At NY Report’s annual International Business Opportunities Conference, sponsored by Citibank, several experts spoke about international growth opportunities. During the first panel discussion, “International Business Success Stories: How They Thrived,” three business owners spoke about their successful international expansion, the problems they’ve faced, and advice for other business owners looking to grow globally.
Overcoming Lack of Infrastructure
Owners of businesses with international branches should anticipate unanticipated challenges. “Along the way you’re always going to have the mini crisis,” said Craig Schlanger, co-founder of Apple Seeds, a children’s community center with classes, retail, and play space. Schlanger pointed out that running an international franchise is more expensive, because more negotiation is required for different contracts. “Once you have your own attorney in the US working on your agreement and you’ve paid him thousands of dollars, then they tell you that you may need to hire an attorney in India who knows the local laws. So you hire an attorney in India, he goes through the same agreement, makes two red lines and sends you a bill for a little less than thousands of dollars,” Schlanger said.
Photographs by Jeffrey Holmes
Logistics can also cause problems with everything from international trademarks, to taxes and fees, to shipping delays and issues with customs. For example, said Schlanger, due to different taxes and international treaties, “your money starts coming in and significant amounts are missing.” If you don’t know how to navigate overseas tax authorities, you will be surprised by the amount of money they can and will withhold. This led to him to hire international accountants to set up overseas bank accounts in order to get some of his money back. “We opened our Indian bank account last month. It took nine months of paperwork and applications just so the money could be deposited directly from the Indian tax authority into our bank account. Then we have to wire the money back to the US.” Apple Seeds uses the same curriculum in each of the locations and it requires specific supplies; some needed to be shipped to their international locations. “Some of the materials we use you can’t buy in Mexico or India, so they want us to buy them for them and ship them out there, which we’re happy to do,” Schlanger said. “Three months and God knows how many payments later, it was stuck in customs, and they couldn’t get started. It delayed the opening for three months. I think they got 80 percent of it out finally. Twenty percent got lost. These are the things that just come up on a daily basis.”
Mark Laufer, president of Laufer Group International, an international supply chain management company with a joint venture in China, added that small businesses often have more difficulty with international expansion than large businesses, due to the fact that they don’t usually have the infrastructure in place to mediate the challenges that occur. In order to navigate this difficulty, he’s made it his priority to understand and adapt to the cultural differences between America and China. “You have to get your arms around [differences] much more from a cultural and a mental standpoint, rather than a legal one,” he said.
Navigate Cultural Differences
“At the end of the day, as a small business, the ultimate backbone of your relationship with the people you are potentially doing business with can be summed up in one word: trust,” said Laufer. “The key to a successful international business is understanding who you’re doing business with. Focus first and foremost on relationships because that’s where your successes and failures come from.”
According to Laufer, the most important aspect of creating mutual trust with potential international partners is understanding cultural differences. “When going to a foreign country to meet with potential partners or employees, the worst thing you can do to prepare is to read a book that tells you how to behave,” said Laufer. Foreign businesspeople will expect you to be, and act like, an American; however, you should take care to avoid stereotypes from either country. US businesspeople, for example, should take care not to dress, act, or speak too loudly, to avoid confirming American stereotypes. To create bonds and forge relationships quickly, Laufer recommends showing an interest in local food, which can then lead into discussions about local culture. “That’s my secret weapon. Food is the greatest lubricant to breaking down barriers. Get them talking about their local culture, ask them questions. If you show a genuine interest in their life, they’ll respond in kind.”
Michelle Court is the managing editor at The New York Enterprise Report. She can be reached at email@example.com.