In the process of preparing and implementing foreign trade operations, participants resort to a detailed study of both the potential range of possible counterparties, specific firms and organizations, existing counterparties and competitors. The study of the counterparty’s activities is a generally accepted element of the trading operation.
There are many specific conditions that determine the choice of a trading partner, but there are also general provisions that guide merchants in the implementation of international trade operations.
The choice of a counterparty largely depends on the nature of the transaction (export, import, compensation, etc.), as well as the subject of the transaction. At the same time, 2 questions arise: in which country and from which foreign counterparty it is better to buy or sell the necessary goods.
When choosing a country, along with economic considerations, they take into account, first of all, the nature of trade and political relations with this country: preference is given to those with which there are normal business relations, supported by a legal framework and which do not allow discrimination against our country. Currently, the Republic of Belarus has signed more than 50 international trade and economic agreements, which establish certain trade regimes.
When choosing a company, it is extremely important to study various aspects of the activities of potential partners, taking into account such criteria as:
technological – the study of the technical level of the company’s products, its technological base and production capabilities; scientific and technical – information on the organization of research and development and the costs of them; organizational – the study of the organization of management of the company; economic – assessment of the financial position and capabilities of the company; legal – the study of the norms and rules in force in the country of a potential partner and directly or indirectly related to cooperation.
A comprehensive study of the activities of firms taking into account these criteria will allow an objective approach to the selection of a reliable potential partner in a foreign economic transaction.
As a rule, the collection of data on counterparties is carried out by foreign trade or foreign economic organizations, firms, departments, bureaus, etc. Such structural units are created, in almost all enterprises of the Republic of Belarus.
Operational and commercial work on the study of firms in foreign trade organizations should include:
preliminary collection of data on the company with which it is planned to negotiate and conclude a transaction; ongoing monitoring of the activities of firms and organizations with which contracts have already been concluded; identification and study of new firms and organizations of possible counterparties for exports and imports; systematic study of the structure of commodity markets by major export and import items; monitoring the activities of competitors’ firms.
Summarizing the practical experience and generally accepted methods of assessing potential partners, their reliability and profitability, we can identify a number of principles that allow an objective approach to the choice of a counterparty partner.
The basic principles of choosing a counterparty company:
First of all, it is necessary to assess the degree of solidity of the business partner. The degree of solidity of the firm means quantitative indicators of activity (the so-called indicators of the production and market activities of the company), the scale of operations, the degree of solvency, as well as the degree of trust that banks give it. Indicators of production and market activity of the company can be divided into 2 groups: general (main) and private. General indicators include: net profit received by the firm; sales volume or turnover; indicators of profitability of production and market activities of the company, growth rates of its sales and assets, qualitative and quantitative composition of working capital; availability of a sufficient number of means of payment in it; the ratio between equity and borrowed capital. Particular indicators are indicators of the solvency of the firm (liquidity and coverage ratios).
Another important principle in choosing a company is its direct business characteristic – business reputation. The reputation of the company is determined by thoroughness and conscientiousness in the performance of obligations, experience in a certain field of business, the desire to take into account the proposals and wishes of the counterparty and solve all emerging difficult situations through negotiations. Over the past 15 years, the share of reputation value (in the total value of the company) has increased from 18% to 82%. That is, if a company is valued at $ 40 million, then $ 10 million is the price of its tangible assets, and $ 30 million is the value of reputation. The decrease in the company’s reputation index by 1% causes a drop in its market value by 3% at once. Thus, the company FORD, the American manufacturer of passenger cars, in 2001 bought from the population a series of previously sold cars with a design defect, trying to maintain its impeccable reputation deserved by many years of experience.
The next principle can be called taking into account the experience of past transactions. Other things being equal, merchants prefer those firms that have proven themselves well in the past.
A certain importance when choosing a partner can be exerted by his position in this market – whether he is an intermediary or an independent producer (consumer) of products. Merchants, as a rule, seek to eliminate unnecessary intermediary links in trade operations, so as not to cede part of the profits to the intermediary. At the same time, mediation services are widely used when they are an objective necessity.