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What Are the Advantages of International Trade?

The internet and technology have made it much easier for businesses of all sizes to profit from the many advantages of international trade. Going international could provide your business access to a world of opportunities.
March 21, 2018

If you're looking to expand your business, have you considered the advantages of international trade? 

Maybe you think it's safer to focus on trade on your home turf. But venturing out of your comfort zone to trade internationally may make your business stronger, more successful and more profitable. 

Before you pass on expanding into foreign markets, consider some of these potential advantages of international trade.

1. Increased revenues

One of the top advantages of international trade is that you may be able to increase your number of potential clients. Each country you add to your list can open up a new pathway to business growth and increased revenues.

The 2016 FedEx Trade Index, a national survey of 1,004 small business leaders conducted by Morning Consult, shows that business leaders engaged in global trade say they're growing faster and hiring more employees than small businesses who stay stateside.

"Sixty-five percent of small businesses that trade say their revenue is increasing versus 46 percent of small businesses that do not trade," the report said. "Small businesses that trade are also 20 percent more likely to say they are hiring more employees." (Respondents included business owners and executive at companies with between two and 500 employees.)

2. Decreased competition

Your product and services may have to compete in a crowded market in the U.S, but you may find that you have less competition in other countries. 

3. Longer product lifespan

Sales can dip for certain products domestically as Americans stop buying them or move to upgraded versions over time. 

Focusing only on the domestic market may expose you to increased risk from downturns in the economy, political factors, environmental events and other risk factors.

Selling a product to an overseas market can extend the life of an existing product as emerging markets seek to buy American products.

4. Easier cash-flow management

Getting paid upfront may be one of the hidden advantages of international trade. 

When trading internationally, it may be a general practice to ask for payment upfront, whereas at home you may have to be more creative in managing cash flow while waiting to be paid. Expanding your business overseas could help you manage cash flow better.

5. Better risk management

One of the significant advantages of international trade is market diversification. Focusing only on the domestic market may expose you to increased risk from downturns in the economy, political factors, environmental events and other risk factors. Becoming less dependent on a single market may help you mitigate potential risks in your core market.

6. Benefiting from currency exchange

Those who add international trade to their portfolio may also benefit from currency fluctuations. For example, when the U.S. dollar is down, you may be able to export more as foreign customers benefit from the favorable currency exchange rate.

You can also benefit from currency conversion. Let's say you do business in Japan and the Japanese yen is strong against the U.S. dollar. Your company's profits from Japan will be in yen. When you convert the payments in yen against a weak dollar, that means more dollars for your American head office—a welcome boost to your bottom line. This alone could be one of the most valuable advantages of international trade.

7. Access to export financing

Another one of the advantages of international trade is that you may be able to leverage export financing. 

The Export-Import Bank of the United States (EXIM) and The U.S. Small Business Administration may be places to explore for export financing options.

8. Disposal of surplus goods

One of the advantages of international trade is that you may have an outlet to dispose of surplus goods that you're unable to sell in your home market.

9. Enhanced reputation

Doing business in other countries can boost your company's reputation. Successes in one country can influence success in other adjacent countries, which can raise your company's profile in your market niche. It can also help increase your company's credibility, both abroad and at home. This is one of the advantages of international trade that may be difficult to quantify and, therefore, easy to ignore.

10. Opportunity to specialize

International markets can open up avenues for a new line of service or products. It can also give you an opportunity to specialize in a different area to serve that market. 

Being exposed to the realities of the world outside your home base may even spark innovations, upgrades and efficiencies for your products and services. We never know what happens when we open our minds to ideas, feedback and experiences that come from outside the boundaries of our own country.

If you're not sure whether or not you're ready to partake in the advantages of international trade, you might want to check out the resources available for you at The International Trade Administration (ITA). In addition to export education material, the site gives an export readiness assessment

If you're in the UK, you can check out Get Help Researching Export Markets. In Canada, you can access international trade resources made available by The Canadian Trade Commissioner Service.

Read more articles on business expansion.

Photo: Getty Images