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The International Entrepreneur – International Business Lessons from Mark Zuckerberg

Like most professionals in technology fields, I’m a bit fascinated by Mark Zuckerberg. Really, who could have predicted the meteoric rise of Facebook twelve years ago when it was just started? He’s not one to build the same wisdom-drenched following like Richard Branson or Guy Kawasaki. But the day he put his newly acquired Mandarin Chinese on display at Tsinghua University in Beijing, he had my full attention.

China doesn’t even allow Facebook access for its citizens. And here was one of the titans of American technology industries not only speaking Chinese, but using all of the Chinese cultural savviness of a well-coached leader. As I watched this video for the first time, I thought of three things:

  1. I had clearly underestimated Mark Zuckerberg as a world-class business leader.
  2. Facebook would eventually enter the Chinese market, breaking down communication barriers on its way.
  3. I needed to double up my efforts to master Mandarin Chinese.

Impressive as this interview may be, China still doesn’t open its doors wide to Facebook or other social media platforms that aren’t easily censored. It’s a political issue and one that is difficult for most Westerners to understand. Why would Chinese citizens allow this censorship to continue? Why would they allow themselves to be ruled by a small group of unelected party officials? There are several reasons, but the main one is rooted in Chinese culture: harmony. But I digress away from our topic.

Speaking of difficult to understand… just this past week, Mark Zuckerberg was speaking at the Mobile World Congress and he told about Facebook’s recent ruling in India’s courts. Facebook wanted to offer free Internet to Indian citizens. But the courts saw it differently. Facebook was not allowed to charge different pricing for services, even if one of those prices was nothing. The Indians felt that there was a price – preferential access to Facebook and their partners’ sites. It became a net neutrality issue.

Mark Zuckerberg, India, International Trade,

Image Source: Justin Sullivan/Getty Images/Business Insider

If you’ve ever read my blog before, you know that I give what I hope is helpful advice to small and medium-sized companies expanding into global markets. My focus is on providing tips and tools to help companies avoid the most common and costly mistakes. Facebook is by anyone’s definition a massive company with extensive financial resources beyond 99% of all companies.

Here are the International Business Lessons for the rest of us:

  1. “Every Country is Different”. That’s actually Mr. Zuckerberg’s exact quote about the Indian court ruling. That may sound incredibly obvious, but every week I talk with at least one company leader who finds this basic fact incredulous. Recently a sales VP I talked with couldn’t imagine that since various countries negotiate differently that he should raise his prices in markets where locals would expect to negotiate a larger price discount. International business is a pattern of learn, adapt and move forward.
  2. When it’s important, take the long view. Facebook will never give up trying to access the Chinese market. That said, they will also never hopefully give up their stance on freedom from censorship.
  3. Creative problem solving is a core international business skill. If at first you don’t succeed, it’s time to stop, regroup, figure out what went wrong, and then figure out another way. That’s what Facebook is doing in India and in China. That’s what successful companies of all sizes do to win new global customers and grow to their full potential in world markets.
  4. Cultural understanding matters. In the video of Mr. Zuckerberg’s interview, the reaction is clear – his Chinese audience is both surprised and delighted. I’m sure he would have had a great interview had he delivered it in English. They would have even appreciated his answers had he not been coached in Chinese cultural etiquette. But in one interview, he captured a nation’s attention for all the right reasons. This goodwill will shorten the time it takes to enter this market. Few of us have time to learn Mandarin. But we can learn a few basic phrases in any language. We can either research or hire a coach to show our cultural respect to our future customers.

I look forward to seeing what Mark Zuckerberg and his Facebook team do next to continue to influence culture and technology. And I look forward to the continuing evolution of international markets for the rest of us. Onward & upward.

For more Tips and Tools on International Business, you can join the International Trade Tribe.

The International Entrepreneur – Are Your Outsourcing Resources Ready for International?

The International Entrepreneur Asks Are Your Outsourcing Resources Ready for International?
Today’s companies tend to be leaner and more agile than those in years past. They often have to be in order to grow at a rate fast enough to secure the next round of funding or attract the right acquiring firm. How we do business has fundamentally changed to where many company functions like legal, accounting, HR and marketing can be outsourced to a large degree. But what happens when a company decides to enter international markets? Are these BPOs ready to join you on your international business expansion?

Here are some questions to ask your company’s law firm, accounting firm, marketing agency, bank, payroll service and any other business process outsourcing (BPO) providers:

  • Do you have any offices or partners in the markets we are planning to enter?
    If your home market is small like Singapore or Luxembourg, then likely any outside resources are well connected to the rest of the world. They have to be. For larger markets like the U.S. or Brazil, your local bank may not have the international connections or in-house expertise international currency and finance that you’ll need.
  • Are you able to serve staff based overseas with sound advice and similar services in international markets?
    Payroll is a great example of where this applies. Most payroll outsourcing companies choose to serve only their home market. But there are a handful of international payroll companies that handle the complexities of payroll around the world to help keep your company in compliance.
  • Do the contacts that you work with have international experience?
    Sometimes a law firm or accounting firm has the ability to extend to other parts of the world through sister offices or partner firms. But often when a company shifts from one market to global markets, the staff who serve the company may need to change to the more internationally experienced resources.

