The Export Advantage

As we wrap up our focus on exports this month, the culmination of which was the U.S. Export Import Bank’s annual conference in Washington, DC last week, and as we celebrate averted government shutdown, I would like to offer for your consideration three short articles, which review and summarize issues we covered over the last few posts and offer lists of countries with best opportunities and the most ease of doing business.  The first one – Export Advantage is written by me and is reprinted in its entirety from this month’s issue of the  NY Enterprise Report and the other two are brought to you courtesy of the Global Edge blog.
Selling to emerging markets abroad can mean growth… if you are aware of the pitfalls
April 1, 2011
Published on NY Report (http://www.nyreport.com)

Exporting American-made goods and services has become a hot topic as we slowly rebound from the domestic recession of the past two years. Timing is everything, and with a favorable exchange rate for the US dollar, prices are competitive again.

Other factors in our favor include the global economic recovery, surging demand from emerging markets, the US Government’s financing and advocacy resources, and the cache of the words “MADE IN THE USA.” Service and manufacturing businesses in the New York area have much to gain from an expanding export market.

They especially can look to the unique opportunities existing in nations with emerging economies such as in Eastern Europe, Africa, the Middle East, plus India and the awakening giant, China. But companies must first successfully navigate the process of exporting with countries that are new to trading with the West.

If an American company is not prepared, it will face many obstacles that could prevent it from doing business abroad successfully. Emphasis on Export President Obama made his goals clear when he initiated the plan to double US exports in five years, and he underscored it in his 2011 State of the Union address when he said we must learn to compete globally. He has mandated that US government agencies responsible for promoting and financing American exports, along with many trade organizations and non-governmental organizations (NGOs), to unite around a powerful common goal, thereby making it easier for small and mid-size businesses to enter the export market.

Early results are encouraging, with the Export-Import Bank of the United States (www.exim.gov) just coming off of its best year of financing US exports, and the trade deficit at its narrowest in a long time. Despite the emergence of low-cost Asian and South American competition and a strong European presence, American companies remain, and will continue to stay, highly competitive in a number of sectors and industries internationally.

These industries include aerospace, medical equipment, construction machinery, agricultural equipment, telecommunications, technology services, environmental engineering, entertainment, food, hospitality services, architecture, and transportation.

The Export State of Mind

Skeptics say US companies cannot compete with low-cost goods and services from China, Brazil, and Korea; yet Germany, with some of the highest labor costs in the world, is an export powerhouse. Holland and Sweden also have highly paid workers, yet they succeed at exports.

Why? Business people in these countries think, eat, sleep, and literally live exports. It’s that simple. Their domestic markets are much smaller than ours, so they must look for business beyond their borders. They dig in and learn foreign cultures. They develop relationships and design goods and services that can be adapted in various countries. They are dedicated to finding ways of doing export business and nothing is going to stop them. And these companies are not all major European conglomerates. Untapped export opportunity exists for many small and medium-sized enterprises. International trade is simply not the typical mindset for American businesses, perhaps since historically we have been fortunate to have such a huge marketplace right here within our own borders.

But things are changing— quickly. There seems to be a lack of commitment and planning, as exporting is an afterthought to many US companies, when instead it should be a core part of that organization’s state of mind. I’ve seen it many times: a US business hires an international sales manager at the middle-management level—usually an American with extensive foreign sales experience. He or she is assigned a massive territory with a great sounding acronym such as EMEA (Europe, Middle East, Africa), often with little marketing budget or technical support. That person is sent traveling across the globe to look for qualified distributors.

I often wonder why, in contrast, even small American companies have domestic sales forces to cover multiple towns, boroughs, cities, or maybe even states, but overseas it’s acceptable for these same companies to assign entire continents to be managed by a single person with limited administrative and financial resources. What can be done to change this mindset? How can American companies open new markets abroad?

