Define Domestic Trade Function, Barriers, Advantages Dis Advantages
The word domestic is taken from the Latin word Domesticus. That derives from a noun word that is domes. It’s mean home. Domestic trade is also called internal trade. In which products and services are purchased and sold within the same territory. It is not a huge market. It is just relating to the same country market where seller and buyer both belong to that country. It is said that there is less competition in this trade.
Because within same domestic market all the companies face same challenges of the economy, political, social, and technological. Companies have to choose domestic or another type of trade it depends on the type or nature of products. It helps out the country to exchange goods and services equally to all people within the same country.
Definitions and meanings of domestic trade:
Domestic trade means that to sell or exchanging products and services between an individual and their country. In this type of trade, selling is constrained within the border. All the related products and services are being sold within that country. These products and services are purchased by domestic people. It is quite different from international trade. It helps out to make the economy strong. Domestic trade is divided into two types.
The first one is wholesale and the second one is retail. In wholesaler domestic trade the product is purchased in large bulk quantity and then sell them to retailers or direct consumers. This type of trade is being done by wholesale of wholesale commission agents. In retail trade, the retailers buy the products in huge quantities but not the same as in wholesale trading. These products are being sold in consumer markets (definitions, 2020).
If we talk about all regions of the country then we realize that all these regions are not producing the same products and services within a country. There is some specialty of all regions. But the people that are living in different regions within a country have equal rights to use the same products with the same benefits.
Functions of domestic trade:
- It helps out to build up the competition.
- It helps to enhance the technology of the country.
- It helps to increase sales and profit of importer and exporter.
- It offers more potential for selling of products.
Domestic Trade barriers:
Trade barriers are imposed by the government to protect the nation’s home. In which the government make policies that reduce the number of goods and services that can be imported.
Tariffs: Sometimes the government impose a high tax on some products and services that can be harmful to consumers. The main motive of imposing this tax barrier is to protect human life and provide security to consumers according to consumer laws.
- Retaliation against trading partners: Sometimes it happened that, competitors start an unfair competition among them. Through which consumers and the economy of that country bear. That is the reason governments or countries impose retaliation against partners of trading in the domestic market.
- Fine on unethical behaviours: There are many countries even now all the countries which are doing domestic trade are imposing fine to that companies. Which do not take care of the needs of customers. The reason for imposing that barrier is to protect consumer rights.
Advantages of domestic trade:
- Simpler Market Analysis: During domestic trading, the company or producer have to make an analysis. As the market is not so huge. There are limited people so, it is easy for traders to make analyses on the market. It is easy to recognize the target audience of the product and services. It is cost-effective as compared to international market analysis.
- Communication is a breeze: In the domestic market communication with people is very easy. As all employees, producers, and customers belongs to the same culture. They all speak the same language. There is no communication barriers among people. It is beneficial for domestic producers and traders.
- Low transportation cost: At the domestic level companies bear low transportation cost. When a company make product at low cost and transport them to audience at low cost. Then there is a huge chance for high-profit margin
Large employment opportunities: This is another benefit of domestic trade or domestic business that people get jobs. It creates job opportunities for domestic people.
- Mobility of resources: It allows the traders to mobile all resources like land, labor, and capital.
Disadvantages of domestic trade:
- Greater Impact from Cyclical Changes: Predicting cyclic changes is very easy and cost-effective for the domestic market. But it takes more ups and downs in the domestic market than international market.
- Limited market size: Limited target audience is a negative point for domestic traders. There are some products for which domestic target audience is not enough. They have to move beyond domestic territory. It creates a low level of profit.
- No foreign earning: It is another disadvantage of domestic trade. That company cannot earn from the foreign market.
- Limited choice: A disadvantage of internal trade is that customers have a limited choice of products. it also restricts the import of some foreign products as well.
- Difficulties at the time of emergency: It is a huge negative point of domestic trade. People have to face problems of scarcity, food at the time of emergency.