For all of your company’s business functions directly affected by the international expansion, you can decide between two approaches: Centralized and Decentralized Outsourcing.

Centralized Outsourcing is when your BPO resource has an extensive network of staff or trusted partners in all of your markets. The largest accounting firms fall into this category. And it helps to have one cohesive approach to accounting that leverages the specialized knowledge that these firms typically have in areas like international taxation.

Decentralized Outsourcing makes sense when in-country resources have the best perspective. This is often the case with marketing agencies. If I’m going to concentrate on the German market because I know that German businesses desperately want and need my product, then I should hire a marketing agency based in Germany to spearhead my marketing program there.

Some additional advice:

  • Be sure to ask specific questions of your service providers to learn their fuller international capabilities.
  • Don’t contort around a business relationship to avoid hurting someone’s feelings. Yes, the company founder’s best friend may have done the accounting for the last five years, but unless his firm can handle all of your transactions, currencies and tax reporting, it’s time to move to a fuller service firm.
  • Generally, companies keep all processes tied to their value chain in-house rather than outsourcing them. With keeping that in mind, some companies also choose to redefine their value chain altogether to fit what they actually do best. That’s at least food for thought!

I hope you found this article helpful. If you would like to receive additional tools and tips starting with a Market Entry Checklist, please click here.

The International Entrepreneur – 5 False Assumptions That Can Hold You Back from Global Success

international assumptions, international business, international marketing

 

I have been fortunate these past 10 years to mentor a promising international marketing professional. “Quinn” recently went back to university to complete his international MBA. He just accepted a position in Tennessee where he will be building international channels from the ground up in B2B & B2C markets. It’s an exciting opportunity for anyone in our field of international marketing.

Quinn knew where to start when he was hired last month. He worked with engineering to define the product changes required in order to meet international standards (CE, etc.). He developed a selection criteria to pick the right early international markets where the company would focus resources (UAE, Mexico & Australia). He identified a freight forwarder who will provide the right kinds of logistic support. And he started to identify opportunities to meet the right kinds of in-country partners to facilitate business deals and new client acquisition. Quinn seems to be on the right track towards providing a solid foundation to his international expansion.

But others are often not so fortunate. What is much more common to find are one or more of the following false assumptions underlying early-stage expansion decision making. A failed international expansion can scare a company’s leadership for years away from what should be lucrative international markets.

 

Assumption #1: We are focusing on the right markets.

To get to the heart of where this assumption can steer leaders astray, ask the question “how did we come to decide on which countries to expand to first?” In Quinn’s case some of the main factors were: one or more hot weather seasons and markets that could serve as a gateway to a larger region. Mexico is a great entry country to Latin America and the Caribbean. The UAE is closely economically linked to the rest of the Middle East. And Australia has New Zealand and Southeast Asia as neighboring trade partners.

Often companies instead choose countries where they have a contact or is a key staff member’s country of origin. Companies might follow a language to markets that really don’t make sense based on a more strategic criteria that focuses on long-term profitability.

 

Assumption #2: Our staff is ready to engage with international clients and partners.

To find out if your staff is ready, start with questions like: “Who on staff has experience working with international clients?” “How does staff feel about taking on international clients?” While the international expansion leader may be excited about his role, this does not mean that others share his background or attitudes.

Be sure that staff hear about the importance of the international expansion from company leaders. Informally, the international expansion leader should be having conversations to hear any concerns or questions from colleagues. After all, there is nothing worse than generating international sales leads only to have sales reps quietly leave international calls unreturned.

 

Assumption #3: Business moves at the same speed everywhere.

In my home country, the U.S., we typically create partnerships and close sales deals faster than in other countries. Now before you pat yourselves on the backs about our superior business skills and efficiency, please understand that this does not mean that ours are always well-built deals. In fact, misunderstandings and untrusting partners are far less likely to yield the same long-term profitability.

You can ask yourself, “Does my entire leadership team understand that the international expansion will move slower than we may be used to in our home market?” “Am I willing to invest in direct professional relationships including in-person visits to solidify and maintain strong and successful business ties?”

 

Assumption #4: The same rules apply… everywhere.

Definitely no. This is one of the biggest challenges in international business. The rules most definitely change based on country and local market. Rules that change include product standards, packaging requirements, forbidden marketing tactics, expectations of “gifts”, and how local businesspeople conduct themselves.

