Underestimating the operating costs in an international market
Failure to account for all of the costs of operating in the new market can cripple an otherwise successful marketing and sales effort. Local expenses may include higher taxes such as a value-added tax (VAT), additional fees and assessments that are uncharacteristic of business overhead in the US. Many times these unaccounted-for expenses deplete the anticipated profit margins based on domestic sales and marketing models.
It is critical to engage the services of knowledgeable and experienced people in the local market who can help you understand the real cost of doing business locally and steer you past dangerous miscalculations about the true financial opportunity available.
Deciding to become a global company too late
Companies are complex structures not unlike houses. The foundation is laid and the supporting infrastructure is built based on the expected character and intended use of the house. Additions to the house expand the square footage but are unlikely to change the character of the house. They are easily identified as additions to something existing.
Companies are much the same way. A “purpose-built” global company has an infrastructure that more easily supports such operations. Companies with a “bolt-on” approach to global expansion will have a more difficult time appearing and behaving like a global company. That being said, the earlier in their growth process a company establishes the strategic direction of a global company, the earlier they can take on the appearance and behavior of a company positioned and organised to support global operations.
Having this international expansion vision early sets the management expectation early and cascades through the organization from the start. This vision impacts organisation, staffing and business strategies from the very beginning which is far more advantageous than having to retool the organization and dislodge entrenched interests in the status quo.
Failing to get expert advice
Few entrepreneurs possess all of the knowledge and skills required to lead their companies into a global expansion. There are many experts who have been there before and can provide the advice and guidance to help avoid the many missteps and pitfalls awaiting the unacquainted.
Expert advice is not cheap, but it pales in comparison to the costs, missed opportunities and damage to the corporate psyche and reputation caused by failed first attempts or other errant initiatives.
Additionally, commit the internal resources required. Select an internal staff for which the international expansion is not just an extension of their current responsibility. Have this as their primary responsibility. Partner them with external experts and ensure a knowledge transfer so that you’re developing internal expertise while growing the business.
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Be aware that in some countries, the business does not move forward unless you are willing to offer a bribe.
Prepare yourself to say no and walk away from the deal. Do not do something behind closed doors that you will regret afterward. You need to follow your company’s code of conduct, which probably prohibits such actions. More importantly, you need to follow the laws of your own country. A Canadian businessman was recently sentenced to three years by an Ontario court for offering bribes to Air India officials and India’s then Minister of Civil Aviation. Finally, if bribing someone was the reason you won the business, then you are easily replaced by someone else who is willing to offer more. Building a long and lasting relationship is fruitful, but it needs to be based on trust and an understanding of the value each party brings. This is especially important in international trade due to the cost and effort associated with foreign market entry. Louei is the Director of Business Development at Canada Topp Group based in London Ontario (Canada) sais “For example, at my company we always seek long and lasting relationships with qualified distributors who can serve our global brands. In the event that we get a request for a one-time sale, we attempt to turn it into an exclusive contract, but if they are not qualified, the sale is refused. This helps us to maintain the integrity of our brands, and it perpetuates a healthy relationship with our network of distributors. This also creates a distinguishing factor from the many cheap imitations you are more likely to encounter when you trade internationally.”
You will face challenges with logistics (ie. shipping, customs or transportation).
Do not get frustrated; rather, put on your creative hat and shift gears into solution mode instead of blame mode. Too many people and processes are involved, so you just need to be positive and be prepared. We face challenges when we travel on vacation for pleasure, so you can only imagine the added complexity of doing business across international borders. Once you have gone through the process multiple times, you will learn and become creative in forecasting trouble and planning for it. Louei is the Director of Business Development at Canada Topp Group based in London Ontario (Canada) sais “At my company we learned to send the shipping documents to the buyer as well as to the clearing agents before the shipment is sent. The documents are then validated to ensure they are compliant with the customs of the receiving country. We take actions on any changes required before the products leave our warehouse. This saves time and cost for all parties involved, especially if you are trying to meet a campaign deadline. Any delays can be costly.”
Similar to how you prepare for challenges, you also need to prepare for the good news of increased sales from your new foreign market. There is additional demand that needs to be fulfilled, but in ways which are not necessarily similar to what you do at home. New packages, instructions in different languages, and product modifications are a few items to consider in order to satisfy the needs of your new customers. These items come at an added cost, which you must incorporate into your price while maintaining your competitiveness. We sent samples of our products to a foreign market so they could test them in their labs as well as do market studies for consumer acceptance. The package design was refused at customs because it did not meet the needs of the conservative culture. As a result, we had to send loose samples without the packaging to proceed with the testing. Once it was approved, we designed a special package specifically for that market, which was welcomed by customs and by the end user.
