Why do companies participate in international business transactions?
When searching to expand their business, many companies consider the advantages of international trade and here we explore the reasons of why do companies participate in international business transactions. Today it is both practical and profitable to engage in international business. The current economic globalization allows companies to cross over national boundaries. Looking from the point of view of the consumer, one can realize that almost all of the products or services that one buys today come from abroad. The article analyzes why do companies participate in international business transactions and the advantages that come within.
The 2016 FedEx Trade Index, a national survey of 1,004 small business leaders conducted by Morning Consult, shows that business leaders engaged in global trade say they’re growing faster and hiring more employees than small businesses who stay in state. “Sixty-five percent of small businesses that trade say their revenue is increasing versus 46 percent of small businesses that do not trade,” the report said. “Small businesses that trade are also 20 percent more likely to say they are hiring more employees.”
As a general note, in the past 30 years, the volume of international trade has expanded from $200 billion to over $7.5 trillion and the sales of foreign affiliates of multinational corporations are now twice as high as global exports. International business has created a network of global links between countries, institutions, and individuals with trade, financial markets, technology and living standards. For instance, if the production of coffee would be reduced in one of the countries in Latin America, individuals and economies worldwide would be affected.
Between the 1960s and the 1990s the importance of manufactured goods increased while the role of primary commodities decreased. Today, there has been a shift to manufacturing industries in countries with emerging economies.
One of the first advantages companies have in mind when engaging in international business is that they can increase the number of clients. With every country serviced that they add on their list the number of clients grows accordingly. Further, when reaching other markets a company may find a market in which the competition is not as high as in the home country.
Moreover, international markets can open up roads for a new line of goods or services for a company. Often international markets help companies to specialize in a different area to better serve that targeted market. Being exposed to the realities of the world outside your home base may even spark innovations, upgrades and efficiencies for your products and services. International business can cause the flow of ideas, services, and capital across the world and permits the acquisition of a wider variety of inputs. Also, when companies participate in international business transactions unemployment gets reduced and becomes a less common problem. In conclusion, only with domestic resources at hand, each country would only be able to offer a limited number of products or services and shortages would be prevalent.
Contact us, your international business attorney in Florida, to help you understand why do companies participate in international business transactions and assist you in starting your international business.