As the world is slowly but surely emerging from the viselike grip of the global financial crisis, American manufacturers are presented with an unprecedented opportunity to enter a great number of rapidly growing foreign markets. Many of the emerging markets of Eastern and Central Europe, Central and South Asia and Latin America have been severely affected by the crisis, but have recently resumed or are about to pick up where they left off with their blistering growth. Industries such as alternative-energy generation, agriculture, communications, aviation, road construction, and health care are booming, along with many others.
Despite competition from China, Germany and now Brazil's rapid emergence as a world-class manufacturing power, the opportunities are so vast, and U.S. industry is still sufficiently competitive so that firms here can successfully enter foreign markets and grow their manufacturing business.
Expansion overseas is not for the faint of heart, however. It requires unwavering commitment to chosen markets, reshaping current organizational culture to have a global focus, learning new ways of doing business and dealing with issues that are pervasive in many emerging markets -- poor infrastructure, increased crime and corruption, different work ethic and fantastic bureaucracy.
Yet in many cases, foreign expansion offers superior financial returns. It can also create a more competitive organization, which is not only capable of generating additional sales abroad, but is better positioned to defend its home turf from foreign competitors.
A number of superb tools are available globally from both the U.S. government and nonprofit corporations to assist American manufacturers seeking to either export internationally or set up foreign operations. These include political risk insurance, export financing, international project financing, business advisory and security services.
Growth in Emerging Economies Spells Opportunity
The opportunities that are available today for U.S. manufacturers can be illustrated by two examples in industries that span multiple countries and are poised for rapid growth.
The world's demand for energy is unprecedented and almost every emerging country is looking at or in the process of implementing programs for producing alternative energy. On the drawing boards in many places are massive solar installations, wind farms, conversion of gas/coal boilers to wood-burning and a variety of other options. All require major infrastructure construction and equipment installations.
Agriculture offers the same opportunities and many nations are hungry for foreign know-how, quality products and inexpensive financing. Modernized agriculture requires irrigation equipment, construction and farm machinery, grain storage and food processing and distribution.
A typical three-year to five-year foreign market entry strategy for a U.S. manufacturer may look something like this:
• Develop export operations in several markets that offer the greatest opportunity and deploy export financing and export credit insurance tools to maximize sales and mitigate risks.
• As sales build, develop market expertise, learn the local culture, get to know existing manufacturers or other potential local partners.
• Develop a plan for local operations, build up internal capacity, utilize U.S. government financing and political risk insurance to establish local manufacturing operations, which will have both financial and social benefit for the organization.
• Repeat in as many countries as possible.
Free or Inexpensive Resources
Although no two countries are alike, there are tools and resources that have been put in place by governments, multinationals and non-governmental organizations (NGOs) that, once mastered, will allow a business of almost any size to have a solid framework for entering any foreign country. These resources range from informational and financial to networking, advocacy and protection. What's best, and what too few U.S. manufacturers realize, is that many of these resources are either completely free or nominal in cost.
• The United States Commercial Service provides market reports, local partner searches, trade missions and support for U.S. businesses seeking to export or enter target markets. The service has many offices throughout the United States and in more than 100 foreign countries.
- Overseas Private Investment Corp. is an agency of the federal government that provides political risk insurance and project financing for projects that involve direct investment by the U.S. firms across a number of industries.
- The U.S. Export Import Bank is an export credit agency of the federal government, providing financing and insurance for U.S. companies that export U.S. manufactured goods and services.
- The U.S. Trade Development Agency provides grants for projects overseas which involve U.S. exports.
- The Overseas Security Advisory Council is part of the State Department's Diplomatic Security effort to help U.S. businesses abroad better protect their operations, especially in nations where politics and unrest create dangerous instability.
- The American Chamber of Commerce provides advocacy and support for U.S. businesses in many nations.
- The Princeton Council on World Affairs provides education, information and strategic business development services for companies seeking to expand abroad.
These organizations offer advice on protection, due diligence, financing and a wealth of useful information. Use them as much as possible, immerse your company in information-gathering and become part of the community you hope to enter. Read local publications, learn the culture and as much of the language as practicable, hire qualified legal and financial advisers and invest in developing relationships with local business and financial partners.
Consider Smaller Markets
| Key Contact Information|
Export-Import Bank of the
811 Vermont Avenue, N.W.
Washington, DC 20571
(202) 565-3946 or
Overseas Private Investment Corporation
1100 New York Avenue, NW
Washington, DC 20527
U.S. Commercial Service
U.S. Department of Commerce
1401 Constitution Ave., NW
Washington, DC 20230
United States Trade and
1000 Wilson Blvd., Suite 1600
Arlington, VA 22209
Fax: (703) 875-4009
U.S. Chamber of Commerce
1615 H Street, NW
Washington, DC 20062-2000
Overseas Security Advisory Council - Bureau of Diplomatic Security
U.S. Department of State
Washington, D.C. 20522-2008
Fax: (571) 345-2238
With so many opportunities come many questions. How do I choose the right markets? How many countries can my company enter at once? What financial, human and administrative resources will we need? What would be our return on investment if we do this? These and other questions are all legitimate and the answers lie across a broad spectrum. Government and NGO resources can help answer these questions, as can private merchant banks and others who can offer counsel and assist with business and political connections.
International expansion sounds exciting, cool and profitable. However, if you or your organization lack patience, commitment, a desire to learn, and a strong value proposition, international expansion can be the most painful and costly undertaking you have ever tackled.Like any other significant undertaking, realistic goals must be set. Ask yourself what you hope to accomplish personally and for your organization. Quantify your objectives in terms of additional revenue and market position, both short and long term. How will such an expansion affect your present operations? How will you finance the undertaking? What will you do when you are asked to pay bribes?
A good rule of thumb is to triple any "realistic" timeframes you come up with. Things always take longer overseas, and in some countries it can be much longer.
Then consider this final question. Are you personally ready for many grueling flights, jet lag, bad hotels (or great hotels in some places), unfamiliar food (sometimes amazing, sometimes inedible) and driving on unpaved, hazardous roads?
If your answer is "yes," then pack light and enjoy the journey.
Alexander Gordin is managing director and cofounder of the Broad Street Capital Group, New York, a private international merchant bank. He is a trustee of the Princeton Council on World Affairs and author of the upcoming book "Fluent in Foreign."