General Consideration in International Business

General Consideration in International Business

Each type and method of international business has its unique critical success factors, but some aspects cut across most situation. Financial and tax consideration will always be present, and trade in goods always generates question about transportation and insurance.

Credit risk, or nonpayment risk, is a significant factor in international business, as the ability of the creditor to obtain credit information is usually far more limited than is possible at home,. In addition, where a business accounts to its investors in its own currency but quotes its prices in the currency of its overseas customers. There is always the possibility of a drop in value of thoseother currencies in the period between quotation and payment. This currency risk gamble can also go in the exporter's favor, but most businesses seek to avoid such risks wherever possible, Strategies include payment in the home currency rather than in foreign currency, or the purchase of financial instruments that hedge (insure) against this risk for a fixed price. Currency risk cannot always be avoided, as some transactions (such as direct export consumer sales) rnust be denominated in local currency in order to attract customers, or in instances where the cost of hedging instruments is unreasonable given the transaction size.

Sometimes the selection of an international market or the form of the overseas business entity will be dictated by conditions beyond the control of the prospective trader, Still, it is rare to find oneself totally without options, and the fact that these options exist requires a business and legal strategy to make appropriate choices.

All of these risks make international business a profitable field for lawyers, and serve as a clear warning to international businesspersons. This section began with a simple definition that international business is any domestic business operation that includes an international element. Do not be tempted by this simplicity to conclude that international business is merely an extensior, of domestic business to an "over there" place. The businessperson who can best employ international business law to minimize risks and maximize opportunities stands the best chance of long-term success.