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Look before you leap

Why businesses should develop a checklist for going global

work desk of businessman with laptop, globalization business concept

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The overseas market is a big one, with exports from New Jersey totaling $34.2 billion in 2018, according to the most recent figures from the U.S. Census Bureau. Businesses of just about any size may benefit by adding overseas sales, according to experts, who suggest thinking of the move as a kind of counterweight — if domestic sales slow down, other countries may be able to take up the slack.

But going international takes planning. “If you’re selling products, some basic questions include whether you’re exporting the goods or if you’re planning to manufacture them overseas,” said Roger Cohen, the lead international trade consultant for the New Jersey Small Business Development Centers. He’s also president of Cohen International, a Nyack, N.Y.-based international business development and government contract proposal consulting firm. “If you’re manufacturing in the host country, be sure to budget for expatriates or another local representative who’ll be in your overseas office for the long term. And you should also consider shipping and other product costs. Re-engineering expenses may also be incurred if you have to modify your products to meet local demand, or safety and operating requirements, like different electrical standards.”

Even if it’s established that there’s a demand for a particular product, a wanna-be global company still needs to do some research, said Joy Schneer, a professor of management at Rider University.

“First, determine if there are any legal obstacles to selling your product in the target country,” she said. “Are there any specific rules you’ll have to follow? Even if you comply with local regulations, you need to research the country’s infrastructure, to be sure you can actually get your product to the target market.”
Fortunately, she added, “The internet makes it easier to research these kinds of issues. The federal Department of Commerce can offer some useful information, while many countries have local organizations – privately run, and government run – that can provide guidance.”

It’s also useful to consider political, economic and legal issues before venturing onto the global landscape, said Denis Hamilton, an assistant professor of professional practice at Rutgers Business School, and a former vice president at Johnson & Johnson.

Denis Hamilton, assistant professor of professional practice, Rutgers Business School.

Denis Hamilton, assistant professor of professional practice, Rutgers Business School. – RUTGERS

One fundamental question is whether a particular country is attractive for the organization. “To assess the factors necessary to answer that question, it is important to first evaluate the political climate in that country,” he said. “How stable is the government? What is the view regarding foreign business entities? Is the form of government supportive of free-market enterprise? Is there a history of corruption in business affairs in this country?”

Additionally, look at the economic situation. “Is the economy stable, growing, subject to high inflation in prices and costs?” he noted. “What is the average income? What percent of the population is above the poverty level? In other words, is there sufficient economic capability and stability to support the kind of business to be conducted there?”

Courts and judiciary are also big concerns. “Does the legal system protect the rights and agreements of business entities?” he noted. “Will contracts be enforced, if necessary? Will property rights be protected including intellectual property rights — this is a big current debate regarding China.”

Just the way you are?

Even after a decision has been made to do business in a particular country, “an organization needs to consider whether or not they need to make any significant changes to their products or services in order to be successful in doing business in that country,” Hamilton added. “In addition to resolving the standardization versus customization question, an organization needs to consider what their entry strategy will be: Will they initially export products to that country? Or, do they intend to partner with someone locally either through licensing, franchising or a joint venture/strategic alliance?”

Local labor laws should also be on the checklist, according to Rutgers School of Management and Labor Relations Associate Professor Tobias Schulze-Cleven. Businesses should be aware of complying with local labor and employment laws, which provide workers in many countries with substantial rights, according to Schulze-Cleven, who also serves as co-director of the SMLR’s Center for Global Work and Employment.

“The United States is an extreme outlier, with far fewer worker protections than other rich democracies,” he said. “In Germany, for instance, workers have the right to form a works council to represent them collectively on various issues — although wages are an exception, as they require collective bargaining through unions.”

In Germany, the right to form a works council applies to all companies employing more than five workers. “Moreover, support by as few as three workers is enough to instigate the formation and formal election of a works council,” he added.

“Effectively, all large companies have works councils, and they have become important as instruments of workers’ co-management.”

Despite some economic uncertainty and the highly publicized tariff battles, “it’s still a good time to move onto the international trade market,” Cohen said. “Markets are still strong, and businesses and individuals are still buying goods and services,” he observed. “But it takes time to get everything set up. In a business-to-business venture, it can take six months just to identify the right contact, and another six months to set up a meeting. If you’re working with an established local distributor, it can take less time, but you still have to research a number of issues.”

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