There are seven key initiatives American companies should undertake to have the best chance for success in the export market:

7 steps to becoming successful in the Export Market:

1 Commit:

Senior management of any organization seeking to become a serious exporter has to understand the extent of the effort required to become truly internationally focused. It also has to be willing to commit resources—both human and financial—to execute its export strategy. Export is not something to be attempted on a shoestring. It also is important to avoid a disconnection between the international sales group and the senior management of the company.

2 Explore:

Once management is determined to succeed abroad, the question becomes, which countries offer the best opportunity? The answer varies, depending on what business you are in and what type of product you present. Emerging markets today generally present more attractive opportunities to American companies entering the international arena than the mature markets of Europe or Canada.

Although a lot has been written about BRIC countries (Brazil, Russia, India, and China), terrific opportunities exist for US exporters in smaller markets in Africa, the Middle East, Eastern Europe, Central Asia, and South America. Utilize the free resources offered by the US Commercial Service (trade. gov/cs), CIA Factbook (www.cia.gov/ library/publications/the-world-factbook/ index.html), and industry trade groups. Attend appropriate trade shows and, most importantly, plan exploratory trips to evaluate various markets and assess your company’s product competitiveness. Select a single market to focus on.

3 Learn:

Learn as much as you can about international trade by becoming familiar with Incoterms—13 standardized definitions of words used for international trade and shipping. Also learn about commonly used letters of credit, contracts, financing options, foreign exchange, international shipping, and dispute resolution. Immerse your entire management team by offering a crash course in your chosen market’s culture, which includes learning local business customs and basic language. Learn about a country’s holidays, history, and what really makes the market tick; what’s beneath the surface.

4 Get Assistance:

A number of terrific resources, many of them free, are available to help budding exporters The aforementioned US Commercial Service, part of the Department of Commerce, has an impressive network of offices around the globe whose sole mission is to help US companies export more. US Trade and Development Agency (USTDA, www.ustda.gov) helps American companies learn about export opportunities at the very early stages of the planned international infrastructure projects.

The US Trade Administration advocates for qualified US companies in their quest to win international tenders and foreign government orders. The Export-Import Bank of the United States provides low-cost export financing, credit, and political risk insurance for qualified goods and services exporters.

Many non-profit export assistance centers and national chambers of commerce provide help, documentation support, and networking opportunities. Invest in hiring a local attorney, a market advisor, and a good interpreter who is familiar with business jargon. Develop a relationship with an experienced international shipping company.

5 Plan:

Develop a comprehensive market entry plan for each country you will do business in. Carefully look at the competition, and assess political and business situations, your potential customers, and sales prospects for the next three to five years. Devise a distribution strategy, training and support mechanisms for your distributors, and hire salespeople and/or agents.

Allocate sufficient financial and administrative resources to support planned activities, and understand that time overseas often moves much slower and things take much longer than they do here. Plan for contingencies such as political unrest, economic collapse, currency devaluation, customs delays, retroactive legislature and taxation, intellectual property theft, criminal interference, corruption, strikes, and natural disasters.

6 Execute:

While it is vital to plan, you must remember as you are executing the plan that things may change and you may be forced to scrap your original plan and rewrite it to adapt to changing market conditions. While time in emerging markets moves slower, the markets themselves can move much faster than those in the US so it is vital to monitor, adapt, and execute swiftly and decisively. Emerging markets are often filled with shoddy goods and services, and new players are looked upon with suspicion. A damaged reputation is almost impossible to repair, so be sure to provide support and service for your products from the beginning.

7 Repeat:

Prepare your entry into each new market by following the steps above. With each new market, the process will become easier. As your company exports to emerging markets, it will enjoy significant rewards financially and culturally. The process will not only help you become more diversified, but it will also make you more competitive in your domestic markets.

Author Information:Alexander Gordin is the managing director of the Broad Street Capital Group, New York, a private international Merchant Bank, Trustee of the Princeton Council of World Affairs and author of the upcoming book Fluent in Foreign™.