To prepare for these new rules, definitely do your research before that first contact. There are many sources of culture and legal information available online. There are also consultants who specialize in a particular region or country who can help.

 

Assumption #5: We already have all the answers.

There are international business professionals who spend a great deal of time staying current on how to do business effectively around the world. And they don’t even have all of the answers. What the great ones have is a strong network of resources who specialize in areas of international business and geographic regions.

As a company leader, ask yourself “what do we need to know in order to be successful and lower our exposure to risk?” “what areas are we already experiencing challenges?” Again, you can save budget by doing online research with reputable sources or else hire competent international expansion specialists.

Either way, your company will be much better positioned to reach its full global potential!

 

I hope you found this article useful. For more Tips and Tools from Becky DeStigter, The International Entrepreneur, sign up here.

The International Entrepreneur – How to Manage Holidays Around the World

business, international, holiday

 

The end of the year is approaching and now is an ideal time to reflect how you and your organization acknowledge important holidays celebrated by your international and domestic clients. In many parts of the world, the year’s passing is marked by its major national, cultural and religious holidays. Most of us have developed ways to reach out to our family and friends to acknowledge the passing of holidays. In business, I would encourage you to embrace the cycle of major cultural and religious holidays, using it to forge deeper connections with customers and partners. In most parts of the world, business relationships are forged between people instead of between companies. Those relationships are the glue that hold your business partnerships together.

Here are some suggestions:

Find out who celebrates which key holidays

In today’s multicultural workforce, it is sometimes difficult to know if an individual celebrates the major holidays associated with a country’s culture or religion. For instance, normally people of the Islamic faith celebrate Eid Al-Fitr to mark the end of Ramadan, the Islamic month of reflection and fasting. But not all celebrate this holiday. For instance, I know a Muslim woman from Lebanon who does not participate in the rituals related Ramadan, but does actually celebrate the gift-giving ritual of Christmas. The best way to find out is to ask your key contacts which major holidays they celebrate.

National holidays can sometimes be just as important as religion-based holidays. It is often a day where businesses are closed. In some countries like China, people return to ancestral homes and are out of the office for more than a week. A simple acknowledgement of national holidays is enough.

Most holidays are cyclical, falling on the same day each year. But some like Ramadan are based on the lunar calendar. Also be aware that some countries have similar holidays, but celebrate on different days or even with vastly different traditions. For instance, Canada and the U.S. both celebrate a holiday called Thanksgiving, but they fall in different months.

Sometimes holidays are built into a company’s culture. To find out if a company is expecting employees to celebrate a holiday, ask if there are days that the company will be closed for celebration. If you are doing business in a part of the world that traditionally celebrates Christmas, Ramadan/Eid, Jewish high holidays, or Hindu holidays, ask about this a few weeks before the upcoming holiday. This information can easily be stored in the company customer-relationship management (CRM) system and tracked by customer-facing staff in your company.

 

the-lantern-festival-977259_1920

 

Recognize the holiday in a sincere way

A card is one of the best ways to show respect for someone’s holidays. It’s simple but takes a little effort. Cards can be ordered online, particularly if a holiday is not regularly celebrated in your part of the world. If your business relationship is not as critical, consider sending an email wishing your customer or partner well. But be careful to understand what a specific holiday celebrates. Yom Kippur is the holiest day in the Jewish holiday. This year a friend of mine wished her Israeli partners, “Happy Yom Kippur.” This was met with amusement since Yom Kippur means “Day of Atonement.” My friend plans to adjust her greeting when this holiday comes around next year.

The question that often comes up is gift giving. This is a tricky issue as some cultures will expect a gift to mark a holiday. First, check both home laws and in-country laws to know the limits on what is considered a gift and what crosses the line to bribery. Rules definitely vary around the world. An alternative to gift giving is giving a donation of time or other resources to charity in the client’s name to show honor and respect.

 

Be Ready for the Impact of a Major Holiday on Sales and Shipping

If you’ve ever tried to ship your product into the Middle East during Ramadan, you know how hard it is to get anything processed and sent forward to your client. Business grinds to a glacial pace during that month. Likewise, in many countries that widely celebrate Christmas business can slow down dramatically around the end of December as many employees take vacation days to be with their families. In order to keep business cash flow from drying up at a potentially critical point, you may want to time marketing, lead generation and sales cycles to wrap up before a major holiday. There is no reason to be caught unaware when holidays can be known well in advance.

I hope this article helps you in navigating your international business relationships through the holidays. For more information about doing international business, sign up for The International Entrepreneur Mailing List.

