INTERNATIONAL DEVELOPMENT
July 2003
by Dr. Bob Williams
The business is up and running. Recruiting is up. Sales are
up. Cash flow is positive. Time to conquer the International
Market! And there are very good reasons to think
internationally. Each country opened, running and
generating a positive cash flow helps strengthen the US
Parent Company and creates new opportunities for all: The
sales force and the Company. Each new country broadens
the sales base and eliminates peaks and valleys. Each new
country helps excite additional recruiting in all countries.
Each new country makes the Company's name better
known and more recognizable around the world. Each new
country broadens the base for International Conferences
and conventions, for different and better promotions, more
flags to display in the Home Office, and most importantly,
the opportunity for senior management to be even more
effective.
Yes, international is the way to go if you are ready and if the Company can afford it.
But along the way management should be wary of the pitfalls that come with
international expansion. And there are many! Legal requirements to ensure a
proper business infrastructure; banking requirements to ensure smooth transfer of
capital; product registration to ensure trouble-free importation; seamless sponsoring
with a smooth running computer program for worldwide recruiting; a compensation
plan that can be universally adapted; a plan for worldwide commission payments;
competent local management; protection of distributor mailing list; protection of
proprietary formulas and trademarks are but a few of the many details that must be
done, and done properly, if your international expansion is to become a dream
come true. A simple slip and the dream can quickly become your worst nightmare.
A check-off schedule to eliminate most obstacles can be readily obtained. (If you
are unable to find one, contact me and I will send you a work sheet)
What I consider to be the biggest unseen pitfalls are: cultural differences, individual
country work ethics, politics, currency stability, ease of doing business, individual
country legal "quirks" not found in most countries, and the biggest pitfall of all, cash
flow. These differences can be subtle or startling. A few examples:
English speaking Canadians relate more to the UK than to the US. They have
strong ties to the Commonwealth. They know the US well, they enjoy visiting here,
but their roots go back to England, Scotland, Wales and Ireland. Queen Elizabeth's
picture is still shown proudly through out Canada. Quebec does not speak the
French as is spoken in France. American English is not the same English spoken in
England, Australia, New Zealand or South Africa.
Muslims worldwide do not work on Friday, they do not eat pork and dogs are
considered unclean, so are avoided. They will work on Saturday so be prepared to
be open six days per week if you do business in a country that has a mixture of
Muslims and non-Muslims, such as Malaysia, Indonesia, the Middle East and Parts
of Africa. Most businesses in Asia work five and one half to six days per week
The Philippine Peso, the Indonesian Rupee, the Thai Baht have all depreciated by
enormous amounts within the last few years. The Australian Dollar, the Yen, the
Pound, the European Monetary Unit and most world currencies have shown
fluctuations against the US dollar. Ranges from 10% to 50% are common. Some
currencies have almost become worthless.
Although there are exceptions, Malaysia will not let a foreign owned Company own
more than 30% of a Malaysian Company. Most countries require the local Board of
Directors to have local representation and in some instances the representation
must be in the majority. Additionally, some countries require the Chairman and
CEO to be locals.
Employment requirements in many European countries are extremely costly by
American standards. High hourly wage scales, thirty days paid vacation, long
maternity leave, early retirement, inability to fire or discipline employees are
common through out Europe. In other areas of the world, it is all but impossible to
fire an employee for any reason, but their hourly wages are extremely small.
Sales Tax, GST, VAT all have to be carefully considered when pricing of products
and creating a compensation plan. Some are add-on, such as Sales Tax or GST. In
Canada, the GST is computed differently in Quebec than it is in other Provinces.
Other taxes, such as VAT, are built into the selling price. In all instances the
customer and the Company are well aware of taxes and how they are calculated.
The problem arises when commissions are calculated. It isn't always easy for a
programmer or instructor to understand how to compute or explain commissions
net of tax.
Cash. The life-blood of all businesses worldwide is cash, regardless of what it is
called. Money does indeed make the world go around. Before any serious
commitment can be made to developing the International Arena, a solid cash
management program must in place. More than one Company has looked upon
international to generate enough sales, profits and cash to save a struggling US
parent. That is not generally a successful strategy. The US parent must be in a
position to provide working capital as required until a new country can stand on its
own. A word to the wise: do not simultaneously open more countries than you can
afford to fund. Do your homework first.
So how? A brief, condensed step-by-step:
1. Assess your own company. Is it ready to expand? Can it afford to expand?
2. What countries best represent your growth plans? What is the basis for
choosing a country? (Or countries). Are your development plans solid?
3. Does your product require a market survey in the chosen countries? Can it
be imported into the country or must it be manufactured locally? Caution, be
leery of cross border shipping for "personal consumption only" as this
procedure can lead to problems
4. Infrastructure first: legal, accounting, banking, import brokers, computer
programmers, print providers, and providers of other support services
5. Staff, physical facilities. Staff training: where and by whom.
6. Soft launch
7. Grand opening
International is, in my opinion, the only long-term way to grow. It offers a
tremendous door to the future, but it must be done correctly. A successful
International Start-up does not "just happen"; it is well thought through and well
executed. A final word: International should not be done as an OJT project. Make
sure that whomever you use to start (or manage) your international operations has
the qualifications to do so. Each project must have a "Champion" to see the project
along, select your Champion wisely.
Starting and managing International operations can be time consuming and costly,
but if your company is in business with the plans of staying in business, then
International is the only road for long term success. I wish you good luck and good
fortune as you travel it.
Dr. Bob Williams
