International business is a trending topic today. Producing and selling products or services in a foreign country is challenging. Quality control of manufactured products is a challenging task, along with inventory, prices, and employee engagement. If you produce complex technological products it may be hard to avoid theft of intellectual property, especially in China. Intellectual property or trade secrets aren’t protected in Asia to the same extent as in Europe or US. Be careful and smart with decisions in regard to the protection of your product or service.
You might ask yourself: Will it happen to me? Am I vulnerable?
I have first-handedly experienced theft of products, may this be an example for you: My company was building wooden furniture in Hungary, and it was doing pretty good. The local institutions and government were supportive and we had all the correct paperwork. The entire business was financed by myself and two family members. We had our own factory in Hungary where our skilled workers produced a large variety of furniture designs, some pre-ordered and customized and standard furniture designs. The wood we used was imported from Bali, Indonesia. Usually once every 2 weeks a big shipment was stored at our warehouse next to the production facility.
One day I received a phone call from one of my warehouse managers, and he told me: “I just received questions about warranty information from another warehouse in France, the products have our labels, did you ship a big order to France?” As you might already assume, we had not, and we never had any big shipments leave for France before.
As a result, we had our entire warehouse checked which revealed that approximately an amount of 3 fully loaded trucks with furniture were stolen. That’s not something small and easy to hide and basically impossible to be a one-man’s job. The entire load was worth about $200.000. Luckily we were able to restore the value of the load in full, but tripled security in our warehouse in Hungary and tripled inventory checks too.
Based on my personal experiences and observations, I came up with a list of 6 tips that should help you to be more successful abroad, but also be aware of certain risks:
1. Investment, Time & Profit
If you’ve never conducted any business abroad before, there’s no way you can know what it costs and how long it would take. However, you can make estimates to persuade your superiors, potential investors, or even yourself. Taking your business abroad regardless the size is usually worth the risks. Obviously, this isn’t always the case but rest assured: it will be costlier than you estimate.
Plane tickets and hotels are rather simple calculations and yet often miscalculated! In addition, you have to obtain information about the market, customer demand, custom rules and regulations, local competition and local restrictions. It’s very hard to determine estimated costs for that. Therefore, make sure to find a good local lawyer. It will be harder to enter the local sales cycle because you’ll have to convince new potential customers to exchange their current products for yours.
Corruption is a huge problem in today’s world. Not only in politics, but also in the business world. In Europe and U.S., it is against the law to bribe government officials or other businesses to do business yourself. The tricky part is, it’s hard to tell if your newly chosen business area has a serious corruption problem. Basically no one will admit that corruption exists in their market. For example, conducting business in North Korea, Iraq, Somalia or Sudan is a no-brainer. We had numerous offers in Bali from shipping companies that told us they could help us exporting protected rainforest wood. They bribed customs officials at the harbor who would give all required stamps. We didn’t have to think twice to avoid these shipping agencies.
3. Be there when running your business
It’s important to live and work in the area where you commit to starting your own business. It’s much easier to gain crucial information and maybe even more important, you show full commitment to your new business. In addition, being able to afford local a workforce, fully furnished office, company van(s) and housing show sufficient funds and capital. Furthermore, it’s easier to get in touch with local officials and governmental institutions and create a network and personal relationships with important people. Network and personal relationships are a key to success regardless of the country you conduct business in.
4. Local partner
Most business universities emphasize the importance of local partners. Obviously, this partner is only interested in becoming your ‘partner’ in exchange for financial benefits. This partner knows your business inside and out, has a great network, wants nothing but the best for you and your business. Good luck finding such a partner. Question yourself: Why would such a partner need you?
As mentioned before, corruption is a serious problem but sometimes hard to recognize, however, you want to avoid it. That doesn’t mean your partner won’t bribe anyone. A partner can get you in serious problems by bribing customs officials. When you decide to start a business in a foreign country you do need local help. You need a local lawyer, advisors, and other counsel, but definitely not a business partner.
5. Language and Health
Before moving overseas, it’s smart to do some research on local healthcare, clinics and the quality of these healthcare institutions. Apart from having a business insurance, you want to have solid international health insurance coverage. In any situation or scenario that might occur, you want to be covered for any potential medical expenses. Especially in Asian countries, local health care isn’t always sufficient and private hospitals are your only option. Private hospitals are expensive and comparable with EU / U.S. rates.
At last, today most people in Asia speak English, or at least a little. This wasn’t the case 20 years ago, at a time when basically no one spoke English, not even officials or hotel owners. Even though most people speak some English now, I highly recommend to study the local language and learn some phrases. Speaking the language presents some valuable advantages. Firstly, it shows interest and respect to the local people and its culture which can sometimes benefit your business in unexpected ways. Secondly, people are less likely to rip you off. Many of them consider you to be someone living in the area longer, so you know the products and prices.