Political, economic, environmental and other issues in international business transactions are increasingly becoming the responsibility of international business leaders as much as governments. The globalization of trade and investment means that businesses increasingly face challenges and opportunities when transacting business internationally. As such, we discuss the main issues in international business transactions today. Some of the biggest challenges in international business transactions are the international company structure, the foreign laws and regulations, the international accounting system, the cost calculation, the method of payment, the currency rates, the shipment methods, the communication aspects, the political risks, the supply chains and the worldwide environmental issues. We will analyze them in more detail below.
When the objective of the company is to expand into international markets it must compete globally. For this, the company must have a team in place that can take an international challenge. One fundamental consideration is the structure of the company and the location of the team members. It is important for a company to analyze the advantages and disadvantages of having central headquarters or having offices and representatives locally.
Another key aspect in succeeding in international markets is having knowledge and understanding of the local laws and regulations that govern the specific market. This involves tax aspects, trading laws, employment and labor laws and others. One of the main legal areas to consider when it comes to doing international business is tax compliance. The tax system, rates and compliance requirements are different from state to state and can make the accounting function of a multinational organization significantly challenging. Accounting strategy can be the key to maximize the revenue of the company.
Another major consideration within the strategy is price setting for the services and goods the company sells overseas. The company must consider the costs associated with doing business abroad in order to remain competitive and still be profitable. The company must research the prices used on the local market and what competitors offer for the same price.
When a company is doing business overseas it must also take into consideration the payment aspect, as it must determine an acceptable payment method and ensure a secure process for the buyers. Aside from this, the company must also take into consideration the currency rate fluctuation. Monitoring exchange rates must therefore be a central part of the strategy for all international business transactions. However, global economic volatility can make forecasting profit especially difficult, particularly when rates fluctuate at unpredictable levels.
Good communication is at the center of effective international business transactions. However, communicating across cultures can be a very real challenge. Effective communication with clients and customers abroad is essential for success in international business. And communication is often more than just a language barrier. Cultural differences can also influence market demand for your product or service. The need your business may address at home may already be met or not exist at all overseas. One must research the local market insights before pursuing an international business transaction.
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