Twelve questions you should ask before starting business in Asia
Starting any sort of business, in any part of the world, is a risky
proposition. When starting a business venture in Asia or any other
continent, there are 12 very pertinent questions you should ask yourself
before making an investment commitment. : Christopher W. Runckel, a
former senior US diplomat who served in many counties in Asia, is a
graduate of the University of Oregon and Lewis and Clark Law School, has
fashioned this self questionnaire for the greater elucidation of the
potential Asian investor. He served as Deputy General
Counsel of
President Gerald Ford’s Presidential Clemency Board. Mr. Runckel is the
principal and founder of Runckel & Associates, a Portland, Oregon based
consulting company that assists businesses expand business opportunities
in Asia.
1. Do I need to export my Product?
This is a decision that only you can make. If you have developed a
comfortable niche market for your particular product, you are satisfied
with current sales and you do not really have the additional production
capacity to expand your output, you may decide that this just isn’t
needed. Also export requires time, attention and money; you need to
decide whether these are available for this effort. The United States is
the largest market in the world and many companies need not look
elsewhere. However, more and more the world is becoming interconnected.
Telling whether a company is a U.S. company or another nationality is
often difficult since companies compete internationally and often invest
and buy in others all over the world. Therefore in the long run, even
with the great size of the American market it is very hard to not take
notice of the large and growing markets for goods in Asia. As trade
barriers to export are removed in countries as diverse economically as
China and Vietnam and Cambodia, opportunities currently exist for many
U.S. and other companies that have never exported before.
2. Is my product or service needed in Asia?
The first question to ask is whether there is a demand for your
product. Before you make the decision to try to enter the huge Asian
market you need to make certain that there is a market for your product
or service. State and federal trade development agencies publish trade
statistics and country market reports that can help you learn more and
make informed decisions. If you live in a major city or near a major
University, the city or University library may have many directories and
other volumes describing market trends. If there is a SCORE Office, this
office may also have resources to assist you.
The Internet and the U.S. Department of Commerce also offer many
information sources in this area. Many companies have entered exporting
following participation in SCORE, U.S. Department of Commerce and State
export education and training courses. These courses are usually
designed for new exporters and can help you determine whether your
product or service has export potential.
3. Where should I start my efforts to export in Asia?
Oftentimes this is determined for you. As you produce your product
and as knowledge of it spreads in this interconnected world, oftentimes
you will get inquiries from potential buyers around the world who will
become aware of your product. Your interest in pursuing these requests
will be determined by your company’s need for expanded sales and ability
to focus on these requests which are often fairly time consuming because
of the time and distance that may separate you from your potential
customer. Keep in mind that not all business environments are created
equal.
Doing business in some countries is much, much harder than in others
because of government regulations, immature markets, low buying power
and many other factors. Countries such as Singapore and Hong Kong offer
very open and transparent markets, China and Japan although much larger
are more complicated and may take more time to create results. Research
your opportunities both on a country and a company basis before
selecting a target market.
4. Will my product or service need to be adapted for Asian or
other markets?
Some adjustments in your product may be necessary to improve your
chances of success in Asia. Measurements will need to be converted from
the U.S. system of measurement to the metric system, which is used by
virtually every other country in the world! The factors that will
determine whether you need to modify your product or service for your
target markets are:
Government regulations in the country you intend to sell your product
Non-government standards
Country specific or region specific requirements - voltage, climate,
others
Cultural sensitivity
Support and servicing requirements
Information about these factors is critical to the success of your
sales efforts and should be studied and collected as part of your market
research efforts.
5. If I am already marketing my product in Europe, can I expand
this effort to Asia?
Strategies that work in Europe or Latin America probably won’t work
in Japan or China or often in other places in Asia without some
adapting. Learn more about the country you intend to sell in and about
specific marketing strategies that have succeeded in the past by talking
to consultants or other experts in the countries in which you are
interested.
Marketing strategies may include participation at State and Federal
trade missions, international trade shows, advertising, direct mail, and
on-line promotions via the Internet. Keep in mind with respect to the
Internet, that although growth figures for the Internet in Asia are
among the highest in the world, total usage is still limited when
compared to U.S. and European levels. A well thought out
export-marketing programme will utilize many or all of these techniques
in a balanced manner that takes into account the particularities of the
Asian country in which you want to sell your product.
6. Do I need to translate my sales literature into the local
language? Will I need to learn foreign languages?
If you are serious about succeeding in the Asian market, it is highly
recommended that you translate your marketing materials into the Asian
language of the prospective country in which you intend to market and
sell your product. English is the universal language of business but
people always feel more at ease reading and speaking their first
language.
Even Asian business executives who are good English speakers and whom
have been educated in the U.S. or western Universities often will prefer
their first language and will feel more comfortable in it. A comfortable
buyer who is able to better understand how your product stands apart
from the competitors is what you want. Having someone within your
company who is capable of speaking in the language of the culture in
which you are doing business demonstrates commitment to the market. It
also simplifies communications, which can occur in either English or the
host country language to ensure that there are not misunderstandings.
