The article below, written by Aaron Rose, was originally published by The Center of Excellence for Global Trade & Supply Chain Management, a partnership with Highline College in Des Moines, Wash.
“The World is Flat” is not just the title of a book by Thomas Friedman, but it is a concept in conducting business in the 21st Century. Given today’s ease of sharing information worldwide, it has become easier than ever to export to markets on the same continent or land thousands of miles away. However, the variety of markets that exist means not all countries provide ideal conditions for your product or service. A business must choose its export market(s) carefully by gathering relevant and accurate information, speaking with trade experts, and performing a country-level risk assessment.
Lots of Market Choices, Make an Informed Decision
There are approximately 196 countries in the world (depending how the word “country” is defined). From Afghanistan to Zimbabwe, each country possesses its own set of risks and opportunities. Developed markets like the United States, Canada, Japan, the United Kingdom or the euro area, the monetary union of 19 of the 28 European Union (EU) member states which have adopted the euro as their common currency and sole legal tender, offer stable conditions with low political and security risks, as well as a strong rule of law for enforcement of contracts and protection of intellectual property to safeguard your investment. While stable, these markets may lack the economic growth that allow for rising consumer or enterprise spending necessary for an exporter to implement a successful international growth strategy.
Emerging or developing markets in Asia, Latin America, Middle East and North Africa, and sub-Saharan Africa may offer a rapidly growing middle class who will purchase your products or services, but also present significant geopolitical and socioeconomic risks. Selecting the right export market involves doing your homework about the specific nuances involved with exporting, learning about the country’s political and economic environment, trade regulations and understanding risks associated with each market.
Successful business leaders often say that you worry less about making good decisions if you make informed decisions. And making informed decisions about your business strategy often involves performing a significant amount of research. Choosing the wrong export market for your business is easy when you do not perform the proper due diligence. Choosing the right resources to learning about the nuances of exporting is the first step to developing a viable international growth strategy.
Export.gov Can Get You StartedExport.gov is managed by the U.S. Department of Commerce and International Trade Administration to assist U.S. businesses plan their international sales strategies and succeed in today’s global marketplace. The “How to Export” page contains a video collection to help small businesses become better equipped to enter the exciting exporting world. And the report, “A Basic Guide to Exporting,” provides an overview of the fundamentals in exporting, designed for small to medium-sized companies who are considering finding new market segments overseas.
Through Export.gov, the Top Market Series contains reports prepared by economists and trade experts who analyze and rank industry opportunities in key overseas markets. Export.gov also provides export information by industry, which is updated regularly by commercial specialists around the world.Exporters Utilize Country Commercial Guides
Country Commercial Guides, prepared by trade and industry experts at U.S. embassies worldwide, contain information regarding market conditions, opportunities, regulations, and business customs for over 125 countries. These guides are an excellent starting point to find everything you need to know about doing business in an overseas market, detailing eight important factors to help you decide if a market is right for your product or service:
- Doing Business in …: Provides a broad overview of the market and the top reasons why U.S. companies should consider exporting here. Recommends strategies for entering the market and summarizes challenges or barriers for U.S. companies;
- Political and Economic Environment: Links to the State Department’s website for background information on the country’s political environment, its bilateral relationship with the U.S. and the country’s membership in international organizations;
- Selling U.S. Products and Services: Provides guidance and best practices for selling U.S. products and services in the market, includes typical use of agents and selling to the government. Provides steps for establishing an office or joint-venture/licensing partner, and conducting due diligence. Discusses the state of e-commerce, franchising, and direct marketing;
- Leading Sectors for U.S. Exports and Investment: Identifies the top industry sectors that have potential in the market. Provides a general overview of each sector, including trade data, challenges, sub-sector best prospects, and a list of relevant websites and trade shows;
- Trade Regulations, Customs and Standards: Describes trade regulations, customs and standards in the market. Provides information on import tariffs and documentation U.S firms should be aware of when exporting, including any prohibited items or temporary entry procedures;
- Investment Climate Statement: Describes the country’s openness to foreign investments and provides information on the country’s investment policies, the labor market, political violence and levels of corruption. Describes foreign trade zones and laws for protecting property rights;
- Trade and Project Financing: Describes the country’s financial system and how U.S. firms typically get paid. Describes the banking system and provides information on foreign exchange controls in the market. Describes important sources of funding for project financing; and
- Business Travel: Describes relevant business travel information and business customs, includes any special visa or entry requirements, potential health risks, travel advisories and information on travelling around the country.
