Top Tips on International Trade
21st March, 2014
In today's age of e-commerce and globalization, international trade is no longer reserved for large corporations and multinationals but provides a good opportunity for fast growing businesses to develop their customer base at low or minimal costs.
However, in order to make a success of International Trade, these are the areas business owners should consider carefully:
Plan and prepare
It is essential to spend sufficient time planning and preparing before starting to export. Set an annual budget to deliver a range of international activities and decide realistic export sales targets.
The budget should cover costs for market research, overseas visits and participation in exhibitions, marketing and website developments. External assistance is available from organisations such as UKTI and local chambers of commerce.
Market research will help you to understand common business practices and the potential of the products you have to offer.
Be aware of language and culture
When considering different markets, an understanding of the needs and requirements of the customers you are targeting is invaluable. It will also be helpful to speak the local language, even though English is still the leading international language.
You don’t have to be fluent, but a basic understanding of the local lingo will go a long way and will help to create a rapport with local customers and contacts.
An understanding of local customs and a sensitivity to the values of a country is also helpful when forming relationships.
Be aware of local laws
Make sure you understand local politics and trade policies, quotas, tariffs, pricing and logistics of the contemplated market. Likewise, find out whether there are any laws or regulations that could hinder your trading.
Knowing that your products are compliant with the local laws of the target market is crucial. Obtaining guidance from local trading authorities will help minimise risks.
Form Relationships
Even though the internet is a great way to sell directly to consumers or businesses, exporters are under pressure to maximise sales in the shortest possible time and multiple market entry methods have become the norm.
In order to find adequate local representation, it is important to take the time to get to know your trading partner, ensure that they understand their business and yours and that you will be able to work together.
Your local representative should be somebody who speaks the local language, has an understanding of the culture and can advise you of the local laws and regulations as well as the intricacies of local customs.
Consider the route to market
Once you have decided on a market and found a representative, you will need to decide what kind of relationship you wish to form.
Do you want to retain control and appoint an agent who markets and sells on your behalf, or would you prefer to sell to a distributor who buys the goods from you and sells them in its own name and on its own terms? Establishing franchisees or joint venture partners are other alternatives.
Whatever route you choose, it is essential to put in place a robust agreement that clearly sets out each party’s rights and obligations and also includes provisions that outline how to terminate arrangements, in case one or both parties wish to part ways.
Consider applicable law and jurisdiction
The laws of every country are different and there will be different approaches to commercial agreements.
Should a dispute arise, a decision on the outcome could be made outside the UK, which may not be to your advantage.
If you are happy for the agreement to be governed by the foreign country’s legal system, it is a good idea to use the services of a local lawyer.
No matter how good your UK advisor is, they will not have the same insider knowledge of the potential pitfalls awaiting the unwary in a foreign legal system. And even if your agreement is governed by UK law, there may be local statutory laws that override certain contractual arrangements.
Again, a local lawyer will be able to provide advice. Ward Hadaway is a member of GGI International, a global network of lawyers, accountants and tax advisors and can put you in touch with local specialists in almost every country of the world.
From the outset, the right legal, financial and tax advice can really put you in the picture when it comes to the nitty-gritty of trading abroad. Proper professional advice at the outset will save you money in the long run.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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