When venturing into international trade, hold on to your shirt and watch your back. Both of them could be in danger. Cultural differences alone can create huge stumbling blocks to successful international trade. International tensions can and do play a significant role. Internal political changes and turmoil affect the long-term outlook for any business going into a new nation.
Language and culture are far more difficult to master than most people would believe. Easy problems like not selling pork to deeply religious Jews in Israel are few and far between. One of the more famous international language blunders occurred when General Motors decided to market the Nova in Mexico. In Spanish, the word Nova means "does not run." Everyone was lining up to not buy that car.
Companies like Kentucky Fried Chicken and WalMart have each had well documented marketing issues in Japan because of the dramatic cultural differences between the east and west. Just as an item that markets well in one part of the country may languish in another region, international cultural differences can all but kill a new business venture if a company has not done enough market research. The same is true if that research has ignored the regional differences in the new nation.
Tensions between nations can change the business view in a very short time. If one nation decides to slap tariffs on imports from a nation that they had always maintained a policy of free trade, it can be death to those products. An example from a few years ago involved Girl Scout cookies to soldiers in Japan. Japan opted to place tariff of more than $10 per box in these cookies. Thousands of boxes of cookies were left in the warehouse at the port because the tax was higher than the value of the product.
When a company gets slapped by these types of taxes, their products become waste. The profits then head for the basement to become large losses. Many nations try to avoid these practices so that their products are not given the same treatment, but it is too bad if you happen to be the unlucky one caught in the tariff crossfire.
If the international tensions rise too high, all imports and exports are stopped. Often the businesses running within the new country are seized and taken over by the government. This can happen both when nations are feuding and when national leadership experiences a dramatic shift.
Many of the oil fields developed by large companies were taken over in various areas of the world a few decades ago. It did not matter how loud the companies complained. The nation has a right to take what it wants when it is held by foreigners. Losing mineral rights, equipment, and buildings were extreme losses to be absorbed. Fortunately, big oil was strong enough to withstand these financial setbacks.
If a nation becomes radical or militant in its outlook, all assets held by foreign interests will be seized . This can spell not only problems for the new businesses in that country, but the losses can be large enough to topple the company that made the investments
