Watching the evening news you might get the idea that the world economy is all about America.
Here in the United States we get so focused on our own country, that any gain for the rest of the world tends to be presented as a loss for the United States. We hear it all the time:
We are losing jobs here while another country gains.
Businesses are growing in other countries so they must be shrinking here.
But some U.S. companies see growth in the rest of the world as a huge opportunity. This includes small businesses that never before did business outside of a limited geographical area.
They are “rushing” to expand in other countries, according to one source.
Recently I had the chance to interview Larry Harding, founder and President of High Street Partners.
His company assists businesses with the strategic and practical aspects of setting up operations in other countries. He reports that his company and other professional service providers that assist businesses with global expansion “have never seen business so brisk.”
According to Harding, the global expansion binge is due to 3 factors:
- Weak dollar — The dollar’s fall is making U.S. companies attractive. U.S. companies are being “pulled” overseas. “Take the example of a U.S. architectural firm. Today their prices may be 20% cheaper overseas,” said Harding. They go after work in overseas markets and end up opening offices in other countries when they are awarded large projects. Even with the cost of opening an office and hiring some local help, it’s still profitable for the U.S. architectural firm.
- Growing markets — China and parts of the Middle East, among others, “have a pile of cash and are in a frenzy to build out their infrastructure,” Harding says. There’s a tremendous amount of building going on, leading to opportunities in construction, architecture, telecommunications, heavy equipment, technology, finance and a wide range of related products and services used in construction projects or as a result of new construction. The growing middle class in China and other places is also driving demand for consumer goods such as washing machines, bicycles, recreational boats. An example of an opportunity for a U.S. small business, he says, might be for a bicycle supply company, or a boat parts and accessories company to supply the demand in boats.
- The “World is Flat” effect — Referring to Thomas Friedman’s book, The World is Flat, this effect means that cross-border markets are more open than ever before. The Internet, technology, improved transportation and other factors encourage doing business across borders.
But seizing any new opportunity always involves risk.
For one thing, you can easily negate the benefits of the opportunity if you let your costs of selling to other countries get out of hand.
Harding says a common pitfall is that a U.S. company will win a million dollar deal and commit in the contract to be the “importer of record” — not realizing how important those 3 words are. The contract now obligates them to deal with all the paperwork and pay all the import duties. They ship the products. Then they get an unexpected bill for $135,000, eroding much of the deal’s profit.
As long as you are prepared and avoid such pitfalls, Harding says, “the international opportunities are definitely real and should not be dismissed.”
Read Larry Harding’s 5 tips of what SMBs (small and medium businesses) should consider before expanding to other countries, reported by Denise O’Berry over at AllBusiness. It’s a quick read and will give you some idea of what to consider in global expansion.
And don’t miss my earlier interview of Larry Harding from last December. In it he discusses the trend toward smaller and younger companies developing a brick-and-mortar presence overseas.