Global growth can be both daunting and rewarding.
Here are the steps to take, the mistakes to avoid, and the basics of exporting and importing.
The American market for almost everything is huge, but it’s not large enough for many entrepreneurs. For these growth-minded business owners, the rest of the world is their oyster. Seeking international growth by going global as an importer-exporter offers opportunity aplenty. Some of the specific advantages presented by successfully growing globally include:
- You can extend the sales life of existing products and services by finding new markets to sell them in.
- You can reduce your dependence on the markets you have developed in the United States.
- If your business is plagued by destabilizing fluctuations in your markets due to seasonal changes or demand cycles, you can even out your sales by tapping markets with different or even countercyclical fluctuations.
- You can exploit corporate technology and know-how.
- Finally, by entering the global marketplace, you’ll learn how to compete against foreign companies-and even take the battle to them on their own ground.
The overriding reason to go global, of course, it to improve your potential for expansion and growth. And there are too many international opportunities for us to catalog them all here-or even in a much longer book than this one. The obvious opportunities are the markets in Canada, Mexico, Europe and Japan. But those only scratch the surface. There are many other fast-growing, less-competitive markets.
Just spin the globe and you can find an opportunity to sell something, somewhere. Unearthing just the right opportunity for you involves more work, of course. This information will get you started on that work.
Questions to Ask Before You Start
Experts agree that growing a business in America is risky enough. But what if your aspirations prompt you to debut your concept in a foreign land instead? Wesley Johnston, professor of marketing and director of the Center for Business and Industrial Marketing at Georgia State University in Atlanta, highlights the factors that can either make or break your business when you try to grow by going global. Here are key questions to ask yourself:
- Will the product sell well in the targeted culture? Think market research. The good news is most American products and services are embraced overseas. But if many of your potential consumers are lactose-intolerant, you’d want to steer clear of opening an eatery that sells only cheese pizza, says Johnston.
- Is your target market familiar with your product or service? If not, be prepared to invest a lot of time and money in consumer education. On the flip side, if you’re the first one to introduce a new and exciting concept, “the product then becomes synonymous with your company name or chain,” Johnston explains.
- Do you feel comfortable in that country? Since you’ll probably have to live there temporarily to operate the chain in its early stages, you’ll need a working knowledge of the language and culture.
- What is the infrastructure like? Can you get Western-style accommodations and support? How good are the roads? Are your supplies guaranteed? What about the reliability of hot water?
If you don’t get the answers you want with the first foreign market you’re considering entering, that may not mean your idea is poor-just that you picked the wrong place. “It’s a big, big world out there,” Johnston says. “I don’t think there’s any one idea that won’t work somewhere.”
The Pitfalls of Exporting
Along with promise, going global carries an equally heavy load of peril. From chasing too many opportunities to getting whacked by currency fluctuations, the game of international expansion has many threats that domestic-only businesspeople never see. You can grab the brass ring of growth by going global, but only if you avoid the pitfalls.
The moment you’ve been waiting for has finally arrived, and you’re ready to export your product. Now what? Your first order of business is to heed the hard lessons learned by those who have gone before you. Many have blundered, but that doesn’t mean you have to. Below are some of the most common exporting mistakes, according to John E. Cleek, program director at the Bloch School of Business Administration at the University of Missouri in Kansas City.
- Failing to plan your strategy. “Small businesses are particularly vulnerable to this problem, but larger ones are often guilty of the same mistake,” says Cleek. “It takes far more time to extract yourself from problems created by lack of planning than it would to do it right the first time.”
- Chasing inquiries the world over. Just because dozens of countries show interest doesn’t mean you’re ready to market your product everywhere. Patience is key. “It takes discipline to respond to an inquiry from a country about which you know very little,” Cleek says.
- Assuming if it works in America, it will work anywhere. Not true-you need to tailor your sales and marketing efforts to each country. Don’t ignore the cultural differences that shape the marketplace. The same goes for pricing, shipping, payment terms and packaging.
- Assuming business will be done in English. Familiarize yourself with the local language. Says Cleek, “It is the height of ignorance to expect other people to learn our language to buy from us.”
Doing business around the world can seem a long way from doing business in your hometown. But each year countless small businesses make the trek. Like most long journeys, going global can be boiled down to a series of steps. Here are the six basic steps to going global:
- Start your campaign to grow by international expansion by preparing an international business plan to evaluate your needs and set your goals. It’s essential to assess your readiness and commitment to grow internationally before you get started.
- Conduct foreign market research and identify international markets. The Department of Commerce is an excellent source of information on foreign markets for U.S. goods and services.
- Evaluate and select methods of distributing your product abroad. You can choose from a variety of means for distributing your product, from opening company-owned foreign subsidiaries to working with agents, representatives and distributors and setting up joint ventures.
- Learn how to set prices, negotiate deals and navigate the legal morass of exporting. Cultural, social, legal and economic differences make exporting a challenge for business owners who have only operated in the United States.
- Tap government and private sources of financing-and figure out ways to make sure you are getting paid. Financing is always an issue, but government interest in boosting exporting and centuries of financial innovation have made getting funding and getting paid easier than ever.
- Move your goods to their international market, making sure you package and label them in accordance with regulations in the market you are selling to. The globalization of transportation systems helps here, but regulations are still different everywhere you go.
Understanding Another Culture
One big difference between doing business domestically and internationally is culture. According to Hilka Klinkenberg, founder of Etiquette Internationalin New York City, less than 25 percent of U.S. business ventures abroad are successful. “A lot of that is because Americans don’t do their homework or because they think the rest of the world should do business the way they do business,” she says. Klinkenberg offers the following tips to avoid making costly mistakes in international business meetings:
- Build a relationship before you get down to business. “That entails making small talk and getting to know one another without [immediately] getting into business discussions,” she says.
