Going Global, Part II – A Three-Part Series Covering Tips, Advice, and Resources to Help You Turn Your Company into a Global Presence on the Internet.
In Part I of this three-part series, we were introduced to the many resources available to help us research international markets so that we could determine if going global would be a profitable activity for our particular business.
Part II of this series deals with getting our products/services to the foreign markets that we have identified.
Part III will deal with promoting your product or service to a global market.
There are several methods of foreign market entry including exporting, licensing, joint venture, and offshore production.
Exporting can be accomplished by selling your product or service directly to a foreign firm or indirectly through an export intermediary such as a commissioned agent, an export management firm, or a trading company.
International joint ventures can be a very effective means of market entry. International joint ventures are often accomplished by licensing offshore production.
Licensing involves a contractual agreement whereby you negotiate the rights to distribute or manufacture your product or service to a foreign country. Offshore production involves either setting up your own facility or sub-contracting the manufacturing of your product to an assembly operator.
Exporting is the most commonly used strategy by small businesses for entering the global market. There are two basic ways to export: direct or indirect. The direct method requires your company to find a foreign buyer and then make all arrangements for shipping your products overseas. If this method seems to difficult for your business’ capabilities, there is an alternative that may suit your particular situation. There are several types of export intermediaries that you can consider.
Commissioned Agents – Commissioned agents act as brokers who link your product or service with a specific foreign buyer. Generally, the agent or broker will not fulfill the orders but rather will pass the on to you for your acceptance. They may insist upon export logistics such as packing, shipping, and export documentation.
Export Management Companies (EMCs) – EMCs act as your off-site export department that represents your product or service along with the products and services of many other companies. EMCs look for buyers on behalf of your company and then take care of all aspects of the export transaction.
Export Trading Companies – ETCs perform many of the same functions of EMCs but they tend to be demand-driven and transaction-oriented, acting as an agent between the buyer and the seller. If you offer a product or service that is attractive to ETC buyers, you are likely to get repeat business.
ETC Cooperative – ETC cooperatives are US government sanctioned co-ops of companies with similar products and services who seek to export and gain greater global market share. Check with your particular trade associations for more information.
The Export Trading Act of 1982 – This legislation encourages the use and the formation of EMCs/ETCs by changing the antitrust and banking environments under which these companies operate. The Act increases access to export financing by permitting bank holding companies to invest in ETCs and it reduces restrictions on trade finance provided by financial institutions.
Foreign Trade Companies – Some of the largest trade companies are located outside of the US and they can offer a very good opportunity source. US & Foreign Commercial Service (US&FCS) representatives in embassies around the world can tell you about trading companies located in a given foreign country.
Exporting through an Intermediary – Working with an EMC/ETC makes sense for many small businesses. The right relationship, if structured properly, can bring enormous benefits to the manufacturer. Your product gains exposure to global markets with little or no commitment of staff and resources from your company. The years of experience and the well established network that your EMC/ETC has created may help you gain faster access to international markets than you could through establishing a relationship with a foreign-based partner.
Export Merchants/Export Agents – Export merchants and agents will purchase and then repackage products for export, assuming all risks and selling to their own customers. This option should be considered carefully, as your company could lose control over your pricing and marketing in over-seas markets.
How to Find Export Intermediaries – Small businesses seeking to go global often report that export intermediaries find them through trade shows and trade journals where their products are advertised. So, it can often pay to get the word out that you are interested in exporting.
One way to begin your search for a US-based export intermediary is in the yellow pages of your local telephone directory. After just a few initial phone calls, you should be able to determine whether indirect exporting is an option that you want to pursue further.
Direct Exporting – While indirect exporting offers many advantages, direct exporting also has its rewards. Although the initial cost outlays and the associated risks are greater, the profits can be greater, too. Selling directly to an international market means that you will have to handle the logistics of moving your goods overseas. But, the extra efforts can pay off. There are two different approaches to direct exporting: Sales representatives/agents and distributors.
Sales Representatives/Agents – Like Manufacturers’ Representatives in the US, foreign based representatives or “Agents” work on a commission basis to locate buyers for your product or service. Your representative most likely will likely handle several complementary but non-competing product lines. An agent usually will have the authority to make commitments on behalf of your firm.
Distributors – Foreign distributors, in comparison, purchase from the US company and re-sell it at a profit. They maintain an inventory of your product which allows the buyer to receive the products quickly.
Your agreement with any overseas business partner – whether a representative, agent, or distributor – should address whether the arrangement is exclusive or non-exclusive, the territory to be covered, the length of the association, and other issues.
The third article of this three-part series deals with finding buyers in the foreign markets that you intend to penetrate. It describes the different ways that you can promote your product to your foreign buyers and how to make sure yur Internet presence is maximized.
Dale Bowyer holds a degree in Economics and East Asian Studies form Oberlin College. He is a seasoned and successful e-business entrepreneur with many years of international e-commerce experience.
