INTERNATIONAL TRADE is the EXCHANGE of GOODS and SERVICES between countries. 

The shoes that I am wearing whilst I am writing this article are an example of an EXCHANGE OF GOODS between countries as they were produced in Vietnam, but I have purchased them in Mexico. 

For the past 13 years, I have been assisting clients in India, the USA, Canada, South Africa, etc., to obtain the Portuguese citizenship in Portugal or the Brazilian citizenship in Brazil. And this is an example of an EXCHANGE OF SERVICES between countries.

As you can see, INTERNATIONAL TRADE is part of our lives and nowadays it is almost impossible to buy GOODS or SERVICES that were not produced or are being rendered in another country.

However, although INTERNATIONAL TRADE is more trivial in the current times, the decision of a company of joining the INTERNATIONAL MARKETPLACE is not always that trite.

This happens because INTERNATIONAL TRADE is far more complex than domestic trade as companies must deal with economical, legal, political, and even psychological implications that they do not face when making business in their own country.

For instance, someone that sells “Coxinhas" at a bar in Brazil does not have to worry about if the customers know or like this typical Brazilian snack. But if someone decides to export "Coxinhas" to be sold in the USA, they will have to research if this snack will have a market in that country, which taxes they will have to pay to send the product to the USA, how much the currency exchange will affect the cost of the snack, if there is any sanitary measure that must be observed so the product can enter the USA, etc.

Therefore, considering that several extra details and risks must be taken into account for someone to join the INTERNATIONAL MARKETPLACE (which I intend to talk about in future posts), here in this text we deal with the question: WHY SHOULD A COMPANY GO INTERNATIONAL? 

Below I list the SEVEN REASONS for a company going international:

1. INCREASED PRODUCTIVITY

The PRODUCTIVITY of companies that EXPORT tends to increase because as they have to answer to more clients and markets, they are forced to increase their production both in terms of quantity and quality.

And this happens either through the reduction of their idle capacity (the time spent in the manufacturing plant where no production occurs), through the correction and adaptation of their PRODUCTION PROCESS to the new demands.

2. COST REDUCTION

It is a direct consequence of INCREASED PRODUCTIVITY because it gives the companies more leverage when negotiating with suppliers.

With a bigger production, the companies tend to buy more feedstocks & supplies. Therefore, they can get BIGGER DISCOUNTS when buying in bulk, decreasing their costs, which consequently increases their COMPETITIVE EDGE and profits.

3. DECREASED TAX BURDEN

Most countries have SPECIAL TAX REGIMES and programmes to encourage their companies to EXPORT like tax deductions & incentives, duty drawback, etc. 

With proper TAX PLANNING, companies that export can take advantage of those rules and decrease their tax burden significantly. 

4. REDUCED DEPENDENCE ON THE DOMESTIC MARKET

Probably, you might have already heard the saying “don’t put all your eggs in one basket”, which is much repeated by financial advisers when they want to tell people that they should not concentrate all their resources on just one investment.  

And this is what exporting means to companies: DIVERSIFICATION OF MARKETS. A company that exports can compensate for eventual economical struggles or seasonal troughs in its home markets with sales to other countries.

Moreover, when a company sells to other countries it is enlarging its range of consumers and consequently its chances of increasing their sales & profits almost unlimitedly.

5. INNOVATION & MANUFACTURING OF HIGHER QUALITY PRODUCTS

Companies that export are more INNOVATIVE than companies that do not, due to their foreign competitors and to the regulations of the countries they sell their products to, which forces them to improve their production by importing or creating NEW TECHNOLOGIES.

Inevitably, this implies that those companies not only manufacture HIGHER QUALITY PRODUCTS but also introduce these new technologies in their domestic market, which benefit from these innovations as well.

6. MORE INVESTMENT IN QUALITY CONTROL AND HUMAN RESOURCES

Considering that the international market has HIGHER STANDARDS and is MORE COMPETITIVE than the domestic one, the companies that EXPORT are more prone to invest in QUALITY CONTROL PROGRAMMES and HUMAN RESOURCES.

Indeed, imagine a situation in which an international buyer returns a product because it is of poor quality or has a flaw. The devolution cost is high as the distances in an export operation are farther than in a domestic sale and there is far more bureaucracy involved. So, companies are obliged to be very strict about the quality of their products to avoid situations like this.

In the same way, those companies invest a lot in the personal development of their employees as they need QUALIFIED STAFF that can keep up with the demands of the international competition. Consequently, the working environment also tends to be better in companies that EXPORT too.

7. POSITIVE REPUTATION

Companies can strengthen their POSITIVE REPUTATION before their consumers, suppliers, employees, and even competition when they EXPORT their products. 

This happens because their brands are immediately associated with the HIGH-QUALITY STANDARDS of the INTERNATIONAL MARKET. Hence, they are perceived by the community as a company that has good products, that is a good place to work, which is trustworthy to do business with, whose practices are a reference, and so on.