Selling abroad: What you need to know about trading internationally

For businesses looking to expand into foreign markets, the move can be risky. Here’s what to expect before you start selling abroad.

14 February 2020

Thinking of taking your trade to other countries? For those with their sights set far and wide, international business can be very appealing, offering vast opportunities for investment, growth and diversification. However, selling abroad is not without its risks and challenges. That’s why it’s imperative that you protect the business by minimising these potential issues when dealing with organisations in different countries.

 

Whatever the reasons for going overseas with your trade, it’s important to familiarise yourself with the processes, terms and concepts before making any decisions. Here, we’ll run through the most important factors of international trade, guiding beginners through the considerations that businesses need to know when looking to expand their activities internationally.

 

What kinds of international trades exist?

 

  • Import trade

 

The trade of purchasing goods and services from a foreign country because the business’ home country cannot produce the goods/services in sufficient quantities or at a competitive cost.

 

  • Export trade

 

The sale of locally-manufactured goods and services to foreign countries. Essentially, export trade is considered the opposite of import trades.

 

  • Entrepot trade

 

Entrepot trades combine both exports and imports; goods and services are imported from one country so that they can then be exported to another country. The imported goods are not used for consumption or sale in the importing country; rather the importing country adds value to the goods before exporting them.

 

image of port

 

Many countries use such trades for the following reasons:

 

  • A lack of access or direct connection between any two countries
  • Better processing or logistical facilities available with a third country
  • A lack of a trade agreement between two countries
  • No trade finance in banking facilities available in the importing country

 

What are the benefits of international trade?

 

International trades afford those countries involved many advantages compared to solely operating in their local markets, including:

 

  • Through focusing on producing goods and services specific to their geography, expertise and capacity, countries can foster a culture of differentiation and specialisation.
  • High-quality goods and services at more affordable prices, allowing countries to meet the needs and requirements of their people.
  • Greater local market competition that lets producers and suppliers increase capacity with the aim of beating foreign competition.
  • An increase in unique trade agreements that emphasise the transfer of technology from more developed to less developed nations, which lets the latter improve their production abilities.
  • More jobs and employment opportunities as a result of international trade and finance. Countries trading with one another tend to create more professional opportunities compared to countries who stick with local trading.

 

warehouse employee

 

What do you need to consider before trading abroad?

 

  • If your stock is cheaper, it may be low quality

 

Do you sell a high-quality product? If so, this shouldn’t be a problem. But if you use a cheap supplier, the product may reflect the price. Lower-quality stock may result in returns, which can cost businesses a fortune, especially with currency conversions to factor in as well. Strike a balance between the price of suppliers and keeping your customers happy.

 

  • Do you know enough about the culture of the country you’re trading with?

 

While you may be used to certain approaches and methods in the UK, they may not necessarily translate to foreign markets. Be sure to research the culture and beliefs of the country you plan on trading with, and if you’re doing a lot of marketing, be mindful of potentially offending your target audience.

 

  • Are competitors already operating there?

 

If your competitors have set up shop in your proposed markets, then use their presence to your advantage. For a start, it could show that there’s a demand for your service or product in this market. Additionally, it provides you with an opportunity to see what’s working for your competitors and what isn’t; from here, you can work out how you’ll differentiate yourself from others.

image of businessman

 

  • Are you ready to travel abroad?

 

Get used to the departure lounge, because you’ll be doing your fair share of globetrotting if you trade internationally. From market research and partner meetings to dropping in to see how business is, there’ll be plenty of travelling abroad if you want to do things right. While you can do things virtually, it’s recommended that you do as much as possible in person – but make sure you factor in the time and travel costs if you’re really committed to it.

 

  • Will there be language barriers?

 

Unless you can converse in their native tongue, there’s a chance you’ll need to hire a translator if you want to do business with non-English speaking markets. In which case, hiring bilingual staff is another cost you’ll have to consider.

 

  • Are you prepared to comply with international law?

 

Business laws and employee rights can become tangled up across different countries, so make sure you’re up to speed on anything you may be dealing with in terms of legality. There’s a chance you may have to hire more legal help if not.

 


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image of businesswoman at laptop

 

How can you protect your business?

 

It’s essential that you protect your business as much as possible when dealing with international organisations. Information is crucial – your first steps should be to do the requisite research on who you’ll be dealing with; you want to be as well informed as you can, to minimise your exposure to risks.

 

Use local and international credit reports to cross-reference those you’ll be dealing with to check if they’re solvent. Certain credit reports alert you to changes in companies’ credit scores in real-time, providing you with a constant reference about whether these companies are safe to start trading with.

 

If it comes to a point where you have to collect debt from abroad, you may find the process a difficult one to resolve. It can be hard enough recovering debt at home, so it’s important to include clauses in your contract to ensure both parties agree to apply British law in the event of any disputes. A paper trail will make proving claims a lot easier, especially where electronic evidence is not admissible.

 

Be aware of certain processes that can help you reclaim money too, such as the European Order for Payment Procedure (EOPP), the European Small Claims Procedure (ESCP) and the European Enforcement Order (EEO). It’s worth noting that these processes are not a failsafe, so as mentioned above, carrying out proper credit checks before doing any business abroad is critical.

 

Gazprom Energy is a leading and award-winning business energy supplier, helping thousands of small businesses manage their gas and electricity contracts. To find out more about what we can offer your business, visit the homepage or call us today on 0161 837 2295.

 

The views, opinions and positions expressed within this article are those of our third-party content providers alone and do not represent those of Gazprom Energy. The accuracy, completeness and validity of any statements made within this article are not guaranteed. Gazprom Energy accepts no liability for any errors, omissions or representations.


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