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What Are Some Of the Challenges of Going Global?
As a business owner, you have goals and dreams for your company. However, economic growth continues to be a challenge facing small businesses in the U.S. In fact, the
2017 State of Small Business Report found the following to be true:
- 39 percent of small businesses struggle with growing revenue.
- 46 percent found increasing profits to be their Achilles heel.
- 34 percent of companies found growing cash flow, in general, to be a challenge.
To overcome these challenges, perhaps going global is in your organization’s natural next step.
And while international expansion is exciting and rewarding, it can also be daunting. To say the least, it takes a lot of hard work and planning.
So how do you effectively go global with your product or service? This is a question that plagues many small businesses. Unfortunately, there is not right or wrong way, according to Andre Haddad, CEO of car rental company
Turo.
“Depending on the product, you might be able to go global in one step, or you might need to go step by step,” Haddad told
Forbes, adding that it’s important to be mindful. “Successful international expansion is by no means easy or accidental.”
Even if you have a good strategy in place, you and your staff will need the wherewithal to overcome a number of roadblocks that could stand in the way. The following are some of the growing pains you could face as you expand.
Culture: Don’t assume that if your product or service works in America, it’ll work anywhere in the world.
This is not true. Your strategy needs to tailor sales and promotional efforts to fit each new foreign market.
Language: If your staff will need to field customer service calls from overseas countries, especially from China, Vietnam and other emerging markets, they need to be prepared. Find ways to navigate the language barriers over the phone as well as in emails. John E. Cleek, program director at the Bloch School of Business Administration at the University of Missouri in Kansas City, says it’s foolish to think business will be done in English. He told
Entrepreneur, “It is the height of ignorance to expect other people to learn our language to buy from us."
However, if you aren’t fluent in a country’s language, then an option would be to work with distributors that do speak the native language.
Work habits: Not only are other countries located in different time zones, potential global clients’ working habits are far different from the U.S. For example, Germany restricts employees to working no more than 37.5 hours per week. They also take the entire month of August off for vacation. So you will have to plan inventory needs accordingly.
You could face other unexpected cultural barriers. In China, the color red is a symbol of luck, while in other countries, it represents a warning sign. Religious beliefs or traditions must also be considered to run effective marketing campaigns abroad.
Environmental initiatives: Countries may vary in how they handle recycling or other green initiatives. You’ll want to be conscious of the environmental standards and regulations in each trading partner’s country, as these may affect your inventory management.
If you manufacture hazardous materials, there might be restrictions or taxes on certain chemicals imported to create your product. You may also encounter different regulations on how to handle potentially hazardous manufacturing byproducts. And while recycling has become common practice in most U.S. companies, it could be a challenge to incorporate successful recycling programs abroad due to high cost or inconvenience.
Other challenges also abound, such as finding a viable location to either set up shop or build. In particular, companies that deal with food, energy, and transportation face environmental pressures to use fewer natural resources and offer products made with recyclable materials.
Taxation: Taxes can become a barrier that
impacts your company’s ability to import and export inventory in and out of certain countries. There are many nuances that vary from country to country, so be sure to do your research. For example, though Canada is very similar to the U.S., it imposes a value-added tax that the U.S. does not.
Product specifications: Some countries require you be certified to sell within their borders. Again, do your homework because it could negatively impact your business plan; it could take several months to obtain necessary licenses.
“From an
inventory management standpoint, it's pointless to keep a large volume of product in a warehouse where it can't be sold for months,” Suzanne Koss, partner with Wipfli LLP,
wrote in a blog. “If you know such laws in advance, you'll avoid costly inventory mistakes.”
Local regulations: When you do business in another country, whether you’re selling goods or services, it’s important to take several things into consideration, including:
Hiring local: It’s definitely a good practice to hire people native to the country for management. They are excellent resources, since they know the culture and business practices of the country as well as how best to handle inventory challenges on foreign soil.
Knowing the rules: Every country’s tax laws and export regulations vary, according to Koss. “Some countries have strict policies about the types of business practices allowed in their countries that often include human resource and pension restrictions and rules if you hire a foreign workforce,” she added.
Technology and Communication: Communication can be a challenge in any type of business. But when you are a globally competitive company, language barriers and technology differences can be a recipe for failure. Your offices in the U.S. may have the latest
inventory management and accounting systems, while your overseas counterparts may have slower systems - or perhaps questionable electricity. When facets of your company use disparate systems that don’t communicate with each other, your bookkeeping slows down and orders slow or simply come to a halt.
“You’ve got to rely on translations and reports from foreign staff members instead of using a centralized system when the technology you rely on to run your business isn’t compatible with the technology used by your buyers, foreign offices and global sales force,” Kloss said.
How has your company overcome challenges in your efforts to go global?
