Today there are over 300,000 US companies actively selling into international markets. And despite all the current noise in the news around tariffs, protectionism, nationalism, etc. the horse has left the bar – it’s a global economy. Whether you’re just starting to consider growing your business abroad, or are an established businesses working to evolve into a true global organization, here a handful of key considerations that should be top of mind as you consider next moves:
1. Don’t Neglect Your Neighbors
The inclination in expanding overseas is to chase massive markets in far away lands. The news is littered with stories about exploding middle classes in countries like India, Brazil, and Indonesia (part of the BRICI counties along with China and Russia). You hear it all the time, “If we can get X% (small) of a YMM person market (huge) we’re in business!”…but the facts of US exports paint a very different picture…
Over a third of all US exports go to Mexico and Canada. When you include China, and established trading partner, that number jumps to over 50%. That’s half of all exports going to 3 countries. Every industry is different of course, and there are success stories out there, but the combination of proximity, free trade, logistical support, cultural familiarity etc. makes Mexico and Canada natural trading partners. These markets may not be right for your offering, but if you’re in the early days of your strategic planning process, don’t be enticed by the road less travelled in the hopes of finding a pot of gold at the end of the rainbow.
2. Protect Yourself
From a risk standpoint, it goes without saying that doing business overseas carries with it unique risks that US companies simply don’t face domestically. This shouldn’t dissuade you from growing abroad, but it does mean extra effort is required to protect you, your employees, and your business. Three key areas of risk to pay particular attention to include:
- IP – Intellectual property protection differs dramatically from country to country, so make sure you understand what you need to do in each new market to protect yourself. Our recommendation here – even if a particular overseas market is just a “maybe” at this point, it’s worth investing in the right protections early on.
- Contractual – Whether you’re formalizing a relationship with a supplier, employee, distributor, or any other entity in a foreign country, make sure you understand local law, and construct agreements accordingly. Many countries, for example, have protections for distributors and employees that will override contractual language. Avoid headaches down the road and engage local counsel.
- FCPA – The Foreign Corrupt Practices Act is no joke. Even agents of your company (e.g., contracted manufacturers reps) can get you in trouble for violating FCPA statutes abroad. Every company doing internationally is subject to FCPA compliance and claiming ignorance is no defense. Take the time to understand FCPA and what you need to do to protect yourself accordingly.
3. Focus, Focus, Focus (with a caveat)
Focus is critical to success in international markets, even for established businesses. We tend to view “international” as a monolithic, one-off opportunity, but the reality of course is every country has a unique set of competitors, channel dynamics, cultural nuance, legal statutes, etc. and will require some level of product and/or service customization to succeed.
All that said, unless your long-term international strategy is focused on a very limited number of countries, you need to be thinking broad as well as deep. You simply can’t be all things to all people and build a scalable international business at the same time. This means, for example:
- Ensuring sufficient scale in product modifications to justify capital costs
- Setting up a legal entity structure that addresses first forays but can scale as the business grows
- Finding global service providers that can address needs in the short and long term
- Entering countries that have longer term strategic value (e.g., as a gateway to regional trade blocs).
The trick is focusing but not to the point where you limit growth going forward.
4. Plan Conservatively
As we all know, business is tough, by definition. International business is exponentially more difficult. Challenges you face in your domestic market are amplified by a host of factors as you grow internationally including distance, language, legal systems, cultural norms, politics – just to name a few. It is therefore critical to approach your international strategy with a realistic view on what it will take to meet key business objectives, otherwise you risk running out of money, motivation, board support, team enthusiasm, or a host of other critical inputs before plans are realized. A simple rule of thumb here: Double (or triple!) your timeline and halve the forecast. If you can live with the results, full steam ahead!
5. Ready the Organization
Moving into international markets will touch all functions within the business. What will terms be with overseas customers? Will we sell in US dollars or local currency? How will we manage payroll? What are local packaging requirements? The list is nearly endless, and no function is immune to the impact of expanding abroad.
Whether you’re still in the planning stages or doing some business overseas but struggling to take the business to the next level, systematic planning and buy-in across the organization is critical. There are no short cuts here. Make international growth a priority and build a process around ensuring that each function has identified the implications for their competencies and responsibilities, has taken an honest look at where the gaps are, and defined a plan and timeline for filling the gaps. Your international business will only be as strong as the weakest link in your organization.
6. Leverage Free Resources
Not everyone company can afford to hire Mckinsey or BCG to perform a systematic internationally growth strategy or project manage efforts to grow abroad. The good news is for SMEs there’s a ton of resources out there that can help companies get over the hump and make real strides internationally. Here are a few that we’ve found helpful and are topical to the discussion above.
- US Commercial Service – the trade promotion arm of the International Trade Administration, it’s mission is to “help U.S. companies get started in exporting or increase sales to new global markets.” There are a ton of free/low fee resources here for companies of all shapes and sizes. In particular, check out their Gold Key service – in country business development support – as you hone in on particular countries for implementation.
- Nationmaster – is a great central repository for statistical information on just about any country along any metric. Very clean site and easy to use.
- TerraFirma Strategy – Lots of tools / content here for businesses expanding abroad. Their international readiness assessment is very helpful tool in assessing your organization’s preparedness for international expansion. Also check out their database of online resources for links to a host of other very helpful sites online.
