Feasibility of international trade involves determining whether new trade opportunities are viable by weighing the potential benefits against the risks and costs involved. Before a business enterprise embarks on establishing new investments in international trade, it is pertinent that the firm assesses its strengths in terms of resources and the dynamics of global business environment ( McGovern, 2018 ). Such an assessment will help the organization identify the challenges which will emerge thus developing strategies to overcome them. Establishing feasibility of international trade is crucial since it will help an organization understand its readiness and while also being on the lookout for more promising opportunities.
Research is a crucial requirement when an organization seeks to establish the viability of international trade. In studying the dynamics of international trade, the management will understand how their market segment works, sources of products, competition and consumer purchase behaviors among others. On the international business arena, competition is particularly fierce and delay in decision making can force a business out the market. Second, it is critical to understand product requirements in the global market which also provides information about the industry ( Gervais, 2015 ). For example, if a company in the US seeks to expand its operation in Japan it has to align its products characteristics with the Japanese industry.
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The research process will give an organization the leeway to analyze three essential aspects of international markets. Trade barriers are a significant factor to consider since they indicate the ease of penetration into a foreign market ( Li & Beghin, 2017 ). Identifying all tariffs and non-tariff barriers including all regulations that a country has in place will significantly influence how easy it will be to enter into international trade. It is vital to keep abreast of the political situation in the country that an organization seeks to set base ( Huang, Wu, Yu & Zhang, 2015 ). For example, a country maybe on the verge of political instability as it transits from one regime to another which can affect the plans of the company. Last, the level of competition in a country significantly determines the ease of penetration ( Edmond, Midrigan & Xu, 2015 ). If competition in the target market is high, it is cheaper to target a smaller growing market with less intense rivalry.
Establishing the feasibility of international trade is an integral requirement for any business that aims at expanding its operations. Conducting a detailed research will give insights on competition, political stability and trade barrier in given country.
References
Edmond, C., Midrigan, V., & Xu, D. Y. (2015). Competition, markups, and the gains from international trade. American Economic Review , 105 (10), 3183-3221.
Gervais, A. (2015). Product quality and firm heterogeneity in international trade. Canadian Journal of Economics/Revue canadienne d'économique , 48 (3), 1152-1174.
Huang, T., Wu, F., Yu, J., & Zhang, B. (2015). Political risk and dividend policy: Evidence from international political crises. Journal of International Business Studies , 46 (5), 574-595.
Li, Y., & Beghin, J. C. (2017). A meta-analysis of estimates of the impact of technical barriers to trade. In Nontariff Measures and International Trade (pp. 63-77).
McGovern, E. (2018). International trade regulation (Vol. 1). Globefield Press.
