With today’s technology, it is not that difficult for a business to expand internationally. Through modern transportation, technology and, of course, the Internet, any business can sell its products or services anywhere in the world.
However, while it may be easy to do, it’s difficult to do well.
“Businesses need to understand the markets they are considering,” says Gonzalo Freixes, associate dean, Professional MBA Programs at the UCLA Anderson School of Management. “The foreign regulatory environment is very different in other countries than it is here. For example, labor laws are extremely different in most other countries than they are in the U.S.”
Companies also should research the logistics of doing business in that country, from supply chain distribution issues to the best marketing options, to financial reporting structures.
Smart Business spoke with Freixes about what companies should know about global business.
How can a business determine where it should expand?
If you are going to go global, you have to determine where it makes the most sense to go. To determine that, you have to do some actual feet-on-the-ground, field market research in that country. Go to the country, talk to people in that industry, talk to customers, suppliers, distributors. If you get a chance, talk to your potential competitors, because today’s competitor may be tomorrow’s strategic partner.
That preliminary field research is very important to determining what the marketplace is like. Is there a demand for the product or service you are selling? Is it a crowded competitive space? Is there a niche market you could enter as a way into the country? It also helps you get an idea of the regulatory framework to find out how difficult it is to do business in that country, in terms of setting up an entity there.
To do business in some Middle Eastern countries, you have to have a local partner in that country. That local partner must own a certain percent of your business; otherwise you won’t be allowed to do business there.
Most importantly, identify that there is a market there, and what your delivery strategy or mechanism will be for getting your product or service there.
Where should businesses start with their research?
Don’t rely entirely on the Internet. The Internet and written research in the public domain about a particular country or market is helpful in establishing a foundation of what to expect, but there is no substitute for actually picking up the phone or, more importantly, meeting people face to face. In so many other cultures, and in some degree our own, personal relationships and interactions are the biggest drivers toward being able to do business successfully.
In other words, get on the phone and get on a plane and go talk to people. Don’t be afraid to cold call. If you have people you know in that country, whether it is fellow alumni, former business colleagues, friends or classmates, leverage those contacts to help you learn about the country and the culture.