The Role And Importance Of Communication In The International Trade Environment

Communication consists of so many dimensions and is a very complex subject. While discussing communication, one has to look at several aspects regarding the subject. You have to identify different skills, components and challenges in the environment of communication, though it doesn’t end there.

A communication line also goes beyond the borders of your business and stretch to international companies. To successfully trade across international borders, you have to analyse the country and culture of the people whom you are trading with. You have to get a feeling for the way they do business and also for customs or manners that could offend them. People from a different background will feel honoured and will be much more open to business if they can see that you respect their ways. Because of this reason, it is also critical to look at the importance of multicultural communication in international trade. Looking at aspects such as marketing, logistics finance and payment, we discuss the important role that communication plays in today’s businesses.

1.1 The importance of communication in the international trade environment

To communicate is to live. It plays such a vital role in our daily existence that we can do nothing without it, but just as important as it is in our daily existence, the more so vital it is in the business environment because if the communication lines between your business and those of your partners’ isn’t open and up to standard, it could mean the financial ruin of both entities (RANI). Communication is “…the successful transition of information through a common system of symbols, signs, behaviours, speech, writing or signals.” (ITRISA, 2010:30). To implement successful lines of communication in your business, you have to look at all the components mentioned above.

1.1.1 The components of communication

According to ITRISA, communication is made up of three components, each one just as important as the other. We look at verbal, written and non-verbal communication to grasp the importance of this complex subject. Verbal or spoken communication is important because that is the quickest way to portray your ideas and hear other peoples’. It also provides room for discussion. On the other hand, it can be very difficult to arrange because of the distances between partners. It is not sufficient as means of communication because people can read just as much in the things you don’t say but show. This is known as non-verbal communication and helps when words just aren’t enough to express yourself. Non-verbal communication is reflected in your body language and this can cause confusion. It is very important to do research before communicating face to face with people from other cultures. Your use of personal space, for example, may be offensive to them. This is a very difficult component to exercise and should be regarded as one of the most important factor to consider in the relationship between you and your business partners in a other country. Written communication is a very easy way to communicate less important aspects of a deal but should not be used in midst of a crisis, when problems need to be sorted out quickly and with no misunderstandings. More important decisions regarding the deal should be on paper to insure a permanent record of the agreement between the two parties. In today’s corporate environment, electronic communication also takes up a major part of the methods companies use.

These are just the main methods of communicating. Numerous other means of communication exists and in the end, companies should decide which method might fulfil their needs best. It should be noted that every method of communication has its own advantages but also disadvantages. The main goal when choosing a method should be the success of the deal. The method which will best fit target should be chosen in the end. Once you understand the critical importance of these components, you can start looking communication in the corporate environment.

1.1.2 Communication in the international corporate environment.

Communication between employees of the same company is important. Francis Jock takes it even so far as to say that the skill of communication -or the absence thereof- can cause a business to either be successful or to fail. Let us assumes the lines are already in order. To communicate with people from another corporation tends to be slightly more difficult because other corporations may do business in a whole other way. Business partners from other environments are out of your control and are unpredictable (ITRISA: 2010, 25). A general segmentation of the kind of entities one might have to work with can be private companies, government organisations or foreign entities. For the purpose of this essay, we look particularly at the communication between you and a foreign entity. To make successful business deals, employees administering the deals between businesses of different cultural background need to understand the importance of multicultural communication. (HINNER: 2010)

According to Hofstede (2001) culture consists of five dimensions. Each dimension is just as important as the other. The first dimension is uncertainty avoidance. This describes the certain culture’s need to point out exact details of the transaction so that the risk of failure is minimised. Another dimension is power distance. This refers to the way people of different positions in community, treats each other. In one culture, people might be treated as exact equals while in other cultures, people in higher positions will not be treated as, say a general worker. Aggressiveness discusses the gap between genders in the business environment. Cultures might also adopt either a long or short term orientation. A Long term orientated culture will typically show casual, “laid- back” manners in dealings and might not be too hasty in closing a deal while the short term orientated culture will do exactly the opposite. Individualism or collectivism is the last dimension identified by Hostede (2001). This dimension describes the culture’s preferences when it comes to working in groups or as individuals. It is very important to keep these dimensions in mind when dealing with other cultures as this could mean either success or failure.

1.2. The Role communication plays in the International Trade Environment.

The role of communication in the international trade environment is so important that many studies have been committed to emphasizing and analysing this role. Models to help companies interpret communication in their daily business environment have been created. Databases’, statistics and other information has been collected on this subject (GRIFFITH: 2002). It is difficult to ignore the role of communication. According to ITRISA, communication plays a big role in three main aspects of the general business. A discussion of logistics, marketing, finance and payment, follows.

1.2.1. Logistics

Though there are many events that can happen which a company has no control over, the role of human error in logistics are a major problem. Communicating various details about a consignment and its shipping specifications is a major part of the success of the business deal. Employees need to make sure that both ends of the partners understand each other when making decisions about the obligations regarding delivery, the costs each partner is liable to carry and freight insurance. To achieve a clear understanding of the responsibilities of each party, there should be good communication between the importer, exporter, inspection officers, and various banks involved, customs authority in both countries, agents and insurers.

1.2.2. Financing and payment of international trade deals

Without funds and the proper management necessary, international trade will not be possible. Before entering in a contract with the other company, you have to make sure that the financing on your side is guaranteed. To acquire this financing, proposals to your financer and motivation behind your proposed deals have to be in order. Only after this, you can commit yourself to a partnership with the foreign company. Once this partnership has been established, the two businesses should communicate so that they will be aware of their exact obligations regarding payment, due dates for this payments, the manner in which funds will be forwarded etc. It is important to verify these details so that the financial risk regarding the deal can be minimised.

1.2.3 Marketing

Marketing must be the most essential of the three roles because without marketing, you cannot create a market for your product. Without this market, there would be no demand for your product and therefore, no international trade. A company should communicate with affiliates in other countries, get information from them and get to know their clients. One should be very careful not to offend potential customers and thereby stopping the deal even before it could realise. The absence of communication in marketing had previously led to many business deals gone wrong and it is important to get to know the culture of prospecting clients before trying to sell something to them.