International Business
Most companies think doing business outside the United States is simply not worth the risk, when in actuality, the true risk is choosing not to do business in the international market. The Asian middle class is growing and spending billions of dollars every year. Can your company afford the risk of not having your product in that market?
Most American companies are not comfortable doing business internationally. In the past, they have never had to, as America has always been the industrial superpower, and the world came to our doorstep to do business. However, in the 21st century, the balance of power has shifted, and American business has no choice but to adapt to this change. America is still a superpower; American businesses just need to learn how the new game is played, and I can help you do that.
Country Development Classifications
Developed Country:
- Developed economy
- GDP
- GNP
- Post-Industrial Economy
- Service sector provides more wealth than the industrial sector.
Developing Country:
- Underdeveloped industrial base.
- Low human development index.
Underdeveloped Country:
- Agriculture is main work.
- Little industrial activity
- Little money spent on health care U& education.
Why Do Companies Go International
- Growth
- Labor Force
- Resources
- Idea’s
- Diversification
Why Don’t Companies Go International
Risk:
Patience & Persistence
- International deals have a very long gestation period – months to years
- Understanding the CUSTOMER’S needs and wants
- The deal you expect may differ vastly from what the customer has in mind
Challenges to Doing Business Internationally
- Cultural Barriers
- Payment Terms
- International Contracts
- Rules of Exporting & Documentation
- INCOTERMS
- Choosing Your Partners
Cultural Barriers
- Language
- Aesthetics
- Values
- Attitude towards time
- Attitude towards work
- Manners
Terms of Payment
- An exporting company must make sure that it can collect from its importing customer.
- There is a delicate balance between financial protection and good customer relations.
- A sale isn’t complete until the money is deposited into your bank account.
- Lack of credit information.
- Lack of personal contact.
- Expensive collection process.
- No easy legal recourse.
- High litigation cost.
Payment Terms
- Cash in Advance
- Open Account
- Letter of Credit
- Document Exchange
Cash in advance
The most secure and least risky method of international trading for the importer.
Open Account
The goods, along with the necessary documents are shipped directly to the importer, who has agreed to pay the exporter’s invoice at a specified date.
Letter of credit
- The importers bank promises to pay the exporter, when the exporter has met all the conditions of the sales contract.
- The exporters bank will send shipping documents to the importers bank, and the importers bank will send payment to the exporters bank.
Documentary Collection
The exporter receives payment in exchange for the shipping documents, with the funds and documents channeled through their respective banks.
