By Nathan Menoian
Sept./Oct. 2009
Taking your business global will set before you arduous challenges, plenty of “dos and don’ts,” and some surprises too.
A serious financial investment will be required, not to mention many months of research and planning. But those who’ve been through the process of putting together a global venture agree that having the right people in place is of significant and lasting importance.
Jim Zawacki, who chairs Grand Rapids-based GR Spring and Stamping, says for companies expanding to foreign markets, finding key personnel who share the culture and language of the new location is a smart move.
Local is even better, Zawacki adds, noting that languages often differ from one territory to the next. Equally important: hire as many English-speaking people as possible, thus minimizing communication errors between the U.S. home office and the new site.
Zawacki says hiring a law firm with proven international business experience and an understanding of the business history of the area is important. It wouldn’t hurt if they knew the language as well.
Zawacki bought his company in 1985, and runs three facilities in Grand Rapids, one in Kentucky, and another in Chihuahua, Mexico, as well as an office in Japan in addition to being involved with a successful venture in China from 2003 to 2007.
The challenges of an international operation include those involving logistics. Zawacki’s advice: Always have backup plans in place for delivering products on time or, on occasion, even quicker than planned. With cargo ships taking up to six weeks to reach their destination port, that’s an imperative.
Zawacki also has an opinion when it comes to dealing with international currencies. “Begin your venture using American money, and be sure to quote prices with American money.”
|
Jumping too fast into a global venture can sometimes lead to dire consequences. Slow down and think it through, says Kevin McKervey, a business advisor and shareholder of International Services at Clayton and McKervey P.C., in Southfield.
“In today’s competitive environment, many small to mid-size companies feel pressure from their customers to go global, or face losing existing business. This causes many to want to start up a new subsidiary in a foreign country immediately. This can be very costly, and for some, can lead to the ultimate demise of their entire business.”
For a smoother transition into foreign markets, McKervey suggests:
-¢ Rough out a budget: “The mere process of putting dollar signs alongside your plan will force you to think it through.”
-¢ Consider alternatives: “Don’t overlook subcontracting to an existing company in the target country. Profits may be lower, but your risk is substantially less.”
-¢ Evaluate the depth of your management team: “While managers devote time to global expansion, the homefront will still need to be managed. Make sure you have sufficient resources to keep both efforts moving forward.”
-¢ Put aside your American ways: “Your ability to adapt other ways of doing business will be critical to your global success.”
If you’re wondering where the money is, banks are still loaning and, as always, requiring inventory and buildings as collateral. McKervey said lenders are more cautious these days because of the current global economy, and might ask for a letter of credit from a foreign bank, or loan funds only to your subsidiary.
Businesses understand that their competition isn’t just from the company down the street or nearby city-it’s become truly global.
|
Rob Dutkiewicz, also a shareholder of Clayton & McKervey, is an expert advisor to foreign companies looking to establish a U.S. venture.
“Companies expanding into the United States often find the differences in doing business go beyond cultural,” he says.
Dutkiewicz lays out common business differences for consideration:
-¢ Employee benefits are different.
-¢ On individuals transferred to the U.S., you may not need to pay Social Security taxes.
-¢ Credit may be hard to get.
-¢ Federal identification numbers are important.
-¢ Holidays are not the same.
-¢ Income taxes are computed on worldwide income.
Knowing your customers, respecting their culture, and understanding their needs is what Manoj Chadha stresses as the most underlying importance of your expansion.
It’s easy to get bogged down with the details and logistics of a global venture, but don’t forget about the basics, says Chadha, vice president of international operations for Bissell Floor Care, Inc. in Grand Rapids.
While business is certainly about making money, without knowing and respecting your customer, any success will be short lived, says Chadha, whose employer is prominent in Australia, England, New Zealand, Russia, South Africa and the Middle East.
“Some companies have made the mistake of taking American products and forcing it on other countries and cultures, and they’ve failed miserably,” Chadha says. “It’s a real disconnect until you understand your customers.”
|
Part of the challenge and surprise of doing business overseas also has to do with protecting your trademark, adds Chadha. “We’ve had instances where an unscrupulous person or company will take our name and trademark and we have to fight to get it back.”
Another company with a niche that keeps on growing is Ada, Mich.-based Amway Global.
Sally Prominski, a senior regional sales consultant focused on Southeast Asia, says her 30 years’ with Amway has made her an active participant and front row observer to the firm’s worldwide growth.
Among her lessons learned: Make sure you do it right-especially in following the laws and regulations of the country; do your homework ahead of time; and manage your expectations; don’t over commit.
“We’re in Vietnam now, and surprisingly much of the business comes from the northern region, where the younger population is excited about new business opportunities,” says Prominski.
While visiting there, Prominski recalled seeing eagerness among the people for a chance to reach their aspirations in life. From that observation, she believes the overseas business climate is very entrepreneurial.
Because Amway also built a manufacturing plant there, it had to contend with a variety of additional issues, including acquiring property and complying with building regulations.
Depending on the complexity of the market, Prominski says it could take up to three years to get a building venture up and running. And since many of the business laws in various countries are subject to change, business people are wise to “expect the unexpected.”
Two tricky factors to nail down are foreign taxes and labor laws, says Prominski.
So, is this a good time to test the waters? From her point of view, the decision to go global is a positive challenge. And launching an overseas venture also helps businesses think about ways to diversify.
Finally, while global markets provide substantial opportunity, risk is equally present. Each company and venture is unique and must be individually evaluated.
When it comes down to it, just like business conducted domestically, understanding the business environment and respecting the customer is universal.
