We discuss international business transactions and lay out some specificities of this topic. The purpose of this article is to introduce the readers to cross-border business transactions between private business entities. There are few types of international business transactions, including international technology transactions and international joint ventures.
Through international business transactions, businesses carry out trade of goods, services, technology, capital and knowledge across national borders and at a global level. It involves cross-border transactions of goods and services between companies from two or more countries. Today’s global marketplace offers a great number of business opportunities but can also present significant challenges and risks for businesses. Globalization leads to trade barriers falling and buyer preferences changing. Globalization can also be seen in terms of production, where a company can source goods and services easily from other countries. Globalization impacts nearly every company irrespective of the company size. Regardless of the type of international business transaction involved, a clear and comprehensive international contract is critical to protect the rights of the contracting parties and to establish each party’s rights and obligations. An important aspect to be considered is dealing with foreign currencies. Companies that engage in international business transactions must always be aware of the latest exchange rates and market data for the local currencies in which they are dealing.
In order to be able to conduct business, multinational companies need to build a bridge between national markets. One of the efficient tools for this action is to eliminate barriers in order to make cross-border trade easier. For instance, the European Union (EU) has free trade agreements at varying levels with most other European countries. The EU shares its single market with three EFTA members via the European Economic Area agreement, and the remaining EFTA member—Switzerland—via bilateral agreements. Another efficient tool is an effective communication system, including information processing and transportation technologies. All firms that want to go international have one goal in common and that is the desire to increase their respective economic values when engaging in international business transactions.
The prevalence of international business has increased significantly during the last part of the twentieth century thanks to the liberalization of trade and investment and the development of technology. Some of the significant elements that have advanced international business include:
• The formation of the World Trade Organization (WTO) in 1995;
• The inception of electronic funds transfers;
• The introduction of the euro to the European Union;
• Technological innovation that facilitates global communication and transportation;
• The dissolution of a number of communist markets, thus opening up many economies to private business.
International business transactions are impacted by economic and political environments. The economic environment is different from one country to another. There are industrialized countries, emerging countries and less developed countries. On the other hand, the political environment of international business transactions refers to the relationship between the government and business, as well as the political risk of the nation. The companies involved in international business transactions must be prepared to deal with different types of economies and different types of governments.
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