Tiffany Sees Sparkle in Overseas Markets

CEO Michael Kowalski on Building the Jewelry Giant’s Brand in Asia

By LAURIE BURKITT, WSJ.com 

A fixture on New York’s Fifth Avenue, jewelry giant Tiffany TIF 0.00% & Co. is aiming to improve its luster overseas and particularly in Asia, where demand for gold and gems appears to be insatiable.

‘We’re renovating stores and upgrading the quality in sales professionals,’ says Tiffany CEO Michael Kowalski. Bloomberg News

U.S. shoppers have largely driven sales for the New York-based high-end jeweler, but that picture is changing. For the quarter ended Oct. 31, comparable sales in the U.S.—at stores open at least a year—rose by a modest 1%, with the bulk of sales logged at the New York flagship store, which sells mostly to tourists.

Michael Kowalski, Tiffany’s chief executive, is looking for ways to turn those tourists into regular customers when they return home. Adding to Tiffany’s Japan-based stores, which the company first opened in 1993, the jeweler plans to open in markets such as Russia and in France.

The other target is China, where the company operates 24 stores and plans to open three a year for the foreseeable future, attempting to take on rivals in a competitive market and convince Chinese consumers that Tiffany has the best cuts, designs and service.

Mr. Kowalski recently traveled to China to show off Tiffany’s yellow diamond collection and spoke to The Wall Street Journal in Beijing about plans to build its brand in Asia.

Résumé

• Education: Bachelor’s in Economics, University of Pennsylvania, 1974; M.B.A., Harvard University, 1977.
• Career: Began career at Avon Products in 1978, a year before it acquired Tiffany. Avon later sold Tiffany, but Mr. Kowalski remained at the jewelry maker, helping to take it public in 1987. He was appointed president in 1996 and CEO in 1999.
• Extracurricular: Loves nature, enjoys Chinese food and hates having his picture taken.

WSJ: What are your goals for moving beyond the U.S. in the next three years?

Mr. Kowalski: We do believe there are wonderful geographic expansion opportunities for us. We’ve tried to build a diversified geographic portfolio so that we aren’t dependent on any one region or any one country. We’ve only recently become a stronger presence in the Middle East and we’ll open our first-owned-and-operated store in Russia this spring.

We’re also optimistic about potential in China. Our companywide plan is for Tiffany sales to grow between 10% and 12% for the foreseeable future.

Right now, we have 24 stores and will probably open three to four stores here per year for the future. We certainly want to be flexible and watch how the market develops. That’s our strategic objective. Clearly if we regard China as the fastest-growing market going forward, that implies a growth rate meaningfully in excess of that 10% to 12%. We’re reasonably confident about that.

WSJ: Some luxury companies are wary of China, where an austerity campaign has hit luxury sales. What makes you confident?

Mr. Kowalski: We think the growth curve in China will be something we’ll love in terms of slope. But it’ll also be volatile. In 2011, it was a fantastic year here and 2012 wasn’t so wonderful. [But] 2013 is stronger and we just had a great quarter here.

WSJ: What is behind the volatility?

Mr. Kowalski: It’s driven largely by consumer sentiment and reaction to economic conditions perceived—real or of the moment. Consumer confidence is less volatile in Europe. China is at the higher end, [while] the U.S. is in the middle. I don’t know what drives that, but it’s a continuing challenge here.

WSJ: Consumers are becoming increasingly global, particularly the Chinese consumer. How is tourism changing your approach?

Mr. Kowalski: [The] rise of the Asian consumers and tourism has caused us to change some of our store practices. We accommodate customers who are speaking other languages. It’s a struggle to find Mandarin-speaking sales professionals. We have to work hard to find them.

WSJ: What are you doing beyond language?

Mr. Kowalski: It has caused us to increase our store presence in markets that are heavily visited by Chinese customers. We’re building a flagship store in Paris on the Champs-Élysées.

We are enhancing the store experience in the U.S. and all over the world. We’re renovating stores and upgrading the quality in sales professionals and everything you see in the store.

