Expanding Your Small Business Internationally
Content provided by the Women Presidents' Organization
By Marsha Firestone, Ph.D.
President and Founder of Women Presidents' Organization (WPO)
Question: How common is it for a small business to go international, and what are the major hurdles?
The Women Presidents' Organization (WPO) recently surveyed its members about their expectations concerning the economy and their plans for the coming year. One of the most interesting trends to emerge was the fact that many of our members are considering both domestic and international expansion.
From the survey, we discovered that half of our members plan to add offices domestically and 66% plan to add international locations. Contrary to popular belief, small enterprises with products and services can and do expand into international markets. A saturated domestic market or a need to diversify a customer base are excellent reasons for expanding into the international arena.
Admittedly, expansion into overseas markets is fraught with challenges,especially access to capital. First determine if your bank has a department or officer to handle international transactions and expansion or a correspondent relationship with another bank that does. There are also other avenues you can tap for capital, some of which are as follows:
Obtaining Capital and Business
Intelligence for International
The U.S. Small Business Administration offers an Export Loan Guarantee Program to small businesses that want to establish or expand export operations, guaranteeing up to $500,000 of commercial financing. Other institutions that provide capital for international expansion include:
- Overseas Private Investment Corporation(OPIC) http://www.opic.gov/index.asp
- Private Export Funding Corporation (PEFCO)- http://www.pefco.com/
- Export-Import Bank of the United States (Eximbank)- http://www.exim.gov/
Hand-in-hand with securing funding to expand your business internationally, it is necessary to gather information about international competitors such as their packaging, pricing, distribution and sales channel management, strengths and weaknesses, suppliers, customers, business strategies and marketing channels.
Thanks to the Internet, today it is possible to access a substantial amount of international competitive business intelligence online. After collecting general information, select a fee-based service, such as Dow Jones or Dun and Bradstreet, for more detailed financial and business evaluation of companies worldwide, or approach a foreign equivalent-for example, Teikoku Databank in Japan or the BÜRGEL company in Germany-to assess foreign companies.
Perform a country-specific PEST analysis of those countries into which you would like to expand. PEST is an acronym for the Political, Economic, Social and Technological factors that could affect your business. Some of these factors include trade regulations and tariffs, exchange rates, discretionary incomes of target customers, inflation rates, demographics, cultural norms and technological sophistication.
Multilingual Packaging For Higher
Another of the hurdles to cross is to repackage and possibly redesign the company's product or service for the international market. The need for multilingual text and accompanying instructions or warning labels is essential. Today we are seeing how trilingual English, French and Spanish packaging can lead to higher sales as the U.S., Canada and Mexico become one market. In Mexico, standards known as Official Mexican Norms specify packaging requirements, which include making Spanish as prominent as any other language and prohibiting stick-on labels. Different countries regulate packaging copy content, size and placement.
Logistics services companies exist to help a company jump through the hoops of packaging standards, offering complete contract packaging, distribution, warehousing, and shipping services. In some countries, you may need to change the name of your product or alter elements of advertising and marketing campaigns that work in the U.S. but may be inappropriate abroad.
Finding International Distribution
To find the appropriate distributors for a product or service, attend industry trade shows and advertise in international trade journals. Whether products and services are sold through agents, importers, retail outlets or value-added resellers (VARs),thorough research is a must. Take time to visit the people with whom you decide to do business and build a substantial and credible relationship.
A commission agent can sell a product and send orders to the company which then ships the product, invoices the customer, and pays the agent a commission. An importer, on the other hand, actually buys the product. If you choose to export your product, sell directly to the importer, who stores the goods in a warehouse and sells them for a mark-up.
Other ways to expand internationally can include licensing a product or entering into an alliance such as a joint venture (JV). If a joint venture or licensing agreement is selected, you enjoy the advantages of having a partner that knows the business methods, customer preferences, culture and language of the target country. However, as with any partnership, an added risk occurs if your new international partner is a VAR doing some level of improvement on the product. Early research with Dun & Bradstreet or an equivalent will help make certain the company will work until those who have financial stability and integrity.
For more information on expanding your business internationally, go visit the Web site of the U.S. Small Business Administration's Office of International Trade at: http://www.sba.gov/aboutsba/sbaprograms/internationaltrade/index.html
Content copyrighted by the Women Presidents' Organization