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Expanding Markets

5 myths debunked about going global

Don't puzzle over taking your business global anymore. Experts bust five common myths and provide tips on how to make your global expansion more successful.

Don't fret or puzzle over taking your business global anymore. These five common myths that hold many back from new market expansion are easily debunked, says one noted expert on entrepreneurship.

When companies evaluate options for growth, many medium and small business owners don't appropriately consider going international. In fact, the U.S. Department of Commerce estimates that less than 1 percent of U.S. businesses export – a much smaller percentage than in other developed countries. But according to expert Chris Hanks, founder and executive director of the Shore Entrepreneurship Center at Kennesaw State University’s Coles College of Business in Kennesaw, Ga., there’s no reason to hold back.

“Despite these common myths, many small businesses are finding it easier and more profitable to expand their business internationally.”
 – Chris Hanks

“There are several sound reasons to consider exporting; demand for high-cachet American goods, improved technology, lower taxes and tariffs in some markets, and generally increasing incomes in markets abroad,” says Hanks. Too many business owners miss exciting opportunities because of common misconceptions. Let’s explore – and explode – some of the myths surrounding exporting.

Myth No. 1: It's just too risky
Let's face it: Running a business locally is hard enough, let alone in an unfamiliar country. Did you know that U.S. companies that export not only grow faster, but are nearly 8.5 percent less likely to go out of business than non-exporting companies? While this may seem counterintuitive, the diminished risk is a result of the diversification and expansion afforded a company's customer base by going global.

Did you know that financial tools such as a letter of credit (LC) can help mitigate risk? An LC guarantees that a buyer's payment to a seller will be received on time and for the correct amount. An LC is a commitment by a bank, on behalf of the buyer, that payment will be made to you, the exporter, as long as the terms and conditions of the deal have been met. The buyer pays its bank to render this service. An LC is useful when reliable credit information about a foreign buyer is difficult to obtain, but you are satisfied with the creditworthiness of your buyer's foreign bank. An LC also protects the buyer since no payment obligation arises until the goods have been shipped or delivered as promised.

Myth No. 2: It's too complicated
Doing business internationally can appear incredibly complex. However, once you learn just a handful of new business procedures, you'll be able to grow in any market with few complications, according to Hanks. “The list of agencies, companies and websites devoted to international trade is almost endless,” he says. UPS also offers a wealth of information online, plus tools that can be integrated into your enterprise resource system. Plus, many cities have centers run by the U.S. Commercial Service (USCS) that provide forums for exporters and importers, and every state offers support to exporters.

Did you know, the USCS also assists smaller companies in finding the right overseas business contacts? It has numerous regional offices and free or low-cost services that can introduce you to overseas clients and help with legal requirements.

Myth No. 3: Competition is too tough
Many business owners assume competition overseas will be fierce. But many overseas markets are underserved, making it easier for small businesses to establish a niche. Growing economies can create unique opportunities. For example, Vietnam and Russia import items such as used trucks, while countries such as Japan are interested in luxury items not available domestically – Christmas trees, for example.

As the global middle class continues to expand, Hanks believes that small businesses may have significant competitive advantages. More frequently, he says, consumers abroad demand specialized and artisan products. Some consumers may be willing to pay a premium for authentic niche goods that only small businesses can provide. Customers value diversity and demand more choices. “Why else would a country so heavily dependent on automobile manufacturing such as Japan import the Ford Focus?” Hanks says.

Myth No. 4: We're too small
International trade is not the exclusive preserve of giants. In fact, in 2014, nearly 98 percent of U.S. companies exporting were small- or medium-sized. Small companies often have greater flexibility and may be able, therefore, to satisfy international partners better. “Name recognition, extra resources and export departments do not match the drive, motivation and tenacity of a small business owner,” says Hanks.

Look at husband-and-wife business LemonDrop Stop, based in Monticello, Minn., which sells photographic backdrops through its website. To overcome tariff and tax issues, and optimize and grow the international business, the business couple chose UPS i-parcel® technology, an innovative currency and payment management system that enables localized shopping and shipping for global consumers. Such systems can enable international business for even the smallest companies, and allow their customers to have a shopping experience that’s as natural as shopping in their home country.

Myth No. 5: We can't reach customers
“The Internet has leveled the playing field when it comes to matching buyers and sellers,” says Hanks. Businesses no longer need to incur the expense of extensive global travel. Also, businesses can use Google AdWords, the Internet advertising platform, to direct keyword ads to people in specific markets.

Industry trade shows are often a good place to find foreign importers eager to carry U.S. products. Two of Hanks’ former students went to a trade show in Atlanta as part of a class exercise and came back with a business importing unique Indian art. The Export Yellow Pages, in partnership with the U.S. Chamber of Commerce, can be another great source to find customers. The U.S. Small Business Administration’s network of Small Business Development Centers also help small businesses find markets and customers. Another option is to locate a small or medium-sized business to serve as your partner overseas, which can then, in turn, find a customer base for your product.

“Despite these common myths, many small businesses are finding it easier and more profitable to expand their business internationally,” says Hanks. “A well-conceived strategy to go global can actually reduce risk for your business and build sales.”

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Anonymous
This is excellent and answers the basic questions I had about International Trading costs. Very helpful, thank you UPS!
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gsandler
Another federal program that can help buyers overseas find buyer and distributors is Commercial News USA, the official export promotion magazine of the U.S. Dept. of Commerce. Online at www.thinkglobal.us
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Anonymous
i found the topic interesting and educational as well. it serves as an eye opener for small businesses to aim high and go global.
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