Issue:September 2016
EXTERNAL DELIVERY - International Business, Something to Consider
Not every product, technology, or service is intended for international trade. But then again, not every business is intended to stay at home either. So let’s examine the possibility of expanding beyond the US borders.
Globalization and the reduction of foreign country trade barriers have vastly improved the ability of US businesses to expand internationally. There are several ways to achieve international business activity through what is called Foreign Direct Investment (FDI).
A company can make a greenfield investment, which is investing in a brand new facility, from the foundation on up. Or, a company could acquire an already established company in a foreign country through a merger or acquisition (M&A). There are pros and cons to both of these investment strategies, but most companies choose the M&A route.
Two other methods for international expansion are worth considering. Licensing and export. Licensing is when a company grants to another company the right to produce and market its products in the licensee’s home for a royalty fee. The disadvantages are that the licensing company may have its technical expertise exposed, plus lose control over manufacturing, sales, and marketing. So protecting your company assets is paramount. Exporting may be considered if you produce a product but transportation costs may be so high that you will never make a profit.
Let’s assume then that your company is not in a position to build a company from the ground up in a foreign country, acquire a foreign company, license a foreign company, or export its products to a foreign company.
What to do when you do not have the assets to realize one of the aforementioned strategies? We solved that problem in one of the companies that I worked with.
It was a matter of our finding a partner in one of the foreign countries that we had targeted for our business. Because we were targeting multiple countries, we identified one primary partner, and together, we identified multiple “subpartners” in the other countries that we had targeted.
We ended up with a large distributor in the Netherlands who covered not only their own country, but France, Italy, Germany, Belgium, Austria, and the UK. We had quarterly meetings in their office discussing strategy, quarterly performance, new products, local country product design and marketing issues, and competition.
Obviously, you need the Managing Director of the distributor to speak fluent English and have sales people and administrative people who speak acceptable English. So when you believe that, for various reasons, you should begin expansion into the international market, don’t try to go it alone. While the process is not super hard, it can be tricky. Your distributor can help you a great deal in this area as ours did in setting up our business. We established both a business partnership and a personal partnership right away. We had the normal bumps in the road along the way, but it proved out to be a great business situation for both of us.
To view this issue and all back issues online, please visit www.drug-dev.com.
John A. Bermingham is former Executive Vice President & COO of 1st Light Energy & Conservation Lighting, Inc. and former Co-President and COO of AgraTech, a biotech enterprise. He was also President & CEO of Cord Crafts, LLC; President & CEO of Alco Consumer Products, Inc., Lang Holdings, Inc., and President, Chairman, and CEO of Ampad, all of which he turned around and successfully sold. With more than 20 years of turnaround experience, he also held the positions of Chairman, President, and CEO of Centis, Inc., Smith Corona, Corporation, and Rolodex Corporation as well as turning around several business units of AT&T Consumer Products Group and served as the EVP of the Electronics Group, and President of the Magnetic Products Group, Sony Corporation of America.
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