Venturing into international trading is never an easy thing. When you talk about bringing your business to the global stage, you speak of dealing with people from a different culture which intrinsically have a unique set of beliefs or otherwise similar to yours. Although money is a “religion” which people across the globe understand, there are some elements in international trade that make the process less simple as rooted in the disparity between legal norms.
But while legality is one thing in business, politics is not the sole reason why international business is rough for many, if not all. Yet, there are also other factors at play that makes the process of making trades more complicated than it could be.
Here are the most common problems which international traders face that add friction to their business:
A business will not be considered “global” by scope if it does not go overseas. Whether it is a country next to yours or from a faraway place, an international business is always concerned on a few critical areas, namely the geography and the transport of goods towards the location.
But although there are now a handful of means by which the goods are safely transported from one destination to the next wherever in the globe, there are also underlying issues in this matter that is truly a concern to the exporter, like the prevailing norm to the target locations and the risk of losing the cargo at any point in the delivery process.
To offset these latent problems, it is always wise to make due research to learn about your new target market and adjust your business plan accordingly while also making sure that your goods are insured in whatever troubles it may face, either on sea or on air.
When dealing with customers from far-flung places, having the right method of conducting financial transactions is very important. By tapping with today’s available technology, cashless payments should already be at the core of your business.
Considering that each country has its own currency and whose value may be more or less than others, digital transactions make for a boon in international business where easy conversions are made without fault.
In business, trust is everything. But trust is that fickle thing that is not easily formed, especially between two people who speak two different languages. Although many people nowadays have grown accustomed to speaking English as a vernacular in business, that is mostly in the formal sense and may not necessarily apply at the local scene. If you want to foster trust with your target market, you must learn how to communicate using their language.
The process of exporting products to another country is not a one-way thing where you, as an exporter, just simply send out goods to an intended country and it will just be received by whoever and let its distribution go to the market. It does not really work that way.
When there is an exporter—which is you, for example—there also has to be an importer, too, who basically handles the goods you sent for sales and distribution.
Yet, while it may sound so simple, finding the right person to do proper business with you is not always easy. In any undergoing which involves money, there are potential scammers who are dishonest enough to take away money from other people. Otherwise, they may simply be ineffective in the trade they ought to be doing.
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If you want your business to succeed globally, you as a manager as well as your team needs to be prepared to handle the task. The structure of your organization and the location of your teams is critical to understanding the type of business process you have.
One example I can cite is Coca-Cola, it is one of the most notable multinational business structure to look to. The company is run into different continent-level groups, each with a President as their leader so that there will be no communication barrier. The country- or state-based leaders are managed by the central presidency and this is to make sure that the quality is managed centrally.
However, Coca-Cola adapts to the culture of the country even with their advertisements that they promote the Filipino culture so that they can get the loyalty of the Filipinos.
One of the typical problems also is the conversion of currency. Doing international trades is very difficult especially when it comes to the financial statement of the company. The bank reconciliation will be more difficult it seems because of the different currencies all over the world. Also, you need to consider how the tax works in other countries, how they treat or compute the tax or the discount. This would be more complicated, because the money topic itself is already a complicated issue. This is why before going globally, there should be a contract for who should be handling this fee and that fee. Preparing a financial report locally is not easy, how much more if the revenue and expenses are global?
Also, one of the problems I think is the third party of the business. I mean, the outsource products or manpower of the company. For instance, when you have a partnership with some delivery company. Their failure could be your failure too. If they are not handling your items carefully, the satisfaction of the customers will be affected. Even if the delivery company will be the one to refund, you will lose one client.
International trading involves a great deal of risk. Conducting business overseas for the first time requires a lot of research and planning. Initially, it is difficult to develop a close relationship with other parties in different countries because of the distance. Most likely, traders will only meet virtually through email or other communication tools if not through web conferencing. It is difficult to entrust someone you haven’t personally met with your products or investment. Just like what the blog mentioned above, there are risks involved such as the shipment being lost at any time and potential fraudsters. It is important to find trustworthy and credible service providers so that the company/trader is protected and secured. Therefore, extensive research and business planning is essential. This process assists in the selection of service providers such as importer, exporter, cargo, insurance, etc. Local connections or groups with experience in trading can also mentor and help with the decision making.
Engage in International business is not easy. Encounter a lot of challenges between traders, especially distance from one country to the other. Close contact with each other is difficult and impossible to meet always (buyer and seller). Different languages can be one of the barriers to a business arrangement. Some country uses their original dialect which needs an interpreter to understand and to close the deal. Risk in transit where goods are delivered over a long distance. Documentation and payments, due to these different currencies need median in order to facilitate. Market changes can be also one of the problems. Business owner should prepare their selves in order to be internationally successful. Good luck to the business owner in their global endeavor.
Like previously stated, economic globalization is never easy since it necessitates a high level of trust, the appropriate choice of person with whom to conduct business, the tolerance to await, and the guts to take a risk. The technological era is currently booming, and new modes of product transportation and paperless payment are emerging, but we have yet to face and realize the ongoing trend of development. To remedy this, a cooperative project between the local authorities and public entrepreneurs should launched to update their business methods and introduce an inventive trend into their goods.
The following are the most common issues that can arise when conducting international trade:
1. Distance: Due to the large distances between countries, it is difficult for traders to establish close trade contacts. The rare occurrence of both buyers and sellers getting together means that personal connection is scarce. There is a significant time lag between placing an order and receiving goods from other countries. Distance raises transportation costs and increases risks.
2. Different languages: Different countries speak and write in different languages: foreign language price lists and created catalogs, and must advertisements written in a foreign language.
A trader who wishes to buy or sell goods in another country must either know the foreign language or hire someone who does.
3. Difficulties with transportation and communication: Dispatching and receiving goods takes longer and costs more money. During times of war and natural disasters, goods transportation becomes even more difficult. Additionally, sending or receiving information is expensive and prohibitively costly.
4. Transit risk: Foreign trade is much riskier than domestic trade. Goods must be transported long distances and are subject to the hazards of the sea. These risks are covered by marine insurance, which raises the cost of goods.
5. Special measures are necessary to increase the quality of information about foreign people in business because there is no direct and close relationship between buyers and sellers. It isn't easy to obtain reliable information about foreign traders' financial positions and business standing. As a result, credit risk is high.
6. Credit risk is high because each country imposes import and export restrictions to protect their domestic industries. Similarly, tariffs are imposed on raw material exports. Importers and exporters must pay taxes.
7. Documentation: For both exporter's and importers' work, various documents need to be prepared, both of which take time and money.
8. Foreign market research: Each foreign market has its unique characteristics. This has the specifics of requirements, practices, weights, measures, and the regularity of marketing. Foreign trade success requires a strong presence in foreign markets. It is challenging to obtain accurate and up-to-date information on foreign markets.
9. Payment issues: Each country has its currency, and the rate at which it can exchange for one money for another (known as the exchange rate) fluctuates. In the event of a change in the exchange rate, there is an additional risk.
Money remittance for payments in foreign trade takes a long time and costs a lot of money. If goods are dispatched, but payment isn't received in a reasonable time, there is a greater risk of bad debts.
10. Frequent market changes: Demand and supply conditions in other countries are difficult to predict. The price of goods and services can swing significantly in international markets. Changes in consumer preferences, changes in tariff and freight rates, currency fluctuations, and new competitors entering the market all occur when new competitors enter the market.
Global marketing is a little bit complicated compared to local marketing. The environment of global marketing presents a couple of problems and variability. As the world move along in terms of information technology, innovation and better methods of classifying marketing efforts, global marketing is still not easy to pursue. That is why it has become a challenge for every growing business who decides taking into global expansion to accept and conquer.
Aside from what was discussed in this article, another problem faced by international traders is political instability or environment. Every country has different political systems like democracy or dictatorship and they have different economic systems. Political atmospheres in different places either gives opportunities or turns out to be a challenge on international marketers.
Government in every countries have their philosophies, procedures and priorities to the international trade. They usually adopt with liberal or restrictive approach on their international business operations. Long-term trend of global political environment is uncertain and unpredictable. Extreme change in these policies will create constant difficulties to international traders. When dealing with international markets, we should give special attention to international political and legal environment.
Business trends, partnership, culture, beliefs, politics, law imposed by other countries can also be additional challenges that international traders may face. Knowing these challenges would help them create a strategic plan to mitigate the risk and/or address all those challenges. It's not always an easy thing but with precaution can lead you to a successful international business trade.
Business trends, partnership, culture, beliefs, politics, law imposed by other countries can also be additional challenges that international traders may face. Knowing these challenges would help them create a strategic plan to mitigate the risk and/or even mitigate the risk of doing it. It's not always an easy thing but with precaution can lead you to a successful international business trade.
Doing business on the global stage is not that easy. Some problems arise along the way, but there are also common ones that we can have more control over. The first is about the location and transport. The difficulty of these is that there are a set of norms and guidelines in other areas going to the recipient which we are not familiar with and there is a tendency that something unexpected happens to the ones we shipped along the way. The best way to deal with this is to research our target market and make sure that we sent our exports to the trusted cargo partners. If we are new to exporting, we should try searching online about cargo companies that can help us and make sure it’s legit. The risk here belongs to the part of the exporter especially if the mode of payment is cash on delivery. I would rather choose expensive cargo companies for as long as they can assure me that the recipient will receive the package in good condition than to risk with cheaper ones but has a higher probability of losing or being damaged along the way and besides, the shipping fee will be shouldered by the client. Cashless transactions are also becoming a trend in our daily lives. A problem with the payment process is the exchange rate which is unpredictable due to increases or decreases. The payment rate can be decided in two ways, depending on the agreement between the importer and the exporter. It can be the exchange rate based on a specific prior date from the delivery or the exchange rate on the date the importer receives the goods. The exporter should learn the native language of the target market for easy communication and avoidance of confusion. If our target markets will like our product, they may also refer it to their friends who speak the same native language so it will be easier on our part in building a new relationship to a bigger market. We need to make sure that we partnered with the right importer to deal business with and be careful at all times. Since money is involved, make sure that you transact with the right ones to avoid conflicts between you and the importer and never let these scammers take away money from other people.
All our moves should be well thought out and executed in the most secure way possible. Aside from the problems mentioned in the blog, we also need to consider the government and political factors of each country, just like the payments of tariffs and other laws about the exchanges of goods so that we are aware of the variations and we can plan out better solutions the next time we transact business. The cultural factors may also be a common problem, but I guess this is the easiest way to deal with because this can be solved by proper communication, respect and sensitivity from all parties involved. This blog is very helpful in guiding those future businessmen who plan to market on the global stage, because the contents are up-to-date and very applicable in the real business world.