U.S. Small Business Administration

The concept of doing business overseas can be intimidating to owners of small businesses.  Very often they believe such an undertaking is beyond their reach; one that is open only to larger companies.  For many, the images of McDonald's Golden Arches piercing the Beijing skyline or of Coca Cola dispensing machines tucked away in remote African villages symbolize the magnitude of resources necessary to do business outside the domestic U.S. market.

But according to recent statistics, that is a misconception, and there is a vast market out there waiting to be tapped.  For example, 95 percent of the world's population and two-thirds of its total purchasing power are located outside the United States.  World trade has grown at more than twice the rate of the U.S. economy since 1960.  Further, according to the U.S. Department of Commerce, 60 percent of American firms now exporting successfully have fewer than 100 employees; in other words, small businesses.

The returns are obvious.  Doing business overseas allows you to broaden your marketing base, which means greater sales growth; increase production while reducing per unit production costs; extend the life of your product; and bottom line, increase your profits.

If up until now international trade has seemed off limits, it is time for a change in attitude.  Because if growth and expansion are your goals, you need to adopt the views of companies like Coca Cola and McDonald's and think of your market as global rather than merely domestic.  To help you do that, we have written these articles, drawing on the expertise of many export specialists.  These articles were designed to answer some of your questions and to address many of the considerations involved in successful competition in overseas markets.

Do Your Homework

Once you have decided international trade is the way to go, the hard work begins.  Just like when you started your business, homework and hard work will be the keys to your success.  The first step in the process is research, and in most cases, more detailed research than you had imagined.

One expert advises that market research should begin on a macro- economic basis.  "By this, I mean investigating such items as population, gross national product, climate, trade statistics, political structure and stability, economic climate, and so on.  Such items will allow you to immediately exclude some countries and save you time."

After you have a feel for a country's viability, you can launch into more targeted market research.  It is critical that you identify the markets with the most potential for your products or services; identify competitors that currently serve those markets; decide what product or service modifications, if any, are needed; determine the appropriate market entry strategy for your chosen market; and decide the most efficient way to sustain profitable operations there.

As one expert notes, "Foreign trade does not require unique talents.  It calls for evaluating the same basic considerations and risks that you would prudently apply to your domestic business.  The difference is that you will have to do more research; because of differences in culture, language, consumer appeal and individual purchasing power, many facets of the foreign market are far less familiar."

Just as markets are different, so are the needs of your potential customers.  Variations in climate, physical environment, personal income and spending habits as well as national traditions and religious beliefs influence the types of goods and services customers need.

You must also analyze the competition, including the strengths and weaknesses of your major competitors; their market share; the reasons for their success; and the methods they use to market, package and distribute their product or service.  You should also try to ascertain whether there are any market segments that your competition has overlooked.  You may find a relatively untapped market where you can get off to a good start.

Conclusion

It used to be that doing business overseas was an option available only to major corporations.  But as the marketplace becomes increasingly global and through an increase in federal assistance programs, the U.S. government works hard to over-come this country's trade imbalance and help the international opportunities for small business grow.  The export of goods and services is no longer the complicated undertaking it used to be.  And there are countless organizations and other resources to which you can turn for information and help.  However, like any other business endeavor, it requires hard work, the ability to plan and commitment.  Because, if you are willing to give it your all, your success can be boundless.

* Excerpted or reprinted with permission from Small Business Success, Volume 1, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration.