Why doesn’t the success that Canadian companies enjoy at home translate overseas? I believe the main reason is a lack of knowledge about how to do business internationally.
While you may be aware of factors such as language barriers, distance or time zones, it’s easy to assume that the way business is done overseas is no different than it is here in Canada. It’s a critical mistake to make, and one that leads to frustration and a disappointing degree of success.
In the late 1990s I starting expanding my company’s overseas sales, and 10 years later about 85% of our revenue was generated outside of North America. Here are a few critical lessons I learned along the way:
1. Negotiate with caution
So you think you’re a good negotiator eh? While Canadians generally have good business skills, when it comes to international bargaining we have a lot to learn.
I confess I thought I was a pretty good negotiator until I did business in India for the first time, almost 10 years ago. I spent months negotiating with an Indian conglomerate called Tata by telephone and email. After working through all the technical details and updating the quote with small discounts here and there, I was informed that my company was the selected bidder. The company requested that I pay them a visit to finalize the details of the agreement before they sent a Letter of Intent.
So off I went to Pune, to spend an afternoon negotiating the final pricing, terms for shipping and payment. I left India with a handshake deal and a promise that the LOI would be sent to me soon. While the agreed upon price was a little lower than I had hoped for, this was to be our first reference in India; Tata was a highly respected customer, so I felt that we were still in good shape.
Days after my return to Canada I received a phone call from Tata’s purchasing arm asking for an additional discount. A few days later, after another call and another discount, the LOI finally arrived. At the final price the deal was marginally profitable but still acceptable. But between the LOI and the final contract I faced two additional rounds of negotiation, so that the final price meant we made no money on the deal.
Lesson learned: In India, as in much of the developing world, a handshake deal or LOI means that final negotiations have just started. Hold back your “best price” until it is time to sign the formal contract.
2. Acquire reference customers in each market
At least this story has a happy ending. Before offering the final discount, I asked Tata if they would issue a joint news release announcing the deal. The story was ultimately picked up all over India, and having Tata as a reference customer led to my company making many additional sales in India.
Lesson learned: Sometimes it’s worth losing a little to win a prestigious customer, because it allows you to establish a foothold in a market. This is especially true in developing markets where customers tend to follow the leader.
MORE REFERENCES: There’s More Than One Way to Bait Your Sales Hook »
3. Take it slow
The typical entrepreneur works quickly and expects everyone around him to move at a similar pace. But the typical customer moves slowly and can’t be rushed. It can take upwards of two years when establishing an overseas sales channel to build relationships and position your company to win business once an opportunity presents itself.
Particularly outside of North America, customers need to learn to trust your company before they are willing to give you business. In 2008, I anticipated that the Brazilian auto industry was going to boom in a few years time. I took the time to develop a strong sales channel, build customer relationships and earn trust. Opportunities started to arrive in 2010 and 2011, and we quickly gobbled up 90% of the market based on the groundwork we had laid years earlier.
Lesson learned: Success in overseas markets requires careful planning and patience.
MORE PATIENCE: The Right Way to Set Up in Another Country »
4. A strong local presence is key
At my company, our main competitor was based in Germany. While they had a strong product, we were able to beat them in Asia about 80% of the time. The secret was we spent the time to train our local reps to sell our products, whereas our competitor used their reps to generate leads but managed sales out of Germany.
Overseas customers need to trust that their local rep will be there to support them and advocate for them. Customers want to deal with a local presence as much as possible, rather than with head office personnel who are on the opposite side of their world, and don’t speak their language or understand their needs.
Lesson learned: Train the overseas sales channel and support them while letting them do their jobs to win you business.
MORE LOCALS: 20 Tested Ways to Expand Your Business Globally »
Corey Miller ran a successful high tech company in the auto industry for over 20 years and currently helps transition North American B2B manufacturing companies into global competitors. He can be contacted here.
MORE DEVELOPING MARKET ADVICE:
- Afraid of Exporting? You’re Not Alone »
- The 6 Hidden Costs of Emerging Markets »
- Get to Know the New Global Middle Class »
- The Factor that Could Stall Your Export Plans »
- Developing Markets Crucial to Canadian Businesses »
Does your company do business in the developing world? What lessons have you learned from operating in emerging markets? Let us know using the comments section below.