In today’s day and age, the world of business has expanded to every corner. Countries often trade internationally, providing many business opportunities. Although most of the goods and services which we receive are made internationally, we must also understand the information, process, and effects about such trade.What is International Business?International business is a term which describes commercial transactions which take place across country borders. For example, when a company in Canada sells products to Germany, it is participating in an international business transaction.
International business can come in different forms: Moving goods from one country to another (i.e. importing/ exporting, trade) Licensing, franchising, or other contractual agreements which permit foreign firms to use goods, services, and processes from other nation The formation of sales and manufacturing, as well as operations and distribution of them in foreign marketsAdvantages of International Business:There are many advantages to international business. Some of these are: Revenues will increase: This is perhaps the top advantage to international trade.
Every country with which international trading is done with, allows an increase in the number of potential customers. Less competition: Focusing on one area for a market results in crowding of it. Product lifespan extension: Focusing on many markets instead of a single one decreases risk to exposure of economy downturns due to loss in interest or change in technology. International business therefore lowers economic risks. Currency exchange benefit: When foreign currencies are strong against your country’s currency, your company profits will increase for your business. This is a strongly valuable advantage, and enables businesses to have the opportunity of exporting more. Foreign customers will benefit from the currency exchange rate, resulting in more profits. Selling surplus goods: Companies can sell unwanted goods from their country to foreign ones, reducing risk of losing sales, hence stabilizing profits’ expectations and results. Reputation enhancement: Expanding business in other countries can result in boost of business reputation. Being successful in one country can influence your success in other ones. Thos raises your company’s profile and credibility. Disadvantages of International Business: A few of the disadvantages of international trade are: Shipping Customs and Duties: International shipping companies (i.e. FedEx, UPS) make it easy to ship packages to almost any destination in the world. Most custom agencies charge extra fees on items which are shipped to them. Language Barriers: Despite online translators, language is still a major disadvantage of international trade. The marketplace is filled with products whose names are poorly translated into another language. Cultural Differences: Cultures common gestures and communications differ. For example, in Western cultures, the word yes generally means agreement. However, in some Eastern cultures, it can mean that the person merely comprehends what you are saying, but doesn’t agree necessarily. Also, in India, nodding your head means no and turning it side to side means yes, as contrary to Western cultures.Servicing Customers: Time zones make it difficult to communicate in person with customers, and to answer their calls/ offer customer service. Returning Products: When international customers are not satisfied with a company’s products, a process must be in place to return/ refund them. Intellectual Property Theft: The wider a product is distributed, the more likely that it may be illegally copied by a competitor. Obstacles to International Business: International business has obstacles which make it difficult to practice. Some examples of this are: Marketing: Language barriers, understanding cuisine, and varying sales tactics, make it difficult to convey a product’s message, purpose, and function overseas. It must be done according to the foreign country’s customs and traditions. This may be difficult to learn/ adapt to in international business. Economics: The target for international business may be hard to reach, as type of government may be different, as well as labor force quality, political corruption and instability, etc. It would be best for businesses that are planning to go international, to analyze the cost-stability trade-off before taking up any foreign business operations. For example, a more expensive choice for international businesses would be countries that are developed and have an educated workforce, compared to those with a corrupt government, political instability, etc. Financial: There is also the risk of foreign currency exchange and corporate taxes present. Thus, it would be a wise for choice for businesses to establish a forward contract with businesses. This allows it to exchange currency at the spot rate, which prevents it from losing significant funds. Hence, the business will