  • copyright RSL Media LLC

Now What? Which Emerging Market is Right for Your Business?

by Thomas on Wednesday, March 16, 2011 – 12:52:34 PM ESTWhen most people think of emerging markets they instantly think of the most famous four: China, India, Brazil and Russia. All have had staggering economic growth in recent years and continue to have great prospects for the future. However, are these necessarily the best countries for your business? The Market Potential Index by MSU-CIBER gives entrepreneurs an alternative to guessing by offering a comprehensive ranking tool that helps answer the question, “Now What?”

The index rates 26 emerging countries on a variety of factors and gives an overall ranking based on an adjusted weighted average. The top ten include the usual contenders such as Hong Kong, China and India, but how much do you know about Poland in sixth place or the Czech Republic in fifth place?

Poland has been privatizing many state-owned companies since the 1990s and encourages the development of small and medium business. The MPI has highlighted Openness (ranked 7th) and Economic Growth (ranked 13th) as the main factors swaying international companies to seek opportunities in Warsaw, Poland’s capital. One such example is the recent conversion of the Felix Hotel in downtown Warsaw to a Best Western. Best Western recognized the opportunities in Poland and was willing to endorse a Polish hotel with its name in order to exploit the growing amount of business travel to the country.

The MPI has also signaled huge potential for Czech Republic‘s future growth by ranking them second in Market Consumption Capacity, second in Commercial Infrastructure, and third in Economic Freedom. Economic growth can already be witnessed by the increasing amount of premium goods being sold in the Czech Republic. One example is local entrepreneurs selling premium beer though an increasing amount of microbreweries. In 1989 there were only 65 such breweries.  However, this number has surged to 104 breweries today!  The MPI can be used to highlight that the Czech Republic still has market capacity and may be a great place to start a business.

So before your business rushes headfirst into emerging markets, take a lesson from history and remember that many investors have gotten burned by rushing into emerging “gold” markets that they didn’t understand. Make sure to look at all your options and use the MPI to gauge which market would be best for your business.

gE Blog Series: What’s on Top? Part 2 – Top Countries in Ease of Doing Business

by Evan on Tuesday, March 29, 2011 – 4:56:01 PM EST

As globalization becomes an increasingly important trend in the business world, finding the right country to conduct business in may seem like a difficult task. However, it could be easier than you think. The International Finance Corporation, an organization under the World Bank, develops anindex to rank 183 countries based on their ease of doing business. The country rankings depend on nine different percentile categories including: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business.

Here is the list of the top ten countries:

1. Singapore
2. Hong Kong
3. New Zealand
4. United Kingdom
5. United States
6. Denmark
7. Canada
8. Norway
9. Ireland
10. Australia

Singapore, one of the world’s fastest-growing economies this year, tops the list with the most business-friendly regulations. A company can begin conducting business in less than three days making Singapore an ideal place for new businesses operations. Singapore’s government has also established additional tax incentives for certain industries including legal services, finance, shipbroking, and maritime financing. Alongside tax reductions, technology plays a tremendous role in enhancing Singapore’s ease of business ranking. Authorities in Singapore have been one of the most aggressive adopters of information technology to post business processes, such as import and export details, online. All of these factors contribute to Singapore’s success in doing business and are a main reason why Singapore has topped the list five straight years.

Other countries on the list are making an effort to improve their rankings by implementing newreforms and procedures. Countries deemed easiest to do business often have electronic procedures, as in the United Kingdom where commercial court filing can now be done online. Countries in Asia are beginning to adopt electronic procedures making these countries the most active in taking business-friendly measures. Hong Kong retains its high ranking through business reforms including the abolishment of fuel tax on diesel and civil justice improvements. Its one-stop online service for business registration and incorporation has been one of Hong Kong’s most significant reforms. Hong Kong’s success is a good example of the bright future for other countries in Asia looking to enhance their ease of business ranking.

As doing business abroad becomes easier and more effective, the world will become the marketplace for many companies. The international business landscape benefits greatly from each country’s improvement in creating a business-friendly environment and the good news is these improvements will certainly continue.

 

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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