Emerging Markets...Doing “Small” Business with “Big” BRICs…
The BRIC countries—an acronym that refers to the countries of Brazil, Russia, India and China—are four emerging economies that appear to be making its presence felt. So much so that many U.S. investment firms, including such venerable firms in Goldman Sachs, are now predicting by the year 2050, these four economies could emerge as the world’s most dominant. Why such bold predictions? For starters, the emergence of these BRIC fast moving economic engines—along with the substantial buying power of its newly estabished middle classes—could be the reason. This may be the same reason why many small U.S. companies should consider doing business with some of these red hot economies. Many small U.S. business owners are beginning to ponder the following question: “Can my small business do business with these big BRICs countries?” What's the market economic response to such an inquiry? The proverbial market economic response--both domestically and internationally--has always been the same: “it just depends on the market.” Moreover, realizing that there potentially exist a global marketplace for your particular product or service is one thing; discovering how to make it a reality is another.
The Numbers Don’t Lie...
A small U.S. business looking to tap into these new emerging BRIC markets should consider the following statistics:
· In Brazil, there are roughly 30 million lower class citizens that are now apart of Brazil’s ever growing middle-class income bracket—a figure that should continue to increase as Brazil’s burgeoning economy continues to grow.
· In Russia, the Moscovites, as Russia’s urbanites are often termed, now register retail sales far beyond that of both Parisians and Londoners.
· In India, well over 200 million intellectual workers will enter the workforce in the next 30 years, thus creating one of the world’s largest affluent societies.
· In China, the rural poor that have migrated to its urban cities have created a middle class so large that it now exceeds the entire U.S. population.
Why should U.S. small business owners discern these figures? Because where there’s a growing robust economy, there’s lots of room for both domestic and international small businesses profits. Nevertheless, here are a few fundamental steps that small business owners should remember before testing uncharted international waters.
Finding the “global need” for my business->
Most economists would define demand as human need—that is, before deciding to venture into the international business arena, at the very root of one’s economic decision to take the international plunge, a small business owner has to ask him/herself: “Does someone in Brazil, Russia, India and China, truly, ‘need’ my product or services?” Certainly this question can be answered by doing ones homework and market research on that particular country’s economic environment. But initially, what you want to ask yourself are the following questions:
1) What’s the current political economic situation of the country?
2) Is the economic environment conducive to my overall business objectives?
3) What are the tax ramifications and the cost of obtaining work permits?
These and a host of other pertinent questions should determine whether or not your company’s product or services will create the kind of demand that could turn a significant profit.
Websites are a welcome...
Furthermore, there are bunch of government related websites on the internet that you could scour to determine whether or not your small business is globally demanded. One such website is export.gov, an economic portal which exists to facilitate entrepreneurial activities on the global stage. Theoretically, what you want to get from these websites is whether or not there exist implicit international laws, tariffs or any other hidden barriers to trade. Absent enough capital to put a high price international lawyer on retainer, a small business owner will have to verse him/herself on the national laws geared towards foreign companies. Another website to make this a reality is www.exportlegal.org, which is made up of group of private lawyers who will provide pro bono legal consultation to U.S. small businesses thinking of taking their companies global.
Initially, you want to utilize websites to do the first phase of your company’s market research—especially in the areas of health and safety, employment practices, contractual relationships, environment practices and patents & trademark issues.
Networking at international business organizations…
Get ready to do some traveling...
If that doesn’t seem to work out you could always visit the country. When I say visit the country, I don’t mean it in the sense that you should ever mix a business trip with pleasure. What I mean is that if you’re a small business owner that’s indifferent about doing business with, for example, India or China, then maybe a two week “business/pleasure jaunt” to either Mumbai or Shanghai becomes a viable option. During this brief period, you should, then, be able to garner enough research on:
1) Similar products or services.
2) The market price and competition that exist between those product/services.
3) The supply-chain network in operation for your company’s overall market.
Overall macroeconomic stability->
Certainly, as a prospective small business owner vying to set up shop on foreign soil, it behooves conventional wisdom to become abreast with a foreign government’s propensity to regulate and/or tax its large and small businesses.
Search for stable price levels...
What’s inflation? Inflation represents a situation where an economy’s overall price levels begin to rise. Why is inflation such an important economic indicator for a small business owner? Well, for two reasons:
1) Low levels of inflation are the hallmark of an overall stable macro economic environment, thus a significant indicator of an amicable small business culture.
2) High level of inflation tends to act as a tax on a business, thereby discouraging foreign direct investment.
Eyeing foreign direct investment...
What’s foreign direct investment? Foreign direct investment is a domestic company controlled through ownership by a foreign company or foreign individuals. Essentially, as a small company with it's main headquarters in the U.S. and smaller companies located on foreign soil, most of what you’ll be engaged in is what international economists would consider to be "controlling of production facilities abroad." In fact, this "controlling of production facilities abroad" constitute much of what we, in the economic community, consider to be international trade—to be exact, whenever a domestic company fills its reached a point of market saturation, there are certain economic dogmas within the theorems of international trade that postulates that it may be time to look abroad for profitable opportunities. Nonetheless, these same dogmas holds true for big and small businesses, alike.
Furthermore, the decision to engage in foreign direct investment should be one based on the advantages it could potentially provide to your small business.
Signs of growing economic sectors...
In any robust economy--like the kind you’d find in the BRIC countries--there are very important signs you, as a small business owner, should keep an eye out for--specifically, you should search for sectors of the economy that are continuously growing. For example, China’s industrial sector is, arguably, the most advanced in the world. Russia and India’s service sectors are both comparable to the United States and Europe. Brazil’s oil and gas sector is staking a name for itself on the international scene. Therefore, if I’m a small business owner, knowing these tidbits should give me an important point of reference from which to potentially launch my international small business venture.
International business protocol->
Before engaging in international business, U.S. small business owners must be cognizant of the everyday nuisances of that country’s business rules, requirements and regulations. As an American businessman, you can’t assume that all countries operate in the same manner as the United States. In that same vein, you also can’t assume that all countries do business under the same protocol either.
Negotiating the right to do international business...
In international economics, negotiations are a means to a financial end, whereby a company either tries to create or destroy operations in a foreign country. Now more than ever, especially in an ever expanding globalization world, any small business owner looking to set up shop on foreign soil will have to negotiate with a plethora of business characters. This said, in order to obtain, just, the right to do business in Brazil you’ll have to negotiate with Brazilian custom agents, Brazilian business consultants and, quite possibly, Brazilian lawyers. Although the process for obtaining a permanent residency visa seems straight forward, a small business owner, not prose in the local language and culture, would be best served to let an experience international law firm handle the proceedings.
Negotiating business contracts in China...
To the novice international small business owner, negotiating a business contract in China may seem like an arduous ordeal. Unlike, their Asian counterparts in India, the Chinese speak Mandarin and not English. But language differences aside, many small business executives from the United States should find that negotiating with Chinese negotiators isn’t all that difficult of a task—that is, of course, they learn to abide by Chinese business protocol. Impatient U.S. small business owners will frequently find themselves at a significant disadvantage with respect to the manner in which the Chinese conduct business. During the business contract process, U.S. negotiators mustn’t permit themselves to be manipulated by artificial western deadlines.
It’s estimated by 2050, the four BRIC economies could become so large that they could surpass the current richest countries of the world. What this could represent to a small U.S. firm is a very large international opportunity.