Becky DeStigter, The International Entrepreneur

The International Entrepreneur – Becky DeStigter receives Certified International Trade Professional Designation from FITT

IMG_2196For Immediate Release

Wednesday, November 25, 2015 (Scottsdale, USA) – Becky DeStigter, MBA, MS, has just been fully certified by the Forum for International Trade Training (FITT) as a FITT International Business Professional (FIBP®). Becky chose to complete this certification on FITT’s Executive Path, using her 10 years of international trade experience and graduate education to form the basis of her application to be permitted to take the FITT Professional Exam and submit for final approval.

“I chose the FITT program certification because I wanted to join the growing global standard in international trade. There are many charlatans working in the industry who are not able to deliver substantive or reliable international business advice or outcomes. By earning this accreditation I join a group of well-trained professionals with a growing global footprint.

Working in a such a rapidly evolving field, I needed to know that my certifying organization had periodic content reviews to ensure that the international trade strategies and tactics reflected today and not ten or even two years ago. FITT stays on top of the international trade industry with frequent reviews,” said Becky.

FITT is a non-profit international trade training and professional certification organization based in Ottawa, Canada. The network of CITP®|FIBP® certified international trade professionals continues to grow and expand its influence. FITT is endorsed by the World Trade Centers Association.

 

About Becky DeStigter, FIBP

Becky and her company, The International Entrepreneur, helps business-to-business technology and professional services companies to realize their overseas potential.  To do this, she provides research insights on overseas markets, as well as ways to mitigate exposure to international trade risks. Becky works with companies from all over the world. She speaks English, Dutch, Spanish, German and is working on Mandarin Chinese.

Becky has an MBA, an MS in International Business and a graduate-level Certificate in Entrepreneurship from the University of Colorado Denver. The University of Colorado Denver is one of only 30 universities in the US and the only university in Colorado to receive the prestigious CIBER grant for international business research & education. Becky spent two years working under top international entrepreneurship scholar, Dr. Manuel Serapio.

For six years Becky owned a successful strategic marketing company. She served twice as Chief Operating Officer of start-up Software-as-a-Service technology companies, once as COO of a stem cell testing company and also spent 4 years working in various marketing and sales support roles in the healthcare software industry in growth-stage companies.

The International Entrepreneur – Building a Stronger International Strategy

Today’s reality: most companies don’t strategically plan their international expansion. Or if there is a plan, it’s often broad and filed in some file drawer collecting dust. Instead, it sort of just happens and employees are along for the ride. If you are wondering if this is true in your organization, here are some signs of absence of a solid international strategy:

  • Knee-jerk reacting to international opportunities. Throwing resources at the newest market or big international prospective client can put untold strain on company operations trying to cover what amounts to chasing your tail.
  • Unsolicited partnerships are the backbone of your expansion. If you don’t understand motivations, the wrong resellers & other partners can steal your intellectual property or otherwise spoil your international brand.
  • Financial surprises plague profits. When issues like Italy’s profit repatriation rules, Indian labor laws or a Brazilian lawsuit keep catching your company off guard, it’s a sign of lack of research & planning.
  • Flimsy market entry justification. My favorite in this category is breaking into markets with the highest GDP growth. Since a country can have high growth one year & sink the next, it leaves no room to build a market long-term. A boat that constantly changes course will never to reach goals or a final destination.
  • Pulling out of markets based on this quarter’s earnings. Exiting an international market not only burns bridges but also often leaves many local financial obligations and works against long-term efforts.

building international strategy, international business, international marketing

A Better International Strategic Framework

The good news is that there is a better way. The tail chasing can stop and your staff can productively work together towards the right goals. Here’s where I normally begin an international strategy assessment:

  1. What’s your company’s exit strategy?
    What’s your company owners’ exit strategy? Are you planning an IPO, equity buy out or acquisition? Or do you plan to pass on this company to future generations? What kind of company will your leaders be passing to its next owners? Knowing the window of time to exit helps to determine which opportunities make the most sense to maximize outcomes.
  1. What are the goals of the international expansion?
    Many companies measure international success based on the Return on Investment (ROI). If this is your situation, then your strategy needs to reflect the required Internal Rate of Return. But many companies choose to reflect multiple value-creation objectives. These can include building a global brand, increasing global market share, developing an international supply chain, and reducing dependency on a single market or currency. By defining the goals up front, you know exactly what port you’re sailing to before you leave shore.
  1. Do you know your real opportunities and costs?
    It is a rare company that takes the time to research the true potential of their markets and then the associated costs to gain market share. But those who do are typically the market leaders (no surprise, really). It takes internal staff or international consultants asking the right questions to truly unearth the new business environment BEFORE investing more resources.
  1. What are your company’s risk tolerance and comfort with foreignness?
    Inherently some international projects are riskier than others. Safe may be doing business between the U.S. and Canada, or between Germany and Austria. There are similar business environments, language, culture, etc. But at some point, success will bring opportunities that are further afield and rich in potential. When those potential clients call, is your company ready to do business in Mongolia or Mali?I recently spent time working with a software company where some of the front line staff quietly avoided following up on international leads. Needless to say, the close rates for international leads were incredibly low. The company CEO touted his global company, but there was serious resistance in the ranks.
  1. What are your financial resources for expansion?
    The best-laid plans in the world are reduced to dust when there is no money to pay for the international expansion. I am amazed at how many companies actually try the no-cash approach. In my experience it’s never successful. Ever.Most small and medium-sized technology and services companies finance their expansions slowly through retained earnings. This can be effective if it aligns to your end game plan. Some companies rely on either bank loans or equity investment to finance their expansion. This works well for a well researched, contemplated and executed plan. A fourth option that should always be considered is to look into your own government’s export promotion programs. There may be grants, low-interest loans or other incentives to expand while creating jobs in your own country.

