The Role of International Trading House

4. What is Trading House
Trading house are service companies. They do
not manufacture anything and must,
therefore, justify their intervention by the
value added that their service can bring to an
international transaction.
For manufacturer, the type of market he is
prospecting will determine if a trading house
is useful to him

5. Reasons
Trade Liberalization and the constant lowering
of tariff barriers
The mounting industrialization of developing
countries
An Increased in international competition

6. What do Trading Houses Do ?
 Trading houses as intermediaries in four type of commercial
activities :
 Exporting
 Importing
 Offshore trading

7. The Manufacturer’s markets
1. Local Market
2. Cross-border markets (neighbouring and
regional states and countries)
3. Overseas markets (all others)

9. Local Market
1. The prime market for the manufacturer is the
domestic market. He knows the competitive
environment, the language, the transport
and currency of transaction.
2. Inter-provincial trade barriers are non-
existent for most manufactured products.

11. Cross-Border Markets
• There are high similarities in living standards,
personal tastes, technical norms, banking and
commercial practices.
• Three elements should be considered:
1. The currencies are different
2. There is an international border to be crossed  with
the help of customs brokers can easily handle the
paper work and the payment of duties
3. The two governments can vote different trade
policies, but the Free Trade Agreement goes along
way to reduce the barriers.

13. Overseas Market
• A trading house that acts as a principal or
merchant in a transaction offers a particularly
important service to the manufacturer
• It provides a ready market at his door, and
saves him the export formalities and risks. In
effect, the transaction is negotiated as if it
were a”domestic” sale.
• Company priorities will determine the degree
of need to a Trading House.

14. Trading House functions
1. To identify a potential market for a given
product
2. To find buyers or agents and to elicit their
interest
3. To establis the product specifications in the light
of market needs, standards and regulations and
in accordance with the suppler’s capabilities
4. To determine the appropriate mode of
transportation and the routing , with regard to
cost, quality of service and security

15. Trading House functions
5. To price the goods for delivery at destination
6. To determine the buyer’s credit worthiness
7. To negotiate the transaction
8. To execute all the logistics steps which are
necessary to receive and deliver t he
merchandise
9. To obtain, if necessary, proper coverage for
maritime risks and currency fluctuations

16. Trading House functions
10.To prepare the documentation as prescribed
in matters of international trade
11.To finance the transaction and pay for the
goods and services received
12.To collect payment for goods delivered
13.To respond to and settle claims

17. • Most Trading house act as principals for their
own account. They are not consultans. They are
firm buyers making a profit (or a loss, sometimes)
on the transaction.
• Other traders will act as manufacturers’s agent
and will represent a wide spectrum of
complementary products. They can then
distribute their cost over the whole range of
products from a number of suppliers. Agent earn
commission if a deal is concluded..and after
payment has been received by the manufacturer