American companies are doing more business overseas—they’re selling to customers in foreign countries, outsourcing their manufacturing processes to international firms, or simply reaching out to a broader audience of vendors and clients via the Internet.
The idea of doing business in distant lands sounds simple enough on paper for an established firm, but trading overseas requires a skill set most American companies lack. Before you can even think about making that first international transaction, you must learn the local ordinances and regulations to be successful.
One way for midsize companies to flatten this learning curve is by working with experienced, reputable local partners in the target market. If
you want to sell your widgets in, say, Ireland, then tracking down and forming an alliance with a distributor there can often provide the easiest entry point. That’s because your local partner already understands Irish consumer buying habits and knows the country’s trade rules.Michelle Stacy, managing partner at San Antonio, Texas-based ArchPoint Consulting, which counsels corporations on sales, marketing, operations, and finance, acquired experience in international business firsthand while working for firms such as Gillette and Procter & Gamble. When entering a country, her team would ask: Are we going to work with someone locally for distribution and logistics, or are we going to do it ourselves?
“In
many foreign countries there are established distributors who understand their markets and know how to sell into them,” says Stacy, who considers such intermediaries to be customers, not partners, which, may suggest a 50/50 relationship. “They know the local language and can share their selling experience in exchange for a fee [usually a margin of total sales volume].”Once onboard, that local distributor can either represent the product or service in one or more foreign countries, or handle less responsibility by selling the widgets without providing logistics and distribution. “You can also split up the duties and have one company provide the logistics, another handle the sales, and yet
another, the ordering, shipping, and billing processes,” says Stacy. “It’s all a question of how much control you want to have in those respective markets and how much margin you have to work with.”Bill Decker, director at the Denver-based market entry consultancy firm Partners International, says any relationship with an overseas firm should be looked upon as a marriage and should be entered into only after the proper due diligence and research is completed. “Americans tend to pick partners too quickly,” says Decker. “They meet someone at a trade show and partner with them, only to find out that it was a ridiculously poor choice.”
Choose well-connected companies,
Decker advises, that have deep experience in the market Before sealing any deals, get to know a firm’s current customers and suppliers; and check into its ethics (by doing, for example, a pilot project with the firm). Later, you may want to go beyond simple distribution and explore opportunities in co-production and co-branding.“Do your homework and get to know who you’re getting involved with and what other products that company represents in the market,” Stacy urges. “Talk to other companies that are using the firm as a local partner, and be sure you understand the terms of your agreement. Only then can you build a win-win relationship.”