know in advance how much cost a negotiation will have. Other financial obstacles include paying the corporate taxes of the nation, as well as determining which foreign vendor offers the best deals. Logistics: It is important to hire shippers who are familiar with foreign areas, so that the product can arrive on time and prevent a bad reputation for your business. Imports and Exports:Canada is the 12th largest export economy in the world and has the 24th most complex economy. In 2017, Canada exported $377B and imported $326B, resulting in a positive trade balance of $51.2B. Canada’s top exports are: Crude petroleum ($54.1B), Cars ($46.5B), Refined Petroleum ($11.5B), Vehicle Parts ($10.4B), and Petroleum Gas ($10.2B). Its top imports are: Cars ($28.5B), Delivery Trucks ($15.6B), Refined Petroleum ($12.1B), Crude Petroleum ($10.8B) and Computers ($7.19B).Canada’s Trading Partners: Canada deals with much trade internationally. The majority of the products which we purchase were foreign designed, made, and/or assembled. We import such products from foreign countries. Its top import origins are the USA ($149B), China ($50B), Mexico ($22B), Germany ($12.3), and Japan ($11.7B).We also export many Canadian products to foreign countries, in order to receive profits for our economy. Canada’s top export destinations are the USA ($247B), China ($18.4B), Japan ($9.7B), Mexico (8.1B) and the UK ($7.47B).Canada and Trade Agreements:Canada has dozens of trade agreement with other countries of the world. The following is a list of the FTA (free trade agreements, which have reduced or nonexistent tariffs on imports and exports to the involved regions) which Canada has internationally, as well as the dates of their enforcements. Canada ” Chile Free Trade Agreement (CCFTA) (July 1997) Canada ” Colombia Free Trade Agreement (CCOFTA). (signed 2008, enforced August 2011) Canada ” Costa Rica Free Trade Agreement (CCRFTA). (November 2002) Canada ” European Free Trade Association (EFTA). (Iceland, Liechtenstein, Norway and Switzerland, July 2011) Canada ” Honduras Free Trade Agreement (CHFTA). (October 2014) Canada ” Israel Free Trade Agreement (CIFTA). (1997, been in modernization process since 2014) Canada ” Jordan Free Trade Agreement (CJFTA) (October 2012) Canada ” Korea Free Trade Agreement (CKFTA) (January 2015) Canada ” Panama Free Trade Agreement (CPAFTA) (April 2013) Canada ” Peru Free Trade Agreement (CPFTA) (August 2009) The most well-known trade agreement is CUSMA- Canada United States Mexico Agreement (known as USMCA in America, and formerly known as NAFTA- North American Free Trade Agreement), which involved Canada, the USA, and Mexico. (1994, all tariffs eliminated 2008)How International Business Affects Us:International business has its ups and downs, but without it, our economy would never thrive as it does now. International business allows businesses to have a large selection of companies to choose from for selling their products. Consumers can receive the very best they can from different parts of the world (i.e. German cars, Chinese silk). They receive the highest quality goods, which results in higher demand for businesses. The economies of the countries which produce and export, as well as the one that imports the product, thrive as a result. For example, if Canada did not implement international business in its trading, consumers would have to rely on Canadian goods, which they cannot entirely. Canadians can rely on their country for supplies of wheat, for example, but once winter hits, we must import it from other parts of the world. Canada also doesn’t have the proper climate to grow ingredients and produce materials that we need to create our needed goods and services. The same goes for all countries. They rely on each other for supplies of goods, and hence to enable them to offer certain services. (i.e. Canada relies on Japan to produce cars (goods) so that we can have successful car dealerships (services)).International business is what keeps all economies thriving today. It maintains connections with different cultures and business tactics, aids to the needs and wants of consumer, and allows businesses to profit well from it. Without international business, we wouldn’t live as we do now. We would only have the limited supplies of goods and services that our country can seasonally produce. In simpler words, the people would not be able to live comfortably, or even much longer, if international trade wasn’t implemented. The modernized internet and technology which we have today has made it much easier for Canadian businesses-small or big-to profit from the numerous benefits of international trade. Going international opens the world of business to even more worlds of opportunities. Whether or not these businesses find it safer or simpler to focus on a single market, it is hard to avoid the fact that international business strengthens business, as well as makes them more profitable and successful.