Whether or not to become involved in or expand in international trade is a crucial business decision.
In today’s highly competitive and global business environment, companies are finding that they must incorporate some form of international trade in order to maintain their level of competitiveness.
The need for international trade research
To make effective decisions about international ventures, it is vital for company managers to have access to information about market conditions.
Accurate information helps reduce the uncertainty associated with new international ventures, reduces the chances that decisions will be based on erroneous assumptions about a market and enables a systematic assessment of the benefits and disadvantages associated with a new business venture.
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Conditions in the business world are constantly changing. Customer needs and preferences change; competitors are constantly shifting their product or service offerings, pricing, business strategies and promotional strategies; and market environments are subject to shifts caused by external factors. International trade research enables companies to monitor these changing conditions and alert managers to potential problems in advance.
Overall, international trade research has many applications:
1. Strategic global business planning
Research supports the development of a business plan and its various components, including marketing, financing, distribution and product development.
2. Determining foreign market potential
Estimating the demand for a product or service in an international market is a vital component of strategic and financial planning. Research enables companies to make a realistic assessment of the strengths of their products or services and the amount of competition in a potential market.
3. Decision making
Research provides the basis for informed decision making. It helps managers decide which markets to target and what approaches to use in entering them. It reduces the risk of making costly errors and identifies potential threats before they become harmful.
4. Identifying new global trade opportunities
Research enables companies to identify new opportunities for products and services or new markets. Research enables potential opportunities to be evaluated so that the most suitable ones can be acted upon.
5. Enabling cost-benefit analysis
Every business decision has costs and benefits associated with it. Research indicates how management should balance costs and risks against potential returns.
6. Guiding the international marketing process
Research is used to determine customer needs in a market and how to deliver products or services that will meet those needs. Research provides comparisons with competing products and identifies the modifications required to address new markets.
7. Minimizing global trade risks
Research can help a company minimize its risk exposure in new markets by exposing the signs of instability in a market.
8. Identifying potential problems and challenges
Research helps companies identify situations in which international business is likely to become more expensive or challenging because of unforeseen political, legal or cultural conditions.
9. Monitoring foreign market performance
Research is used to track customer satisfaction, guide operations and test new initiatives. It also helps companies determine which markets are profitable and which are not.
Using international trade research to help strategic planning
When gathered and analyzed correctly, international trade research will increase the chances that a business decision will be the correct one, and thus increase the possibility of successful trading.
Research can help identify unstable markets that are likely to be unprofitable, cultural or financial issues that might make a product unlikely to sell in what seems to be a promising market, or a market that has not yet been exploited.
It is important to plan research into international markets carefully so that the most relevant and current information is obtained.
It is also essential to remember that research cannot be used to make accurate predictions, only as an aid for decision making.