These questions are a starting point for building a better international expansion strategy. But to truly leverage your company’s competitive advantages and global potential, you should engage with business resources who can help your company plot the course to success.

If you would like to review your company’s international expansion strategy and plans, I offer a 30-minute complimentary conference call to learn about your opportunities and challenges. To schedule this call, please email me at [email protected].

 

Best of success in all of your international business dealings!
Becky DeStigter, MS, MBA

The International Entrepreneur

The International Entrepreneur – When Is English Just Not Enough?

International Entrepreneur, international business, marketing, technologyThere’s an international travel blogger I know who makes his living by paid presentations to tourism boards around the world and reviewing cruise ships, resorts and other travel services. Not a bad life for an ex-tech entrepreneur!

But one thing I always find interesting is that middle-aged Midwestern never learned to speak another language beyond a couple of words of high school German. That means that all of his presentations, business transactions well, travel is done in English only.

I’m sure there have been times when Fred wished that he understood key languages like Arabic, Spanish or Chinese. Then again maybe the non-English-speaking Yemeni taxi driver taking him to God-knows-where was just part of the adventure. But his is also a business that needs to be sustainable. Could he reach a wider audience with his services and articles? Would it help to be able to negotiate a better price or get the local inside scoop on a hidden travel treasures?

For the rest of us: Is there a greater value from expanding your business beyond your native language?

As almost always in international business, the answer is,it depends.

Now fast-forward to all of the rapidly expanding American technology companies that are all trying to find the magic incantation to yield predictable, sustainable revenue growth. There’s pressure from investors to show increased market share and progress towards greater profits. Global market potential can be an escape valve from the pressure cooker of stakeholder expectations. After all, the U.S. may be a large country but it only accounts for 5% of world population and an ever-shrinking percentage of world technology consumers.

But really, in today’s global business environment, isn’t English the language of business? Companies get incoming inquiries all the time from international leads. And couldn’t interested readers just hit the Google Translate button to read blog post in their native language? Do we really need to change our product’s language, along with every other function to be able to reach non-English speakers?

Many American tech companies side step this whole issue by focusing on expansion English-speaking Canada, The United Kingdom, Australia and New Zealand. If these are truly the most profitable time investments for the company, then why not use English as the expansion criteria?

But the truth is, most companies don’t do the research to find out. Ignorance isn’t quite bliss when your expansion is financed by investors or retained earnings. Honestly, Canada is normally a safe bet because of market similarities and NAFTA. But sometimes there are surprising markets that are more profitable and less competitive than native English markets. Take for example Tadley, Inc., which develops management software for private secondary schools. With over 3,000 education clients, their strong markets (no surprise) are in Asia and centered around China. Or take a less tech example, ladies’ handbags. A Japanese women is used to paying sometimes twice as much for the same designer handbag as in the U.S. It wouldn’t make sense for either Tadley or a handbag designer to stick with English-speaking markets.

Based on the Smartling[i] survey, we can estimate that for every international lead we get there are 9 others who only searched for our product or service in their native language. That’s a quick finger in the air to know which way the wind is blowing for your international market demand.

Only through market research can you know the projected Return on Investment based on market potential and the associated costs (including translation and localization) for your company’s products and services. Armed with this information, you can go forth with more confidence in your expansion planning.

Next week’s article will be about the nuts and bolts of gathering the right types of actionable information to make smarter decisions for international expansion. Until then, best of success in all of your business efforts!

[i] https://www.smartling.com/pr/the-global-need-for-multilingual-content/

The International Entrepreneur – Interview with International Export Expert, Ed Marsh (Part 2)

Ed Marsh, International Entrepreneur, International Business

Ed Marsh, Consilium Global Business Advisors

Two weeks ago I posted Part 1 of my interview with international B2B sales and marketing expert, Ed Marsh. Today I share the rest of Ed’s insightful answers.

Q3: What’s the biggest mistake you see companies making in their online marketing for global markets?

