Many people without vision ask, ``Why bother trying to go overseas or across borders with your product or service? We are doing fine in the US." The answer is obvious, of course: businesses look overseas for the same reasons they try to gain a larger share of the US: Markets. The overseas and transborder markets present (1) new opportunities for growth (thus allowing you to lower your marginal cost); (2) exposure to new customers who may request improvements that hadn't occurred to you or your US customers; (3) status (let 's face it, saying that you need to check your Brazilian and Dutch sales figures is very cool); (4) hedge against seasonal or business cycle fluctuations in US sales; and (5) taking it to the competition! (Wouldn't you love to have your overseas competitors walk into a store or open a local trade magazine and see your business advertised?)
Should you look at the foreign markets?
Capacity: The first issue is whether your business has the capacity to supply product or service overseas. If your business is so busy that it is not able to keep up with the US market's demand, you have an enviable position, but it is a position that allows you to move into the foreign markets that will have to wait until you can increase production capacity. Remember that you will have to make a substantial investment to open up foreign opportunities, and you do not want to make such outlays until you are sure that your business can take continuous advantage of the opportunities. The same is true for services.
Risks : The second issue is whether your business can take on the additional risk at this point. Your business will have to rely on foreign associates, foreign regulations and rules regarding international transactions, perhaps even foreign currencies and court systems. Unfamiliar places bring surprises along with opportunity. You have to ask yourself, ``can I live with surprises?"
True Desire: You have got to want it. The management team must be 110% behind the idea of foreign market development, otherwise minor (and major) setbacks will cause fatal wavering and end your business ' attempts to expand.
Money: You are going to spend money, no doubt about it. Can you afford the outlays and expense associated with developing new markets? Payments from foreign are often later than domestic payments, so your invoicing may be changed. You will also face increased phone and fax bills, travel costs, translation costs, market research costs, bank fees, shipping fees, new foreign-language brochures and advertisements, etc. At first your business will probably rely on outside help for many things, and that will cost.
Patience: Need I say more?
Funding Your Export Adventure
There are different ways to get money for developing foreign markets, and not surprisingly, there are government programs mixed in with the private sources of money. The following is a very brief overview of some of the programs available at the state and federal level.
Small Business Administration
The SBA furnishes both loans to exporters and loan guarantees for expenses related to exporting (such as market-development, equipment, needed facilities and capital, etc.) under the SBA Export Revolving Line of Credit Program. This funding can be used for foreign labor, trade-shows, foreign business travel, inventory growth or other prerequisites to foreign-market involvement. These loans and loan guaranties are, however, not given unless financing cannot be obtained through regular commercial lenders. Your business will need to go through standard commercial banks and other lenders and be refused before it can get aid from the SBA.
The SBA helps businesses with foreign ambitions in other ways too. Seminars and conferences on importing and exporting are held at SBA offices throughout the country. Through the SBA, you can plug into the Service Corps of Retired Executives and consult with retired executives with experience in international business who will give you advice on how to proceed. Or you can access the Small Business Institute program, with locations at over 400 colleges throughout the country, which aids businesses by assigning student consultant teams to assist small businesses.
Eximbank (Export-Import Bank)
By offering guaranteed working capital loans to qualified (American) exporters, the Eximbank is a federal government agency that specifically provides financial assistance to American exporters. Eximbank and the SBA offer to guaranty 85% of loans to exporters between the amounts of $200,000 and $1,000,000. The Eximbank also offers insurance against commercial and political risk through a program called the Foreign Credit Insurance Association.
State Export Programs
Twenty-seven states have programs to help exporters find financing, and other states are considering passing similar legislation. Some states have also (1) set up information clearinghouses for business opportunities overseas; (2) opened up offices overseas to help state businesses get in touch with overseas agents, distributors, and government official, (3) hosting seminars on getting started and building international relationships; (4) enacted laws granting various tax breaks for exporters; (5) set up international trade shows and catalog distributions.
If you want to see what your state is doing, contact your state offices for export programs and see if your state is doing its job.
Identifying Potential Markets
What your business is looking for in overseas markets will be fairly unique, and it is impossible for this web site to give you any useful advice beyond the marketing equivalents of ``buy low, sell high" . One business selling water purification filters might be looking for a poor nation that needs cheap devices that can make water potable, while another country might be selling an expensive item that will appeal only to Britons with an income over x100,000 a year. So we won't insult your intelligence or waste your time by trying to give you advice in this area, you know your markets and your products.
What we can tell you is where to go to find more information about potential markets.
