Doing Business Internationally
by Michelle Bomberger | June 15, 2012Our guest blog comes from Andrew Crowder, International Trade Specialist, Washington Department of Commerce
95% of the population of the world lives outside US borders. If your business is not exporting, you are not playing the business game at its true size.
Exporting can be a potent source of growth for your business. By exporting, you can lessen the risks associated with a slowdown in the US. You can also learn about other technologies and other ways of doing business. Whether you choose to or not, you are already competing globally. Why not make some money at it?
But exporting success, while it can happen quickly, usually takes some time—as much as a year or two to identify, vet, and start doing business with foreign customers or partners. Let’s take a quick look at the export process to identify critical steps.
Dedication of resources: Exporting is a discipline—like law, or accounting, or operations management. It has its own body of best practice and its own specialized knowledge and vocabulary. To succeed at exporting requires a commitment from top management to master this discipline, and a dedication of resources, both to bring necessary skills in-house and to market products overseas.
Making sure it’s legal to do business: Most exports are legal and require no special permissions. There are three important exceptions to this general rule, though, that can cost you your business, or even your freedom, if not observed:
Proscribed or dual-use technologies: The export of some items is prohibited outright, while the export of dual-use items—items with potential military as well as non-military uses—requires permission from the US government. The responsibility for determining what can be exported rests with the exporting company.
Proscribed countries: US citizens may not do business with certain countries. This list is getting shorter, and countries to be careful about include Cuba, Iran, North Korea, and Syria. In addition, exporting companies are held responsible for third-country shipments. Know your partner, and make sure they are not shipping onward to a proscribed country.
Proscribed parties: These are persons and organizations that the US government has determined pose a potential threat, and their presence in a transaction could stop it, or could trigger and export licensing requirement.
Lists of proscribed technologies, proscribed countries, and proscribed parties are maintained by the Bureau of Industry and Security, and you can access those lists at:
Choosing a market: The level of success of your export effort will depend mostly on how well you choose your market. One fundamental choice is to do business with a people you like and whose culture you respect. That way you can enjoy your international business, and not merely profit from it. There is a process for choosing a market. Basically, it is to identify your top business drivers, and then rank a group of potential countries according to how well they satisfy those drivers. There are both Federal and state resources to help you with this process.
Choosing a channel: Once you’ve identified your market, you will need to determine the best channels for that market. What is the relationship on the other end of the deal? Are you selling directly to customers? Should you sell to a wholesaler? Will you have an agent or employee abroad? Will you have a distributor, who will take title to your product and then resell it? Are you going in as a subcontractor to a contracting firm already established in the market? Market characteristics and national business practices will influence your choices here.
Qualifying your partner: Once you’ve identified your market and determined your channel, you will need to assemble a list of potential partners in the channel, and qualify them. Again, state and Federal resources are available to help you. Once you’ve narrowed the list down to a few potential candidates, the best thing is to go meet them in person. Make sure you have a contract, with performance targets written in, with any potential distribution partner. Good legal advice is essential here.
Getting paid: This is why you’re in business, after all. It’s important to structure payment terms and methods in such a way that you make things easy for your customer without assuming undue risk for yourself. The Export Finance Assistance Center of Washington, a not-for-profit entity established in 1983 to coach Washington companies through international transactions, and to help reduce export payment risk, is available to help you free of charge.
Make sure you address these key issues as you plan for growth in foreign markets. I look forward to seeing you at the discussion on June 27th.