Fifth Third Bank on going global Featured

8:00pm EDT May 26, 2008

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

with confidence.

“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.

  • Every country has a foreign office in the

    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.

  • Get a good international attorney and

    accountant who can help you with any legal

    or tax ramifications upfront.

  • Research and find a reputable freight forwarder that can help you with the logistics in

    countries around the world.

  • Find a financial institution that can give

    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.

  • Currency risk — A good international

    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.

  • Movement of funds and cash flow — A

    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

    Greg.Greene@53.com.