- Don’t impose time limits. Says Klinkenberg, “Keep [the meeting] as open as possible because it adds strength to your negotiating position.”
- Do your research. Learn at least a few pointers and facts about the country; it shows you respect your potential partners’ cultural heritage. Also, get comfortable with the basic words in their language.
- Bring your own interpreter. If they provide the interpreter, warns Klinkenberg, “the interpreter is going to have the other person’s [interests] at heart, not yours.”
- Understand body language. “People think [body] language is universal-it’s not,” she says.
- Dress with respect and authority. This should be self-explanatory. If it’s not, seek the help of an image expert.
Financing Help From the Import-Export Bank
As with any growth plan, expanding internationally requires financing. And growing globally requires special capabilities when it comes to finances. One of the most popular sources of financing for businesses expanding overseas is the Export-Import Bank of the United States. The Ex-Im Bank, as it’s commonly known, is an independent U.S. government agency that has helped finance overseas sales of more than $300 billion in U.S. goods and services since 1934.
The Ex-Im Bank guarantees working capital loans for U.S. exporters and guarantees repayment of loans or makes loans to foreign purchasers of U.S. goods and services. It also offers U.S. exporters credit insurance to protect against nonpayment by foreign buyers.
To get Ex-Im Bank help, your product or service must have at least 50 percent U.S. content. The bank will finance the export of all types of goods or services except for most military-related products.
Finding a Foreign Distributor
As tricky as it can be to obtain financing for a global expansion program, finding foreign business partners can be even tougher. If you can find foreign distributors for your product, you will be able to simply sell them your products and let them worry about reselling them at a profit in their domestic markets. Distributors are nice because they can offer foreign customers top-notch service and are easier for you do deal with because they typically buy enough of your product to build up an inventory.
You may be able to find a foreign distributor by simply looking around your home city or state for a foreign company with a U.S. representative. Trade groups, foreign chambers of commerce in the United States, and branches of American chambers of commerce in foreign countries are all good places to start your search for a foreign distributor.
International business consultants can provide valuable help the first few times you are trying to evaluate a foreign distributor. If you prefer to do the job yourself, look for the following when assessing in a foreign distributor:
- You can eliminate many foreign distributor prospects by deciding whether you need a stocking or nonstocking distributor. Stocking distributors are generally larger firms that will commit to purchasing an inventory of your product.
- If your product requires a salesperson knowledgeable about technology and other special aspects of your product, you will obviously require a distributor who can provide that type of sales force.
- The best distributor will be one with a track record selling to the companies or consumers who are target markets for your product.
- Unless you are fluent in the language of the country you are selling to, you should choose a distributor who can speak your language well.
- You will want prompt, competent responses to your requests for information or service. Make sure your phone calls, faxes and e-mails are answered in a timely, satisfactory fashion.
- Meet your prospects in person, and, as always, get and check references.
Importing Products and Services
International trade involves more than shipping U.S. products overseas. For many products, foreign sources of supply can provide higher quality, lower cost or some other desirable feature in comparison to U.S. sources. For instance, Italian shoes, French wines and Japanese cameras are widely available in the United States because of their recognized superiority in some respects to domestic alternatives.
Importing doesn’t have to be limited to goods, either. Many companies have grown by importing services in imaginative ways. For instance, a large quantity of the data-entry work that used to be done in the United States is now done by workers in countries such as India and China. The companies for whom this work is being done have effectively imported the data-entry services of international workers.
At one time, identifying sources of products to import was a serious challenge for American importers. But vast improvements in the global telecommunications network have greatly eased that task. Today anyone with a computer and a modem can do Web searches to locate suppliers virtually anywhere in the world. Furthermore, they can communicate with those suppliers, exchanging specifications and requirements far more easily, swiftly and conveniently than ever before. If you have an idea for importing a product made in another country, it should be easy to find a supplier who can sell it to you. Here are tips for finding a source of products to import:
- Start by focusing on countries whose imports to the United States are granted favored status. This means lower import duties and lower cost for you.
- Once you’ve selected countries as likely sources, contact trade representatives at the appropriate embassies. They should be able to provide you with lists of manufacturers of the products you’re interested in.
- Attend foreign and domestic trade fairs where companies seeking to export to the United States are exhibitors.
- Read U.S. and foreign newspapers and magazines, scanning for advertisements and articles about products you might want to import.
The Internet is having a large impact on the way international business is conducted. This impact is especially significant when it comes to finding leads for international trade partners. You can look at TradeNet, the U.S. government’s online trade-matching service, for numerous links, databases, message boards and other tools for finding products to import and other opportunities to grow your business internationally.
Once you’ve identified some likely sources of products to import, make contact with the company and begin gathering information. You’ll want to obtain samples of products and, of course, discuss prices and terms of payment. Take special care to check the quality of the products-the United States is a sophisticated marketplace, and shoddy products that might succeed elsewhere will be shunned here.
As in any circumstance where you’re checking out a new prospective supplier, ask for references. Get a referral to a company that has dealt with this supplier before, and call to check them out.
Shipping procedures are a paramount concern when moving products long distances. High-value items may be shipped by air, but many products come by ship. This often means transit times measured in months, with the associated risks of missing market opportunities. Make sure your supplier understands your requirements for delivery and that the shipping procedure chosen will do the job. Once you are happy with the arrangements, have an attorney experienced in international trade review the contract.
Why Go Global?
International expansion is not necessarily the best way to grow your company. The U.S. market is big enough for most small businesses to expand almost indefinitely. But entering the international arena can protect you against the risk of decline in domestic markets and, most important, significantly improve your overall growth potential.
Excerpted from Growing Your Business