A3:  Most US companies make the same fundamental mistake globally that they make domestically.  Their entire marketing and sales approach is built on who they are, what they do/make….from their perspective.  And that’s functionally irelevent to any potential prospect in the world, including at home in the US.  It makes them ideal 3rd bid participants, but not dynamic growth engines.

The solution is to really understand their buyers – and often assumptions are so firmly embedded in a company that outside assistance is critical to really understanding buyers challenges, perspectives, goals, etc.  Buyer personas must be rigorously built, and then a complex “3D buyers journey” constructed.  That’s the foundation for successful market development domestically which is, in turn, the foundation for global success.

But that’s also where trouble arises…..because companies proceed to use that same foundation globally.  Partially because it’s a lot of work to build it properly in each case, and partially because it takes deep market familiarity and extensive interviews to construct – it doesn’t get built for target markets.  Then they compound that with translation.

Effective global content isn’t translated, or even localized.  It’s transcreated, or created in the local language based on the local persona and optimized around the native and intuitive keywords which describe the market specific business challenges prospects there face.

So exporters need to think of digital marketing as a process of continuous improvement and innovation – instead of a website.  They need to really nail their domestic program first.  Then they can incrementally internationalize what they have – experimenting and adjusting based on metrics each step of the way.

Q4: What are you recommending to U.S. clients worried about the strong dollar affecting their export potential?

A4:  Interestingly I don’t hear many concerns expressed about the strength of the USD.  Certainly today’s cross is less favorable than the rates over the past several years, but I don’t have the sense that it’s impacting projects…at least yet.

But I suspect that specific concern may be implied in uncertainty around the bigger topics of foreign exchange and payments.  Those are perennial areas of considerable worry to US companies.  Often the resources to whom they naturally turn for advice, their accountant and commercial banker, are unfamiliar themselves.  That creates a real barrier to export success.

So in general I recommend that they find other resources/advisors/service providers for that expertise, and further that:

  1. They embrace hedging – it’s neither some whizz kid MBA complicated thing, nor some dastardly Enron approach.  It’s simply agreeing today to buy currency at some point in the future for a given price.  Companies can easily and inexpensively lock in today’s margin on a deal and let the FX market do as it will.  A good currency trading resource will be inexpensive, responsive and proactive with business recommendations.  And international customers will appreciate your flexibility to work in their currency.
  2. They secure foreign receivables insurance – not every deal can get done with cash in advance.  Banks push clients into L/Cs which can be appropriate, but are expensive, complicated, often have gaps…and ultimately are more in the bank’s interest than the clients’.  Insuring foreign receivables (details vary by policy) not only protects the seller against buyer default and other risks such as non-convertibility of currency, but it also allows companies to use a higher portion of receivables in the asset base upon which their borrowing capacity is calculated.

Q5: Any last advice you’d like to share with growing B2B companies currently expanding in international markets?

A5:  Four things.  The first is a small, simple one.  The way to grow exports is to look for profitable customers to add.  It needn’t be some huge, expensive, protracted project with an ephemeral payoff years down the road.  Make it easy for the right buyers to find you, work through the transactional details, and start making money globally.

The second is a bigger, more strategic topic.  A huge percentage of US SMBs are owned & managed by baby boomers.  They’ve grown accustomed to a sellers’ M&A market over the past few years.  But research shows that a majority plan a transition over the next five to ten years – and when they simultaneously move in that direction, suddenly the inertia will shift and it will be a buyers’ market.  That means that companies need to move proactively to achieve key strategic positioning steps which will help to competitively distinguish their company from many others in a crowded market.  That’s where global diversification is key.  Not only should their global sales  contribute  rising revenue and profits (key to valuation, particularly among competitors with stagnant or anemic earnings) but also the diversification itself will create value – perhaps even enough to position a company as a strategic acquisition target for acquirers seeking further global diversification themselves.

The third is practical.  Current US debt levels will almost certainly result in increased tax burdens on SMBs, particularly on pass-through entities commonly used by privately held SMBs.   That means that tax reduction strategies should be at least part of business planning – and exports could be hugely beneficial through the IC-DISC structure that’s been around for years and was recently made permanent.  It offers companies nearly 16% savings on profits from export sales.  That’s probably appealing just based on today’s rates – but almost certainly will be more so as rates are likely to rise.

Finally is the value of lessons learned.  1:2 babies born in the US today is Latino.  But there is no monolithic Latino culture – rather it’s a diverse group of cultures and languages from throughout Latin America and the Caribbean.  There’s no better way to learn how to successfully market and sell to those US consumers than to dive deeply into the markets from which they come.  And there are many other product, service and application lessons which can be learned in foreign markets which will spawn R&D and successful new product offerings for the domestic market.

