Suppose you want to take a leap of faith and expand the horizons of a local business. Introducing your products to the international market increases the chance you will get new clients and increase revenue for your business. However, it wouldn’t be a great idea to let all the benefits of this bold step blind you to the possible challenges you should be wary about. Here are some of the risks and challenges you should know as you run an international business.
The language barrier is definitely the most prevalent challenge of international trade. If you run an international business, you can’t escape interacting with people from different countries who speak foreign languages. The meaning behind your words could get lost in translation, causing your clients and business partners to misunderstand your goals and expectations. A practical solution to this predicament would be to ensure that all your team members and employees can speak and understand the language your target customers speak.
Another challenge you are likely to encounter while running your international business is political skirmishes. The friction could be within the country or countries you ship your goods to. This political instability could cause delays in shipping or cause your goods to get damaged in transit. The best way to deal with political instability would be to keep yourself updated with world news. This knowledge will help you make informed decisions and change routes to more politically stable countries.
Complex nature of customs requirements
Before your cargo or package is cleared by customs, you need to declare what you are shipping, sign numerous documents, and present a plethora of licenses. All this work is tedious, meaning it is best to rely on agents to do the heavy lifting. Experienced customs brokers are more cost-effective and adept at providing expert guidance on customs regulations and compliance to let you get your clearances faster. It is one of the best ways to cut on the risks while reducing duties and avoiding penalties.
Supply chain management
Supply chain management becomes more complicated when your goods are traveling overseas. There are numerous factors to consider, such as shipping methods, customs clearance, and international regulations. It would be wise to develop an effective supply chain strategy before your business ventures into unchartered territory. Ensure you study the existing supply chains, familiarize yourself with the trade regulations, and tailor your strategy to the specific locations where you want to do business.
To gain a competitive advantage in the industry, you need an effective team to help you achieve your goals. You need to decide whether having one central headquarter will work for your business or whether you need various representatives on the ground in the countries you operate.
If you settle for the latter option, the next step would be to determine how they will coordinate with one another across the time zones. Another effective option would be to hire external team members from the local community who understand the culture and mannerisms of your target market.
As you continue your operations, you must be aware of your business’s effect on the environment. The Government and multinational corporations will be quick to shut you down if they have reason to believe that your business is not sustainable. You could also face legal issues such as lawsuits, which are very costly. Therefore, it would help ensure that your business processes are highly environmentally friendly.
The numerous layers of tax could eat away at your revenue, leaving your business with scraps that can barely keep you afloat. Please understand the legalities surrounding tax treaties to avoid paying double taxes. Therefore, you must develop and rely on a robust accounting strategy if you want your international business to thrive. The Common Consolidated Corporate Tax Base proposal allows companies operating within the EU to limit tax liability to only one corporate center.
Fluctuation of currency rates
One of the significant aspects of running an international business is receiving payments in various currencies. However, the exchange rate in your native country might be different in another country. For instance, a dollar in Korea might have a different value in the United States for the same number of products or services. The intelligent thing to do would be to know the inflation and exchange rates in the nations where your business operates.
Every business comes with its own set of unique challenges and setbacks. Even though international trade is more complex, it is certainly possible. We hope this article has shed some light on the possible challenges and highlighted how to mitigate the risks to make your intentional business successful.