SBA (Small Business Association)
The SBA has an office called the Export Information Service (XIS), which provides reports on over 2700 products broken down by category. These reports tell you which countries export which products and in what number, so you can find out which countries produce the product you intend to market . The largest twenty-five markets for each of the 2700 products are also listed. Of course, you will have to find out whether your product is one of the 2700 that are covered by the reports, and if you are marketing something entirely new (i.e., original invention), your product won't be covered (although something similar might be!).
To obtain more information, contact the International Trade Specialist in your Region's office of the SBA and request more information.
Commercial Information Management System (CIMS)
The CIMS is a database run by the United States Department of Commerce. CIMS provides market research information, which can be searched using either SIC numbers or ``key word" searches. Over 7000 reports from the Department of Commerce's offices WORLDWIDE are available on this system. Each report deals with a particular industry in a single country.
CIMS can also give you access to United Nations and United States census information. With that information, you can find out which countries imported your product last year and in what quantities, rates of increase or decrease in demand, level of competition in each country, etc.
Comparison Shopping Service (CSS)
So long as your product is an American one (i.e., the product is distributed in the name of an American firm and is at least 51% comprised of American content) and you are willing to pay a modest fee. The CSS report will answer many questions that a neophyte exporter must know about the country before deciding whether to build an export relationship with a particular country. Comparable local products, typical sales channels open to your business for getting the product into the country and marketing it, suggested prices for your product, consumer preferences, advertising, local laws and regulations concerning the product, foreign associates you could contact, and other basic questions are often addresses in the CSS report. The answers are obtained by market researchers who speak to other importers, distributors, retailers, wholesalers, end-users, and local producers of comparable products. Each CSS report is customized according to your needs, and it takes about six weeks to finish it and send it to you.
Country Consumer Market Research
At the Center for International Research, which is part of the Department of Commerce 's Census Bureau, there is yet another database that small U.S. exporters want to use. In this database you will find demographic, economic, and other social data for every country in the world. The information is culled from the United Nations, UNESCO, the World Health Organization, the World Bank, the International Monetary Fund, the Organization for Economic Cooperation and Development, etc. Information on each country's languages, population, literacy rates and education levels, labor force, GNP and other useful data for developing your marketing plans.
Local Port Authorities
Believe or not, these guys (and gals!) are there to help you too! Call the port from which you are likely to ship your goods, and ask them about information packets and services they offer to companies considering using the port facilities as an port of export.
Determining Current Market Conditions and Identifying Markets
Here are a number of resources to consult when trying to obtain information on present market conditions in countries around the world.
ABI/INFORM: This service provides information on current business conditions and trends by giving abstracts of articles appearing in over 800 publications, trade magazines, and other sources of business information.
GLOBAL VANTAGE (Compustat and Extel Joint Venture): This international financial database provides in depth pricing and market information. Information on over 4,000 public and private companies in over 100 different countries appear in their records, with new information added weekly.
PIERS: Culling data from the ship manifests of vessels taking goods out of the country, this database can tell you what products are currently going where. Exporters, product destinations, and other information contained in manifests are found here.
PROMT: Over 180,000 articles a year from the world's import and export press coverage are annotated. This database covers almost every industry in the world. Information on over 120,000 companies can be found in this database.
COMEXT: This database provides information on the foreign trade between European Community member states and the roughly 200 non-member countries.
Small Business Foundation Hotline: Along with the help of some government agencies, small business foundations, and private companies, the Small Business Foundation runs a hotline giving answers on the export process, regional events, other sources of assistance, and other useful preliminary information. The hotline number is (800) 243-7232. For a small fee, the SBF hotline will give you a personalized Country and Market Report, which is an analysis of your potential markets given the product or service that your business is offering. Even more useful may be the Trade Leads Matching Service, which costs about $40 and may put you in touch with some initial foreign buyers.
Trade Information Center: Foreign Market Research, financing programs, locating overseas buyers, trade mission and expositions, and information on tariff rates and export licensing requirements. (800) 872-8723
Export 90s Hotline: Free! Country profiles, key contacts, trade environment, current trade issues, and guides to state and federal assistance programs.
After narrowing your search to the one or more foreign markets in which you think your product will flourish, you need to find out more information. Right?
Commercial News USA
Again the Department of Commerce is a good place to start. The Department of Commerce publishes Commercial News USA. Commercial News USA is a magazine sent around the world containing pictures and descriptions of American products. It costs at least $250 dollars for to get space in the publication, but it is worth the money.
According to one source, a good Commercial News USA ad could generate up to 30 to forty international inquiries.
Foreign Buyer Program
Foreign Buyers come to the United States to attend trade shows put on by the Department of Commerce. At these trade shows, US companies pitch their goods to the buyers and the Department of Commerce provides multi-lingual brochures, interpreters, counseling, and other help.
