The global economy grows stronger
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The Internet and mobility have ‘democratized’ the global economy. It’s now possible to communicate with customers instantaneously anywhere on the planet and to ship products with increasing speed and efficiency. Anyone with a new product or concept can potentially introduce it to the global market with minimal capital investment.
The global economy has ushered in a new age with a workforce based on skills, not geographic location. This means you can now significantly reduce costs by using inexpensive offshore customer, manufacturing and administrative services in any overseas venture. The newest online communications/meeting technologies reinforce this dynamic by allowing you to manage your foreign workforce and stay in contact with customers and partners. The same applies to small-scale businesses as well. –Just this morning, a small business owner friend of mine concluded an important business agreement via Skype with a company in South Africa.
All of this is exciting, but don’t forget you can also lose your shirt on what seems to be a sure-fire venture.
- Intellectual property rights vulnerability. Patent and copyright protections are often limited in foreign countries. Is your product difficult or easy to reproduce? If the latter, you are an easy target for intellectual property theft.
- Cumbersome foreign rules and regulations. If a foreign market is hampered by excessive red tape, do you have the requisite legal resources to deal with it? International laws governing internet, phone and other sales can vary widely. One example–if you’re doing business in Europe, you’ll need to follow more stringent consumer privacy laws.
- Sudden currency fluctuations. If you conduct business with lag times from purchase to payment, currency fluctuations can quickly turn profit into loss. The underpinning variable is the current relative strength of different currencies. Hedging currencies may help, but requires the oversight of experienced international currency professionals.
- Limited credit card use. Is credit card use common in your target foreign market? This isn’t the case in many countries, so you need to check to see how many people in that country have access to credit cards. Also, make sure that you choose a merchant account provider to oversee your credit card translations and to ensure optimal currency conversions.
- Heavy tariffs and duties. Before giving up at the prospect of high tariffs, take a careful look at the Harmonized Tariff Schedule and Federal Trade Agreements to determine if previously inaccessible markets may have recently opened.
- Cross-time zone challenges. This week I’ve been struggling with the time differential communicating with international clients in Turkey and India. If you’re serious about establishing an international presence, you’ll need 24-hour management and customer support capabilities. When a significant crisis arises, e.g., a port of entry problem or natural disaster, you’ll need hands-on action from an authorized manager. Some problems require an on-site manager (or one who can travel there quickly) who can make emergency decisions.
In Part III of this Insights article, I’ll conclude with some final considerations and strategies for ensuring the success of international ventures.