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Opportunity And Peril: Global Trade For The Family Business

Monday 28 May, 2001
The world is wide with opportunity for family businesses. But at the same time, endeavours into the global market can be perilous, particularly as company management defines its global business strategy and assesses the role of family members in executing this strategy. Several fundamental guidelines can be followed to mitigate the risks inherent in international trade and global business ventures in general.

First, avoid becoming a pioneer, at least in the initial phase. Next, forge strong “local partner” relationships. Finally, learn as much as possible about the culture, language, and business practices of the targeted country.

There is a romantic tendency to go where no man (or woman) has gone before. For example, Vietnam represents a huge, untapped market for buyers and sellers. However, the truth is that it takes at least five years for countries new to world trade to mature enough to become reliable trade partners. Russia, after ten years of trade havoc, is still struggling to achieve credibility. Those who arrive first are at greatest risk, an acceptable risk perhaps for the deep pockets of McDonalds or Coca-Cola. But when a smaller company ventures into the world arena, it should identify countries with a track record for reliability and consistency in purchase or sale of the company’s products. Pioneering can be a natural or desirable process, once a strong foundation is laid.

To establish sound footing in a new market, it is essential to have a strong “local partner” relationship. Such an entity could be an actual partner, but might also be a purchasing agent or a sales organization. Some of the ways to identify candidates are: through foreign trade missions at embassies or consulates, by membership in inter-country trade organizations, by attendance at local trade shows, and even from Australian-based trade organizations to which a company already belongs. A well-chosen local partner can lessen the learning curve for the new venture.

When entering a new country, it is indispensable for the global trade manager to be familiar with its culture, customs and language. There are a number of sources available for such preparation. Local colleges or universities may offer courses on these and related subjects. AusTrade is an excellent source of political information, and provide useful trade, natural resource, and statistical data on foreign economies. The public library can be a valuable source of information, and of course, the Internet offers rapid access to volumes of information.

Time permitting, a course in the local language is worthwhile. Even taped language courses provide basic conversational skills that will be appreciated by local contacts. Every foreign country presents a set of cultural and business practices different from our own. Increased understanding of these differences will accelerate entry into the new market.

Selection of the person to spearhead development of global trade can be challenging, particularly for a family business. On the one hand, it would be ideal to entrust the venture to a family member. On the other, the wrong choice would present a problem, not just for the business, but for the family as well. For many companies global trade exists as a business within a business, so its manager must have already exhibited either the capability or the potential to work successfully and independently in a fast-paced entrepreneurial environment as well as the ability to spend long periods of time alone, away from home and family.

In addition to the requisite business skills, this individual should possess personal traits, many of which might be unwelcome in the home office: a touch of wanderlust, a sense of adventure and independence, a measure of imagination, a dose of curiosity, a high level of energy, and a strong enough sense of self. If the family business cannot identify one of its members who has both the business prowess and the suitable personality for work that is much different from day-to-day operations, it would do well to look elsewhere for an executive to manage its global activity.

Opportunity and peril: Sometimes global trade is used for a competitive edge. In other circumstances it is a necessity that becomes an opportunity. Pricing, quality control, on-time shipping, currency fluctuations, and political upheaval are just a few of the factors that can affect global trade, and there can be dramatic repercussions on the business and the family if things go wrong. Prudent planning, as always, coupled with careful selection of a global trade manager can help to ensure ultimate success in building a family business’s global presence.

Author Credits

Professor Kosmas Smyrnios. This paper has been adapted from his recent book, Family Business Succession Planning: A 10-Step Guide (2000). Centre for Professional Development. Tel. +61 3 9205 0600. Professor Smyrnios can be contacted on +61 3 9925 1633
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