We’re changing the ratio of selling space to provide more seating space. More casual sit-down environment, more private areas.

WSJ: What are some of the lessons you have learned by doing business in Asia?

Mr. Kowalski: One thing we’ve learned is the need for high standards of service and store experience. We learned that several years ago in Japan and it was critical to our success. Here, we operate in a more intense environment than back in the U.S. and we need even higher standards of service.

WSJ: What specifically have you learned in China?

Mr. Kowalski: We learned we need to be more overt about how we present our brand. A great example would be the store signage. If you were to look closely at the New York Fifth Avenue store, Tiffany & Co. is written in steel letters on both sides of the doors, perhaps two [feet] in length, six inches in height and it’s carved into the granite of the facade. And that’s the only signage there is.

When we first came to China, we were equally discreet and subtle in how we presented the brand and that created a problem. People simply didn’t see or couldn’t see the brand. They couldn’t understand what the store was about. We’ve had to be more direct and less subtle in how we communicate the brand. We need to do a better job of telling brand stories to give a deeper, richer more robust sense of brand. We’ve recognized that while there’s a broad awareness of consumers, we need to work very hard to increase the depth of that knowledge. There is limited understanding of our heritage and that diamonds are central to our business, that we cut our own diamonds. We need to work much harder to communicate that in China than in America or even in Japan.

WSJ: How are you changing your strategy based on what you’ve learned?

Mr. Kowalski: One thing we’ve started to do is use Tiffany blue far more aggressively in the stores and in the facade.

The other thing we’ve done in China is focus on diamonds. We are the world’s authority on diamonds and we’ve emphasized that more dramatically than anywhere else in the world. We’re also speaking more about the Tiffany heritage. We are 176 years old and more longer-lived than many of the luxury brands.

WSJ: You’ve had success in China recently, but what are some of the challenges?

Mr. Kowalski: Diamonds are seen as value items here, which is at the core of their attraction. But one of the challenges with them in China is the bridal tradition, the engagement ring tradition. It has developed some in the last 10 years. But that’s a core part of our business. We’d like to think our presence here is encouraging that development of the tradition.

Write to Laurie Burkitt at laurie.burkitt@wsj.com

This is what people in 9 emerging markets think about Bitcoin (survey)

What do you think these kids think of Bitcoin?

Rebecca Grant, VentureBeat

Bitcoin took us on a wild ride this year — it saw highs and lows, attracting both heady optimism and angry tirades from skeptics.

Most of the action happened in established tech markets in the U.S., Europe, China, and Japan, but the greatest implications could be for the developing world.

Jana is a mobile platform that connects brands with consumers in emerging markets. The company also has a research arm and decided to survey 1,800 people across nine countries — India, Indonesia, Philippines, Vietnam, Kenya, Nigeria, South Africa, Brazil, and Mexico — to see what they think about Bitcoin (infographic below).

When asked “have you ever heard of Bitcoin before today,” 48% of Indonesian respondents said yes, followed by 45% in Vietnam, and 34% in the Philippines — all Asian countries. South Africa and Mexico had the lowest response rates of 13% and 16% respectively.

58% of all respondents said they would “feel comfortable” investing in virtual currency. This number was highest in Kenya (74%), which could be due to the popularity of its mobile money service M-Pesa, which means people are already comfortable with digital money. Brazil and Mexico were the only countries where less than 50% of respondents would feel comfortable investing money in virtual currency.

Bitcoin is highly volatile — it soared from under $10 to over $1,200 over the course of the year, with various ebbs and flows. China played a huge part in driving the surge as well as the crashes. China’s largest Bitcoin exchange stopped accepting yuan deposits yesterday  morning, sending the price tumbling to $522. The price has since gone back up to around $700.

One of Bitcoin’s biggest selling points is how cheap and easy it is to transfer money. Traditional cross-border transfers (like Western Union) charge exorbitant fees, while Bitcoin is basically free. Furthermore, it is global and not controlled by one particular government.

