An Introduction to International Trade

The primary reason most companies trade internationally is to reduce risk, if you think of the old adage of not putting all your eggs in one basket, the same applies to the business world and international trade, if you’ve got a stable market here in the UK it might prove prudent to look at how you can grow your business internationally.

The first step you would take when looking into international trading would be examining your business here in the UK, this would make it easier to start looking for a market internationally that might compliment your own. It’s simply a case of thorough research

One of the main factors to take into consideration when trading internationally is finance; this is again going to involve thorough research. Whichever country or countries you choose to trade with you will need a very comprehensive knowledge of their currency both in relation to your own currency and the value of your product or service. One of the more secure ways to trade internationally is with letters of credit, these are a banking instruments you use to insure that you’re paid, if you have a letter of credit against any transaction you are guaranteed to get the money as long as you adhere to a set of criteria that you agree with your customer at the outset.

When it comes to international trade, you should always make sure the export price has been carefully researched and you understand the different elements of that price, this means your product or service is very unlikely to be marketed at the same price you might charge in the UK. There are several factors you’ll need to take into consideration before concluding a price you wish to market your product or service at. The first is how much it might cost you to collect and convert any foreign currency. Secondly you’ll need to make sure all your logistics are covered and thirdly, you will have to do some form of market research too and this cost will also need to be covered in some shape or form. These are just three very generic points and you may come across many more especially when you start to deal with the specifics of individual countries.

Preferential trade agreements are agreements set up by trading blocks, an example of a trading block would be the European union as it’s a block of countries that work and trade together and have agreements. Basically, it means it’s easier to do business with some countries than it is with others.

European Union regulations have dramatically changed the very nature of international trade. In terms of distribution, you are no longer allowed to sell exclusively in any specific market, you can’t be restricted, but your marketing activities can be. As far as agents are concerned, they actually have employment rights and you have to be very careful about how you appoint them. When it comes to international trade it would advisable to research very thoroughly before you signed anything.

It’s not just the business world which you’ll need to research when trading internationally, you must also understand local customs, cultures and etiquette too. One of the nicest things you can do is actually be observant of the business etiquette you’re looking at. For example if you were to spend a period of time working with the Japanese, you would learn they are not very keen on hard sell, you’d also learn they have a tendency to nod their head and say yes a lot as you’re talking, this doesn’t necessary mean they’re agreeing with you but that they understand what you.

Punctuality can also be a major area of importance with international trade, culturally we tend to vary in the way we treat our meetings, in the UK we like to be punctual and we try very hard to keep our meetings down to about an hour, if you went over to Italy, they’re not so punctual and it’s not an offence not to be punctual. In Germany it’s a huge offence to be late for a meeting, some Germans will not see you if you’re more than ten minutes late. These things need to be looked at and planned into any visit you make.

International trade can be a very complex but very rewarding business venture. As with all business ventures, thorough research and due diligence is essential. There are plenty of organisations out there which are designed to help you, whether it’s step-by-step assistance you need or just a general nudge in the right direction.

Business Link is there to offer free business advice and support on almost any topic; GuruOnline has over 50 exclusive online videos from Business Link offering free international trade advice on a whole host of topics from incoterms to international marketing to managing risk to operational requirements.