Can Be Global
irst, it rarely makes sense to pursue business in Osaka, Japan, when we have yet to realize our commercial potential in Orlando, Florida. Second, the transnational strategy of the emerging company must be fundamentally different than the strategy of a Fortune 500® company. And third, the emerging company must be offering a product or service fulfilling a truly unique and recognized niche in the marketplace; it must enjoy some demonstrable competitive advantage.
With today's extraordinary communications, even the emerging company has a fairly good understanding of its industry, and knows generally who is doing what domestically as well as globally. Sophisticated industry and market research may not be required, at least not initially. As transnational expansion is being explored, one of the best first steps is to increase one's participation in industry association meetings and trade exhibitions. This increases one's acquaintance with other players in the industry, with competitors as well as potential customers, with alternative product performance, with pricing patterns, and with fundamental developments and trends within the industry. One will begin to meet prospective agents and partners.
While most of our industry associations tend to be "American," there are mammoth international trade fairs for most industries, often biennially or triennially; many of these trade fairs happen to be in Germany -- especially Düsseldorf. Since literally the whole world comes to these trade fairs, participation in these global gatherings is mandatory for any company contemplating transnational expansion.
One's own industry association is often an excellent source of assistance and information. The International Trade Administration within the US Department of Commerce offers a variety of services and can be quite helpful. Especially within the larger States, an Office of International Trade and Investment can also be an important source of information and assistance. Of course, many "consultants" flourish in this field of international trade; while some of these professionals may provide critical services, the emerging company should be extremely careful to investigate the qualifications and proven performance record of any consultant with whom it is considering working.
The most common market entry strategy for the emerging company is to continue manufacturing in the United States and simply retain an agent or agents to represent the company in specific markets overseas. An agent must be selected with the utmost care, and knowledgeable legal counsel should be retained to draft the agency agreement. A detailed and realistic marketing plan must be developed with the agent(s) so there is a shared understanding of anticipated performance. Of course, some other alternative may be more appropriate; e.g., a manufacturing licensee, a technology transfer, a joint venture or other form of strategic alliance. Frequently, a reciprocal relationship may evolve where the US company is also representing its offshore partner in a complementary product/service area here at home.
From the beginning, it is most important to be aware that transnational trade is not to be undertaken casually. It will take a substantial and ongoing commitment of time (and money) to identify and then to supervise the right partners, to implement required modifications in product design, to master the still-arcane export/import and customs regulations, and to facilitate the financing and payments collection for this new business. Cultural differences cannot be minimized. In addition to all other forms of communication, time must also be allocated for regular face-to-face working meetings with one's offshore partners.
We live in a world of opportunity. But we also live in a continental domestic market of opportunity. Transnational trade is providing many emerging companies with profitable additive sources of business. However, we must have sound reasons for being in Frankfurt, Germany, rather than Fort Worth, Texas. The leap into the global marketplace needs to be preceded with the careful investigation and realistic assessment of its risks and anticipated gains.
Your comments and suggestions for these pages are most welcomed!
Revised: July 1, 2019 TAF
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