Even with the uncertainty in the
worldwide economy, expanding
into international markets is still a viable strategy for U.S. companies. In the
1970s international business accounted
for less than 1 percent of the U.S. gross
domestic product, but that number has
jumped to more than 26 percent today.
“Businesses that are involved internationally tend to be more profitable, grow
faster, pay higher salaries, and add more
jobs than firms that are involved in
merely domestic activity,” says Lance
Brouthers, professor of management and
entrepreneurship and research director
of the DBA program at Kennesaw State
University, Coles College of Business.
Smart Business spoke with Brouthers
about how to prepare your business for
the change, strategies to put in place to
start doing business overseas, and things
you should be aware of in international
business negotiations.
How can leaders prepare their companies
for international business?
They need to think about their products
and markets. They need to ask themselves what is unique about their product.
What is their sustainable competitive
advantage? What’s their unique selling
proposition? Developing superior product quality is one strategy; companies
should then identify the right markets
where there is a demand for their particular product. Most state governments
have foreign trade offices and sponsor
trade shows and trade missions, and
some states have overseas offices to help
businesses establish contacts within certain target countries.
What are strategies leaders can implement
to start doing business internationally?
They should try to identify a product or
set of products that they think are good
quality, somewhat unique, and aren’t easily imitated in the foreign marketplace.
Another way they can go abroad is in
developing their brands. Brand equity
tends to be fairly universal. So if you’re in
an emerging market and have some
wealth, you want to buy the same brands
that people in the U.S. want to buy.
Larger businesses can look for countries
where the tariffs are high. You wouldn’t
think they would want to look for high
tariffs, because the tariffs act as trade
barriers. But when a country imposes
high tariffs, it’s because it doesn’t believe
its domestic products can compete with
international products. So it’s like waving
a big red flag.
What should leaders be aware of when
doing business internationally?
When you leave the country, you’re not
in the U.S. anymore, and the laws and
protections that apply in the U.S. may or
may not apply depending on what country you pick. If you pick Western Europe
or Canada, most of the same laws tend to
apply. But the more culturally distant the
country is from the U.S., the less applicable the laws and customs are. You have
to realize that the local indigenous businesses in a foreign country are going to
know their markets, rules and regulations better than you are. So you’re going
to have to have some kind of intrinsic
advantage in your product that more
than outweighs all of these liabilities of
foreignness that are associated with
doing business overseas.
How can leaders adjust to and prepare for
the cultural differences of international
business?
They probably want to contract someone to help with negotiations rather than
doing them on their own. One of the fundamental differences between U.S. businesses and most of the rest of the world
is that American business tends to be
short term and contract specific. Most of
the rest of the countries tend to do business based on relationships, so it takes
longer to develop these relationships.
One of the problems that American businesses have in doing business internationally is they tend to move their personnel around a lot, and when you’re
doing business-to-business types of
sales, people in other countries like to do
business with the person more than a
company. Not all firms overseas have the
same goals as American businesses. We
tend to have short-term, profit-oriented
goals here. They tend to have much
longer-term interests in mind.
Gift giving is also an important part of
negotiations in international business.
Take the time to find out what the hobbies and interests are of the people
you’re negotiating with, and bring them
little gifts that show that you have taken
the time to understand them. American
businesses, particularly smaller and less-experienced ones, tend to be at a disadvantage in these international negotiations. They tend to alienate potential
business partners or targets of opportunity because of their lack of sensitivity to
these kinds of issues.
LANCE BROUTHERS is a professor of management and entrepreneurship and research director for the new DBA program at Kennesaw
State University, Coles College of Business. Reach him at (770) 423-6972 or [email protected].