Adam Draper, who runs a Bitcoin-oriented accelerator program, said that Bitcoin is still more of an asset than a currency. If and when it stabilizes, the impact could be the largest in countries with emerging economies.

“It is interesting to look at inflationary markets like Argentina, Venezuela, and India, where the value of a Bitcoin could be a better store of value than their own currency,” he said in an interview. “Remittances and cross-border payments are also a big deal, and Bitcoin could change the game if adopted appropriately.”

The respondants in Jana’s survey view Bitcoin as less safe than banks, more safe than the stock market, and comparable to investing in property.

However the Bitcoin ecosystem still has a long way to go before it is feasible or practical for people who don’t have money to gamble. Because Bitcoin is still just that — a gamble.

Happy Holidays and Best Wishes in 2014! Thank You for Your Patronage!

Prospects for the Global Economy in 2014

CFR. org (Council on Foreign Relations)

Authors: A. Michael Spence, Distinguished Visiting Fellow, Council on Foreign Relations Robert Kahn, Steven A. Tananbaum Senior Fellow for International Economics Ernesto Talvi, Nonresident Senior Fellow and Director, Brookings Global-CERES Economic and Social Policy in Latin America Initiative Yukon Huang, Senior Associate, Asia Program, Carnegie Endowment for International Peace Mark Zandi, Chief Economist, Moody’s Analytics
Interviewer(s): Mohammed Aly Sergie, Online Writer/Editor

The International Monetary Fund expects the growth of the global economy will accelerate to 3.6 percent in 2014 from 2.9 percent in 2013. Five top economic experts offer insights on how to read trends in different regions.

Developing economies will likely enjoy relatively high growth in 2014, while the United States will continue with real growth and Europe’s economy will expand very slowly, says CFR’s A. Michael Spence. Moody’s chief economist Mark Zandi expects the United States to experience its fastest growth in a decade, driven by a reduction in fiscal austerity, a resurgent housing market, and the “superb condition of American corporate, bank, and household balance sheets.”

Europe is growing, and capital is beginning to return, which has made policymakers “buoyant,” says CFR’s Robert Kahn, but officials face the challenge of bolstering the growth rate “before markets again lose confidence in the reform process.”

Well-managed Latin American countries that depended on abundant inflows of foreign capital will have to adjust their growth rates of consumption, investment, and public spending, says Ernesto Talvi of Brookings. Carnegie’s Yukon Huang says China can reach a more sustainable growth path if it deals with its debt problem and boosts productivity.

A worker maintains machinery at TIM stainless steel wire factory in Mexico. (Photo: Tomas Bravo/Courtesy Reuters)

A. Michael Spence, Distinguished Visiting Fellow, Council on Foreign Relations

The 2014 global economy is likely to see a reemergence of the post-crisis pattern of relatively high growth in the developing economies, a continuation of real growth in the United States, and very low growth in Europe.

The U.S. economy is growing at 1.5 to 2 percent in real terms, led by a flexible private sector shifting toward external demand in the tradable sector. Tail winds are coming from growth in the emerging markets (especially China), low-cost energy in shale gas, and extensive deleveraging in the household and financial sector. Fiscal drag from government persists, and the pattern of public-sector underinvestment will remain, diminishing longer-term growth potential.

“[S]tructural rebalancing in Europe will take time and prospective growth will be low in and beyond 2014.”

In Europe, the ECB has stabilized sovereign debt markets and systemic risk is for now substantially reduced. But growth will not follow easily. Most of the south of Europe has nominal unit labor costs well above Germany’s post-reform levels, and the process of rec­­­onvergence with a common exchange rate is slow and difficult. Reforms to increase structural flexibility and accelerate a structural shift toward the tradable sectors have been limited. The net result is that structural rebalancing in Europe will take time and prospective growth will be low in and beyond 2014.

China has announced an aggressive and credible reform program, emerging from the Third Plenum in November. If it is followed by an equally aggressive program of implementation in 2014 and beyond, the growth pattern will start to shift to a new sustainable one consistent with the higher income levels in the economy. Recovery in the advanced countries will eventually restore some growth potential coming from the tradable sector, but probably not in 2014 with the huge European market treading water.

