Eleven Pitfalls to Avoid in Going Global
Laurel Delaney, Global TradeSource, Ltd.
Going global takes guts. You have to confront the unknown and make it look easy when it’s not. I know. I’ve been doing it successfully for two decades. You can succeed too, but you will probably need to adopt a new set of business attitudes and assumptions.
As you read through these 11 common pitfalls, see if you recognize yourself. Most important, remember, committing a global business strategy to writing is the key. It can mean the difference between surviving and thriving.
1. “Hey, we got a sale, and the product is on the way.” Now ask yourself this: What payment plan did you set up with your customer? Structure the deal in such a way that the product gets sold and you get paid. Ask your banker for help.
A good example of effective planning comes from Steve Schneider, sales manager and founder of New Jersey-based Kramer Industries, a mass finishing equipment, systems and supply company. “We generally do not use letters-of-credit or other credit devices for overseas customers. We offer discounts for pre-payment via wire transfer,” he says. “Most of the business we conduct is with companies that have purchased our product before. As our brand becomes more well-known, we will demand these terms for new customers, but maybe not always successfully.”
2. "My product is really low in price." Typically, customers outside the United States pay attention to packaging first, quality next, and price last. Set your priorities accordingly. Create a package design or service concept that speaks for itself, and quality that leaves no room for competitive comparison. From there, it's only a matter of details to wrap up a sale.
“All our customers, especially in Asia, want and demand low prices,” Schneider says. “Even though we offer premium products, we understand the need to be competitive. Ultimately, when it gets down to the bottom line, our quality and consistency win out every time. Some customers may try other products, but eventually they come back to ours because of superior quality and consistency of manufacturing.”
3. "Now that we have our first international sale, let's try exporting our product to a bunch of foreign markets." No, don’t. Pick a product and pick a market. Put on your mental blinders and ignore distractions, channel your energies, and define the territory where you're going to play until you get very good at it. Then expand.
“You can’t be all things to all people. Decide on something. Then stick with it. And don’t take ‘no’ for an answer,” says Javae’ Wright Sr., CEO and chairman of Leadaz International Sportswear Inc., an athletic footwear and apparel company in Champaign, Illinois. “Persistence is more important than all else.”
4. "I'm exporting my products, but I'll be darned if I am going to make any changes in them." You must tailor your product to meet the needs of the customer. Trying to force a customer to buy what you have available, with little or no willingness on your part to make improvements, is not only insensitive, but downright hostile.
5. "Let's ship the order, then follow-up when we think they need more goods.” Put yourself in the customer's shoes. Would you want to be treated that way? Service brings satisfaction, and satisfaction brings repeat orders. Keep in constant touch with your customer. And make sure the plane or ship delivers the goods on time and in good condition. Too many global businesses overlook the logistics of supplying an overseas market.
6. "I know my product sells well here in the States, so I'm certain it will sell overseas." Just because your product’s in demand here in the States doesn’t mean it will be well received in a foreign country. Always check with either your customer or a local foreign consulate for help determining sales potential. In some cases, you won’t be able to service what you sold or keep up with demand.
7. "I can't afford a trip to visit my first customer. Besides, I wouldn't know my way around." You can't afford not to meet with your first customer because without face-to-face contact, there will be no repeat business. Your first customer should be treated like a king or queen who sets the standard for all future customers.
Few know this better than Dr. Ray Smilor, an internationally recognized expert in entrepreneurship. “Doing business outside the U.S. requires an investment mentality,” says Smilor, president of Beyster Institute, which promotes global entrepreneurship at the Rady School of Management of the University of California, San Diego. “If you want to build an international business, you have to be willing to spend some money, get a first-hand and personal sense of the market, and talk to your customers, especially your first customer. Use this experience as a networking opportunity. It's important to view getting around in another country as an adventure and a learning experience. So, go ahead and take that trip.”
8. "We appointed an exclusive agent, yet didn't get any sales." When exporting a product, ask distributors what they anticipate selling in the first year. Then monitor and exercise good control over a distributor's sales. Find out in advance what products distributors sell to ensure they do not sell brands that compete with yours. And keep an escape clause in place just in case things don’t work out with a distributor.
9. "Our product cannot compete overseas or locally because the tariffs are too high." Get information well in advance on tariff and tax obligations for your products or those of your supplier in the country in which you are about to do business. You don’t want to erode your profits or, worse, impede your ability to compete.
Betsy Shields, president of Park City, Illinois-based Breakaway Technologies, which sells used computer equipment at discounted prices, learned this fast on her first international sale. “I had estimated freight on high-end servers and other computer equipment from Japan to be about U.S. $10,000,” she recalls. “As it turns out, it was U.S. $14,000, so I adjusted my profit margins and selling prices downward to be competitive in the states. But we didn’t mind because the benefit in tapping into a new source of equipment and learning about how the whole global selling process works far outweighed the fact that we achieved a slightly lower profit margin on the deal.”
10. “Who needs a trademark?” Intellectual property should be protected well before you begin selling to overseas customers to avoid losing ownership and subsequent revenues.
11. “I’m not going to outsource, offshore or in-source my product because it’s so unique to this market that there is no way a company can duplicate it, and, in particular, not at a lower price.”
Take a good look at what you make and what you sell. Are you being realistic when you claim your product cannot be duplicated anywhere on the planet at a lower price? Read Thomas Friedman’s The World Is Flat. He might help you see things differently. In a year or so, you might be saying, “My product is made cheaply everywhere.” Then where will you be? As quoted in Friedman’s book, “Louis Pasteur said it a long time ago: ‘Fortune favors the prepared mind.’” Get your global plan in place.
Going global is a long-term commitment. It's an investment in your company's future that deserves your consistent attention to elevate your business to the competitive high ground of tomorrow.