International Development

Details

Category: Articles

Dr. Bob Williams

The business is up and running. Recruiting is up. Sales are up. Cash flow is positive. Time to conquer the International Market! And there are very good reasons to think internationally. Each country opened, running and generating a positive cash flow helps strengthen the US Parent Company and creates new opportunities for all: The sales force and the Company. Each new country broadens the sales base and eliminates peaks and valleys. Each new country helps excite additional recruiting in all countries. Each new country makes the Company's name better known and more recognizable around the world.  Each new country broadens the base for International Conferences and conventions, for different and better promotions, more flags to display in the Home Office, and most importantly, the opportunity for senior management to be even more effective.

Yes, international is the way to go if you are ready and if the Company can afford it. But along the way management should be wary of the pitfalls that come with international expansion. And there are many! Legal requirements to ensure a proper business infrastructure; banking requirements to ensure smooth transfer of capital; product registration to ensure trouble-free importation; seamless sponsoring with a smooth running computer program for worldwide recruiting; a compensation plan that can be universally adapted; a plan for worldwide commission payments; competent local management; protection of distributor mailing list; protection of proprietary formulas and trademarks are but a few of the many details that must be done, and done properly, if your international expansion is to become a dream come true. A simple slip and the dream can quickly become your worst nightmare. A check-off schedule to eliminate most obstacles can be readily obtained. (If you are unable to find one, contact me and I will send you a work sheet)

What I consider to be the biggest unseen pitfalls are: cultural differences, individual country work ethics, politics, currency stability, ease of doing business, individual country legal "quirks" not found in most countries, and the biggest pitfall of all, cash flow. These differences can be subtle or startling. A few examples:

English speaking Canadians relate more to the UK than to the US. They have strong ties to the Commonwealth. They know the US well, they enjoy visiting here, but their roots go back to England, Scotland, Wales and Ireland. Queen Elizabeth's picture is still shown proudly through out Canada. Quebec does not speak the French as is spoken in France. American English is not the same English spoken in England, Australia, New Zealand or South Africa.

Muslims worldwide do not work on Friday, they do not eat pork and dogs are considered unclean, so are avoided. They will work on Saturday so be prepared to be open six days per week if you do business in a country that has a mixture of Muslims and non-Muslims, such as Malaysia, Indonesia, the Middle East and Parts of Africa. Most businesses in Asia work five and one half to six days per week

The Philippine Peso, the Indonesian Rupee, the Thai Baht have all depreciated by enormous amounts within the last few years. The Australian Dollar, the Yen, the Pound, the European Monetary Unit and most world currencies have shown fluctuations against the US dollar. Ranges from 10% to 50% are common. Some currencies have almost become worthless.

Although there are exceptions, Malaysia will not let a foreign owned Company own more than 30% of a Malaysian Company. Most countries require the local Board of Directors to have local representation and in some instances the representation must be in the majority. Additionally, some countries require the Chairman and CEO to be locals.

Employment requirements in many European countries are extremely costly by American standards.  High hourly wage scales, thirty days paid vacation, long maternity leave, early retirement, inability to fire or discipline employees are common through out Europe. In other areas of the world, it is all but impossible to fire an employee for any reason, but their hourly wages are extremely small.

Sales Tax, GST, VAT all have to be carefully considered when pricing of products and creating a compensation plan. Some are add-on, such as Sales Tax or GST. In Canada, the GST is computed differently in Quebec than it is in other Provinces.  Other taxes, such as VAT, are built into the selling price. In all instances the customer and the Company are well aware of taxes and how they are calculated. The problem arises when commissions are calculated. It isn't always easy for a programmer or instructor to understand how to compute or explain commissions net of tax.  

Cash. The life-blood of all businesses worldwide is cash, regardless of what it is called. Money does indeed make the world go around. Before any serious commitment can be made to developing the International Arena, a solid cash management program must in place. More than one Company has looked upon international to generate enough sales, profits and cash to save a struggling US parent. That is not generally a successful strategy. The US parent must be in a position to provide working capital as required until a new country can stand on its own. A word to the wise: do not simultaneously open more countries than you can afford to fund. Do your homework first.

So how? A brief, condensed step-by-step:

1. Assess your own company. Is it ready to expand? Can it afford to expand?
2. What countries best represent your growth plans? What is the basis for choosing a country? (Or countries). Are your development plans solid?
3. Does your product require a market survey in the chosen countries? Can it be imported into the country or must it be manufactured locally? Caution, be leery of cross border shipping for "personal consumption only" as this procedure can lead to problems
4. Infrastructure first: legal, accounting, banking, import brokers, computer programmers, print providers, and providers of other support services
5. Staff, physical facilities. Staff training: where and by whom.
6. Soft launch
7. Grand opening

International is, in my opinion, the only long-term way to grow. It offers a tremendous door to the future, but it must be done correctly. A successful International Start-up does not "just happen"; it is well thought through and well executed. A final word: International should not be done as an OJT project. Make sure that whomever you use to start (or manage) your international operations has the qualifications to do so. Each project must have a "Champion" to see the project along, select your Champion wisely.

Starting and managing International operations can be time consuming and costly, but if your company is in business with the plans of staying in business, then International is the only road for long term success. I wish you good luck and good fortune as you travel it.