Other major emerging economies, especially those with current account deficits and a pattern of reliance on cheap foreign capital, experienced some instability during 2013 as a result of the tapering announcement and high-speed capital outflows and attendant exchange rate volatility. Corrective action may slow them down into 2014, but they will return to higher growth in the longer run, with China serving as a tail wind.

African countries have been quietly impressive over a decade and through the advanced country crises. This seems set to continue in 2014 and will not be overly dependent on natural resource prices and markets. These so-called “frontier” markets, while not huge in aggregate size, are emerging as resilient star performers.

Robert Kahn, Steven A. Tananbaum Senior Fellow for International Economics

European policymakers are buoyant. The urgent sense of crisis has receded, early signs of growth have appeared, and capital is beginning to return. But Europe is not out of the woods, and the risk that the crisis could return is higher than is commonly understood.

Euro area growth is on track to reach 1 percent next year, following two years of decline. Continued bank deleveraging, an uncertain global growth outlook that will restrain exports, excessively tight macroeconomic policies, and an incomplete framework for monetary union provide powerful headwinds to recovery. Stronger demand is needed to boost growth, and a relaxation of fiscal austerity would be welcome in this regard. The European Central Bank (ECB) also will need to do more to spur new lending, particularly for small and medium enterprises in the periphery, and consider full-scale quantitative easing.

The problem with this forecast is that growth at this level is insufficient to reduce high levels of unemployment, which have reached 26 percent in Spain and 12 percent for the euro area as a whole. Youth unemployment, which averages nearly 24 percent for the eurozone and exceeds 35 percent in several countries, represents a critical threat to Europe’s future.

“European leaders need to win back their publics and make a better case for a faster move to economic and political union.”

Banking union will be the focus of policy efforts to advance monetary union in 2014. The ECB-led stress test, essential in efforts to restore confidence in Europe’s banks, will need to navigate a narrow path forward: too soft and the credibility of the ECB could be irrevocably damaged; too tough and the resultant financial stress could turn today’s green shoots brown in a hurry. Market pressures could return quickly if countries were seen to be abandoning their commitment to reform and financing gaps were to reemerge.

Perhaps the more serious challenge to Europe in 2014 is political. Polls show that austerity is undermining the readiness of Europeans to accept the deeper union that is needed to redress Europe’s economic woes. Parliamentary elections in May are likely to bring a strong antiausterity vote. (A euro-skeptic parliament, in addition to being entertaining to watch, could set back efforts to negotiate a transatlantic trade agreement.) Governments in periphery countries such as Greece and Portugal may find it increasingly hard to sustain support for their adjustment programs.

The challenge, therefore, is to restore growth before markets lose confidence in the reform process again. European leaders need to win back their publics and make a better case for a faster move to economic and political union. Failure to do so could make 2014 the year the crisis returns.

Ernesto Talvi, Nonresident Senior Fellow and Director, Brookings Global-CERES Economic and Social Policy in Latin America Initiative

Latin America, particularly countries such as Brazil and Argentina that are commodity-exporting and less dependent on the U.S. economic cycle, have had close to a decade of exceptional growth, doubling the region’s long-run average. This period of exuberance was underpinned by sound macroeconomic policies, but largely propelled by cheap and abundant inflows of foreign capital and high commodity prices. High growth and active redistribution policies made possible by plentiful fiscal resources led to a 13 percentage point decline in poverty rates in Latin America, a 5 percentage point decline in extreme poverty rates, and the emergence of an incipient middle class.

Since mid- to late 2011, however, Latin America’s growth rates have cooled substantially as growth in important emerging economies lost steam (in particular, China’s growth rate declined from previous skyrocketing levels of 12 to 7 percent) and commodity prices weakened. More recently, international financial conditions have tightened—sending shivers through emerging markets—since the Federal Reserve announced the possibility of a gradual withdrawal of monetary stimulus. As a result, international financial and capital resources are expected to become scarcer and more expensive.