About Ed Marsh

Ed was going to be an architect because he loved the nexus of engineering and design.  That was before was going to be an engineer; before he graduated from Johns Hopkins; before he was an Army Infantry Officer (Airborne Ranger); before he set B2B industrial sales records; before he was partners with a German capital equipment manufacturer; before he founded a distribution/rep company for industrial products in India; until he decided that managing a business and employees wasn’t what he enjoyed.  Now that Ed’s got all of that out of his system he runs a consultancy that helps US manufacturing companies grow by applying process excellence to business development – completing the full circle back to an engineering & design combination.  His practice is built on a unique methodology which combines powerful digital marketing methodologies (a HubSpot partner) with his extensive international biz dev experience. Ed is also Export Advisor to American Express

About Consilium Global Business Advisors:  Consilium assists American manufacturers in applying process excellence to their business development.  In other words we help lean, well managed companies with rock solid bottom lines effectively and consistently grow their top lines to match.  We work primarily with mid size industrial manufacturing companies, guiding them through a journey of designing and executing business grade B2B inbound marketing and focused, profitable global market expansion.

The International Entrepreneur – Interview with International Export Expert, Ed Marsh (Part 1)

Ed Marsh, International Entrepreneur, International Business

Ed Marsh, Consilium Global Business Advisors

This week I have the pleasure of interviewing one of the top independent experts in the international business consulting field, Ed Marsh from Boston. If you need expertise particularly in B2B manufacturing markets, Ed is a tremendous resource. His articles are an excellent read too. Here are Ed’s answers to my questions:

Q1: What are some of the changes you’ve seen in global markets over the past few years? Any important trends?

A1: I’ve seen three major changes shift the global sales growth environment. First, the concept of “emerging markets” is now a bit outdated. Most markets have emerged and are now developing. There are a few comparatively “green field” markets remaining in Africa, but most of the others, including many that most US companies consider too different, are actually fairly well developed. Chinese, German and other exporters are often already active, and so the growth play is no longer to ‘seize a beachhead’ but rather to leverage the favorable “Made in USA” cachet as domestic consumer demand grows.

Second, nearly every country is undertaking export promotion efforts – from large, developed and wealthy nations down to recently emerged. And nearly every company is actively importing and even if they’re not yet exporting. That means that global trade is far more fluid. It no longer takes a large company infrastructure to manage the process. Logistics, payments, communications & travel are now essentially ubiquitous. In other words, it’s more feasible for small companies to export now, than ever. And therefore the barriers are more commonly internal (e.g. mindset) than external. And it’s also increasing competition in every market – including at home. So many companies can leverage export to overcome stagnating domestic sales.

Third, the internet. Ten years ago a company that wanted to export faced a lengthy, expensive and laborious journey that started with extensive research; then an educated guess (or gamble) on a market; then a long process of establishing a presence and building relationships, credibility and awareness. In contrast, today, with smart phones leapfrogging internet access into areas still lacking hard wire telephone, companies are growing rapidly – and any one of those rapidly growing companies is a prospect for US exporters (as well as Chinese, German, Indian, etc.) That creates a huge shift from a cumbersome market based approach to an ideal (profitable, long-term) prospect approach. In essence companies today can build a business by helping profitable buyers find them, regardless of passport or country code (almost) – rather than the herculean task of “building markets.”

Q2: Where do you think manufacturers are missing opportunities in key international markets?

A2: They’re not accounting for demographics. Most companies select target markets based on news headlines reciting population and GDP statistics. And companies that build their export growth on inbound results, or helping profitable buyers find them, will often develop concentrations in today’s most dynamic markets. But once a global sales capability has been developed within a company, then it’s appropriate to supplement initial activity with strategically selected market development. Diversification against regional concentration risk, and political and currency risk is built on a deliberate process of market analysis and selection. And that selection needs to anticipate the future – which is largely demographics driven.

Many of today’s active markets have demographic trends which point to substantially diminished future significance. That doesn’t mean that there won’t be profitable sales originating in those markets – but if a company plans to invest in a market anticipating success in ten years, that market should be one which demographics indicate will be growing and vibrant.

They also often overlook important opportunities in smaller markets, or metro concentrations (vs. pan national efforts.) For US companies with a domestic market of 330MM pax, markets like Colombia (48MM), Vietnam (93MM), Turkey (74MM) and Lagos (21MM) in the latter category not only punch above their weight economically, but represent substantial incremental market opportunity (15%, 30%,23% & 7% respectively.) And I recommend comparing that to US markets that they might have eagerly worked long and hard to enter. Charlotte (2.3MM), Seattle (3.6MM) and Dallas (7MM) for example. So companies looking to exports for revenue growth opportunities should not reflexively chase the BRICs. There are compelling markets with much lower barriers to entry.

Tune in next week for the rest of Ed Marsh’s interview!

