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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 Park, The International Entrepreneur, sign up here.

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 Park, 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 friend never learned to speak another language beyond a couple of words of high school German. That means that all of his presentations, business transactions, and 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 a 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 to 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 irrelevant 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 trans-created, 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 he 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, 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 Park, The International Entrepreneur

The International Entrepreneur – Best Practices for Entering American Business Markets

ConfidenceAmerican businesses buy trillions of dollars’ worth of products and services every year. If your company is not American but is looking for a piece of that marketplace, what are the best ways to break in to the American market?

Balancing Money vs. Time

Ideally we would all have limitless capital resources. If that were true, then you could acquire the company with the largest American market share. Or, you could quickly expand into every major American geographic market with local representation. On the other side, there are low-cost ways to enter the U.S., including distributors, local reps, strategic partnerships with companies selling related products and e-commerce. These channels do take time to establish and develop, so will not bring success as quickly as capital-intense approaches will.

Don’t Settle on the First Representative Option

The American market has many freelance sales representatives, distributors and business services professionals. If one learns that your company is looking to enter the American market, you will likely be approached for your business. This may or may not be the right resource for helping you enter the American market. Instead, talk to several potential partners, reps, distributors and suppliers. Ask the same questions and see where the differences exist. In many business cultures, new business relationships require an introduction from a mutual colleague. This is not the case in the U.S. The goal is to find the right resources that will make strategic sense and reinforce your company and products’ brands in terms of quality, values, and service.

Art of the American Fast Deal

Compared with the rest of the world, Americans make buying decisions and business deals very quickly. It is not necessary to have a previous relationship or even a current one to sell to American clients. This can make many non-American companies uncomfortable since they are doing business with a company and its representatives who are unknown and untested. When doing business in the U.S., you need to hire a local business transactions lawyer to write and review any contracts. Americans will expect any signed contracts will be enforceable in an American judicial court. Your American lawyer will help to keep language out of your contracts that increases your business risks.

Business Loyalty has a Price

I was recently talking with a client about possible companies that could acquire them. Since this is my client’s exit plan, we rolled through several names. But the most likely buyer was also a company that might shut the company down after purchase and eliminate the current staff. My client wanted to avoid this option until I asked him how he felt if he walked away from such an acquisition with US$3 million. His answer immediately switched. The truth is that American business leaders are heavily motivated by financial returns. For companies doing business with Americans, this means that if another supplier comes along offering a lower price or other incentives, you may lose that client before you ever knew that the relationship was in peril. The way to keep clients and business partners loyal is to periodically stop and ask them how the relationship is going. If someone is trying to underbid your company’s prices, your partner/client is likely to tell you when asked. Also, keep track of competitors in the American markets as to what incentives they are giving potential clients to switch away from your products.

I hope this article helps you in your business expansion. If your company needs assistance to expand into the United States and you have technical products or services, please feel free to contact me.

Best wishes,
Becky

The International Entrepreneur – Technology Opportunities in Latin America (Part 2)

Cordoba, Argentina – high-tech industry cluster

This is the second article in a series about the technology sector in Latin American markets. Last month, we looked at Brazil. This month, we explore Argentine technology markets.

Argentina’s Business Environment

Argentina has a very mixed reputation as a periodically politically unstable nation, yet with great potential for economic growth when allowed to flourish by its leaders. Argentina has long had a technological focus and success in fields such as medicine, nuclear physics, biotechnology, nanotechnology and space science. It currently plays host to global high-tech companies like Motorola, Microsoft, Hewlett-Packard, IBM, Sony and Google.

Argentina is competitive in terms of access to technology’s core tools. Its internet penetration is twice as high as the world average and similar to many European countries. Argentina’s broadband penetration is less than half of Europe’s, although it is similar to Chile and high for the region. 2011 saw a continued increase of broadband access (fixed 21% and mobile 150%) combined with higher notebook sales and the record sale of smartphones and USB modems. Broadband services over both cellular and fixed networks are expected to continue increasing in 2012.

The main factors helping to drive demand for IT hardware, software, and services in 2012 are:

  • New investments in Argentina in several industries, including tourism
  • Needed upgrades to most current IT systems
  • The growth of Internet access (fixed and mobile)
  • Increased complexity and convergence of technologies
  • Highly educated and tech-savvy population
  • New mobile number portability law
  • Nationwide extension of fiber optic lines under Argentina Conectada Program

Argentina is investing in both technology cluster development as well as in technology infrastructure to help position this country for growth.

Technology Clusters

Buenos Aires

Today, Buenos Aires is home to many tech start-ups and established companies, and a top notch talent pool. The Buenos Aires technology community also provides help in both subsidies and business coaching to its high-tech entrepreneurs. Based in the capital, Palermo Valley is a non-profit organization connecting the Argentine community with the global high-tech business community. For example, Palermo Valley arranged for Argentinean start-ups to pitch their companies in Silicon Valley.

