By Steven Murray, U.S. Commercial Service Pittsburgh
Although it may sound cliché, the world has in fact become smaller in many ways. While the physical distance remains the same, the virtual distance between companies and customers is closer than ever as the web and access to information, allows us to see far beyond our horizon and to connect and communicate globally with relative ease.
As companies look to grow, it is no surprise then to see an increasing number of companies looking to international markets for vital revenue and growth streams. It is noticeable too that not only is the volume of companies increasing, but the composition of companies pursuing international markets are changing as well, with the smaller and earlier stage companies increasingly becoming active in international markets. And this is good for our communities as research shows that companies engaged in international sales tend to be more competitive, be more profitable, and grow faster.
Though we can say that engaging in international sales is overall good for companies, pursuing international markets does not come without challenges and risks, especially for smaller and earlier stage companies. While companies are virtually closer to potential international customers, and more easily able to connect with them, international sales still involve crossing national borders.
Although this statement may be an obvious one, the practical implications of crossing borders are not always so apparent and can mean significant differences between how a company approaches and sells within the U.S. market and international markets. As products cross a border into an international market, those products will need to comply with that country's regulatory and certification requirements, which could be quite different from those in the U.S. Even crossing the U.S. border on the way requires compliance with regulations specific to exporting that allow the U.S. government to capture export data, monitor and to sometimes restrict U.S. exports. Additionally, crossing a border means operating within a new legal environment that can impact how a company develops and enforces partnership agreements, sales contracts and how a company protects its intellectual property rights.
Beyond legal and regulatory environments, crossing a border into a new country or market means developing an understanding of the local culture and business practices, which can be quite different from the U.S., and can also have a significant impact on how companies manage business relationships, or even how they market their products. There are other issues to consider also, such as payments. Are payments in U.S. dollars or in a foreign currency? Does the buyer have access to affordable credit to finance sales? How can a company balance the risk of non-payment with competitive payment terms? These are all considerations a U.S. company will need to contend with when looking at international markets.
While it might seem overwhelming, the reality is that the process is manageable, which is evidenced by the fact that many of the U.S. companies selling internationally are small and medium sized. Given all the factors related to international sales, one may contemplate where a company should begin. The best first step is to develop an export plan. An export plan helps companies understand the facts, constraints and goals around their international efforts, and it will help to catalog many of the varied topics and components related to international sales and account for them to minimize surprises and missteps. While there are several elements to an export plan, key ones include:
Companies should realize an export plan is a living, flexible document that will grow over time. At early stages, it is okay for the plan to be somewhat general, as it will become more detailed as a company grows in its understanding of international sales and identifies specific international markets. For additional information, companies can visit https://www.trade.gov/develop-export-plan to view a sample export plan.
Having an initial export plan will help a company proactively manage the challenges that international sales can pose. This is important for small and early-stage companies, who need to make the most of their limited resources. Additionally, companies are encouraged to reach out for assistance. The U.S. Commercial Service has offices in Philadelphia and Pittsburgh with staff that can assist companies develop export plans. Assistance is also available from the Commonwealth of Pennsylvania’s Office of International Business Development and through Pennsylvania’s network of Small Business Development Centers.