Understanding the Rules of Going Global
International business and trade pose relatively higher risks and challenges compared to a domestic business. There are challenges of communication, cultural differences and complex laws and regulations of each country. However, the rewards in international business can be substantially higher because of less competition and operating as a differentiated marketer with a global product in a foreign market. It is always useful to draw up an international business checklist and guidelines before launching a new business in a global market.
Guidelines for Your Global Business
1. Payment Methods
The most sensitive part of international business is the payment terms because it involves dealing with a distant business partner in an unfamiliar business and regulatory environment. In case of a new client with unknown credentials, the goods or services should be delivered only against cash advance payment. Even with established companies, payments should be accepted by an irrevocable Letter of Credit. Credit must be extended in international business only when there is a deep mutual trust already established between the two parties.
2. Custom Duty, Taxation and Foreign Currency Regulations
One of the most important guidelines for international business is to acquire accurate information about the custom duty, local taxation and foreign currency payment regulations in the country where the trade is to be conducted. The best way to verify these regulations is to seek advice from your bank that is facilitating such trade for you. You may also hire the services of an international trade consultant who can guide you properly before you go ahead with an international transaction.
3. Barriers to Global Trade and Business
You should have proper knowledge of the barriers imposed on international trade by the country where you wish to do business. Firstly, you need to verify that the product or service that you wish to export or import is not on the restricted items list of the country where you wish to trade. A second barrier may be in terms of exceptionally high duties and tariffs on the product or service that you wish to export to that country. This is a tariff barrier that is imposed with an aim to make your export uncompetitive in comparison to the domestically produced alternatives. So evaluate your product’s position with the other countries before going ahead with your international business plans.
A Checklist Before Expanding Your Borders
- Cultural acceptance of your product or service.
- Political and economic stability of the host country.
- Condition of the financial markets in the host country.
- Law and order conditions and patent protection laws.
- Foreign currency fluctuations in the host country.
- Infrastructure and logistics situation in the host country.
- Bureaucratic hurdles and clearances required.
- Local environmental laws pertaining to your product or service.
- Diplomatic and trade relations with your country.
- Foreign investment policy and general investment climate.
- Prevailing interest rates in the host country.
- Custom and excise duties and regulations.
- Policy on repatriation of funds to your country.
- Availability of skilled and unskilled labor in the host country.
- Industrial and labor laws in the host country.
- Export financing, incentives and tax rebates for foreign investors.
- Reputation of the local business partners in the host country.
With a careful evaluation of all these guidelines relating to business, trade or investment in other countries, you can minimize your chances of facing problems or incurring losses in such global ventures.
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