Three ways to find clients abroad (two are wrong)

How to build a solid international business, brick by brick.

By Alexander Gordin, reposted from Citibank.com Business Solutions

January 31, 2013

If you remember the story of the Three Little Pigs, you already know all there is to know about doing business internationally. Just like in the tale, there are three ways to for a company to approach international expansion through exporting.

Passive Lucky (straw house): In this scenario, exporters-to-be go about their daily business and hope that someone from overseas will contact them with an order. Sometimes that does happen, and the order can be a minnow or it can be a whopper. In either case, the approach is no more solid than a straw house, and is unsustainable over time.

Ad Hoc (stick house): This strategy is a little better than the first since it involves some proactive moves by the exporting company. Maybe the CEO met someone at the trade show or called on a potential customer during a business trip. Some exports can be built up in this manner, but no serious, long-term strategy develops. Therefore, any adverse turn of events threatens to quickly undo this fragile structure.

Top-Down (brick house): This is the only correct approach to building business abroad. By committing to a strategic business development approach, would-be exporters are able to gradually implement a systematic, sustainable expansion plan that will serve their companies for years to come.

So how does one develop and implement the Top-Down approach?

Hire experienced advisors. Assign or hire experienced, dedicated folks to staff your international department. Starting with senior management, implement an ongoing training program for everyone involved in exports, finance, shipping and administration. Work with the U.S. Commercial Service, U.S. Chamber of Commerce (AMCHAM) and an American business council in each target market. Set up an account with a bank that has global reach and experience in foreign currency, can provide a letter of credit and has a wire transfer department.

Select the most promising markets for your product. There are about 180 potential countries in the world that merit consideration for exporters. Using tools available from the U.S. Commercial Service, World Bank, Transparency International, CIA World Atlas and private companies, thoroughly explore the markets and select 10 that appear to have the highest sales potential for your company’s products.

Drill down into your target market. Once the locations have been decided, the company should research its target market segments and define its products’ advantage in each. Use currency conversion calculators to set the local pricing for the product and check how it compares to the locally available products. Create a schedule of phases in which each of the new countries will be entered.

Find a strong local partner who will be able to completely service your company’s in-country needs. This is the most important step of all. The local partner should

  • Have a strong ability to recruit and manage local staff
  • Properly represent your company at all levels
  • Understand your strategic goals
  • Respect the value of your brand and understand the damage to it that a single wrong act may cause
  • Look out for your interests when it comes to financial matters and anticorruption policies

There are several types of partners for exporters. They include in-country agent or representative; local distributor or importer; and providers of technical services of equipment where warranted. To find a local partner, there are several good places to start. The U.S. Commercial Service offers Gold Key Service, which will identify and screen potential partners. Query local AMCHAM and industry associations in the target countries. Look on business networking sites such as LinkedIn. Ask headhunters, expats, family and friends, local lawyers, accounting firms and economic officers at the countries’ embassies in Washington DC.

Once the partner is selected, enter into a comprehensive agreement and structure the relationship in a way that affords you leverage and provides for a “trust but verify” framework for monitoring the relationship. Remember, building the partner relationship is an ongoing process and the personal touch is essential to success. Travel to the country often and get to know your partner. Put a contingency plan in place in case the partnership does not work out.

Together with the partner create product pricing; customize your company’s offering to the market; set up Foreign Corrupt Practices Act (FCPA) compliance policy and obtain local certifications and licenses that may be required. Find a great customs broker and an experienced freight forwarder. Line up export credit insurance and export financing from the Export-Import Bank of the United States, or private insurance carriers and banks, which finance exports.

Commit to the process. In order for a company to succeed in building successful export business, commitment of the entire organization starting with the top management is essential.

Once your export countries are identified, your partner selected, your product customized and positioned and your organization committed, execute the strategy patiently and consistently in each target country. Then watch your export business flourish.

Alexander Gordin is the founder and CEO of Fluent in Foreign, a business development and risk management platform designed to help exporters, manufacturers, franchisors and investors successfully enter foreign markets or expand their existing international operations. Fluent In Foreign publishes Fi180 Global Business AtlasTM with unique country profiles and proprietary Fi3
indicesTM to help companies seeking to expand their international business.

©2013 Citigroup Inc. Citibank, N.A. Member FDIC. Citibank with Arc Design is a registered service mark of Citigroup Inc.

 

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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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