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Print Edition StoriesFriday, April 17, 2009
How to expand a company globally
By Deborah Held, ACBJ Wire Service
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With a dreary economic forecast on American soil, the time may be right for the owners of small to midsize businesses to expand their companies globally.
More than 95 percent of the world’s consumers live outside of the United States, according to the U.S. Chamber of Commerce. Global conditions considered, 75 percent of the world’s purchasing power is outside of the U.S., said Israel Hernandez, U.S. Department of Commerce Assistant Secretary for Trade Promotion.
Despite previously being known globally for consumptive spending habits, the U.S. population accounts for less than 5 percent of the world’s buyers.
Owners of small to midsize businesses can expand their global footprints in order to make their products available to the masses.
“We can no longer survive selling to ourselves, particularly in a recession,” said senior trade adviser to the U.S. Chamber of Commerce, Leslie Schweitzer, herself a pioneer of expansion to China in the 1970s.
Small to midsize businesses can profit from foreign office expansion. More than 90 percent of U.S. companies engaging in global export have fewer than 500 employees, said Hernandez.
“Our exports are the bright light in our economy,” said Schweitzer. “One out of every three acres here (in the U.S.) is planted for export.”
Not only are U.S. goods popular abroad, Hernandez says, but so are the business practices for which Americans have become known.
Schweitzer cautions business owners against making rash decisions, and wants owners who are considering opening offices abroad to do research before embarking on the quest. “It’s a tremendous expense and it’s not always profitable,” she said.
A key first step in successful foreign expansion is selecting the best country to enter. Considerations include the stability of that country’s economy, its transparency, and the existence of a free trade agreement, which offers the business owner benefits in terms of greater transparency, as well as tax incentives, protection against intellectual property infringement, fair process, and the awareness that trade with this country is encouraged.
Other elements to consider include: How marketable is a product in a particular country? Which region has the most movement in the particular industry? What is the business climate?
Potential language and cultural barriers must be examined as well, in addition to general safety, wellness, and welfare concerns. Scott Dahlgren, a regional partner at consultancy The York Group’s Boston office, recommends that companies consider how their expansion would affect the entire company. “This plan needs to take into account and align with the entire organization,” Dahlgren said.
For instance, if a U.S. company thinks only about sales when expanding to Germany, they may neglect to provide an adequate support structure to accommodate the time zones. Consequently, their German customers won’t have access to help when they have issues not during typical American business hours.
Resources abound for the business owner in the global expansion process, most notably through the Chamber of Commerce. A trade specialist will come to the owner’s office and help the owner plan for a safe and legally protected foreign expansion, even providing customized market research and due diligence reports on overseas partnership candidates.
Business owners who have led the way into the market are an ideal source of planning information, said Schweitzer. “Most people want to help other entrepreneurs avoid their own catastrophic mistakes.”
Schweitzer advises the business owner to spend time in that country. “I can’t say that enough; you need to understand the market,” she said.
Tread cautiously initially, because establishing a positive presence in the chosen foreign market is vital, and this may be best accomplished by finding a local business partner, manufacturer or distributor.
“Establishing a presence is important, but assuming the least amount of risk is more important,” she said.
Quick tips
• Select a country that deals in export and trade of your own product or industry.
• Conduct appropriate market research on the stability of the climate and any partners under consideration through third-party data and/or U.S. Chamber of Commerce assistance.
• Make certain the country has a fair trade agreement with the U.S.
• Establish an initial presence in the foreign market while assuming the least amount of risk.
• Follow a proven path as laid out by a mentor or the step-by-step approach of a Chamber of Commerce expert representative.
Lynette Cornell, Mass High Tech Editorial Intern, contributed to this article.
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