Import-export trade is considered to be one of the oldest and most important practices of a successful business as it opens a new way for expansion into new markets. Almost all the economies of the world are dependent on imports and exports. The main motive behind indulging in a foreign trade business is to expand the business overseas to reach customers around the world and increase sales in the long run. The import-export industry of a country also acts as a game changer as it is able to offer a wide range of opportunities both for the existing business holders and new start-ups.
We have entered the era of globalization, and nowadays almost all the countries in the world are engaged in international trade with each other virtually. But with the growth of the import and export business, even the challenges faced by exporters have evolved and it has become difficult to predict the barriers that the import-export industry may have to deal with during the upcoming time.
The import and export industry keeps on extending with time. Whenever a business expands, a lot of benefits and opportunities come along with it. But, some challenges might also come up. If you are planning to start a foreign trade business, then these issues are something that you should know about in detail.
Language Barrier
All the countries have their own language. And, they all differ from each other. Sometimes, the language difference might act as a barrier in the foreign trade business. Therefore, as an exporter, you must know how to tackle the language barrier issue. The best way through which you can conquer the language barrier is to learn the spoken and written language of your target countries.
When you are starting a foreign trade business, it is very important to make sure that your brand message is translated properly into the local language of your target market so that customers of that particular area can easily understand the ideas behind your products.
You can talk with a local of that particular country to easily tackle this issue. The best way through which you can convert your brand’s idea and message to your targeted foreign audience is by hiring an interpreter who will act as a mediator between your brand and customers. A lot of big brands have also applied the way of hiring employees who at least know how to write and speak one or two foreign languages so that it becomes easy for the brand to translate their message into various foreign markets.
Currency exchange and inflation rate
When you start a foreign trade business, you will be receiving payments in various currencies differing from country to country.
Suppose we take the example of dollars for better understanding. The value of the dollar in your country will not be the same as that of any other country.
Therefore, when starting an import-export business, you must gather knowledge about currency exchange rates in your country and all your targeted markets. Also, you must check them from time to time as it keeps on fluctuating.
Another important thing that must be kept a check on is the inflation rate. The inflation rate is the rate at which the general price levels increase in a year. Even the inflation rate differs from place to place and it affects all the factors included related to imports and exports.
Both the currency exchange rate and inflation rate are very essential in a foreign trade business and you must keep a check on them from time to time.
Trade Finance and Credit
Trade finance and export credit are two things that exporters cannot access easily as required for micro, small, and medium enterprises even when they are responsible for more than half of the total exports in our country. There exists a high expense of finance as banks and lenders need to pay a heavy price because of the complicated compliances. The banks and lenders usually forward such cost burdens to their clients who are mostly exporters of the country. This also ends up in high collaterals at times. These trade finance and credit issues make the application procedures for credit very complex for Indian exporters. Moreover, there is a serious lack of proper guidance on how to deal with trade finance and credit which makes it even more tough.
Therefore, the Indian government has launched various schemes recently such as the Advance authorization scheme, EPCG License, Export House Certificate, etc with the motive to support the Indian exporters to reduce overall costs by gaining certain benefits over the exports.
Conclusion
Here, we have discussed some common challenges that you might face while starting a foreign trade business. You need to know about such issues and plan strategies accordingly for a successful export business. With the correct strategies, you can easily boost your import-export business in 2023.