“Countries that are less well-managed economically, such as Argentina and Venezuela, are already in crisis mode.”

Less abundant and more expensive foreign capital and financial resources imply that countries such as Brazil—which are spending in excess of their income and financing that excess with inflows of cheap foreign capital—are soon due for an adjustment in the growth rates of consumption, investment, and public spending that will keep growth rates of the economy in check. Countries that are less well-managed economically, such as Argentina and Venezuela, are already in crisis mode.

Policymakers in the well-managed countries of the region will have to face significant economic challenges stemming from a more adverse external environment and stricter financial constraints. These challenges, especially reigniting growth through domestic transformations, are politically complex and take time to produce effects (e.g., education reform in Mexico). Preserving macroeconomic stability and fiscal probity at a time when a dissatisfied electorate (with high expectations due to a decade of very high growth) will pressure governments to accommodate immediate popular demands at the expense of sound policies. How these tensions are resolved will be crucial in determining the economic prospects of the region in the coming years. For better or worse, in the next decade we will witness the emergence of a very different Latin America.

Yukon Huang, Senior Associate, Asia Program, Carnegie Endowment for International Peace

The Third Plenum of the Chinese Communist Party’s Central Committee laid out in November a bold policy framework for reaching a more sustainable growth path. These policy changes are essential as China approaches the level of income at which many other rapidly growing developing countries experienced precipitous growth slowdowns, the so-called middle-income trap. Going forward, if China hopes to evade this “trap” and maintain growth of 7 percent for the rest of the decade, it will have to address its growing debt problem and significantly increase productivity.

China’s $600 billion 2008 stimulus package pushed up its total debt level by 50 percentage points to more than 200 percent of GDP. Given China’s high savings rate and huge level of reserves, this burden is manageable provided that the targeted economic growth rate can be sustained. Thus a major concern addressed in the Third Plenum was the strengthening of the fiscal system so that local authorities would no longer have to rely on bank credit to finance their basic expenditure needs.

“Fiscal reforms and reduced dependence on banks will improve transparency and promote accountability.”

But more challenging is increasing productivity, since China’s past reliance on ever-increasing investment rates and ready access to low-cost labor is no longer tenable. The two most promising areas of productivity-boosting reform are those that will facilitate a more efficient urbanization process, allowing the economy to benefit from the massive supply of labor still trapped in low-productivity rural activities or smaller cities and increasing the role of private firms, whose investment returns are twice as high as state-owned enterprises.

While these macroeconomic problems are high on the policy agenda of senior leaders, the average citizen is more preoccupied with issues of social justice, corruption, and the environment. Thankfully, many of the actions highlighted at the Third Plenum also feed into the wider changes needed to address these politically sensitive concerns. Fiscal reforms and reduced dependence on banks will improve transparency and promote accountability. Rolling back the power of state enterprises and streamlining government procedures will restrain rent-seeking activities and expand opportunities for private firms. Better-managed urbanization will strengthen the voice of the middle class and improve the environment while also boosting productivity.

Mark Zandi, Chief Economist, Moody’s Analytics

Here’s an intrepid forecast: In 2014, the U.S. economy will experience its fastest growth in a decade.

Supporting this optimism is the fading of fiscal austerity. Under current law—if Congress makes no substantive changes to taxes and spending—headwinds from fiscal policy will diminish rapidly. Lawmakers will again need to agree on keeping the government open and raising the Treasury debt limit, but they seem likely to do so after their earlier brinkmanship brought a negative political reaction.

It would be wonderful if Congress and the Obama administration could undertake substantive entitlement and tax reform, but this seems unlikely, and it isn’t necessary in the near term to allow the economy to improve; our long-run fiscal problems will come to a head in the next decade. As long as lawmakers do no harm, which is a reasonably low bar, fiscal policy will quickly become less of a drag on growth.

“The only missing ingredient to a stronger economy is confidence.”

