Outward Bound

By Kristine Ellis

American Executive

Economists differ on how the weak dollar will affect the US economy over time, but there is one point they agree on. A falling American dollar makes exported goods and services more attractive to foreigners.

“This has to be the best time in the last 20 to 30 years for exporting,” said Lawrence Koslow, founder of the Global Business Connection (GBC) and co-author of Going Global: 308 Tips to Take your Company Worldwide (Butterworth-Heinemann, 1999).

Koslow expects this ripe environment to last at least three or four years given such indicators as the Bush administration’s apparent willingness to keep the dollar weak and China’s agreement finally to let its currency float, more or less, against the dollar.

“These factors are good signs in a macro sense for Americans who want to export their products and services, and they aren’t anything that will change in the next six months,” Koslow said. “So now is the time to not only determine whether you are ready to export, but also to build your market.”

Small- and mid-sized companies make up the vast majority of US exporters (97% in 2001, according to the Department of Commerce Office of Trade and Economic Analysis). Some are pulled into foreign markets by the promise of increased revenue; others are pushed by their customers and the need to keep up with their competition.

Although both services and products can be exported, companies typically start out by exporting existing products. In Going Global, the authors recommend that when considering entering a foreign market with an existing product, companies begin by taking a “reality test.” Among the duo’s reality test questions are:

How will entry into this new market help your company or business unit achieve its strategic business goals? How will entry affect your position vis-à-vis your key competitors?
How will it affect your ability to serve your present customers?
How do you envision sustaining a position in the market, once you have entered it?

If companies know enough about the targeted market to easily answer these and other questions, they know enough to seriously consider taking the plunge.

Ask Uncle Sam
There are plenty of resources for researching foreign markets. In fact, when companies contact GBC with questions about going global, Koslow often first asks them if they have exhausted the resources of the Commerce Department. “I believe it is unethical to charge them for information they can get on their own,” he said.

Interested companies can start with the federal government export portal, www.export.gov , which offers links to a variety of information and service sites. Information ranges from frequently asked questions by companies new to exporting to international market research, trade leads, and country-specific export counseling—for example, what product specifications must be met.

Local and regional resources are also available in the form of membership associations, such as state or regional world trade organizations, as well as state government programs. The Montana Department of Commerce International Trade Office, for example, has just a modest program but still can provide a range of services.
“We offer technical expertise for companies, including training seminars on the basics for those new to exporting and on more advanced topics for experienced exporters,” said Mark Bisom, bureau chief for the Montana office. “We also offer one-on-one consultation.” The state also has trade offices in Taiwan and Japan to assist Montana businesses selling to these countries.

Another good resource for those new to exporting is the Export Legal Assistance Network (ELAN). Established by the Federal Bar Association, ELAN provides an initial consultation free of charge to help companies assess the legal aspects of going global (www.fita.org/elan).

Entry strategies
Most companies that decide to export products begin by working with foreign distributors rather than establishing their own sales force or marketing subsidiary. “If it works, it is wonderful,” said Koslow. “If it doesn’t, it can be disastrous.”

A distributor that treats its customers badly, for example, can destroy the value of the exporter’s product. One that also represents competing brands might devalue the product by using it as a loss leader. On the other hand, a good distributor’s knowledge of the local market can help the exporter maximize its opportunities. Other major advantages include limiting some of the complications of selling internationally. For instance, the distributor can handle warranty issues.

State and federal agencies can help companies identify reputable distributors, while consulting companies like GBC can assist in the final selection. “A company might identify six potential distributors, say, and then ask us to investigate them. We might find that one of them is behind in its payments, another sells a competing product or doesn’t sell the volume it claims, and so on,” said Koslow.

Alternative entry strategies include appointing an agent, working with an exporting management company or export trading company, forming alliances with other US exporters, licensing, and more. Each has its advantages and disadvantages, many of which are tied to the product or service being exported.

Given the complexities involved in going global, entering a foreign market isn’t something that happens overnight. That said, there are good reasons for companies contemplating international expansion to start doing their research and putting their plans into action.

“There are a lot of reasons for getting into exporting, and companies need to be very careful about how they go about it. But the United States is maybe 25% of the world market. The other 75% is out there waiting for you, and if you do it right, you can double or triple your sales,” concluded Koslow.

Kristine Ellis is a freelance writer based in Helena, Montana. She can be reached at kellis@mcn.net.

Lawrence Koslow is an attorney and principal of the Global Business Connection®. He has written two books on international business. Koslow may be reached directly at (520) 622-2357 or by e-mail at: larrykoslow@cox.net.