It’s one thing to add a new product to your
company’s line. It’s another thing altogether to take the entire line overseas. Many things are different in the international market, including floating credit and methods of
getting paid. Thus, every business owner
should have a firm grip on how to manage
foreign currency deposits and accounts if
they expect to expand into the global arena
“Doing business globally today is much easier than it was 10 years ago or even a couple
of years ago,” says Greg Greene, a vice president and market manager in business banking with Fifth Third Bank. “With gross
domestic product growth in countries like
China, India, Taiwan and Eastern Europe
that is often in double digits, this provides a
unique opportunity to keep expanding operations in a tough economic environment.”
Smart Business spoke with Greene about
doing business in the international market
and the foresight and planning involved with
such an endeavor.
Why should a firm consider exporting as a
way to strengthen its business?
Our business climate already has a very
developed global infrastructure. With the
advent of new technology and stronger logistics, doing business overseas is fairly easy.
There are several professionals in Cincinnati
who can easily help you develop a plan to
expand globally. You have to break down the
barriers of conventional thought on this subject. Having revenue generated from foreign
countries provides a natural hedge against a
slumping U.S. economy. Similar to diversification strategies in your own investment
portfolio, varying your revenue stream from
different countries can provide greater stability. The U.S. dollar is at an all-time low
against several of the global currencies right
now. This translates into a natural advantage
for U.S. companies that want to export. If
you export into Europe, you will often have
a 15 to 20 percent pricing advantage based
on the sole fact that our currency is weak
against the Euro. Given this natural advantage, this is an excellent time to penetrate
new markets and potentially increase margins. As the global economy continues to
develop, many Fortune 500 companies, which a lot of local small businesses rely on,
will want to partner with vendors that have
command of the global environment. They
want folks who can easily react, supply or
source globally to support their operations.
What advice would you give to companies
undertaking this initiative?
From my experience, most people that get
into exporting do so by sheer luck. An opportunity presents itself and they take advantage
of it. Most strong exporters become so
through the school of hard knocks, learning
from mistakes, many of which could have
been avoided had they done the proper
research and involved the right professionals
upfront. Do the research and set up the infrastructure first prior to exporting. You will
save a lot of money and headaches. Every situation will vary, but here are some tips:
- The U.S. Department of Commerce has
an export assistance center in Cincinnati that
can help connect you with different markets
as well as help you with some analysis.
United States that is designed to ease trade.
You can find these very easily via the Internet
or through organizations, such as the Northern Kentucky International Trade
Association or Southern Ohio District Export
Council. Those organizations are great places
to get educated on various aspects of trade.
accountant who can help you with any legal
or tax ramifications upfront.
countries around the world.
you personalized attention and advice, yet
has the infrastructure to help mitigate currency, payment and collection risks.
What can an international banker do for you?
There’s an amazing amount of products
and services international bankers can provide. It all focuses on three major items:
- Payment risk — A good international
bank will have a number of different solutions that can help mitigate your risk of payment. Even in countries that are politically
unstable, a good bank can almost completely
mitigate your financial risk. Remember, there
is no global court system, so if you don’t
develop a corporate policy behind collections, then you run the risk of losing money.
bank can offer several strategies to reduce
your foreign currency risk. If you sell or buy
products in foreign currency, you are
exposed to fluctuations. As markets and
technology get more sophisticated, currencies are much more volatile. For example,
the advent of the euro in late ’90s started with
an initial exchange rate of 1.18:1. A couple
years later, the euro dropped to 0.83:1 USD,
and since then has strengthened to over 1.5:1.
If you were an exporter dealing in foreign
currency and had no strategy, you experienced a dramatic impact in profitability.
good international bank has a global infrastructure to collect and transfer funds quickly and easily. They also have products and
services that allow you to maximize your
cash flow in other countries. A few banks will
allow you to set up accounts in different
countries and monitor all of them online.
GREG GREENE is a vice president and market manager in business banking for Fifth Third Bank. Reach him at (859) 283-8511 or