The housing recovery should also power stronger output growth. Simple demographics support a pickup: The current pace of construction is far too slow to accommodate newly formed households, replace damaged or obsolete structures, and meet demand for second homes. Housing was vastly overbuilt during the bubble, but it will soon be undersupplied, suggesting that construction will be ramped up significantly across much of the country.

An acceleration in housing hinges on the Federal Reserve’s ability to successfully match the pace of future interest rate increases to an improving job market. Home sales won’t be dented by higher mortgage rates if brisk hiring and a falling unemployment rate lift homebuyers’ income and confidence. For the Federal Reserve to gracefully unwind its extraordinary monetary stimulus policies is no small order, but it is doable, and the most likely outcome.

Most of all, optimism about 2014 is based on the superb condition of American corporate, bank, and household balance sheets. Businesses have reduced their costs and are enjoying record profit margins. Banks have recapitalized and are highly liquid. And households have reduced their debt loads and locked in record-low interest rates.

The only missing ingredient to a stronger economy is confidence. It is hard to know what will lift spirits, but with the pain of the Great Recession diminishing and Washington’s standoff expected to fall off the front pages, chances are growing that this will happen in 2014.

International Guidelines for Problem Solving and 80 Drinks from 80 Countries

As we approach New Year celebrations around the world, I thought a bit of cross-cultural training through some interesting infographics would be appropriate. Enjoy the post and the holidays.

80 Drinks from 80 Countries, from Coca Cola to Soju [Infographic]

Drinks By: Peter Pham

What you order at a bar can say a lot about you. Depending where you live in the world, you may order something a wee bit different than your neighbor in say, the Netherlands. But let’s face it, whether it’s wine, rum, vodka, or whiskey, we are a world of drinkers.

Wine Investment published an awesome infographic detailing the most popular drinks based on the different countries around the world. Among them are wines, whiskeys, beers and even soda. It also could double as a check-list for alcohol enthusiasts to see what other drinks are still out there to try.

While this list takes from drinks that appear to represent each country’s national liquor, keep in mind that a single drink doesn’t do an entire country justice, especially the European ones with multiple delicious liquors. This is still nonetheless a really cool graphic to gaze upon and get a quick intro into drink choices around the globe.

Picthx Visual.ly

Read more at http://staging.foodbeast.com/2013/12/10/a-look-at-80-drinks-from-around-the-world-infographic/#bhUEFj1EHgR2XoDF.99

The Global [Access] State of Mind is Key to Successful Exporting

Two days ago, my clients and I attended a very interesting Global Access event in Nashua, New Hampshire. Part of a series of such events around the country, this event was co-organized at the local Community College by the Export-Import Bank of the United States (EXIM Bank), and the 2nd District’s Congressional Office. Its goal, to help American companies learn about the tools, which exist to help expand exports and mitigate risks in the process.  Although, over my 25 year involvement in international business I’ve become quite familiar with all the tools federal and state governments offer to exporters, the Global Access event in Nashua put U.S Government’s commitment to assist companies that wish to export into a new perspective for me.

It is no secret to anyone that Nashua, NH is not a global metropolis, most people in the U.S., and certainly abroad, do not even know of its existence. Yet, the Global Access session in Nashua was attended by a group of prominent dignitaries including U.S. Congresswoman Ann McLane Kuster, a current Board Member of the EXIM Bank – Hon. Patricia Loui, and a former Board Member of the EXIM Bank – Hon. Joseph Grandmaison.  The event also brought together representatives from the U.S. Commercial Service (USCS), State of New Hampshire Department of Economic Development, Small Business Administration(SBA) and the EXIM Bank.  All this firepower to help companies in New Hampshire learn about exporting, obtain financing and mitigate risks of non-payment. AMAZING!

What was even more amazing, that the $300 plus million dollar deal concluded by our clients with Flex Energy of NH and announced at the event by the Congresswoman Kuster, was just one of several significant export deals successfully signed and executed by companies in New Hampshire.