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Vocabulary
compelling
If a reason, argument, etc. is compelling, it makes you believe it or accept it because it is so strong:
compelling evidence
It's a fairly compelling argument for going.
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Err
to make a mistake or to do something wrong:
He erred in agreeing to her appointment to the position .
Resentment
to feel angry because you have been forced to accept someone or something that you do not like:
She bitterly resented her father's new wife .
[ + -ing verb ] He resents having to explain his work to other people .
Perceive
to come to an opinion about something, or have a belief about something:
How do the French perceive the British?
Women's magazines are often perceived to be superficial .
Encounter
formal to meet someone unexpectedly:
On their way home they encountered a woman selling flowers .
to experience something, especially something unpleasant:
When did you first encounter these difficulties ?
The army is reported to be encountering considerable resistance .
Counterpart
a person or thing that has the same purpose as another one in a different place or organization:
The prime minister is to meet his European counterparts to discuss the war against drugs .
Wind down
to end gradually or in stages, or to cause something to end in this way:
The storm finally began to wind down after four hours of heavy rain .
Temple University is winding down its 14th consecutive losing season .
Rep
someone who travels to different places trying to persuade people tobuy their company's products or services
Prior
formal existing or happening before something else, or before a particular time:
The course required no prior knowledge of Spanish .
They had to refuse the dinner invitation because of a prior engagement (= something already planned for that time ).
Allure
the quality of being attractive, interesting, or exciting:
the allure of working in television
sexual allure
Pitfall
a likely mistake or problem in a situation:
The store fell into one of the major pitfalls of small business , borrowing from suppliers by paying bills late.
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There's a video that tells new students about pitfalls to avoid .
Cripple
to cause serious damage to someone or something, making him, her, or it weak and not effective:
a country crippled by war
Deplete
to reduce something in size or amount, especially supplies of energy,money, etc.:
If we continue to deplete the earth's natural resources , we will cause serious damage to the environment .
The illness depletes the body of important vitamins .
humorous That last holiday seriously depleted my bank account !
Margins
the amount by which one thing is different from another:
The Senate approved the use of military force by a margin of 52 votes to 47.
The poll shows that the government is leading by the narrowest of margins.
Steer
to take someone or something or make someone or something go in the direction in which you want him, her, or it:
She steered her guests into the dining room .
I'd like to steer our discussion back to our original topic .
The main task of the new government will be to steer the country towards democracy .
Cascade
to fall quickly and in large amounts:
Coins cascaded from/out of the fruit machine .
to pass on information by giving it to just a few people, who then give it to more people; to be passed on in this way:
Guest information is cascaded through employee shift briefings .
Communication cascades down the organization until the information has been communicated through each level , to the front lines .
Dislodge
to remove something or someone, especially by force, from a fixedposition:
The earthquake dislodged stones from the walls and the roof .
The Red Sox need two wins to dislodge the Yankees from first place .
Entrenched
Entrenched ideas are so fixed or have existed for so long that they cannot be changed:
It's very difficult to change attitudes that have become so deeply entrenched over the years .
The organization was often criticized for being too entrenched in its views .
Status quo
the present situation:
Certain people always want to maintain the status quo .
Psyche
the mind, or the deepest thoughts, feelings, or beliefs of a person orgroup:
the male psyche
Peru is a very traditional country , and embedded in its psyche is a love of ceremony .
Errant
behaving wrongly in some way, especially by leaving home:
an errant husband
errant children
going in a wrong direction:
An errant throw cost them the game .
not correctly done or not behaving well:
Teachers dislike errant spellings and misused words.
Fruitful
formal producing good results:
It was a most fruitful discussion , with both sides agreeing to adopt a common policy .
Perpetuate
to cause something to continue:
Increasing the supply of weapons will only perpetuate the violence and anarchy .
The aim of the association is to perpetuate the skills of traditional furniture design .
Distinguishing
A distinguishing mark or feature is one that makes someone or something different from similar people or things:
The main distinguishing feature of the new car is its fast acceleration .
Validate
to make something officially acceptable or approved, especially afterexamining it:
The data is validated automatically by the computer after it has been entered .
uk It is a one-year course validated by London's City University.
to prove that something is correct:
He feels that today's economic problems validate his opposition to the policy .
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