Trade Events, Webinars and Experts
In addition to the aforementioned reports and online resources, Export.gov provides access to information on global trade events and webinars. These include seminars and workshops on export licensing and regulations, and the U.S. Department of State’s Direct Line Program that connects you with over 270 embassies and consulates who provide market overviews as well as sector-specific commercial opportunities.
Beyond the valuable resources provided by Export.gov, the U.S. Commercial Service is the lead trade promotion agency of the U.S. government. U.S. Commercial Service trade professionals in over 100 U.S. cities and more than 75 countries help U.S. companies get started in exporting or increase sales to new global markets.
Chambers of Commerce and Export-Import BankUnder the auspices of the U.S. Chamber of Commerce, the American Chamber of Commerce (AmCham) may be found in many countries worldwide (e.g., AmCham Cameroon, AmCham Canada, AmCham China or AmCham Colombia). This link leads to the American Chamber of Commerce Directory. While the U.S. Chamber of Commerce and American Chamber of Commerce groups located worldwide are membership organizations where dues are required to join, many make their reports or events available to the general public.
The Export-Import Bank of the United States (EXIM), an independent, self-sustaining Executive Branch agency with a mission of supporting American jobs by facilitating the export of U.S. goods and services, is a useful source of information. Specifically, EXIM’s “Learning Resources” page contains articles, white papers, and publications focused on exporting globally. It should be noted that EXIM provides valuable services for exporting businesses including working capital loan guarantee, export credit insurance, project and structured financing, transportation financing, and financing for foreign buyers.
How to Analyze Risks in a MarketOnce you have identified which of a short list of countries that may be suitable for your business to export to, your next step is to perform some due diligence on the risks that exist in each country. (Businesses should be in the practice of identifying, evaluating, and mitigating risks.) The Economist Intelligence Unit (The EIU), which provides country, risk and industry analysis, across 200 countries worldwide, is a resource many business owners find valuable when it comes to gathering information on a variety of geopolitical or socioeconomic issues. When considering which country your business should expand to, The EIU recommends asking the following questions:
- Security: How safe is the physical environment?
- Political Stability: How stable are political institutions?
- Government Effectiveness: Does political culture foster strong business environment?
- Legal and Regulatory: Will the legal system safeguard investment
- Macroeconomic Risks: Is the economy stable and predictable?
- Foreign Trade and Payments: How easy is it to get inputs/money in and out?
- Financial Risks: How healthy is the local financial system?
- Tax Policy: Are taxes low, predictable and transparent?
- Labor Market: Could labor market factors disrupt operations?
- Local Infrastructure: Will infrastructure deficiencies negatively affect operations?
Given today’s globalized economy, there are many options to choose when it comes to developing your business’ export strategy. However, not all markets are the same and it is important to investigate the pros and cons of each market you are considering. By doing your homework and asking the right questions, you should be able to make the right decision on choosing the best market to export your product or service. Now you need just one more important item for business success: Luck!! And I wish you plenty of it.
Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He serves as President and CEO of ROI3, Inc., a Seattle, Wash.-based company whose mission is to empower people in emerging economies through innovative, technology-based solutions. He also co-founded Yeeko Inc., a digital media platform that produces content on culture and literature for Chinese readers worldwide. Most recently, Aaron co-founded CareerLight, LLC, a company that provides customized career training for international students to help them prepare for a successful career. As a business advisor, he provides expertise to Fortune 500 and small businesses alike on global strategic planning and business development, international growth management, and knowledge management. In the public sector, Aaron advises governments to promote comparative national advantages to attract foreign direct investment to stimulate private sector development.