The key difference between internal and international trade is, whenever any purchasing and selling of goods occur in the country then it is considered as internal trade whereas whenever any purchasing and selling of goods occur beyond the country then it is considered as international trade. It means whenever any trade occurs inside the geographical condition of a country then it is called internal trade whereas whenever any trade occurs beyond the geographical condition of the country then it is considered international trade. Internal trade and international trade will be discussed in brief to know more about this.
Now let’s discuss internal trade in detail.
What is internal trade?
As we know the purchasing and selling of goods to earn profit then it is called ad trade. And whenever this purchasing and selling of goods occur in the geographical condition of the country then it is considered as internal trade. It is also known as inland or homeland trade. The currency which is used for doing this trade has of that country. As trade is occurring in the country so there is no need to pay any customs duty for that trade. Goods which used is of that country for consumption. It means it is inland country trade in which specific currency of that country is used. And the material used for the consumption is also of that country.
Features of internal trade:-
• Trade occurs in the country
• The country’s local currency is used.
• There are very few formalities while doing internal trade.
• Local transports are used for traveling raw material and manufactured material.
Types of internal trade:-
1. Wholesale trade
2. Retail trade
Now let’s discuss wholesale trade in detail.
1. Wholesale trade
In wholesale trade, goods purchase from the manufacturer in large quantities and it sells to small retailers. And the person who conducts this process of wholesale is known as a wholesaler. As it sells its goods to retailers so it works as mediocre for manufacturers and retailers.
Features of wholesale trade:-
• As wholesalers work as a mediocre for manufacturer and retailer so it creates a link between manufacturer and retailer.
• It buys goods in large quantities with the manufacturer.
• Always specialized in one line of products.
• As it buys goods in large quantities so it spends money a lot.
• It sells goods to retailers in small quantities.
• As it buys products and sells to retailers in small quantities so the margin of profit is low.
• A wholesaler buys products and sells to retailers so it is the main intermediary of the distribution chain.
Services of wholesaler to manufacturers
• As a wholesaler buys goods in large quantities so manufacturers produce goods in large quantities. It means they provide economies of scale.
• They offer sales promotions to sell their products. Wholesaler employees a lot of salesmen to promote their products. And these salesmen find retailers to sell their products.
• It provides market information to manufacturers. As for how the market is dealing with their products, either they are satisfied with their products or not.
• As wholesaler buys products at large quantities so they provide storage capacity to store their products. Wholesaler keeps product at their go down so the manufacturer does not need to keep their products in any godown.
• The manufacturer does not need to invest more capital in their products because wholesalers offer them money in advance to produce the desired quantities of goods.
• As they provide market information to the manufacturer so they do not need to have any more labor to provide their goods.
• Wholesalers provide price stability to manufacturers. As if retailers demand more products and the company has no more goods then wholesaler provides goods from their go down.
Services of wholesaler to retailers
• As wholesaler deals in one line of products. But in that one line, they keep a lot more varieties in that line of products. Because retailers have to show a wide variety of products to their customers, so they demand a variety of products from the wholesaler.
• They provide a regular supply to the retailers. As they have a large stock of goods they kept at their go down.
• Wholesalers provide goods on credit because if retailers demand products then they deliver goods in credit and after they sell they give their money to the wholesaler.
• It provides risk bearing to retailers. As if the demand for any products goes down then retailers have no risk of being that product because the wholesaler keeps the product in large quantities. So all the risk has on the wholesaler. There has no risk on retailers.
• Wholesalers provide information about new products to the retailers. As they have a direct connection to manufacturers so they provide new techniques to the retailers to sell their products.
• It provides transportation facilities to retailers. As if retailers demand goods and for that retailers need to be of transportation. Wholesaler provides transportation facilities to retailers so they do not need to charge for any transportation.
• As wholesalers do publicity of products so retailers do not need any promotion for their products.
• They also teach new techniques to sell their products.
2. Retail trade
Retail trade is the last stage of the distribution chain. Because after that products directly goes to the customer. And the person who does retail trades known as retailers. Retailers provide the link between wholesalers and Customers.
Features of retailers
• As it is the last link of the distribution chain. Because after that it finally goes to the customer.
• It offers a lot of variety to the customer. Because they have a lot of variety of products so it offers those to the customer.
• As it gets goods in small quantities from wholesalers so it sells goods in small quantities.
• It has in residential areas.
• Customers can contact retailers via telephone, messages, etc.
• Retailers act as mediocre between customer and wholesaler.
Now let’s discuss international trade in detail to understand it in a much easier way.
What is International trade?
International trade refers to purchasing and selling of goods beyond the country. It is also known as trade between two countries. In simple words, international trade means to whenever any trade occurs beyond the geographical condition of any country then it is considered as international trade.
Types of international trade
Whenever any country sells goods to another country for their consumption then it’s called an export.
Whenever any country buys goods from other countries for their consumption then it’s called an import.
Whenever any country buys goods from another country and then sells it to another country without any consumption then it’s called an entrepot.
Features of international trade
• Trade always occurs between two countries.
• As it occurs between two countries so payment is also done in foreign currency. In most of the case payment during international trade occurs in the dollar.
Problems in international trade
• Countries have to follow legal procedures during the trade between two countries. There are so many legal that every country has to follow.
• There have some restrictions to trade between the two countries.
• During the trade, the country has high risk because every country has its own rule for trade with any other country. If any country is unknown from that rule and they don’t follow that rule then the country will have to pay a high penalty charge.
• The main problem that occurs while trading with any country is their language barrier. Because every country has different languages so this language barrier produces a big problem while trading.
• If trading occurs between two countries then arrangements of foreign currency are very difficult.
Reason for international trade
• A country can not produce all needs of the people there has some need to full fill for which country needs to trade internationally.
• There is an unequal distribution of resources. Every country has not every resource so for that country trade internationally.
• Sometimes need for raw materials also results to do international trade. Because if a country has not that particular raw material then that country does trade with another country for that particular raw materials.
• There is no country which is specialized in everything. Because there has some of the need to every country.
• Internal trade occurs in the geographical condition of any country while international trade occurs beyond the geographical condition of any country.
• International trade occurs in foreign currency while internal trade occurs in the currency of that particular country.
• Internal trade was done for the objective of earning profit while international trade occurs to full fill the need of any country.
• While doing international trade country has to follow legal procedures and restrictions while doing internal trade there is a need to be of few formalities.
These are the main differences between internal trade and international trade.