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Starting to do Business in a Foreign Country - 10 Top Tips

This guide was written by John Howell, Editor & Founder of Guides.Global (editor@guides.global).

It was written on 3 January 2016. The law and practice change all the time. Our guides are updated as frequently as possible - typically every three years - but may be out of date.

Our guides are prepared by professionals from many countries. They are, of necessity, both brief and general and can take no account of your personal circumstances. They are intended to be a good introduction to the subject BUT ARE NO SUBSTITUTE FOR PROPER PROFESSIONAL ADVICE, which our contributors will usually be happy to provide upon request.

The advice and opinions contained in the guides are those of the author and are not necessarily those of Guides.Global.

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The scope of this guide

This guide looks at some of the first things you need to think about if you are interested in doing business in another country. It is for people whose business will remain based "back home" but trade internationally.

If you want to set up a business operating with a base in another country, see Starting a Business in Another Country.

This guide does not consider the detailed rules that apply in any particular country. For those see our guides about the countries of interest to you.

Introduction

It is not long ago that most business operated locally or nationally. What they made - or their services - were consumed within a few miles or, at most, within their own countries.

Today, according to the US International trade Administration (ITA), there are 293,000 registered US exporters generating US$2.1trillion and accounting for 13.8% of US GDP. Almost all are small businesses. Exports support 6.8million US jobs. In the UK, 15% of all businesses trade internationally. According to the WTO, in 2013 total world trade in merchandise amounted to over US$18trillion with another US$4.8trillion in services.

No wonder companies want to get in on the act - especially in countries where there is favourable tax treatment for exports. Expanding your business to another country can not only help you open up new markets but you can even develop country-specific products or services.

Yet doing business in a foreign country is not easy. Not surprisingly, it gives rise to difficulties and problems that are different from the problems you will have met whilst doing business back home.

The good news is that, with a bit of planning and some work, those problems can be overcome or - at the very least - controlled.

Why does international business exist?

Businesses operate internationally for four main reasons:

Why should you start doing international business?

If you can find a place where your product or service is unavailable or cheaper than local competitors, you have a business opportunity.

If you make a product that is better than local alternatives - and people are prepared to pay a premium price, you have a business opportunity.

If these opportunities are more profitable than using the same money and energy to expand your domestic business, you should be thinking about going international.

What type of business?

Any business that passes any of the four tests above - or, if you are really clever, a business that is going to work for some other reason - will do nicely.

However, things usually turn out a lot better if it's a business in which you have experience in your own country. Usually - but not always. Many successful businesses have grown out of start-ups where the owner had great business skills but no experience in the sector. Many businesses that have been highly successful "back home" fail to make in in the international marketplace, often because their founders lack the devotion, flexibility and special skills needed to succeed.

Business models

There are many different ways of developing your business internationally. Most of you are likely to start off thinking about a particular product or service that you want to export or buy in but there are other opportunities that you can choose instead - or bolt onto that basic model:

Skills required

Are you cut out for this job? It is not for everyone, or for the faint hearted.

Do you have the time and commitment needed to make it a success? If not, does someone else in your company?

Starting to export or import requires a big commitment in time and energy. This can be difficult if you run a small company.

If you are thinking of appointing someone within the company to take charge of this process, they will need to have the power to champion the project and the authority to make things happen. In most cases they will need to be fairly senior in both experience and years if they are to get through the door of your potential partners. This is particularly true in China but also important elsewhere.

Where to do business abroad

Now all that might be pretty obvious but, if you think your business idea is a winner, the big question is where to start.

In my view, there are some countries where you simply don't want to do business: where you are likely to be eaten alive. In these countries the potential gains need to be enormous to make it worth even thinking about starting to do business. The size of the potential profits, in itself, should make you think twice!

Which are these countries? They are countries where:

See our global Fast Facts guide for more information about these things.

Essential preparation for doing business abroad

There are some top tips for people stating to do business in another country.

Growing your international business

Your decision to start doing business in another country can have a major impact. GK - a Realtor based in Florida - decided to explore selling to Chinese investors. Two years later he has sold over 1,000 units to Chinese investors, who now account for about 20% of his business. This all required large amounts of time, money and effort but it has all been very worthwhile.

At a different level, TB makes electric violins in rural England. He started low key sales to foreign buyers via his website. About 10% of his business now comes from overseas but he has invested little in attracting this business.

Courses

There are now specialist qualifications in international trade.

Articles of interest

You might want to look at the following:

How to Start an Import/Export Business. This contains lots of useful background information.

Conclusion

Doing business abroad is a rapidly growing phenomenon. It is a market where small companies can operate as effectively as big ones.

It is not for everyone - see the "skills needed" section above - but it can transform your business.

Other guides of interest

You may also want to read:

 Description Link 
Starting a Business in Another Country
A short guide to choosing and setting up a business based in another country.
Click to see this guide
Starting a Company in a Foreign Country
A short guide to setting up a company around the world.
Click to see this guide

Readers' Comments

 

Further information?

I hope you have found this guide useful. If you need any further help, please contact me.

John Howell

3 January 2016


 

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