International Business Finance - Essay Example

If you have an existing business that creates a tangible product, exporting is the most common method. Start-up costs and risks are limited, and profits maybe realized early on. For some this may be the beginning a new venture, the other choices are options that may reduce some of the start-up risks. There are two basic ways to export: directly or indirectly. Direct Exporting In direct exporting, your company finds a foreign buyer and then makes all arrangements for shipping your products overseas.

This method requires a lot of footwork and infrastructure, and entails more risk, but the potential profit rewards are often higher. If you choose to export directly, you have several options: Sales Representatives or Agents are essentially, the employees that are hired as foreign-based representatives or "agents" who work on a commission basis to locate buyers for your product, the same that is done domestically. Distributors will strike a deal with a foreign distributor, who purchases merchandise from the organisation and resells it with a mark-up.

The distributor maintains inventory and provides after-sales service to the buyer. Indirect Exporting An organisation uses an export intermediary to perform most of the details of the export arrangement. Many small businesses choose this option, at least at the outset. There are several types of export intermediaries: Commissioned agents are brokers who link your product or service with specific foreign buyers, allowing the primary company to fulfil the order, handle packing, shipping, and export documentation.

Export Management Companies (EMCs) and Export Trading Companies (ETCs) are companies that operate in the country where the goods export. EMCs generally represent your product to promote it to other prospective overseas purchasers, while ETCs usually work according to demand, finding a need and sourcing your product for foreign buyers. Both types of companies usually take care of all aspects of the export transaction (including conducting market research, promoting your product overseas, accessing proper distribution channels, and locating foreign distributors), making them a viable option for smaller companies that lack the time and expertise to break into international markets on their own.

EMCs and ETCs usually operate on a commission basis, although some work on a retainer basis and some take title to the goods they sell, making a profit on the mark-up. Importing and exporting, on any scale, from a tiny home office or from the World Trade Centre. It is not required to have a license from the United States government in order to do international trade, but the country with which company does business may require a license. There are several issues needed in an international business plan (Rajan, 1998).

Discuss the different types of risk that impact on an organisation trading on an international basis. Political risk arises from the possibility that a host government will take actions harmful to foreign investors or that political turmoil will endanger investments. Political risk are particularly acute in developing countries, where unstable or ideologically motivated governments may attempt to block return of profits by foreign investors or even seize their assets from the host country. An example is Venezuela.

President Chavez at the time at a desire to broaden the country's socialist revolution in Venezuela and issued a