You have to admit there's a certain excitement in the idea of running an international business. Think of the trips to Singapore or Milan or some other exotic place, of meeting fascinating people, of having your business card printed in a foreign language. And, of course, there's the practical reason: The international market can help a company weather bad economic times at home.
At least several hundred Maryland companies already are dealing overseas, according to the Department of Economic and Employment Development's arm that helps to develope overseas trade.
But is the international market really for you?
Maryland trade experts say even small businesses can be successsful overseas, but the foreign arena isn't for everyone.
EVALUATE PRODUCT'S POTENTIAL
Just because it sells in Baltimore doesn't mean it will sell in Bonn or Bogota, but success at home can be a good indicator of success abroad.
Andrew Gordon, director of program development in the Office of International Trade of the Maryland International Division, says the owner of a small business interested in trading overseas should start by looking at the company's domestic market.
"Before they export to Korea, maybe they should look into marketing in the Midwest," Gordon says.
If the business is succeeding in the United States, the next step may be to look at Canada and then Great Britain, where language and cultures are similar, he says.
Although the Maryland International Division doesn't define "small business," Gordon says the typical company that seeks assistance from his office employs between 15 to 25 people and has $5 million in sales.
A company with fewer than a half-dozen people will find it difficult to compete in the international arena, he says.
Selecting the country in which to market requires a certain amount of strategy. "In deciding on a country, ask what drives the demand for the product in the U.S.," Gordon says. "What you're really doing is looking for a similar market overseas."
In some cases, the product determines the marketing strategy. High technology and sophisticated medical equipment may have to be marketed internationally as well as domestically while the technology is still current. But a small business also must consider whether the country is receptive to the idea and whether it is capable of using the product.
Larry Loomis had a product that he knew was in demand. His New Horizons Diagnostics Inc. in Columbia produces medical diagnostic equipment that can detect infectious diseases such as gonorrhea and syphilis.
A couple of years ago, a German company wrote him and expressed an interest in marketing the products. Now he is selling the equipment in Japan and Europe, and overseas sales are about 25 percent of his business.
"It's an interesting dialogue, an interesting experience," he says.
Andrew Silberstein, executive vice president of Morton Management, a computer hardware company in Rockville, says he "sort of fell into" international marketing. The Maryland International Division persuaded him to take his products to a trade show in Germany and he was besieged with inquiries from foreigners wanting to do business with him. "We realized there were people outside of the U.S. that would be interested in our stuff."
Silberstein says his company fills a niche; The market isn't huge--outherwise his competitors would be the size of IBM--but it's strong enough to support his business.
STUDY THE MARKET
A market study can be invaluable. You might start at the local library, but other sources of information include the Chamber of Commerce, U.S. Department of Commerce, the Maryland International Division, trade associations, and other businesses.
"It's not hard to get general information on the market, what's the challenge is getting information related to your specific product," Gordon says.
Look at the competition, both from other U.S. companies, from native companies and from companies from other countries. Consider their pricing strategy and whether you can compete with them.
In addition, a company should look at other considerations:
* Is exporting consistent with other company goals?
* What demands will exporting place on the company's existing resources?
* Are the expected benefits worth the costs.?
James L. Hughes, program manager with the World Trade Center Institute, a private, non-profit organization designed to encourage Maryland international business, says patience is the key. "A company that thinks you can go over and develop a market in six months will be disappointed," he says.
FINDING A PARTNER
Once you've chosen the country to which you want to export, you need to find a distributor, agent or partner. Small companies especially might want to consider joint ventures with native companies, Hughes says. Although such arrangements cut into profits, they can smooth a small company's way into the marketplace.
Gordon suggests starting with a list of companies doing business in the country you're interested in. Write to the companies, asking if they would represent your product,
taking care to ask them about their size, previous experience, product list and interests.
From the top dozen responses, begin a correspondence, finding out more about their distribution capabilities. If possible, the distributor should visit your manufacturing facilities.
Be careful if the distributor also is a manufacturer. Gordon says that a common mistake small companies make is failing to protect their patents. The distributor can end up making your product without compensating you.
Gordon says a small manufacturer also needs to draw up an explicit agreement about what services the distributor is to perform and specifically list the expectations for his work.
"You have to be careful not to give away your technology," says Loomis, who works with partners in the various companies where he sells his medical equipment.
The company also should "always try to give itself a back door," he says. If an agent or distributor is not performing well, have written provisions for ways to extricate yourself from a contract.
Also, be explicit about payment. Obtain a letter of credit -- a financial guarantee by a bank -- or cash payments. It can be more difficult to seek legal redress in foreign countries, because the laws there often place foreigners at a disadvantage.
Silberstein found out about payments the hard way. He was exhibiting computer hardware at a trade show, where an Italian man persuaded him to sell the items he had brought to the exhibit. The merchandise was shipped C.O.D.
When the man called with a second order, Silberstein requested advance payment or that the sale be secured with a letter of credit. But the man persuaded him to sell the equipment C.O.D. again.