Foreign Trade Shows
Industry trade shows in the target country is an excellent way to test an overseas market and see whether there will be local interest in your product or service. There are trade shows hosted by both private organizers and the Department of Commerce. More information is available from your local DOC office)
Trade Opportunities Program
Sales leads from around the world are gathered and made available to anyone interested through the Department of Commerce's National Technical Information Service. The National Technical Information Service makes the leads available to anyone by putting them on file in the local offices of the Department of Commerce or visit the web site at .
Also, if a real gem of an opportunity arises, the Department of Commerce will often put it out through the National Technical Service and attempt to notify businesses in a position to take advantage of the opportunity.
Now we are to the easy part of overseas business. For a slightly higher fee than domestic freight charges and a little added time filling out shipping forms, you should have little trouble getting your goods to the intended destination.
Before deciding how, where and when the goods will leave the country find out a few things first:
- When does your customer expect or want the goods? If he or she needs it tomorrow, then overnight delivery is needed, not a slow boat to Singapore.
- Who is going to pay for the shipping?
- How fragile or durable are the goods?
- What is the industry standard?
- Once these preliminaries are out of the way, call a freight forwarder. Since most exporters use freight forwarders, so will you, presumably. It is best to not only choose one freight forwarder, but also to develop a personal relationship with one agent or contact person. That one person may become even more helpful than usual once he or she feels that your business is a devoted customer. Freight forwarders are middlemen and (women) who act as an agent for an exporter. They are authorized by you to make whatever arrangements are necessary to move the goods to their ultimate destination. All freight forwarders are licensed by the Federal Maritime Commission.
The forwarders have no financial interest in your products besides the money you pay them to ship the products (and any insurance they may provide against loss or theft), so they are not partners or an ``owner" of your product in any way.
All Forwarders will help you prepare your goods for shipment and document them properly, but the best ones can help you in other ways. By being aware of foreign import laws and practices, a good forwarder can help you avoid problems you would not otherwise know of. Forwarders may also ``know people who know people", and in that way help you find sales leads. You could look for a forwarder with particular ties to the targeted region or you could try one of the larger forwarders with offices in dozens of countries.
It is important to involve a forwarder before you quote prices to a customer, since shipping charges will need to be known by the two parties before a price for the goods can be agreed upon, whether or not you or your customer is paying the freight charges.
Freight forwarders make their money off of the fees they charge you and the commissions earned from the shipping companies and airline who ultimately carry your goods overseas.
If you have a good freight forwarder, you will simply be finding out what they do to get your product overseas. If you have a poor one, you will need to learn how to get the good there yourself. Much like your lawyer and your accountant, the less you have to learn about what the freight forwarder can do for you, they more the freight forwarder is worth to you. That isn't to say that you shouldn't learn about what the freight forwarder does, you just shouldn't need to learn anything about it.
Typical Services of a Freight Forwarder:
- Determines the most economical method of transporting your good
- Seeks the most economical rate within that method of transportation
- Keeps you up to date on any peculiar rules or practices involving importing in the country where you intend to send the goods
- Obtains export licenses if needed
- Coordinates inland freight carrying
- Obtains warehouse and other storage space at the entry point if needed
- Insures that shipping packing is done properly
- Reserves space on the carrier of the goods
- Puts necessary documentation together
- Insures the goods during their shipment
- Notifies buyer that shipment can be expected
- Helps prepare documents necessary to receive payment from your customer's bank
- Naturally, your freight forwarder may do all of this and more (or less), depending on the types of services offered and the sophistication of the forwarder. As ever, the rule in finding a freight forwarder is to get references, check with competitors of the potential forwarder, and speak with people who you trust before deciding on a freight forwarder.
Banking and Overseas Trade
There are about three hundred or so banks in the United States that run full-service international trade departments. These are the larger banks, of course, so your local bank may not be able to help unless it is affiliated in some way with a larger bank (which may well be the case). If your local or regular bank is not able to perform international services for you and cannot give you a reference to a bank that can, ask your freight forwarder for suggestions, they should know of plenty that can help you.
Banks are crucial to your business' success overseas. A good international department in a sophisticated bank can provide you help with: obtaining government export assistance, collecting money from customers, checking the credit of potential customers, hedging the risk against foreign currency fluctuations, providing information about target country import regulations.
For information about the Foreign Corrupt Practices Act, click here.
For addresses of foreign countries ' chambers of commerce located here in the United States, click here.
For a list of foreign banks with offices in the United States, click here.
And click here for more information from the United States International Trade Administration.
Addresses of sources of information:
Overseas Private Investment Corp.
1615 M St. NW, Fourth Floor
Washington, DC 20527
U.S. Export-Import Bank
811 Vermont Ave. NW
Washington, DC 20571
U.S. Trade and Development Program
Room 301 SA 16
U.S. Department of State
Washington, D.C. 20520