Explain the problems of international business

international-trade
cbse

#1

International business suffers from some specific problems which are explained below:
(a) Difference in languages and problem of distance : Each country has its own language in which its traders wish to prepare their trade documents right from trade enquiry or the letter of quotation to the payment documents. This works as a serious barrier between the traders of the different countries. Moreover, the distance between the trading countries increases the cost of transportation of goods, making the price high and also creating risk of fraud, etc. as the traders may not have face to face contact between them.
(b) Import-export restrictions: At times many countries put certain restrictions on their foreign trade to make their B.O.P. (balance of payment) favourable. They impose heavy tariffs or import duties, volume restrictions on both of their imports as well as their exports. This hampers the smooth conduct of IT.
© Lack of proper information about foreign market: In most of the cases new traders do not have adequate information about foreign markets what ever information is provided by different agencies are either unadequate or does not fulfil their requirements. Thus, they fail to have clarity about the opportunities available to them for exports and imports.
(d) Heavy documentation : IT requires so many legal formalities and many documents, which makes the trade procedure very cumbersome as well as complex. That’s why most of the small traders trade only through third parties rather than going directly and have to pay commissions to them which reduces their profit margins, increases the cost of transactions.
(e) Payment problems : IT, traders of an importing
country wish to make payment in their own currency and the traders of exporting country want payments in their legal tender. In both the situations there may come the problem of foreign exchange. The fluctuations in the exchange rates may create problems and risk to the traders of both the countries.