As well, going international has implications for dealing with suppliers. This can provide a firm with stronger leverage when negotiating prices with its existing suppliers. For example, major companies continue to outsource much of their IT work to specialists, a move that in many cases makes good business sense.
Most IT work is still performed in Canada, IDC says, but a growing share of the market is going to companies outside the country. And their share is rising 20 percent a year. However, a growing number of U. In some cases, the quality provided by workers overseas is not good enough. Carbonite, a seller of computer backup services, found that its call centre in Boston was providing much stronger customer satisfaction than its call centre in India. As a result, Carbonite returned call centre jobs to the United States in Boston Consulting Group predicts the combination of production returning from China and increased exports will create between , and one million jobs in the United States over the next decade Flavelle, In lay terms, that means it costs American companies no more to keep their production on home turf than it does to offshore it to traditionally low-cost locales in Asia.
These machines can weigh more than a ton, and NCR found that shipping them from overseas plants back to the United States was extremely expensive. Similarly, General Electric announced plans to hire approximately 1, workers in Louisville, Kentucky, starting in the fall of These workers make water heaters and refrigerators that had been produced overseas Isidore, If a firm is completely dependent on one country, from either a supply or market perspective, negative economic, political, or natural disasters in that country can create significant difficulty, as the Japanese earthquake of proved.
Managing seven key risks when trading overseas
Consider, for example, natural disasters such as the earthquakes and tsunami that hit Japan in If Japanese automakers such as Toyota, Nissan, and Honda sold cars only in their home country, the financial consequences could have been grave. Because these firms operate in many countries, however, they were protected from being ruined by events in Japan. In other words, these firms diversified their business risk by not being overly dependent on their Japanese operations.
American cigarette companies such as Philip Morris and R.
Sell Globally - 15 Tips for Building Your Global Growth Strategy
Reynolds are challenged by trends within Canada, the United States, and Europe. They have also introduced e-cigerettes as a separate business line to retain customers and profits. This was the biggest acquisition ever in Indonesia by a foreign company. As of , Indonesia was the fifth-largest tobacco market in the world, trailing only China, the United States, Russia, and Japan.
To appeal to local preferences for cigarettes flavored with cloves, Philip Morris introduced a variety of its signature Marlboro brand called Marlboro Mix 9 that includes cloves in its formulation T2M, Since , Philip Morris International and Swedish Match AB have operated a joint venture company that has commercialized smokeless tobacco products outside of Scandinavia and the United States. Although competing in international markets offers important potential benefits, such as access to new customers, the opportunity to lower costs, and the diversification of business risk, going overseas also poses daunting challenges.
The relative stability of Canadian, U. Unstable governments associated with such demonstrations and uprisings make it difficult for firms to plan for the future. Over time, a government could become increasingly hostile to foreign businesses by imposing new taxes and new regulations. This process is called nationalization. In recent years, for example, Venezuela has nationalized foreign-controlled operations in the oil, cement, steel, and glass industries. Countries with the highest levels of political risk tend to be those such as Somalia, Sudan, and Afghanistan whose governments are so unstable that few foreign companies are willing to go there.
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This creates a dilemma for firms in that these risky settings also offer enormous growth opportunities. Firms can choose to concentrate their efforts in countries such as Canada, Australia, South Korea, and Japan that have very low levels of political risk, but opportunities in such settings are often more modest Kostigen, Executives who lead companies that do business in many different countries have to take stock of these various dimensions and try to anticipate how the dimensions will affect their companies.
Because economies are unpredictable, economic risk presents executives with tremendous challenges. Car sales by Hyundai Motor Co. Kia has achieved sales volume growth in Europe every year since , increasing market share from 1. If inflation and interest rates were to increase in a particular country, this would make it more difficult for consumers to purchase new Kias.
If currency exchange rates were to change such that the euro became weaker relative to the South Korean won, this would make a Kia more expensive for European buyers Kia. The history of business is full of colorful examples of cultural differences undermining companies. For example, a laundry detergent company was surprised by its poor sales in the Middle East.
Executives believed that their product was being skillfully promoted using print advertisements that showed dirty clothing on the left, a box of detergent in the middle, and clean clothing on the right. A simple and effective message, right? Not exactly. And there are thousands of them—many of them small. The experience of forming new relationships, getting up close and personal with another culture, figuring out how to meet the needs of others, and learning how to be inventive in addressing new business challenges not only is personally rewarding; it also leads to improvements in products and makes companies stronger in whatever market they compete.
We need to take that step outside ourselves and develop relationships and open doors. It may start out small. It did for us. We are a better company and better managers. Maybe even better persons. An overview on how exporting can be one of the best ways to grow a business and offer help if competition in the domestic market intensifies. If you do, can you be profitable under the circumstances?
7 Tips for New Exporters
If you feel you're ready to tackle the challenges of international business, follow this advice from business leaders who have been in your shoes. If you plan on expanding globally, you'll want a great team or partner. Even if your "partner" takes the form of a mentor, you'll want someone you trust and who can vouch for you.
Caicedo said it's crucial to establish a local office and team that understand the market and language to comply with local regulations. The people you hire to deal with your overseas business partners and customers must be immersed in the local environment, but they should also be looking out for your interests. Biolife President Mark Brewer said those expanding internationally shouldn't rush the process of finding trusted and reliable strategic alliances.
When you're looking specifically for a distributor, Brewer said, don't assume the largest one is automatically the best. Morris said it is vital to make sure that when you do expand, you have the right infrastructure in place to ensure a smooth launch.
4 considerations before taking your business international
Instead of only thinking about how your own country's customers might receive your new ideas, you'll need to think about how foreign customers will receive your ideas. If you don't do this ahead of time, you run the risk of offending your international partners by appearing to be more concerned about yourself [than] them. Before making major business decisions, you should think through all possible scenarios — especially during global expansion. Chao advises those expanding their business internationally to spend time in the country they want to break into. An information-gathering trip can be a focal point to develop a plan for moving forward.
It is important for businesses looking for international growth to understand that they will need help.
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Chao said this can be particularly tough for smaller businesses, because they have likely been doing everything on their own up to this point. Rely on experts. Once you do expand, be prepared for some bumps in the road. That may mean changing how you operate in some ways. Once you launch overseas, you will have a whole new customer base to support. Roger Sholanki, CEO and founder of Book4Time , a provider of next-generation wellness management software that operates in 70 countries, said your current system of customer support will need significant changes when you expand internationally.