If companies from a tiny New Hampshire can do it, there is no excuse for companies from every other state not to follow suite. Yes, working with Federal agencies is not often easy. The agencies charged with assisting exporters are constrained by bureaucracy, budgets, political considerations, yet having such multibillion dollar resources placed at the disposal of each end every American company seeking to expand its business internationally is truly a gift and a phenomenal opportunity. Those companies not taking advantage of this opportunity are doing themselves a disservice.

Below, I offer you an excerpt from my book “Fluent In Foreign Business”, which dovetails very well with the event that took place in Nashua and puts exporting in perspective. This fragment outlines a framework on how to expand internationally and take advantage of all the government and private resources that have been developed to enable American companies to succeed abroad

The deals take us to strange places,

exotic towns, abandoned mines,

through the deals we learn people’s faces

and find the truth between the lines.

Exporting American-made goods and services has become a hot topic, as the U.S. slowly rebounds from one the worst economic recessions. Timing is everything. And with a favorable exchange rate for the U.S. dollar, our exports are even more competitive in overseas markets.

Other factors favoring U.S. business include the global economic recovery, surging demand from emerging markets, the U.S. government’s financing, advocacy and policy initiative, and the cachet of the mark “MADE IN THE USA”. American service and manufacturing businesses have much to gain from an expanding export market. It is a widely held view among U.S. economists that increased exports can lead the way to a long-term business recovery.

Growing demand in emerging markets creates new opportunities for American companies to capitalize on a competitive currency by serving the burgeoning consumer classes. In addition to a revival of exports of U.S. consumer goods, accelerating infrastructure development in emerging economies presents opportunities for U.S. manufacturers of capital equipment and industrial materials and services. Capital-intensive sectors such as airport and road construction, real estate development, telecommunications, aerospace, healthcare, and transportation have traditionally been strong for American manufacturers.

Unique opportunities exist in regions with emerging economies such as in Eastern Europe, Africa, the Middle East, South and Central America, as growth in these countries spurs trade with the U.S. The so-called BRIC countries — India, Brazil, Russia and China — have long been in a class by themselves as growth leaders.

Despite the emergence of low-labor cost Asian and South American competition and a strong European presence, American companies are and will remain highly competitive in a number of international sectors and industries. Opportunities abound, but are often riddled with pitfalls and traps for the unwary. A U.S. company competing in the global arena must be informed, vigilant and prepared in order to successfully exploit these opportunities.

The Global State of Mind

Skeptics say that U.S. companies will not be able to compete with low-cost goods and services from China, Brazil, and Korea; yet Germany, which has some of the highest labor costs in the world, is an export powerhouse. Holland and Sweden also have highly paid workers, but are successful at exporting.

Why? Business people in these countries think, eat, sleep, and literally live exports. They are also sophisticated and proactive when it comes to direct investment into foreign markets. It’s that simple. With domestic markets much smaller than ours, they have to look beyond their borders for business. Then they dig in and learn the foreign cultures and develop relationships. They design goods and services that can be adapted in various countries. They are committed to finding ways of selling their goods and services and state borders aren’t going to stop them. These companies are not all major European conglomerates either. They include small and medium size businesses across many industry sectors.

Though untapped export and investment opportunities exist for many small and medium-sized enterprises, international trade and investments are simply not part of the typical American business mindset, perhaps because we have historically been fortunate to have such a huge marketplace right here within our own borders. Yet, fear and simple lack of information on how to effectively do business abroad deter executives from venturing into the international business arena.

Exporting and overseas investment is a state of mind. But it seems to be an afterthought for many U.S. companies that betrays a palpable lack of commitment. I’ve seen it many times: a U.S. business hires a mid-level international sales manager — usually an American with extensive foreign sales experience. He is assigned a massive territory with a great sounding acronym, such as EMEA (Europe, Middle East, Africa), often with a paltry marketing budget or minimal technical support. Then he is sent 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, counties, cities, or maybe even states, but when these same companies go overseas, they assign entire continents to a single person with limited administrative and financial resources.

How do you change this mindset? How can American companies enter new markets abroad?

Fundamentally transforming the way American businesses think of exports and international business is critical to the expansion of U.S. export and foreign direct investment. Here’s how.

