full meals to travellers, and McDonald´s restaurants in
Walmart and Asda stores offering cheap food to people shopping for cheap merchandise.
The World's Top 10 Retailers of
2012 was:
1. Wal-Mart Stores, Inc.
2. Tesco PLC
3. Carrefour SA
4. Costco Wholesale Corporation
5. Kroger Company
6. Schwarz
7. Metro Group AG
8. The Home Depot, Inc
9. Aldi
10. Target Corporation
1. Wal-Mart Stores, Inc.
2. Costco Wholesale Corporation
3. Kroger Company
4. Walgreens Boots Alliance,Inc.
5. Tesco PLC
6. Carrefour SA
7. Amazon.com, Inc.
8. Metro Group AG
9. The Home Depot, Inc
10. Target Corporation
The World's Top 10 Retailers of 2022
was:
1. Wal-Mart Stores, Inc.
2. Amazon.com, Inc.
3. Costco Wholesale Corporation
4. The Home Depot Inc.
5. Alibaba Holdings
6. The Kroger Co.
7. Walgreens Boots Alliance, Inc.
8. Alibaba Holdings
9. Target Corporation
10. Lowe´s Companies
BUSINESS AGENTS
Business agents act more as a service component of the business relationship, so their role is to ensure efficient
supply-demand interaction. Thus, it is not a classical commercial activity, but a service for commercial activity.
Thus, in the classic case, business agents do not purchase goods from their suppliers, pay for them and therefore
do not bear the full business risk because they do not have their capital bound in the goods. They operate on a
commission basis, receive rewards for successful brokering. Their main task is to look for markets for the
purchase or sale of certain goods, to identify a business partner, to negotiate conditions that would suit both
entities for specific business cases and to organize individual phases of business negotiations. (Mulačová et al.,
2013)
➢ A special case is a business traveller who is an employee of an enterprise whose assortment he is trying to
ensure sales. It therefore acts on behalf of the supplier, on his behalf and at business risk. From a material
point of view, its activities are in many ways similar to those of a sales representative. Pražská and Jindra,
2002)
Among business agents we include (Pražská and Jindra, 2006):
Sales
Representative
Business intermediary Commissioner
Freight
Forwarder
Stock
exchanges
Auction
Fairs
and/or
Exhibitions
BUSINESS AGENTS
– Explanation of Sales Representative and Business intermediary
Sales
Representative
➢ It is a separate legal entity acting on behalf of and for the account of the undertaking with which it
has concluded a commercial agency contract.
➢ It searches for potential customers, presents the offers of the represented company, presents goods,
distributes catalogues, samples and price lists.
➢ The sales representative carries out complex negotiations aimed at concluding business
cooperation. It usually leaves the conclusion of the contract to the undertaking itself or concludes
the contract itself on the basis of an authorization.
➢ The sales representative is remunerated on the basis of a commission system
➢ Suitable for simpler business models and assortment, and in foreign trade
➢ The advantage of the represented company is the price, flexibility of the legal relationship and
specialization of the representative.
Business
intermediary
➢ It is less related to a particular business than a commercial agent and is more active on the market
as an independent professional subject whose task is to find a link between the supply and demand
sides.
➢ The range of clients is wider and the turnover is higher than that of the sales representative.
➢ Typical areas of their business are securities trading, finance, insurance and commodity trading.
The essence of brokers' activities is comprehensive professional service and support of clients in
the field of sophisticated business decisions.
BUSINESS AGENTS
-Explanation of Commissioner, Freight Forwarder and Stock exchanges
Commissioner
➢ It makes sales and purchases in its own name on a foreign account. Its scope is in both classical business and securities
and similar financial instruments. The relationship between the principal (the subject for which the commission agent
carries out his activity) and the commission agent is regulated by the commission contract.
➢ The act of concluding a trade contract is exclusively between the commission agent and the customer. This is followed
by the realization of the trade between the commission agent and the principal, when the principal is rewarded by the
principal for the execution of a successful trade.
➢ In the case of purchase he is paid the price higher by his commission, in the case of sale the realization price is higher by
this commission.
Freight
Forwarder
➢ This is a special category of agency. It deals with transport, logistics and related activities. The forwarder shall act in his
own name on behalf of the principal.
➢ The freight forwarder provides comprehensive transport services, arranges the transport of consignments, plans and
manages transport routes, procures means of transport, manages logistics, ensures the storage and transhipment of
consignments, handles various permits, communicates with customers and coordinates transport processes of goods to
destination.
Stock exchanges
➢ They are a specific system for trading a specific range. The actual organization of the market is adapted to trading mass,
substitutable and absent goods.
➢ Typical exchanges are mainly securities, currencies and commodities.
➢ Stock exchange trades are usually realized through brokers, direct contact between buyer and seller is rather exceptional.
➢ Most of the volume of transactions executed on the stock exchange is more of an investment activity rather than a
traditional trading activity. The essence of such activities is an effort to evaluate the invested funds using speculation on
the development of the price of traded activities. An exception and thus a real example of the classical trade in goods is
the acquisition of commodities for the needs of further business - in our case, sales.
BUSINESS AGENTS
-Explanation of Auction and Fairs
Auction
➢ It is a very specific type of business category as it is a public auction in which the bidders present are
competing in the form of a gradual increase in bids for the asset.
➢ The sale is carried out with the one who offers the highest price, but compared to the stock exchange it is
also possible to sell smaller quantities of goods.
➢ Most of the auctions are of a wholesale character, most goods are offered for further business. The retail
character then have mainly real estate auctions or antiques.
