A company wishing to indulge in overseas trade will have to carefully consider the best way of achieving this. Given the following scenarios, discuss the major challenges faced in each case - Essay Example

Strategies and risks associated with international trade Any business advancing its’ operation to an international level must understand that it is not only about reaping the benefits of economies of scale but there are also several risks that come up with international trade. Such businesses are capable of reaping the significant growth opportunities but, not without challenges and risks. Therefore, it is advisable to plan prior for any potential challenge or risks which might deter prosperity as this mostly leads to the generation of maximum returns while enjoying the economies of scale (Yager 1-5).

Considering Software Company who intends to set up hotline support in North America with a strategy of saving operational costs, This idea may, however, be very brilliant but it should come with the problem of cultural and language barriers. For some reasons, being able to associate with local culture of a particular region besides speaking the same language is never sufficient. Therefore, it is advisable that the organization should seek adequate information concerning the local structure and infrastructure of the local community before the branch is put in place as this would significantly eradicate losses (Yager 1-5).

The organization should also consider the issues of taxation and customs; this is because the law of law of taxation is known to vary from one country to the other. it is therefore, advisable that before the firm considers its operation, it should first consult about the laws of merchandise of that particular areas because some governments would not allow products of another state without proper documentation and this knowledge would help the organization in determining the level of its’ returns.

Consequently, the firm may expect foreign exchange challenges which, is very common when it comes to the investments fluctuations especially as per the variations in currency exchange rates. For instance, when local currency appreciates, there would be a decrease in profit of the foreign firms due to volatility in the exchange rates (Yager 1-5). The second case involves a European domestic appliance manufacturer proposing to sell its’ commodities into china without a conclusive decision, this firm should, therefore, consider price optimization since china may also have other industries producing the same products.

Moreover, China’s GDP may never be sufficient to support the purchase of that commodity and lower pricing should therefore be advised in order to increase the sales volume for maximum returns (Hinkelman 566). Another probable challenge is the organizational flexibility, selling appliances from another country would therefore force the organization to consider flexibility because refusal to make alterations leads to loss in customer potentiality and this affects revenue returns. Besides, the business should be very shift in advancing numerous changes in relation to the customer’s demands with appropriate implementations (Hinkelman 566).

In most occasions, selling of commodities across the boarders is often associated with commercial risks. It is therefore advised that before engages into the supply of its commodities to china then appropriate consultation should be made with other companies who had gotten engaged to this country before and proper reports be generated so as to give clear history on terms of payments so f the imported goods. This is because, premature termination with contracts would be of a big blow to the exporter and the constraints of laws and policies have been also found to differ from one state top the other (Hinkelman 566).

Works cited: Yager, Loren. Human capital significant challenges confront U.S. trade agencies. Diane Publishing.2003.Print. Hinkelman, Edward. Dictionary of International Trade 8th Edition. World trade press.Librix.eu. 2008. Print.