Competing internationally Featured

6:19pm EDT August 30, 2006
The number of American businesses sending their goods and services overseas has tripled since 1990. Businesses that don’t export are 9 percent more likely to fail in any given year than comparable firms that do, according to the U.S. Department of Commerce’s International Trade Association.

“If your market has matured in the U.S., you owe it to your business and your employees to think in terms of global markets,” says David Dietrich, vice president at the Family Business Center at NexTier Bank. “The first step is to create a strategic plan for entering a foreign market, while at the same time looking at where your company wants to be over the next few years.”

Smart Business spoke with Dietrich about the most effective steps that companies can take to successfully compete in international markets.

Why should a company be thinking about international business?
It’s something that American companies can no longer ignore. With their own markets maturing domestically, they simply have to look outside of the national boundaries in order to expand their pieces of a shrinking pie. Companies can’t create value unless they grow, and that goes for small businesses all the way up to large conglomerates, and everyone in between. If the proper growth patterns aren’t created, then the company will become worthless. International business is one of the best ways to make sure that doesn’t happen.

How can companies compete effectively in the international arena?
They need to develop a plan and budget right in the very beginning. That means looking at the business strategically and figuring out where they want it to be within the next three, five and 10 years. From there, they need to determine where the international business fits into the existing operations, and carefully allocate resources, talent and opportunity to that new facet of their company.

Due diligence and homework are critical, and must be done on every country and opportunity that presents itself. Businesses also need to understand that those opportunities won’t present themselves, and they have to reach out and grab them or risk being overlooked or passed by.

How can a company find opportunities overseas?
You can attend trade shows and trade missions or seek out less developed nations that are in need of American products and/or services. The opportunities for growth in the latter are just tremendous, but penetrating these markets requires more due diligence because they can be risky to do business with. Check out all of the background nuances and technical issues that could affect how you do business with customers in that country, including export customs duties and the rules and regulations that come with selling products and services there.

Does that apply to both product and service businesses?
There are opportunities for both product and service businesses in developing nations, with technical areas like engineering and environmental sciences in particular demand right now.

How important is it to have incountry local partners when transacting business on a local basis?
It’s critical. Get involved with local partners who know the lay of the land and can help you navigate the international trade waters in their respective countries. An export consultant or export management company can serve as your liaison and walk you through the intricacies of selling goods and services in their area of the world. This is particularly important in nonEnglish-speaking countries, where language barriers can quickly turn into major challenges for American firms.

The biggest challenges come when a company doesn’t adequately prepare for its international launch. Things to be aware of include cross-cultural differences, exchange rates, political issues and the certification requirements (such as product certifications of authenticity) of different countries, each of which likely has its own criteria.

Where can a company go for help?
Once a firm has determined the right strategy and assessed the market potential in the country of choice, it can hire a consultant or participate in an overseas trade mission sponsored by the Department of Commerce or a state export development program.

What advice would you give a company that needs help competing internationally?
Companies need to protect their intellectual property and develop a strategy from country to country on how to do that successfully (using copyright laws, for instance). And while there is no 100 percent guarantee that your product or invention won’t be knocked off, morals and ethics vary from country to country and need to be taken into account when doing business overseas.

DAVID DIETRICH, Ph.D., is vice president of the Family Business Center at NexTier Bank. Reach him at (888) 829-2162 or ddietrich@thebank.com.