Business Studies – 6.2.1 The importance of globalisation | e-Consult

An import quota restricts the quantity of a product that can be imported into a country. This can have several effects on exporting businesses:

• Reduced Export Sales: The quota directly limits the volume of product that can be sold in the country with the quota. This leads to a decrease in export sales and potential lost revenue for exporting businesses.
• Increased Prices in the Quota Market: With limited supply, the price of the product in the quota market is likely to increase. This could benefit exporting businesses that can still sell within the quota limits, but it may make their product less competitive compared to alternative suppliers.
• Opportunity to Export to Other Markets: The quota may force exporting businesses to seek alternative markets for their products. This could involve expanding into new countries or focusing on existing markets where demand is higher. It necessitates market research and potentially adaptation of the product to suit new markets.

The impact of a quota on exporting businesses is generally negative, as it restricts market access and limits potential sales. However, it can also create opportunities for businesses to diversify their export markets.