Definition: The selling of goods and services produced in one country in
another country
The U.S. market for almost everything is huge, but it's not
large enough for many entrepreneurs. For these growth-minded
business owners, the rest of the world is their oyster. Seeking
international growth offers opportunity aplenty by going global as
an importer-exporter. Some of the specific advantages presented by
successfully growing globally include:
- You can extend the sales life of existing products and services
by finding new markets to sell them in.
- You can reduce your dependence on the markets you have
developed in the United States.
- If your business is plagued by destabilizing fluctuations in
your markets due to seasonal changes or demand cycles, you can even
out your sales by tapping markets with different or even
countercyclical fluctuations.
- You can exploit corporate technology and know-how.
- Finally, by entering the global marketplace, you'll learn how
to compete against foreign companies-and even take the battle to
them on their own ground.
The overriding reason to go global, of course, is to improve
your potential for expansion and growth. The obvious opportunities
are the markets in Canada, Mexico, Europe and Japan. But those only
scratch the surface. There are many other fast-growing, less
competitive markets.
Along with promise, going global carries an equally heavy load
of peril. From chasing too many opportunities to getting whacked by
currency fluctuations, the game of international expansion has many
threats that domestic-only businesspeople never see. You can grab
the brass ring of growth by going global, but only if you avoid the
pitfalls.
Many have blundered, but that doesn't mean you have to. Below
are some of the most common exporting mistakes:
- Failing to plan your strategy.
- Chasing inquiries the world over. Just because dozens of
countries show interest doesn't mean you're ready to market your
product everywhere. Patience is key.
- Assuming if it works in America, it'll work anywhere. But
that's not true--you need to tailor your sales and marketing
efforts to each country. Don't ignore the cultural differences that
shape the marketplace. The same goes for pricing, shipping, payment
terms and packaging.
- Assuming business will be done in English. Familiarize yourself
with the local language.
Today almost all entrepreneurial strategies for international
expansion should take currency fluctuations into account. Often,
the number of dollars it takes to equal a unit of a particular
foreign currency can make the difference between a deal worth doing
and a deal that would be a disaster.
When the dollar is weak against a foreign currency--it takes
more dollars than usual to buy a unit of the foreign currency--it
strengthens exporting entrepreneurs in a few ways. If the
entrepreneur keeps prices level, those prices look lower to a buyer
dealing in, say, Japanese yen or Mexican pesos.
The simplest way for exporters to deal with currency risk is to
insist that all deals with foreign partners be done in dollars.
However, that can drive away potential customers who prefer to do
business in their local currency.
Few nations have experienced governmental and economic systems
as stable and long-lasting as those in the United States. As a
result, many U.S. companies that venture overseas are completely
unprepared for overseas instability. If an economic crisis impacts
your business, take the following steps:
- Assess your financial capability.
- Obtain information. A good local partner also comes in handy.
You'll need somebody on the ground who can tell you what the status
is there.
- Save your client base.
- Acquire legal representation by hiring local lawyers.
- Remain focused on your goals.
As an international entrepreneur, you face risks every day you
do business. The cargo you're exporting could fall off the ship, or
it might get stolen in transit. Or maybe a customer went out of
business and didn't pay for the last shipment you delivered. Even
acts of nature can throw a wrench into an otherwise smoothly
functioning global business. So if you haven't already, it's time
to consider whether or not you're prepared for what the future
might bring.
Insurance offers protection, peace of mind and much more. The
types of coverage available to exporters are numerous and include
cargo insurance (to protect your goods in transit), credit
insurance (to protect against nonpayment), fire and theft
insurance, and foreign investment and trade risk insurance (for
confiscation or expropriation of your property overseas).
Policies can be purchased separately or in a package deal
offered by many insurers. To determine the kind of protection
you'll need, consider each country and situation individually, and
research the risks involved. You may even want to talk to a
professional consultant.
Of course, certain situations allow for a degree of chance. If
you have a relationship with a customer in a politically stable
country, such as the United Kingdom, you might choose to forgo
credit insurance. But it probably wouldn't be a good idea if you're
shipping to Africa, which insurers consider to be the riskiest part
of the world.
The cost of insurance depends on many factors, such as where you
are shipping cargo, who your customer is, how valuable the goods
are, and the means by which you ship. And policies, which expire
anywhere from after one transaction to after one year, should be
continually reviewed.