International Trade Development – Three Ways to Reduce the Risks

International Trade Development – Three Ways to Reduce the Risks

International trade development is an effective way of growing your business, especially if the UK market for your company’s products or services is mature or saturated. However, entering an overseas market involves risks as well as benefits. Here are three ways to reduce the risks of trading internationally.

Carry Out Initial Research

The risks of breaking into a foreign market are reduced if you are as well-informed as possible about the commercial, political and regulatory environment in your target country. It is therefore essential to undertake wide-ranging research and prepare a strategic plan. Many questions need to be answered including:

.    How large is the potential market for your company’s goods or services?

.    How many competitors already offer the same or similar merchandise or services?

.    What are the local regulations governing the import and sale of these items?

.    What tariffs and taxes would apply?

If you have little in-house knowledge of the country concerned, it will be very difficult for your company to carry out this research itself. In addition, if a language other than English is spoken in the target country, you will need to engage researchers who are fluent in that language.

It is therefore a good idea to hire a specialist consulting company with extensive, in-depth knowledge of doing business in the countries concerned and knowledge of the language, if relevant.

Identify Potential Partners

Selling your company’s products and services through local agents and distributors is a less risky and less expensive way of entering a market than setting up a local office. However, research must be performed to identify potential agents and distributors with expertise in your sector, a well-developed network of local customers, and adequate warehousing facilities, if relevant. You may also have other criteria for choosing an agent or distributor.

If no one in your company has done business in the overseas market you are targeting, it can be difficult to know how to look for potential partners, especially if sources of information, such as trade directories, are written in a foreign language. Trade development consultants who are skilled in matching British firms with overseas partners can assist you in finding the best possible overseas agents and arranging and facilitating initial meetings with them.

Protect Against Payment Risks

When selling internationally, the risk of non-payment or late payment of invoices is a real risk. Debts totalling Euro360 billion were written off in Europe because of the non-payment or late payment of invoices in 2013/2014, according to a survey of 10,000 business managers in 33 European countries carried out by the credit management group, Intrum Justitia.

Fortunately, there are several ways in which your business can protect itself against payment risks. According to the International Trade Survey carried out by Trade and Export Finance Limited (TAEFL), a financial consulting company, smaller companies tend to ask for advance payments from overseas clients while larger companies prefer to take out a trade credit insurance policy.

If your business has found it difficult to obtain trade credit insurance, another option is to apply for an export insurance policy from UK Export Finance, the UK government’s export credit agency.

Overseas markets offer British companies a wealth of opportunities for growth. However, it is important to carry out careful research, identify potential partners and protect your company against the possible non-payment of invoices before embarking upon the exciting journey of international expansion. Contact Kinetic Cubed to discuss your plans and benefit from our wide-ranging trade development expertise.

Tony Aggarwal is a Director and Co-Founder of Kinetic Cubed. Tony is speaking at the IEDC conference in Fort Worth, Texas in October.

 

 

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