It’s true that much international business is conducted in English,
but to be truly successful you must respect you partner’s country and
culture - language is a key component of this. For contract or major
business negotiations, always hire a translator/interpreter. Do not rely
on the company to translate for you. Their interests and the interests
of your company probably will not be identical.
7. How do I learn about differing customs in Asia, which could
affect my company’s chances of succeeding in doing business?
The Chinese have a saying “Seeing is believing”. The best way to
learn about a country is to visit, to meet the people and to have
face-to-face meetings. But first, do you homework. There is a growing
body of resources available online on each country’s history, social and
political customs, protocol, and business etiquette. Additionally,
Federal, State and Regional export counselors and education programmes
also provide excellent sources. The library and the bookstores are also
great resources.
Because of the explosion of international travel, there are now
travel guides - some of them focusing on the business traveler - that
cover any country you might want to choose. These are good sources of
basic and sometimes even fairly advanced information on a country, its
culture and its people. Many consulting and specialist firms specialize
in intercultural communications for business people, whether traveling
or hosting foreign visitors. Watch the local business calendars for
training opportunities offered by these firms in concert with federal,
regional and state trade promotion offices.
8. How can I finance my international sales?
There is a saying that “money makes the world go round.” This saying
is particularly true in international sales. Getting the money to
fabricate your product, ship and wait for payment are issues that any
entrepreneur must face. Most new exporters need to ask themselves where
to get help at both the pre- and post-export financing stages of the
export process.
Pre-export financing is the financing required of the exporter while
the product is being built and prior to shipment. Post-export financing
is the financing required between the time of shipment and receipt of
payment from the overseas buyer. This is a fairly complex issue and
first time exporters often need help in this area. It is an area where
Export Counselors, consultants and other specialists can often help the
exporter to optimize his deal. Government sources of export financing
are:
SBA Export Working Capital Programmes
EX-IM bank Working Capital Guarantee
State Export Programmes
Additionally many international banks offer financing that may prove
necessary.
9. How can I ensure I’ll get paid for my export sales?
Before making the sale, evaluate the risks -country, currency, and
commercial - of doing business in a particular market. Once you and your
buyer have come to terms, there are many different methods of payment,
including cash in advance, letter of credit, collection, and open
account, that you will need to agree upon. You should also become
knowledgeable about credit insurance.
Forfeiting, available to very large firms through special divisions
of international banks, is a way for exporters to receive cash up front
and mitigate payment risks. Contact your State Export Promotion Office,
the nearest U.S. Department of Commerce Export Promotion Center or the
international department of your bank for help with your finance
question.
10. How long will it take to see a profit from my export sales?
Naturally, the time frame from when you initiate you international
activity to when you make your first sale and start enjoying profits
will vary greatly from firm to firm. Factors such as your company’s
prior export experience, the qualifications of the company that is
buying your product, and the challenges of the market all will act to
vary the time required. In general, expect the turnaround to be at least
one to two years. In more difficult markets, this maybe overly
optimistic and should be adjusted. Keep in mind that if it was that
easy; every company would already be major exporters.
11. How should I ship my product overseas?
First, do your homework on this issue - it can be a key to success.
View your transportation company as a key partner that will make or
break your efforts to export. Further, don’t assume your buyer is as
knowledgeable on this issue. A successful export programme uses
reliable, cost-effective methods of shipment.
Transportation of your product is an important consideration because
it is a significant cost factor. Buyers generally compare competitive
products on the basis of delivered cost. Your company needs to make sure
your product is delivered in good condition, on time, and keep the cost
in line with competitive products. As your sales expand, distribution,
which also includes cost for storage and inventory, will have a key
effect on your competitiveness. The transportation choice, therefore,
should blend the most cost-effective and reliable company that will
produce all these factors.
12. What agencies, groups, or others can provide assistance to my
company on the various facets of the selling to Asia? Is their advice
essential? How much will this expertise cost? How do I know which firm
has the right qualifications?
Generally services provided through your State export promotion
office are free. This is often a good starting point. Most states also
offer education and training programmes in connection with state
community and other colleges and Universities at a nominal fee. Industry
trade associations also sponsor a variety of programmes specific to
their industries. You can often research these via the Internet. Watch
the business calendars in the local media to keep up with export
training opportunities.
The U.S. Department of Commerce has Export Assistance Centers in most
major U.S. cities. These centers also provides counseling services to
exporters although some services such as matchmaker (assistance in
finding a foreign agent), etc. do require payment of a moderate fee.
Export management companies (EMCs), Consulting companies of which there
are many in throughout the United States and other specialist firms
provide services for new and experienced exporters.
When selecting an individual or firm to assist you, evaluate the
company’s experience, especially in the particular country or area of
expertise where you seek assistance. Evaluate the company’s
professionalism, credibility, the education of key firm members, and
general compatibility of the firm with your firm’s goals. Seek a written
proposal of what the company can accomplish for you and at what price
and according to what time period the services will be performed. Seek
and check references, which the firm should be happy to supply to you. |