Cordoba

Cordoba is the second-largest Argentine city and is located near the geographical center of Argentina. It has a fast-growing software industry but a lack of qualified IT workers at least in the short-term. High-tech companies in Cordoba include: Nimbuzz, Intel, EA, Dreamworks, Zynga, IBM, Hewlett-Packard and LinkedIn. There is a new technology park in Cordoba: Cordoba City. A total of 33 companies have agreed to open offices in the complex so far.

Technology Industry Opportunities

Argentina’s information technology market (hardware, software, services, etc.) reached $5 billion in revenues in 2011, 15% more than in 2010 and expected to increase 12% in 2012. IT Services are growing in Argentina as outsourcing of IT-related services continues as a global trend. Total revenues of this subsector reached almost $1.5 billion in 2011.

International consulting firm IDC said data center service providers will focus on value-added services. Technologies like virtualization and green IT are expected to help drive investments in data centers. Argentine data center service providers are expected to adapt offerings for smaller firms given the saturation in the large enterprise segment.

On the hardware side, high-end branded PCs, notebooks, netbooks and minibooks, printers, servers, and multi-user systems will increasingly need to be imported. Smart phones, digital cameras, MP3, MP4, other PDAs, digital storage devices, GPS, and portable and fixed gaming products are expected to increase next year as well. Since locally assembled PCs account for over 70 percent of the market, PC components will continue to be in high demand. Local assembly targets the residential and home-office PC markets. In B2B markets the cost savings from local assembly does not offset guarantees offered from the original vendor. The Argentine Government passed a law three years ago increasing the tariff on imported electronics by 30%. This law is attributed for the increase in locally assembled products over imported products.

The IT Services market in Argentina offers major opportunities for U.S. companies in network implementation, management and maintenance, legacy applications, wireless LANs, RTE (real time infrastructure) implementations, remote operation processing, back-up, critical mission services, disaster recovery systems, internet and network security systems, document digitalization, digital asset management, storage, utility computing, and information systems for rural areas (traceability, RFID, etc). Cloud computing and virtualization-related services are strong market segments in 2012. Software development outsourcing and call centers will continue to garner investments, exports, and increased sales in the Argentine market. In software markets, there will be large opportunities likely in security systems and business intelligence applications in 2012.

Argentina is just one country in Latin America experiencing high growth in technology markets. Brazil, Mexico, Chile and Colombia are also seeing major technology investments by governments, companies and individuals. If you would like more information about entering Latin American markets, please contact me. Best wishes on all of your international business efforts!

– Becky Park, The International Entrepreneur

Article Sources:

INSEAD & World Economic Forum?s Global Information Technology Report 2012

Doing Business in Argentina ? Leading Sectors: Information and Communications Technology, Export.gov 2012

The International Entrepreneur – Exit Strategies for International Ventures

business exit strategies, international trade, international entrepreneur

As your fiscal quarter or year is coming to a close, it’s a particularly good time to evaluate the effectiveness of your company’s various international business ventures. Many companies from countries with short-term business decision cycles (US, Australia, etc.) may be tempted to exit markets that are yielding lower than expected returns on investment. Here are several options to consider:

Exit as Quickly as Possible

If your company is about to fold or is significantly cash-strapped with few financial options, then by all means consider closing down some or all underperforming overseas operations. Keep in mind that there may be additional taxes or penalties owed for any workers’ wages, unemployment insurance, previous tax incentives owed to the local, regional or national government.

Another issue to consider is any future need to do business in that country. Business reputation takes a long time to build and a short time to destroy. The reputation is not only that of the company, but any individuals from the company who did business in that country. If Mr. Smith closes down operations in Indonesia and leaves partners, suppliers and customers in a bad position, then Mr. Smith not only earns a bad reputation for the company, but also for himself should he need to go back into Indonesia for a different company. A negative reputation is very hard to shake in most places.

Ease Out of a Country’s Operations

If a country’s operations is performing poorly and there is no reason to think that it will improve long-term, then another option is to slowly disengage from partnerships and suppliers in-country. This can occur when contracts come up for renewal or by renegotiating a smaller amount of goods. The idea is to preserve relationships and to also avoid costly fines from the local government. This is likely a better option than the quick exit when you want to preserve goodwill in country. Plenty of companies failed in their first attempt to establish a specific market. But oftentimes the same company will return years later and remember lessons learned (like Starbucks’ second attempt in China).

Stay and Make it Work

All new international ventures are challenging. One of the best options if you can afford it is to stay in-country and find new ways to improve your in-country operations. Also, there may be strategic reasons to engage in a low-performing market.

An example is the beer industry in China. There are hardly any profitable foreign beer producers operating in China. So why stay? The Chinese beer market increases by 30% each year. The average income of Chinese workers continues to increase and foreign beer is a status symbol of sorts, especially in the “night market.” Premium beer may not be profitable today, but in 5-10 years beer producers’ investments will likely pay off.

Consider renegotiating relationships with partners, vendors and customers to improve your profitability. It will benefit your partners to renegotiate often instead of losing your business altogether. Look for new ways to increase demand. This includes new ways to use your product or service or different packaging size. Personal items like razors can be sold individually. Consider renting instead of selling a product. Services can be repackaged as seminars of information instead of delivering it individually.

 

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