Explained Basic of knowledge of Global Trade! Risk Management of the Deal by Video
Hi there, this is Iino.
This time I would like to talk about the basics of “Global Trade.”
About the basic knowledge of Trade!
In modern society, the economy is supported by trade.
It is thanks to the trade that we can buy products around us at low prices, and that we can buy them whenever and wherever we want.
If there were no Trade ?
If there were no trade in the world, or if the rules were that everything must be produced and consumed locally, the products around us would be less diverse and more expensive.
Thanks to the trade, cheap products and expensive, rare, and scarce products are available, making business a materially rich world.
Need for the proper knowledge for Trade
However, trading is not the same as buying apples at the local supermarket. You deal with people who have different languages, cultures, and business practices.
To do business with people overseas and buy and sell products, you need to have the proper knowledge.
If you don’t have the proper knowledge, you may fail in your business. You maybe be cheated, lose money instead of making a profit, or violate the law without knowing it.
Since trading is not a volunteer activity but a business to earn profits, you must avoid risks such as loss or illegal activities.
However, with the proper trade knowledge, you can avoid risks and troubles and potentially earn more significant profits, than your competitors who are not familiar with the trade.
Risk for the Trust of the counter party
So what exactly are the risks involved in the trade? The most considerable risk is the trust of the counter party.
Will they pay you properly?
Will they send the product on time?
There is a possibility that the person you are selling to or buying from, will not do the basic things in business.
If you don’t know the other party well or don’t know the situation at any time, there is a high possibility that you will lose money.
Of course, it depends on the person and the company, but in my experience, when dealing with foreign companies, we will have a chance like this.
・ Deliberately delaying payment.
・ Insufficient packaging and wrapping of products.
・ Inadequate packaging and wrapping of products.
・ Delivery is delayed for more than a month without hesitation.
・ They charge you for items that you don’t understand.
These issues are not good or bad, but a just difference in business practices. In some other countries, this is common.
There is a need for proper trade knowledge to avoid the problem causing by different business practices.
Risk for Exchange Rate
In addition to this, there is also the risk of foreign exchange rates. The exchange rate fluctuates daily. If the exchange rate swings to an extremely strong or weak, you may lose a lot of money.
In trade transactions, you must always be aware of exchange rate fluctuations.
Understanding of the international regulation to Trade
You must understand other international regulations to trade.
There are many cases that the company loses big money since they cannot clear the customs, because of violating the regulations without understanding.
It happens pretty often.
What kind of regulations are there? Let me give you examples.
・ Intellectual property infringement.
・ Environmental problems.
・ Dangerous goods.
・ Endangered species.
・ Invasive species.
・ Protection of domestic industry.
・ Safety compliance.
If you look at the big picture, you may think it’s obvious.
But when it comes to actual business transactions, there are many cases where people ignore the regulations and proceed without knowing.
I will make another video to explain these regulations, so please understand some general ones like these.
Now let’s summarize the main points of this talk. Without trade transactions, we would not have the material wealth we have today.
However, there are risks to conduct trade business with other countries, such as…
Payment (credit risk).
Shipping of products (damage, delivery time).
Exchange rate fluctuations.
In addition, if you do not understand the “global treaties” and “regulations of each country”, you may not be able to send products that you thought you could send. It often results in a large deficit.
Proper trade knowledge covers these risks.
In this channel, I will be updating the correct trade knowledge in an easy-to-understand manner, so let’s learn together.
That’s all I have to say this time. Thank you very much!
Contact to IINO san