Importance of overseas trade for all types of business

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In the contemporary economic global enviornment all business can enter into overseas business. That is, the global economy gives opportunities to intenationalize any business, irrespective of size and nature of operations. However, international business expansion is risky compared to local business expansion. Before expanasion in to international business the managers of the business must consider the method of expansion, timing and what part of the world one business seeks markets. These factors must be carefully considred and the managment of the business must implement effective risk management practices to reduce risk or manage risk so that  it maximize returns and increase the wealth to the owners or if it is a listed company increase the wealth of shareholders in the short and in the long-term.

The benefits of expansion in to intrernational business is to take advantage of international capital markets, increase the possibility of seeking profitable market seqments or in the case of small business to find a niche market. As well, international markets,  give the possibility of investing in to global production network in a manner to be cost competitive to its competitors in having operations in low labor cost countries or in the third world countries.  It also benefits a business from differeing business cycles as some business may be in a down turn and others may be in an upturn of the business cycle and it reduces the risk of economic cycles. In addition, the international business  gives  any business tax minimization opportunities for any business in having off shore operations, where the tax regime is low compared to the local tax regime. International business increase the use of modern technology and there fore the potential to increase the efficiency of operations. Above all, international business operations provide the business, economies of scale and there fore the benefits of economies of scale to be loweing the cost structure of operations over a high volume of sales.

In effect, any business can enter in to any market as protection barriers are coming down in most part of the world because of deregulation in the financial market and free trade promoted by World Tade Organizarion and other international bodies such as International Monetary Fund. As mentioned above, international business gives any business many benefits. However international business is very complex by nature. This is because, it has more risk factors than a local business operation due to exchange rate fluctuation, interst rate risks, enviornmental and legislative risk, social and political risks. If these risk factors are not considerd carefully and if there is no process within a business to evaluate such risks and have risk managment polcies in financial management it may not produce returns for the additional risk undertaken in entering international business compared to local business operations and have the possibility of decreasing the wealth of owners than increasing the wealth of owners. In essense, all business have to consider international or overseas trade and business opportunties, which have the feasibility to produce more than adequare return on capital compared to the risk involved. That is, if any business have the capacity to mamage the risk of overseas operations by careful planning and review it has many benefits to a busniess compared to local business particualrly where the market for the goods and services is limited.


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