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Logistics Cost Dynamics in International Business: A Causal Approach

Author

Listed:
  • Ashutosh Kar
  • Pratyay Ranjan Datta

Abstract

The cost of logistics plays a vital role in the pricing of goods in international trade. Besides, the recent imposition of additional tariff by even upper-middle income countries such as the USA, China etc., has led to an increase in the total landed cost of goods. However, a seller has no option but to adapt to changing tariff requirements and can articulate only the logistics cost to a certain extent. This aspect requires an understanding of the logistics cost dynamics in international business. Since a higher volume of goods moves by marine transportation, this study focusses on the same. In this article, authors have attempted to establish a statistically significant relationship between prices and other factors like fuel, number of vessels, freight, and weight value ratio. The paper introduces a logistics-coefficient to indicate the extent of integration of logistics activities to keep the total-landed-cost (TLC) unchanged. Finally, the author proposes the system dynamics model to study the impact of changes in any one or some or all these factors on the price of the product. This model will enable the global firm to decide the entry and exit in the market. JEL Codes: F23

Suggested Citation

  • Ashutosh Kar & Pratyay Ranjan Datta, 2020. "Logistics Cost Dynamics in International Business: A Causal Approach," Foreign Trade Review, , vol. 55(4), pages 478-495, November.
    • Handle: RePEc:sae:fortra:v:55:y:2020:i:4:p:478-495
    DOI: 10.1177/0015732520947861
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    More about this item

    Keywords

    International business; pricing; logistics cost; logistics coefficient; system dynamics;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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