Exporting is an economic imperative for British companies. World markets, particularly in emerging economies, are growing exponentially.
While there is a great prize to be had, exporting and international business can raise specific challenges. What do organisations have to consider before taking the plunge?
I spoke on this very topic recently at an event organised jointly with Scottish Enterprise and Anderson Anderson & Brown in Edinburgh, and here’s a snapshot of what was discussed.
There are different ways to enter the international marketplace.
Many SMEs simply sign up international clients looking to buy services delivered from the UK (which is the case with Ledingham Chalmers), or send their goods to foreign purchasers by ship, courier or through the mail.
Others pursue international business by frequently visiting a target jurisdiction to market themselves and even provide services.
Others may decide it is necessary to set up a foreign subsidiary or branch, or some may enter into agreements with foreign agents or distributors.
Plus, certain organisations will enter into joint ventures with foreign business partners, while others expand by buying out foreign companies.
No matter the level of commitment to internationalisation, the domestic company must consider a broad range of issues.
These call for a holistic analysis, integrating all relevant factors: UK exporters must ensure their goods or services meet the regulatory requirements of the target jurisdiction.
Various business factors must be taken into account too such as the tax regime and payable tariffs; the use of different currencies or exchange rates; or whether there are any insurance implications.
These areas require a specialised advice.
Businesses also need to focus on legal and structural considerations: is there a need to set up a foreign organisation such as a subsidiary or branch, or even establish a joint venture?
Will it be possible to get expatriates into the target jurisdiction to support the business?
Are there local content rules? Will it be possible to contract on similar terms to the UK and will intellectual property be sufficiently protected?
And of course, security, bribery and corruption are vital concerns.
When considering potential foreign business partners, it is vital to carry out adequate due diligence looking at the market position, economic viability and business reputation.
This should be done effectively and sensitively, calling on the expertise of, for example, the British Embassy, UK trade organisations and, if possible, other companies operating in the same geography.
Furthermore, many British companies are acutely concerned about IP risks when entering into foreign jurisdictions.
This concern is particularly pronounced when you consider business in China.
IP is registered on a territorial basis and there should be management plan (which may well involve foreign IP registrations) to protect this valuable commodity.
In short, the opportunities of expansion into the vibrant, lucrative — yet competitive — global marketplace are too great to be ignored. Challenges should be met head on with the right support and advice, and should be seen as a valuable learning process.
If you’ve got your eye on internationalisation, contact us for further advice.
An earlier version of this article appeared in Oil and Gas Vision on 27 June.
Put it in writing! - A recent Supreme Court ruling may mean informal and oral variations of contracts with NOM clauses are not enforceable. Partner Jody Mitchell explains.