Emerging economies have increased their role globally after the emergence of a booming middle class, willing to assume certain consumption habits of developed countries emerging economies have increased their role globally after the emergence of a booming middle class, willing to assume certain consumption habits of developed countries.
The emergence of this circumstance has led to the use of exports has become a primary axis to underpin the growth of developed economies in the coming years, given the progressive trade liberalization carried out in emerging markets. The expansion of the foreign business of any manufacturing company should be fixed in certain aspects that could turn out to be critical, in order to achieve this adventure successfully. Establish a list of possible destinations for shipments based on market potential, level of competition and the fit of products or services in those markets.
The need to establish possible alliances with local partners that facilitate penetration in their respective markets and the necessary support from governments, in terms of the implementation of productive activity or greater ease in commercial operations in the respective customs. Aspects such as tax incentives or the existence of free zones could be a stimulus for the development of economic activity in other latitudes.
The increase in domestic consumption in certain countries is reason enough to include them as a possible destination for our products. Emerging countries that, to date, have been characterized by exploiting a productive monoculture, especially oil exporting countries, are opening their economies to greater diversification, which irremediably leads to greater trade opening with the rest of the world.
Costs and reputation
Given the new economic scenario that presents itself, political risk may be one of the main factors that condition the internationalization of any company. The lack of political stability or legal security limits, at all times, the predisposition of companies to undertake the process of internationalization. The possibility of an expropriation or the appearance of armed conflicts, or the simple fact that there is a widespread corruption of business in those countries, tremendously compromises the fact of starting any economic activity beyond the local markets.
The political risk can range from an increase in operating costs, incurring significant commercial losses, to the closure of facilities due to a possible interruption of the supply chain from abroad, as a result of a political decision that appears on a discretional basis. Without anything to be done to prevent it. Another situation that may arise from said risk is that which refers to the deterioration of the corporate reputation in which companies may incur when they assume as their own the working conditions of third countries.
Currency and legislation
The possible fluctuation in the currency exchange directly affects the income statement of the subsidiary at the time of consolidation with the parent company. The circumstances that may be behind these variations, in addition to those of the market itself, have to do with the lack of legal security that is reflected in low institutional quality in these countries. A runaway inflation or the absence of control by the competent financial authorities can cause a devaluation of the local currency so high that it ends up distorting the returns coming from the economic unit in this country. In relation to the financial sphere, a fact that is currently taking place in certain countries refers to the impossibility of repatriating capital to the country of origin. Another aspect that could also negatively affect a possible incursion in the field of foreign trade is that which refers to the deficient judicial structure that exists in the destination country of our expeditions.
Legislative changes or bias that may occur at the time of resolving any commercial discussion could result in a financial loss large enough to weigh a commercial venture beyond our borders. Due to the necessary internationalization of our companies to maintain the degree of competitiveness and presence in the global market, it is necessary to adopt a cautious attitude and incorporate into the expansion strategy elements that minimize the different operational and financial risks that may arise in the commercial operation abroad.
The application of techniques of internal coverage, by sharing the risk with the foreign client, or of an external nature, such as the contracting of a commercial insurance or different financial products, could be acceptable mechanisms with which to minimize the business risk implicit in any Commercial Operation.