Risks and Benefits of Entering the International Market with Those of Doing Business in the Domestic Market

Weigh the risks and benefits of entering the international market with those of entering or doing business in the domestic market.

Breaking into the market of a foreign company takes much more effort than entering the domestic market. The business owner who decides to expand to another culture will have many more hoops to jump through than in a domestic market. Before the owner enters the new market, the company must know all requirements of doing business in the foreign market. This would include understanding currency and exchange rate issues. Not knowing customs laws of the global market can result in costly mistakes.

Someone in the company should have extended knowledge of a country and culture. Finding a home country employee who knows the language is also important.

Understanding the political environment is also important. In our company we often have shipments held up or lost because of a sudden political uprising that brings importing to a standstill. Holding shipments in a warehouse for months while waiting for the turmoil to settle down cuts is expensive.

Political unrest can also result in the ultimate loss which is expropriation or nationalization.

Deciding how to accept payment is another issue that needs to be decided before entering a new global market. When the product is in another country you simply can’t go get it back as you can in the domestic market. Usually, our company requires prepayment which is good protection, but at the same time limits to whom we can sell. The poorer countries are not always able to prepay so another method needs to be offered. If credit is extended, a company has to understand laws to be able to know how money can be collected.

Entering a foreign market takes extensive preparation and a different kind of mindset. Opening a new business in a domestic market is easier because the knowledge of the market is more straightforward; the business owner can readily acquire the details needed....