How to engage in international trade?

“The international market can be more profitable, pays better for value-added products, and offers many more growth options because you are not dependent on a few clients.” Flavia Santoro, director of Procolombia.

In an increasingly globalized world, expanding into international markets has become a vital strategy for companies of all sizes in Latin America. Opening up to new horizons not only provides companies with greater competitiveness but also better margins and a diversification of market risk. Rodrigo Patiño, manager of the National Association of Foreign Trade (Analdex) in Antioquia, Colombia, points out that internationalization should be seen as an exchange of products and a search for new opportunities for sector development.

Currently, Latin American companies are strengthening their commercial ties with around 90 countries worldwide. The main trading partners include the United States, the European Union, and China. It is essential that companies, both large and SMEs, across the region implement solid strategies to venture into these global markets and make the most of the opportunities they offer.

International trade in Latin America offers significant opportunities for economic growth and business expansion in the region. However, it also faces a series of challenges that can hinder its development. From trade barriers to exchange rate volatility and the complexity of customs procedures, companies in Latin America face a series of obstacles when seeking to expand into international markets. In this context, it is crucial to understand and address these challenges to make the most of global trade opportunities and promote economic development in the region.

Below we list some barriers:

1. Trade barriers: Tariffs and non-tariff restrictions make it difficult for Latin American products to access international markets.
2. Exchange rate volatility: Fluctuations in exchange rates can affect the competitiveness of Latin American companies in global markets.
3. Complexity of customs procedures: Complicated customs procedures increase the costs and delivery times of exported and imported products.
4. Lack of information about foreign markets: The lack of information makes it difficult for Latin American companies to identify business opportunities and establish successful commercial relationships abroad.
5. Poor infrastructure: The lack of adequate infrastructure limits companies’ ability to access international markets and compete on equal terms with their foreign counterparts.

How to design a strategy for international expansion An internationalization strategy must incorporate the considerations that justify entering a particular market, as well as the actions to achieve that purpose and take advantage of the advantages or benefits of this incursion. To develop it:

• Identify the target market and validate if what you offer has potential: According to Santoro, you must thoroughly study the destination country, know the entry requirements, marketing and distribution channels, even visit it and identify similar products, packaging, labeling, and consumption trends.
• Show the value of your offer: Plan a schedule of visits to international fairs with your product or service portfolio. Exports should not respond to transitory situations but should follow a strategic plan for business growth and expansion.
• Know the rules of the target market: Sabrina Bojanini, head of Development at the Medellín Chamber of Commerce for Antioquia, Colombia, indicates that it is very important to consider the tariff and non-tariff conditions imposed in the target markets. Reviewing whether there are Free Trade Agreements (FTAs) or any commercial agreement is essential to establish the costs of the product, good, or service you want to trade. Likewise, in the case of manufacturing, it is crucial to have a certificate of origin and know these standards so that entrepreneurs can access their benefits. Here, the focus shifts to good market intelligence, analyzing political, economic, cultural, and social variables,” notes Bojanini.
• Define a leader who speaks the same language as the target market: Determine an area or a person responsible for leading the internationalization strategy, who has perfect command of the predominant language in the destination country. “Many times, our entrepreneurs want to enter the international market, and the person handling foreign trade does not master the language. The information on their website and their marketing materials are only in Spanish,” warns the Chamber of Commerce official about the importance of mastering the target market’s language, one of the key elements for negotiating with potential international clients.

What types of strategies could be implemented for the internationalization of your Startup or Company?

Soft Landing: Description: Soft Landing refers to the necessary commercial strategies for a company to establish itself in a foreign country, providing a “softlanding” through possible aids and local support.

• Advantages: Reduction of economic and cultural risks, access to local information and resources, smoother integration into the foreign market.
• Risks: Dependence on the quality and reliability of local support, possible challenges in adapting to the conditions of the new market.

Direct and Indirect Export: Description: Direct export involves selling products directly to foreign customers, while indirect export is done through intermediaries such as export agents or distributors.

• Advantages: Greater control over marketing and the sales process, direct access to foreign customers.
• Risks: Market entry costs, logistical and distribution complexities abroad.

Strategic Alliances: Description: Companies can form strategic alliances with local partners in foreign markets to access their distribution network, market knowledge, and resources.

• Advantages: Quick access to the local market, reduction of costs and risks, sharing of knowledge and resources.
• Risks: Possible conflicts with the local partner, loss of control over certain business operations.

Joint Ventures: Description: A joint venture involves creating a new company in collaboration with a local company abroad, allowing the sharing of risks and resources.

• Advantages: Access to local resources and knowledge, sharing of risks and costs.
• Risks: Cultural and management differences, potential conflicts between partners.

Franchises: Description: Franchises allow companies to expand internationally by licensing their brand and business model to franchisees abroad.

• Advantages: Rapid international expansion, royalty income, less financial risk.
• Risks: Loss of control over the brand and image, dependence on franchisees to maintain quality standards.

Licenses: Description: Companies can license their technology, intellectual property, or trademark to foreign companies in exchange for royalties.

• Advantages: Passive income from royalties, access to new markets without significant investments.
• Risks: Loss of control over intellectual property, potential unfair competition from the licensee.

Foreign Subsidiaries: Description: Establishing subsidiaries abroad allows companies to operate independently in foreign markets, adapting to local conditions.

• Advantages: Greater control over operations, adaptation to local preferences and regulations.
• Risks: High establishment and operation costs, potential regulatory and cultural barriers.

International Trade Agreements: Description: Trade agreements between countries facilitate international trade by reducing tariff barriers and enabling the free movement of goods and services.

• Advantages: Preferential access to foreign markets, reduction of import and export costs.
• Risks: Dependence on the political and economic stability of the signatory countries, possible changes in trade regulations.

International trade offers a vast array of opportunities for companies looking to expand globally. In this context, the Soft Landing strategy proves to be a highly accurate and efficient option for facilitating the internationalization of companies. By providing a “softlanding” in foreign markets, Soft Landing helps mitigate economic risks, accelerate the internationalization process, and leverage local knowledge and resources. Additionally, with the support of experts in the destination market, companies can overcome cultural and regulatory barriers, thus establishing a solid foundation for international success. In short, integrating Soft Landing into the international trade strategy can be the key to opening new doors and achieving the desired growth in the global market.