Against his better judgment, Silberstein sent the $50,000 worth of computer merchandisek, but when it arrived in Milan, the company refused to pay for it. The freight forwarder wanted Silberstein to pay $7000 to get the equipment back. The Italian who orginally ordered the merchandise apparently was fired from the company. Now Silberstein is involved in a lawsuit over the freight charges.
"Know how you're going to get paid," he advises.
CULTURAL DIFFERENCES
"A deal can be blown for lack of understanding cultural nuances," says Deborah Maher, vice president of Synapse Inc., a new Baltimore firm specializing in cultural awareness training.
For example, deals may progress slower in Asia because Asian businessmen want time to get to know their partners. "A year could go by and you think you're not getting anywhere, but really you might be doing what you should be doing," Gordon says.
Even if everyone is speaking the same language, the words may mean different things. "Yes may not mean yes. It might mean, 'I understand,'" Gordon says.
Americans might not understand idiosyncrasies of different cultures. The Japanese, for example, treat business cards almost reverently. Latin American businessmen might show up an hour or more late for an appointment, Hughes said.
Often it is difficult to figure the chain of command. A business might spend months negotiating with someone before learning that the individual has no authority to approve a deal.
Women and minorities can face additional problems of racism and sexism. But Sheila Dixon, an international trade specialist with the Maryland International Division and a member of the Baltimore City Council, says those obstacles aren't as great as they might appear.
A number of other countries are accustomed to doing business with people of color. Women might face greater troubles, especially in the Middle East. In those cases, it might be advisable for the woman to find a male partner or use a male employee to assist in the negotiations, she said.
AVOID RISKY SITUATIONS
Eastern Europe, the Middle East and Africa can entice adventurous business people because the developing countries have a potential for big payoffs, but they also have big pitfalls.
Although reforms in the Soviet Union inspired a number of Maryland businesses, Hughes says many have been disappointed. "A lot of people interested six months ago in the Soviet Union are now switching that to Eastern Europe."
Gordon advises small businesses to be wary of the politically and economically volatile areas. Look elsewhere "unless there is a unique opportunity for your product or you have a customer that you know is willing to pay in hard currency," he says. "If you have that opportunity, go for it."
Make sure payments are in hard currency, he advises. A business might negotiate a deal and be near its conclusion only to find that the expected payment is to be made in lumber or lamb's wool.
"A large company can write it off, but for a small company, it's very difficult," he says.
Overseas marketing is not for everyone, but Hughes said, "Everybody should think about it."
"You can't ignore what's going on overseas," he said.
But overseas marketing cannot be done on a whim. "You have to have the commitment to investing the firm's top levels," Gordon says.
Most of those who are willing to make the commitments of time and money are successful, he says.
"If you have a good product and you can sell it in the states, you can sell it anywhere," he says.
10 common mistakes
1. Failure to develop a marketing plan before beginning to export
2. Insufficient commitment by top management
3. Insufficient care in selecting overseas distributors
4. Failure to establish a basis for profitable operations and orderly growth
5. Neglecting export business when U.S. market booms
6. Failure to treat overseas distributors as equals to domestic counterparts
7. Unwillingness to modify products to meet cultural preferences
8. Failure to print sales and warranty messages in local languages
9. Failure to consider use of an export management company
10. Failure to consider licensing or joint-venture agreements
World Trade Week lectures, seminars abound
Maryland agencies and institutions will recognize World Trade Week from May 20 to 24, with a number of seminars and lectures. They include:
* "International Trade Update 1991," a seminar on international business opportunities, legal developments affecting trade and panel discussions on common trading problems, 8 a.m. Monday, May 20, at the World Trade Center. Cost is $50 for Maryland Chamber of Commerce members and $60 for non-members. Call (301) 269-0642.
* "Maryland in the Global Economy," a seminar on international marketing opportunities for small and minority businesses and a seminar on international businesses in the Maryland economy, Tuesday, May 21, from 9 a.m. to 12:15 p.m. at the World Trade Center. Call (301) 234-3944.
* "International Technology Transfer: Opportunities and Strategies," seminars that address ways in which small to medium-sized businesses can penetrate new foreign markets, negotiate contracts, prevent counterfeiting and develop strategies to deal with controls and regulations concerning technological concerns, Wednesday, May 22, from 8:30 a.m. to 2 p.m. at the World Trade Center. Call (301) 323-1010, ext. 2450.
* "Foreign Direct Investment in Maryland," a seminar on motives and success of foreign investment in Maryland and opportunities for Maryland firms, Thursday, May 23, 8:30 a.m. to 11:30 a.m. at the World Trade Center. Call (301) 625-3255.
* "Why You Should Do Business in the Caribbean," luncheon, Friday, May 24, 12:30 to 2:15 p.m. at World Trade Center. Call (301) 444-3261.
* "Confronting the Hurdles of Finance, Marketing and Organizational Structure in Small Business Markets Abroad," concurrent seminars, Friday, May 24, 9:30 a.m. to 4:15 p.m., World Trade Center. Call (301) 444-3261.