The import and export business is an ideal occupation for those individuals who know how to sell, but who also have a diplomatic and engaging character. As sales and distribution agents in one or more countries for overseas manufacturers, importers and exporters are the matchmakers of international trade. Import and export are high-risk businesses that are vulnerable to sudden changes in politics, economics and legislation. There are many risks for an exporter and importer that can be summed up as government risk, regulation risk, labor risk, raw material risk, fixed cost risk, exchange risk, transport risk, and culture and society risk.
Change in Government Regulation: The adjustment in government regulation is another known element that influences business. With the steady change in standards and regulations, this can moderately have an impact in all organizations. The bookkeeping embarrassments in the 21st century, for instance, has driven the "Securities and Exchange Commission in the United States" to be more engaged in corporate consistence. The legislature has presented the Oxley-Sarbanes consistence in 2002, as a reaction on the social environment that calls for open organizations to be more mindful. Customized sets of laws and regulations administer managing
…show more content…
These occur if the currency in the home market strengthens in comparison with the currencies in the target markets, which reduces the value of earnings from foreign business. For example, an export manager of one of the companies surveyed said, “We pay the salaries of our staff in Swiss francs. The customers pay in Euros. Because of the current strength of the Swiss franc, we take a big margin loss”. In addition, Inflation in foreign markets can have a similar effect if it leads to devaluation of the currencies concerned. Recessions in foreign markets and an increase in state indebtedness can cause demand for the company’s products to
Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).
Many business owners and entrepreneurs are doubtful about the global opportunities available to their business. In other words, business owners don’t give consideration to the world markets, instead they tend think locally in terms of gaining customers. This doubt however is unfounded. The international trade commission reported that 70% of the world’s purchasing power and 95% of the world’s consumers are located outside of the United States, which means that there is a massive market that is currently untapped by 99% of business in America. In addition to doubt, there is the uncertainty about exporting to other countries, this uncertainty may stem from lack of knowledge about foreign trade and the international laws. A business owner may be uncertain about how, when, where, and to whom it is legal to ship their products. Although, this uncertainty is understandable it is not required for businesses that are conducting business legally within the United States, business owners should remain mindful of this so that they can push their uncertainties aside. The last factor that deters businesses from international trade is Fear. Fear that there will be unforeseen and uncontrollable issues with transporting goods such as: theft, loss, damages, diversions, and/or regulatory penalties that may be imposed on the business. Although, there is a
Academic Consortium on International Trade (2000) Letter to Presidents of Universities and Colleges. Available at: http://www.spp.umich.edu/rsie/acit/ [Accessed 1 April 2014]
Joshua Shackman presentation "The Economic and Financial Environment of International Business"; marketing is flexible to all regions, and you can expand production facility operations in a country when their exchange rate increases. And take advantage of the increased revenue gained from a more lucrative currency in the case of the large multinational consumer product company scenario. Shackman, J. (2015). Also to combat unfavorable exchange rate fluctuations, one option would be to maintain a production base in market regions you are looking to sell and use those factories to satisfy the demand for the company’s product in those areas. All Internationally operated firms have foreign exchange exposure, so as currency values of profits rise and fall with trade value between foreign currencies and the dollar they have to address and optimize their operational hedging strategy to anticipate and compensate to stay competitive in the
The Sarbanes-Oxley Act of 2002 was signed into law on July 30, 2002 by President Bush. The new law came after major corporate scandals involving Enron, Arthur Anderson, WorldCom. Its goals are to protect investors by improving accuracy of and reliability of corporate disclosures and to restore investor confidence. The law is considered the most important change in securities and corporate law since the New Deal. The act is named after Senator Paul Sarbanes of Maryland and Representative Michael Oxley of Ohio (Wikipedia Online).
3. Likewise, businesses would no longer have to pay hedging costs which they do today in order to insure themselves against the threat of currency fluctuations. Businesses, involved in commercial transactions in different member states, would no longer have to face administrative costs of accounting for the changes of currencies, plus the time involved. It is estimated that the currency cost of exports to small companies is 10 times the cost to the multi-nationals, who offset sales against purchases and can command the best rates.
Capitalism is almost too good to be true, but there comes a time when government intervention becomes a necessity, especially after a series of scandals in corporate businesses that destroyed the trust of investors and consumers. The government finally had to come up with a solution due to the fact that the free market is no longer efficient on its own. Established in 2002, the Sarbanes-Oxley Act, also known as Public Accounting Reform and Investor Protection Act, is a federal law that aims to improve corporate governance by increasing compliance regulations and financial transparency in hopes of preventing big scale corruptions such as the Enron Scandal from happening again. The Enron Scandal, along with other corruption and fraud in the businesses
Investing or venturing into the international market involves critical analysis of the internal and external environment in which the company operates. Usually, a company will decide to venture internationally due to a saturated market or fierce competition in the current country of operation. The demand for a company’s products may have diminished as a result of an economic crisis thus the company will target a foreign market to sustain its sales. In other words, the firms expand internationally to seek new customers for its products. For example, the current Euro zone crisis led to low demand in Europe and many companies extended their businesses to emerging markets where demand was high. A company may also venture in the international market to enhance the cost-effectiveness of its operations especially for manufacturing companies that will benefit from low costs of production in developing world. Global expansion is a long term project as it involves demanding logistics to be successful. Thorough research must be undertaken to ensure that the expansion will create value for share...
During the 1990s, Japan has been exposed to one of the most difficult structural transition periods in its post-war history, in terms of social and economic conditions. There have been two major changes: one is a substantial decline in economic growth in real terms, and the other is a changing social structure characterized by the declining birth rate and the ageing population. Under the pressure of changes in the economic environment caused by globalization and innovations in information technology, Japanese business corporations are forced to adapt to the new situation. While companies faced with fierce international competition, it became more critical to understand the basic knowledge of complicated legal, cultural, economic, and social issues. Engaging in international trade also requires attention to international regulations, international business planning, international market research, funding, distribution and other areas that must be considered separately from domestic business issues. The paper suggests some of the basic tools that can apply to solve the problem or to bring the business opportunity to fruition in today's Japanese business environment
Exporting is the commercial activity of selling and shipping a good or goods to a foreign country. Importing is the commercial activity of buying and bringing in goods from a foreign country. The benefits of exporting and importing are good to a countries economy as it creates local jobs. The Honda plant in Alliston exports the Honda Civic (a three door hatchback and four-door sedan) as well it is the only facility in the world that builds the full-size Odyssey minivan and the Acura MDX sport utility vehicle.
Other types of exchange rate risks are translation risk and so-called hidden risk. The translation risk relates to cases where large multinational companies have subsidiaries in other countries. On the financial statement of the whole group, the company may have to translate the assets and liabilities from foreign accounts into the group statement. The translation will involve foreign exchange exposure. The term hidden risk evolves around the fact that all companies are subject to exchange rate risks, even if they don’t do business with companies using other currencies. A company that is buying supplies from a local manufacturer might be affected of fluctuating foreign exchange rates if the local manufacturer is doing business with overseas companies. If a manufacturer goes out of business, or experience heavy losses, it will affect all the companies it does business with. The co...
Dealing with a lot of International markets, the currency fluctuations will have an impact on the export income. Factors such as taxes should also be considered.
There are ways to conduct international business safety. First of all, it is of paramount importance to know your own product and being aware of country’s trade laws. You must also have done thorough research about the buyers and sellers, including the country trade laws, and legal proceedings. To do business globally, it is important to comply with local laws, satisfy trade security measures, meet documentation requirements, understand complex tariffs and coordinate various parties. Handling these tasks manually increases the risk of failure and avoid supply chain bottlenecks, production downtime. Remember that errors which can be costly when trading across border must also be handled. There terms used quite often in global trade management are export management, import management, trade preference management, restitution management. There are two main problems with trading across borders which must be addressed in a firm. The first problem is Double Indemnity. It is that your firm will be taxed both at home and abroad. This is also a direct result of trading across borders. The second one is language and culture clashes. To increase cross-border trade, the international trading environment is one of rapid, continuous change. It is characterized by cross-cultural contact and communication. This cross pollination of cultures
Reflected in its policies and attitudes toward business are a government's idea of how best to promote the national interest, considering its own resources and political philosophy. A government controls and restricts a company's activities by encouraging and offering support or by discouraging and banning or restricting its activities depending on the government. Here are steps in international law. International law recognizes the right of nations to grant or withhold permission to do business within its political boundaries and control its citizens when it comes to conducting business. Thus, political environment of countries is a critical concern for the international marketer and he should examine the salient political features of global markets they plan to enter.
The first one of the organizations that is responsible for assisting and overseeing companies is the Security and Exchange Commission (SEC). “The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation” (SEC 2008, ¶ 1). Basically it is the SEC’s job to interpret the laws that congress passes and assist companies in implementing these laws. While Congress makes modifications to laws it is this companies job to also make all companies aware of these changes and help them to make a smooth transition into using the newly amended law.