About Ed Marsh

Ed was going to be an architect because he loved the nexus of engineering and design.  That was before was going to be an engineer; before he graduated from Johns Hopkins; before he was an Army Infantry Officer (Airborne Ranger); before he set B2B industrial sales records; before he was partners with a German capital equipment manufacturer; before he founded a distribution/rep company for industrial products in India; until he decided that managing a business and employees wasn’t what he enjoyed.  Now that Ed’s got all of that out of his system he runs a consultancy that helps US manufacturing companies grow by applying process excellence to business development – completing the full circle back to an engineering & design combination.  His practice is built on a unique methodology which combines powerful digital marketing methodologies (a HubSpot partner) with his extensive international biz dev experience. Ed is also Export Advisor to American Express

About Consilium Global Business Advisors:  Consilium assists American manufacturers in applying process excellence to their business development.  In other words we help lean, well managed companies with rock solid bottom lines effectively and consistently grow their top lines to match.  We work primarily with mid size industrial manufacturing companies, guiding them through a journey of designing and executing business grade B2B inbound marketing and focused, profitable global market expansion.

The International Entrepreneur – International Expansion: Organic or Acquisition?

You may be asking yourself if your approach to international expansion is the right one. Should you grow organically by the strength of expanded international sales? Or would the right company acquisition in the local market be a shortcut that provides instant market access?

As with most questions in international business, the answer is:it depends.

Why (or Why Not) Grow Organically?

The International Entrepreneur –International Expansion: Organic or Acquisition?

Shanghai – old & new

There are two main reasons why you would want to grow organically. First, it usually requires less upfront capital investment than buying a local company. Since many growing companies are low on unused capital and may have limited access to debt financing, organic growth could be the better fit. Second, going it alone allows your company to control everything: brand, client relationships, finances, processes and your company culture. For some industries, control is paramount to manageing competitive advantages like intellectual property or internal efficiencies that lower cost structure.

Motivations for NOT growing organically include slower growth. For companies that need aggressive growth as part of their exit strategy (ex. acquisition or merger), then organic growth might not be assertive enough. Also, the organic growth path has a higher chance of making cultural or market-related mistakes. The company may not understand the market’s buying patterns or time frame. A local company would already understand how business is conducted & avoid this risk altogether.

 

Why (or Why Not) Acquire a Local Company?

Acquiring a local company gives you immediate access to local markets, revenue streams and likely to required local connections to government and business resources. The local company already understands business cultures, language, etc. And not every company is strapped for cash. Post-IPO or after an investment round a company may have need to put capital to work as soon as possible. Acquisition may be a strategic shortcut for companies like these.

I see two main challenges for your company doing foreign acquisitions. First, there’s a sizable risk of being oversold on the local company’s value. Other countries valuate differently. Plus as a company is sold key players might leave, creating a hole in client relationship management or other vital functions. This is also a point where a departing employee may take intellectual property outside of the company, thereby reducing company value.

The second main risk I see is one of integration with the new company. Many companies choose to have the local acquired company operate independently of the parent firm in order to avoid integration issues. But there are still likely to be numerous cultural misunderstandings and reduced productivity over integration issues.

For Either Approach, How to Mitigate Some Big Risks

Market Research

It is critical to extensively research your foreign target before market entry. This includes both analyzing secondary data collected by government and industry sources, as well as primary research conducted in country. If international market research is a company forte, then you should do it internally. If not, then outsource this critical step to a qualified international advisor. Intimate market knowledge will make organic market entry and acquisitions much more successful.

Set Aside Additional Budget

No matter how much a company expects to invest into market expansion, it is wise to set aside additional funds for the unexpected (and there is almost always several unanticipated expenses).

Troubleshoot In Country

In any market or subsidiary there will be issues that arise. This is even truer in international markets. The distances may be challenging financially or logistically, but going to visit in person often can clear up issues quicker than a phone call. It’s easier to see a problem and to understand it in context. Again, if you or your team members can’t travel consider sending an experienced international business advisor to investigate and recommend solutions.

A Third (Middle) Option for Expansion

Another option between organic and acquisition would be to seek out a strategic partnership with a local company. While such a relationship needs to be defined and cultivated with great care, it eliminates some of the disadvantages of both organic growth and acquisition. First, there’s no large upfront capital outlay like in an acquisition. The right partner would have both the immediate cultural and market knowledge to help speed product acceptance and avoid the organic method’s slow growth and cultural missteps. And when the partnership is no longer needed, there is no need to dispose of assets.

To explore potential strategic partnerships, consult with your local government export office, industry organizations or an international business advisor for referrals and advice in how to proceed.

As an international business advisor to B2B technology and professional services companies, I can help your company with any of the following:

  • International market research
  • Troubleshooting international operations or marketing/sales issues
  • Searching for potential strategic partners and developing an action plan

I can be reached at: Contact – The International Entrepreneur

Best of success to you in all of your international business efforts!

 

– Becky DeStigter, The International Entrepreneur

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