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In economics, there’s something called the “home country bias.” This situation occurs when entrepreneurs build companies for domestic markets, even though there are opportunities to expand internationally.
Home bias is a problem because it means that founders and business leaders are missing out on opportunities to make returns. Brands that expand internationally tend to receive a host of benefits.
Here’s what you can expect by taking your business global:
Better Productivity
The international marketplace is much more productive than the domestic marketplace. That’s because there are more competition and a bigger market to supply.
The idea that there is more competition might seem like a bad thing. But according to data, firms that trade internationally become 70 percent more productive domestically as well. So, in other words, taking your business overseas helps to bolster your competitiveness in your existing markets.
More Growth
When you take your brand internationally, you also open up the opportunity for increased growth. Many firms fail to reach their full potential because they are unwilling to expand overseas. So any company that does it automatically increases its likelihood of long-term success.
The more growth you have, the higher your pool of potential customers. And the larger your pool of potential customers, the greater your market. So long as you can keep costs reasonable, you can experience tremendous success.
Risk Reduction
Trading internationally might seem like it increases your risk. But, actually, the opposite happens. When you get out of one country and start trading in many, you become less reliant on the domestic market. And that means that even if your home country experiences a deep recession, there are still plenty of other places you can sell.
If you’re importing, you can slash risks using a customs brokerage that anticipates problems at the border. Plus, you can set up a system where you’re not dependent on a single supply chain to meet all your business needs. There might only be one manufacturer who makes the parts you need domestically, but a dozen or so internationally.
Currency Exchange Benefits
International currencies fluctuate against each other considerably – sometimes by 50 percent or more. Again, at face value, this seems like a bad thing – you’d like stable prices. But it’s actually good when you think about it. The reason is simple: companies can trade when international currency prices are favorable. So you can ultimately increase your margins and gain bigger returns.
Wrapping Up
Today’s international trade situation is by no means easy. Brexit, trade wars, and the global pandemic are all taking their toll. But the trend over the last forty years or is remarkably consistent. Countries are opening up their borders, allowing more and more trade, and making the world a wealthier place.
This news is great for any entrepreneurs looking to extract maximum benefits from the current situation. Taking your business global could generate profound market advantages that last for a generation. And you could discover opportunities to enhance your margins – something that could protect you from the economic fallout of COVID-19.
You may also like: Things to Consider When You Run an International Business
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