Small businesses dominate the international business arena by contributing 97% to the number of exports, according to the U.S. Department of Commerce. These businesses are able to take advantage of significant growth opportunities, but not without overcoming challenges and risks. Small businesses must plan for these potential challenges and risks in order to be successful and earn a return on investment (ROI) faster.
Challenges and Risks for Small Businesses
Too often business owners jump when they see opportunities abroad without first taking the time to conduct research and train their employees for the challenges they may face. Here are some of the top challenges and risks that small businesses face.
1. Inexperienced management team. The management team of small businesses may not have experience with international businesses. Having experience with conducting business globally is critical for businesses to move into the international market with the lowest amount of surprises, mistakes, and expenses. the management team should be provided with appropriate training beforehand. Another option is to hire internal or external experts to guide decision making.
2. No local marketing contacts or partners. Having connections in the foreign country is a valuable asset to pushing the product out faster and obtaining a quicker ROI. If the business does not have any contacts or partners, it should start working on networking and possibly hiring a local marketing firm.
3. Foreign country’s laws and regulations. Each country has its own set of laws and regulations when it comes to importing goods, taxes, and even selling online. Obtain legal advice from someone experienced in business law for that country and conduct your own research to see which laws and regulations will affect your business. However, finding information online does not replace legal advice from a qualified lawyer.
4. Inadequate infrastructure within the foreign country. Some countries do not have adequate infrastructure for transporting goods. Find out which obstacles exist and what should be done to overcome them or what adjustments should be made.
5. Cultural and language barriers. Researching the local culture and speaking the same language is not enough to communicate efficiently. When two people are speaking the same sentence, the underlying meaning may not be the same. Find out how the locals conduct business and how their culture affects their decision making and communication.
6. Corruption amongst foreign officials. Corruption is more prevalent than what most small business owners are prepared for. Conduct research into the foreign country and find out how business is truly conducted. If possible, avoid countries where corruption is prevalent to save on future headaches and possible losses.
7.Company is not flexible. After entering into the foreign market the business may have to adapt further to the local market. Small businesses that are not flexible or refuse to make alternations will lose out on customers and potential revenue. The business should be prepared to make changes after entrance and have the structure in place for quick decision making and implementations.
8. Tariffs and quotas. Countries add taxes or restrictions to particular products coming into their country in order to give their own businesses a higher advantage. Unsuspecting small business owners unaware of these tariffs and quotas can end up at a loss instead of profiting.
9. Pricing is not optimized for the country. Small business owners that price its products the same in foreign country as in the United States is either overcharging or undercharging customers. For instance, in countries with a lower GDP, consumers have less money to spend on purchases so lower price points should be set to attract more buyers.
10. Does not provide after sales services. Customer support should be available in the language of each country and be conveniently accessible. Customers should not have to pay long distance charges in order to receive assistance. Small business owners should ensure that they are providing adequate customer service to all their customers. They can outsource this to a customer call center within that country (or a country with the same language), provide a local phone number (or toll-free number), e-mail support (make sure the internet is widely available in this country), and live chat through its company website.