As the global economy is expanding foreign trades are also becoming more prominent. The customer base is no longer restricted to a specific geographic location. However, foreign trade is more challenging than local trade. This is mainly due to the differences in language, culture, politics, and social conditions. If you are thinking of doing foreign trade then you must know the obstacles in foreign trade.
Language barrier
Communication is vital in any trade. When trading with a different country, the language becomes a barrier. When you are going to sell a product in a foreign market, make sure the customers get the correct meaning. So, you need to ensure you are giving the customers the right message. It is recommended to have an international office with team members from the country that you are doing business with. Hiring local people can be very helpful in removing the language barrier.
Cultural differences
You have to blend with the local culture to make your business successful. That’s not easy. Cultural differences are one of the major obstacles to foreign trade. You should be aware of the social norms, holidays, food, traditions, and other things to cater your marketing activities accordingly. For example, in Western countries, the typical working days are Monday to Friday. Whereas, in Muslim countries, Friday is a government holiday. Therefore, if you live in a Muslim country and doing business in a Western country, you must keep your international office open on Friday, thus maintaining their culture.
Managing a team is one of the obstacles in foreign trade
If you are doing business in a foreign country, it is recommended that you have your representative run the international office. You must hire local employees as well. You are accustomed to the attitude and talent of your local people, but not of the other country. Thus, managing a team of mixed nationalities can be a challenge. You must stress the clarity of communication when dealing with employees of the other country.
Currency exchange is among the obstacles to foreign trade
Recently, the currency fluctuation has been significant due to the pandemic, the Israel-Palestine war, and political and other reasons. Your business can be greatly affected by currency fluctuation. , when setting the price of the product or allocating a budget for your business, you should consider the risk associated with currency fluctuation. It is necessary to always monitor currency fluctuation so that you can make necessary changes in your business operations and decisions. You need to keep an eye on the inflation rate as well.
Tariff and Non-Tariff Barriers
These can create challenges for international trade. If the customs duties are high, for example, you won’t be able to make much profit. Technical regulations of a particular country can force you to adjust your production processes. This step may result in increasing operational costs. You should choose a country that has favorable conditions for doing business.
Conclusion
Whether you are producing goods locally and selling internationally or producing goods in a different country and selling them domestically, you have to face these major obstacles in foreign trade. By learning to overcome these challenges you can run your foreign trade smoothly for many years.