1. Comprehensive Education of Exporters and International Investors.  We must establish an education system where exports, foreign culture and international business are taught not as a byproduct, but as a core economic discipline at all levels.  As a nation, we don’t offer the intensive training or formal education required to prepare exporters and direct investors. Neither do we have a system of measuring and standardizing the quality of export organizations.  This must change.
2. Enhanced Export and Foreign Direct Investment (FDI) Infrastructure.  We must refine and enhance our export and FDI infrastructure and better focus our resources on preparing and assisting promising companies to effectively sell and invest overseas.  This has to start with expanded funding to appropriate agencies such as the U.S. Trade and Development Agency (USTDA), which delivers $47 in exports for every dollar it spends funding project feasibility studies and reverse trade missions. We also need our government resources to be leveraged with private-public partnerships (or PPPs).  We need to involve more banks and private finance companies in funding exports and finance American investments overseas.
3. Increased National Focus on Exports.  Exports must become a part of our national agenda, on par with healthcare, housing, real estate, and education, consistently and on a sustainable basis — not just when times are bad. When asked to name the top initiatives that can improve our economy, the average American should come up with exports. The Small Business Administration reports that a mere 1 percent of all U.S. companies are currently engaged in exporting.
4. Build a “Securities” Market Approach to Exports and Foreign Direct Investment.  The U.S. export and direct investment industry should take a cue from the securities industry, which is based on analysis and real-time distribution of information. Imagine how our industry could be served if, in the wake of Japan’s nuclear crisis, one or more export and investment analysts covering the nuclear sector would highlight third-country export or investment opportunities for U.S. companies.

I hope that this book will make a small contribution in helping American companies expand their businesses abroad, whether through exports of goods and services or through direct foreign investment.

Fluent in Foreign Business™ is intended to serve business executives and entrepreneurs considering taking their businesses into the international arena. It is also targeted at their business advisors, i.e. accounting and legal professionals who know their U.S. operations intimately and are in the position to help make tough decisions with respect to international expansion. This book will benefit those of you who are developing or expanding existing import-export businesses.  It will also benefit those of you who are considering investing directly into the foreign markets and operating locally in multiple industry segments.

The book combines basic business concepts with practical business insight and revisits some of my own experiences — some defining moments, some cautionary tales. It is not a guide to customs, holidays, economic data, or market research.  It is not a textbook on import-export trading or a compilation of forms and guidelines. There are many government and private resources that provide that information. Instead, this book is intended to help business executives develop a framework for strategic decision making, access the necessary information to evaluate the relative benefits of foreign market expansion to their organizations, and carefully prepare — organizationally and personally — for the demands, intricacies, and obstacles that prevail in the world of international deal making.

This book examines the ABCs of researching, planning and entering foreign markets such as the decision making process, the importance of selecting the right partners, practical steps one can take to make the search for local partners more effective and efficient, construction of an in-country support network, and managing corruption, culture gaps, and competition.

Government agencies such as foreign ministries, the U.S. Department of State, diplomatic corps, and foreign services have so-called “charm schools” to train employees to handle themselves in foreign markets. A number of leading universities offer programs in international business, geopolitics, and global affairs. However, the majorities of businesspeople who end up doing business in foreign markets or with foreign companies have never attended, or will not attend, such programs. Fluent in Foreign Business is for them.

Fluent in Foreign Business™ is based on my twenty plus years of experience in building and managing companies across borders and thirty plus years of international exposure. I have visited 39 countries, lived in five, and have done business in 31, three of which I have never visited.

Before we embark on an educational and entertaining journey, meet Global Felix™. He will pose provocative questions, the answers to which will help shape your international business strategy.

Although many of these questions come up in connection with doing business domestically, they take on a different dimension in an international context. There is less room for error, the issues are more complex in the face of additional laws and regulations, and the repercussions of a bad answer can be more brutal.

A new Sample Chapter called “Walk Softly and…”or “How big is your bat?” has been published on the pages of this publication. TO READ