➢ The auctions are mostly organized by professional providers of such services (auction companies, port
administrations, authorized organizations), but the auction can also be organized directly by producers or
processors of certain goods and commodities.
➢ Nowadays, an Internet electronic competition among bidders is a very common form, which makes the
whole auction process more efficient and cheaper.
Fairs and/or
Exhibitions
➢ Trade fairs represent a local concentration of supply and demand in a certain assortment focus at a specified
place and at a specified time.
➢ Here, the organizers of the trade fairs act as classic intermediaries - they pay for their space at the event, for
the share of event marketing and related services.
➢ Individual shops are realized directly between exhibitors (sellers) and visitors (buyers).
➢ At present, the role of trade fairs is primarily effective and direct marketing to power groups and detailed
familiarization with the exhibited samples, which leads to facilitating the implementation of subsequent
business transactions.
BUSINESS AGENTS
-the task
WORK IN PAIRS
For the following situations, decide which type of business
agent is best for the company to settle the deal:
• The company is trying to find customers for its new
products abroad.
• The company is trying to find a buyer for its mined
lithium.
• The company is looking for someone to take care of the
logistics of shipments to Indonesia.
• The company is trying to get the best deal for its
product. The price is not fixed and any number of units
of the product can be sold.
• The company has developed a new brick material for
construction. It tries to familiarize its customers in
detail with this new material through samples.
Time: 10 minutes
Business agents: Sales Representative, Business intermediary, Commissioner, Freight Forwarder, Stock exchanges, Auction, Fairs and/or
Exhibitions
2 points for completed assignment
SUMMARY
➢ Trade operations are a complex of activities supporting the purchase and sale of products. Trade operations can
be provided also internationally, when the purchasing process include companies from two or more countries.
➢ Every trade operation in international relations has a specific course influenced by the type of goods, the
character of the relevant market, the commercial policy situation, the chosen distribution path, the extent
and frequency of trading with the given business partner, its legal and financial status and the manner of its
commercial conduct.
➢ Trade operations can be divided by these aspects: subject, territory, type of contract, the movement of goods,
the type of trade and the reproductive process.
➢ The countertrade operations include these trading operations: barter, compensation, parallel trade, junktim,
buy back, clearing and industrial offset.
➢ Internal trade operations fulfil important trade function, e.g. conversion of production assortment to commercial
assortment, closing the gap between production time and purchase time, ensuring the quantity and quality of goods
sold.
➢ Foreign trade operations fulfil these important functions: transformation function, market balancing function,
harmonization function, factor of economic growth and comparing the efficiency of the domestic economy with
the world.
➢ International trade operations fulfil these functions: ensures consistency between the structure of global
aggregate supply and aggregate demand, transforms the world production assortment into an assortment for further
world customer assortment, contributes to balancing markets and eliminating regional disparities, transmits
information, technology, criteria and incentives and it is an important part of international economic relations.
➢ Intermediaries and business agents are two basic models of business categories. Business intermediaries
includes retail, wholesale and foreign trade. Business agents includes sales representative, business
intermediary, commissioner, freight forwarder, stock exchanges, auction and fairs and/or exhibitions.
THE LITERATURE REVIEW SOURCES
1. FERNIE, J., S. FERNIE and CH. MOORE, 2015. Principles of retailing. 2nd ed. New York: Routledge. ISBN 978-1-138-79194-7.
2. LAMBA, A. J., 2002. The Art Of Retailing. New Delhi: Tata McGraw-Hill Education. ISBN 978-0-07-463717-3.
3. MACHKOVÁ H., E. ČERNOHLÁVKOVÁ and A. Sato, 2014. Mezinárodní obchodní operace. 6th ed. Praha: Grada Publishing a.s.
ISBN 978-80-247-4874-0.
4. MULAČOVÁ, V. and P. MULAČ, 2013. Obchodní podnikání ve 21. století. Praha: Grada. ISBN 978-80-247-4780-4.
5. NEWMAN, A. and P. CULLEN, 2002. Retailing: Environment & Operations. Mason: Cengage Learning EMEA. ISBN 978-1-86152-
533-8.
6. PRAŽSKÁ , L. and J. JINDRA, 2002. Retail Management. 2nd ed. Praha: Management Press. ISBN 80-7261-059-7.
7. SINGH, R., 2009. International Trade Operations, 2nd ed. New Delhi: Excel Books. ISBN 978-81-7446-735-5.
8. ŠTĚRBOVÁ, L., I. ČERNÁ, R. ČAJKA, and I. BOLOTOV, 2013. Mezinárodní obchod ve světové krizi 21. století. Praha: Grada
Publishing, a. s. ISBN 978-80-247-4694-4.
9. SZCZYRBA, Z., 2006. Geografie obchodu - se zaměřením na současné trendy v maloobchodě. Olomouc: Univerzita Palackého,. ISBN
978-80-244-1453-9.
10. Web portal Businessinfo [online] [04.07.2019]. Available at: https://www.businessinfo.cz/cs/clanky/mezinarodni-instituce-v-
mezinarodnim-obchode-23486.html#!&chapter=1.
11. Web portal Investopedia [online] [06.07.2019]. Available at: https://www.investopedia.com/articles/markets/122415/worlds-top-10-
retailers-wmt-cost.asp.
12. ZENTES, J., D. MORSCHETT, and H. SCHRAMM-KLEIN, 2016. Strategic Retail Management: Text and International Cases. 3rd ed.
New York: Springer. ISBN 978-3-658-10183-1.
THANK YOU FOR YOUR ATTENTION