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Top 10 Advantages of International Trade for Business

June 29, 2022
Top 10 Advantages of International Trade for Business

Making the decision to transform your business from domestic to international trade can seem daunting, especially if you’ve never traded outside your home country before. Whilst it is a significant leap, and there are a number of compliance factors to consider, there are also advantages to trading internationally that can propel your business to the next level.

In this blog, we’re going to explore 10 of the most compelling reasons why you should consider trading internationally, and the benefits it could bring to your business.

1. Increased revenues through international markets

According to the 2016 FedEx Trade Index, 65% of small businesses who were trading internationally reported an increase in their revenue, as opposed to 46% who were not trading with other countries. The main reason for this is likely to be that global traders have a much broader potential customer base.

For most businesses, this is one of the key advantages of international trade. For small businesses, it could be the difference between staying stagnant or excelling to the next level.

2. Mitigate potential market risks

It might seem risky to begin trading internationally if you’ve only traded domestically, but it actually offers greater risk management. If you only sell in your own country, you will be impacted by economic downturns and market changes, whereas when you trade internationally, you’re not relying on a single market. This means if there is a recession in your domestic market, you may still have viable business opportunities in other countries where the economy is stronger.

From a risk management perspective, it’s safer to trade globally than solely domestically, and this is one of the other key advantages of international trade that persuade a lot of businesses to expand globally.

3. Manage cash flow better through foreign markets

It’s common practice to request payment upfront when trading overseas, and this is naturally beneficial when it comes to cash flow. Upfront payments will allow you to continuously bring in more business and manage your operations without having to worry about delayed invoices.

Requesting payment from clients upfront, especially for large orders, isn’t as common in domestic trade circles, and while this can be more beneficial for the client, it does pose the risk of cash flow issues when business slows down.

4. Boost your reputation through global trade

Companies that trade internationally often find that they can provide a better standard of service, and therefore benefit from a quality reputation. Clients will correlate international success with reliability, efficiency and cohesion, especially if you have the facilities to maintain compliance across your trading operations. If clients can see consistent and compliant successes across other countries, you are more likely to see bigger, better business coming your way.

5. Dispose of surplus products

There may come a time when the product you sell becomes obsolete domestically, which leaves you with unwanted surplus product. Domestic markets differ from international markets, meaning just because there isn’t a demand for your product in your own country, there may well still be a demand across foreign markets. This reduces the risk of waste and minimises potential losses related to surplus product.

6. Increase product lifespans

No matter what kind of product you are distributing, there’s bound to be an upgraded version soon making its way to market. In time, this can hamper the lifespan of your product, creating surplus and having an impact on your returns. By trading internationally, you can extend the lifespan of your product since other markets may not necessarily move at the same pace as your domestic market.

7. Balance foreign exchange risks

Currency fluctuates regularly and this has an impact on all aspects of trade, be it domestic or international. For the most part, when your domestic currency is weak, an economic downturn typically follows suit, and this means your business may suffer. Not just this, but it’s more expensive to import goods, too.

A poor currency rate can spell trouble for domestic-only businesses, but it opens up the door for internationally trading businesses as it means they can export their products for cheaper, therefore enticing more foreign buyers to make a purchase. While you might have to sell your goods at a cheaper rate, there’s every chance you can sell more units. In addition, if another country has an economic downturn and a poor currency value, you can quickly import goods at a lower cost to help facilitate higher returns in the future.

The global economy is more robust than a single market, with seemingly endless opportunities for economic development and growth. This means foreign trade can prove to be more reliable than a single domestic economy.

8. Access to export financing

You may be able to receive payment upfront when trading overseas, but there are undoubtedly some higher costs associated with exporting internationally. Export financing is a way to ease the burden and secure the benefits of trade for your business. Governments often provide support for export financing and there are different types of private export financing available too. If you’re unsure where to start, we can help you.

9. Specialise your business

When you trade internationally, you are exposed to more trade avenues and innovative ideas. You may come across approaches you hadn’t considered before which could allow you to specialise your business and create a new USP based on international thinking and feedback.

10. Reduce business competition

Domestic markets can be crowded to say the least, making it hard to stand out from the sea of competitors. Trading internationally can reduce this competition, depending on the foreign market you trade with.

Preparing to Trade Internationally with clearBorder

Navigating the global market can be complex. You will need to become familiar with import and export processes, contractual terms and rules of origin, as well as how foreign exchange works on a large scale.

At clearBorder, we are experts in foreign trade and offer professional international trade consultancy services. We help your international trade succeed by ensuring you are efficient and compliant across the board. If you’re new to trade we make the processes and requirements simple for you. If you’ve been trading for years, we help you to overcome new obstacles, build your reputation and stay competitive, using our expert knowledge and unique training resources.

Book a free consultation today to find out more about the advantages of international trade and whether expanding beyond the domestic market could be beneficial to your business.