Five Tips for Conducting Business in an Emerging Market
In an increasingly complex global business market, where the Trump administration is utilizing tariffs more often, companies must develop effective strategies to evaluate whether or not to conduct business in emerging markets.
June 18, 2019 at 12:59 PM
5 minute read
In an increasingly complex global business market, where the Trump administration is utilizing tariffs more often, companies must develop effective strategies to evaluate whether or not to conduct business in emerging markets. The criteria that go into the decisions to enter an emerging market are vastly different than the criteria a company may use to evaluate entering a developed or mature market. This article outlines five practical tips to help in-house counsel as they work to reach alignment with their corporate team on an emerging market strategy.
|Look for the 'Sweet Spot'
When your company is initially vetting international markets to enter, look for countries that are not failed states but that also don't have hyper-mature markets. Some indicators to consider include determining whether the country has:
- A rising middle class;
- A younger population;
- A trajectory of economic growth;
- More disposable income;
- Economic diversification;
- Adhere to rule of law; and
- Political stability.
Do Your Homework
Before you travel to further explore your business opportunities, use the existing resources at home to prepare, which is about 90 percent of the job. The federal government has a wealth of resources and insights available for U.S. businesses. These federal resources will help you better understand the targeted country's relationship with the United States and provide you with trusted referral sources. The federal resources include:
- The U.S. State Department can connect you with the officers stationed in the U.S. Embassy in the country where you are considering doing business. These officers are well versed in the culture and customs of the country and can provide you with a treasure trove of information. They can also recommend legal counsel for you to work with in the emerging market.
- The Department of Commerce's Gold Key Program is available for U.S. companies exploring business opportunities abroad. For a small fee, the Commerce Department team can set up appointments with up to five interested partners in a foreign market and accompany you to meetings and provide a driver.
- The U.S. State Department's Overseas Security Advisory Council (OSAC) provides security to all of the U.S. embassies around the globe. They also can provide insight into the risks associated with travel in the country you are considering and advising your corporate team regarding on the ground security issues.
- If the U.S. Trade Representative has an office in the emerging market, it's important to connect with the office in advance of any travel. The office is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries.
- They can assist you in your endeavors and provide you valuable information as you weigh whether or not to enter an emerging market. |
Look at the Culture, Laws, Practices and Courts
When U.S. companies enter an emerging market their business expectations and practices will likely be very different than the expectations and practices of the government and the potential employees in the emerging market. For example, in many emerging countries, unscrupulous business transactions are commonplace including fraud, money laundering and foreign corrupt practices.
Conduct a Thorough Study
The legal and ethical protections will likely be far weaker than those available to businesses and companies in the United States. In fact, in some countries the court systems may be corrupted to the point where it is routine practice for judges and government officials to accept bribes. When conducting business in these environments, it is quite possible that a commercial dispute could morph into a much more serious criminal investigation against your local employees. That's why it is extremely important to have a vast understanding of the emerging country's code of conduct/practices, and to have local counsel who understand the local laws and culture.
It is also important to review the country's laws in advance so that you can understand the enforceability of contracts, the types of licenses you will need to obtain conduct business, the building codes you will need to follow, import/export laws/regulations, and any applicable employment laws. You'll also need to have an understanding of the steps you will be required to take to protect your company's intellectual property.
|Understand the Security Implications (Both Physical and Technological)
Knowing the intelligence posture of the country you are visiting is important information to have. In many emerging markets, it's necessary to leave your primary devices at home and work from “burner” devices while you are on the ground in the country. In some emerging countries, you could be under surveillance as soon as you arrive in country, your data could be hacked so you will want to make sure you are taking proper precautions in advance.
If you or one of your colleagues cannot speak the language of the country you are visiting, consider hiring an interpreter. You should also consider hiring a driver/armored car who knows the cities you are visiting in the country and, in some cases, security to accompany you on your travels. The Regional Security Office within the U.S. Embassy can help you identify these individuals who will assist making sure that you are conducting your business both safely and securely.
Tom McDonald is a partner in the Vorys Washington, D.C. office and leads the firm's administrative and regulatory law, and governmental policy practice. A former U.S. Ambassador to Zimbabwe, he provides government relations and strategic business counsel, and is lead international counsel on arbitration cases both in Washington, D.C. and internationally. He can be reached at [email protected] or at 202-467-8812.
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