Four Mistakes When Doing Business Overseas
Maybe you have a product already and are looking to expand into a new market. Maybe you're looking overseas for a supplier, manufacturer or distributor of a product to sell in the U.S.
Whatever your situation, if you're serious about having an international component to your business, make sure you don't run afoul of these four major misconceptions about international business:
- "I want to be involved with the international market." International market? There's no such animal. Saying that marketing to Portugal is the same as marketing to Poland or the Philippines is like saying that an apple is the same as a kumquat. "We tend to think of the rest of the world as one entity," says Bill Decker, founder and managing director of Partners International Inc., consultants in foreign partnership and market creation strategy. "But really, each country has its own language, laws and business practices." Try to sell alcohol in, say, Saudi Arabia, and you could have bigger problems than just a lack of customers.
- "I have a contract, so what's the problem?" The problem is that the role of law in society varies from country to country. It's tempting to make assumptions based on our legal tradition and concept of "rights." Don't. You may be able to wave a paper contract, stomp your feet and shout "I'll sue!" if things go wrong in the U.S., but the law isn't the same kind of iron fist/weapon in other countries. In Southeast Asia and Eastern Europe, for example, a contract is merely an outline. In other countries, a contract is more like a letter of intent that allows the real negotiations to begin. Don't overlook the effect that government action can have on your business dealings. In the U.S., the government needs a mighty strong justification for taking your property; in Brazil, China and other developing countries, the government (or government insurgents) can ruin your supply chains or make competition materialize instantly.
- "I'll simply get them to do it the way I want." Get whom to do what? Decker has seen too many entrepreneurs try to make a go of it overseas by marchez avec ses gros pieds ("walking about with their big feet"), as the French would say. They come back having spent tens of thousands of dollars, with little to show for the time and effort they put in."What are you going to do?" he asks. "Walk in there and after one month of business negotiations change 2,000 years of history, culture and business practices? It's not going to happen."Rather, if you're serious about gaining a foothold, remember this: Outside of the U.S., business is based on personal relationships. Take the time (and yes, it takes t-i-m-e) to cultivate the right people in the right places. Most other cultures don't have the comfort level we have in the U.S. when it comes to doing business with strangers. (Need proof? As Decker notes in his International Toolkit podcast, the U.S. spent three times as much on internet transactions as the rest of the world combined.)
- "Employees are employees anywhere." Not so fast. Around the world, some employees are more equal than others. In Europe, for example, unemployment laws are much more stringent and employee-friendly than in the U.S. Employers may pay a much larger share (50 percent isn't uncommon) into the unemployment fund. (How else do you think socialized/subsidized health care gets paid for?) In Mexico, employers have to share profits, pay a holiday bonus and contribute to a housing fund for employees. In Germany, mothers receive one full year of maternity leave from their employers. Inside the U.S., profitability is king; outside the U.S., ensuring employment of workers is a more urgent priority.
In all forms of business, when you hire advisors, you want someone who will make your problems go away. In the U.S., that's often a lawyer. But overseas, that's not necessarily the case. Depending on the issue, it could be a banker, a freight forwarder or a customs broker you'll really need. Whether you speak to market-entry specialists like Decker or choose other sorts of advisors, make sure you're working with someone who specializes in doing international deals . . . and doesn't just dabble in them.