No matter what business you're in, developing an
international market "isn't just more of the same,"
says Peter Cherry. As chairman and president of The Cherry Corp.,
an international supplier of electrical switches, keyboards,
displays and semiconductors doing business from Asia to Eastern
Europe, Cherry should know. And for a family business in
particular, going global may pose additional concerns:
Worry #1:How will increased capital demands affect
the family shareholders' needs for liquidity?
It's expensive to do business abroad, says François de
Visscher, a family business consultant in Greenwich, Connecticut,
who specializes in liquidity and capital issues. "But because
some family businesses are jeopardized by international
corporations making incursions into their markets, they have little
choice but to expand into international markets," says de
Visscher.
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"The classic family business struggle--capital for growth
vs. the liquidity needs of shareholders--is further accentuated
when you internationalize," de Visscher says. "So if
management sees a need to market abroad, it must develop a thorough
business plan to present to family [and other] shareholders
highlighting the strengths, weaknesses, opportunities and trends of
the markets abroad. That will point out the need to broaden
markets."
Family members need to unite behind global expansion so that if
they have to give up short-term liquidity, there won't be
altercations among them. "Good communication using the
business plan as a starting point is essential," says de
Visscher.
And start small, counsels Ernesto J. Poza, a consultant in
Chagrin Falls, Ohio, who specializes in helping family businesses
forge alliances abroad. "Create growth opportunities one
country at a time," he says.
Worry #2:How can family businesses compete with large
corporations that are expanding internationally?
- Capitalize on the resources most businesspeople in other
countries pay a lot of attention to in business relationships:
trust and stability. "A lot of people in foreign countries
worry about having to deal with `heavy-handed American
corporations,' " says Cherry. "But when I walk
through the offices of one of our foreign divisions, people know
who I am--a Cherry and the son of the founder--and they know I can
speak for the company. They realize that there's a family
commitment and that this isn't just a moneymaking
game."
"Our alliances with foreign businesses are based on
trusting relationships," says Michael Levinson, president of
The Weekend Exercise Co., a San Diego-based sportswear firm founded
14 years ago by his father, Arthur. "It takes time to develop
an international market, but our foreign distributors know
we'll be around for a long time. For example, we were able to
nurse our distributor in England through some difficult times
before that market turned around.
"Not only that, but I think we, as family businesses, take
a little more pride in our products and the way we do business. We
can't point the finger when someone makes a mistake. We're
`them.' "
- Search out family businesses in other countries. "Two
family businesses that understand and respect each other's
cultures can forge wonderful alliances," says Poza, who has
seen these relationships bloom into fast friendships that transcend
business deals.
"A commonality of interests and mentalities exists between
family businesses of different countries," agrees de Visscher.
"They certainly feel more comfortable dealing with each other
than having to deal with a [giant corporation] where it's
harder to establish a trusted relationship."
- Insist on win-win agreements with partners in foreign
countries."It's easy to get greedy and try to squeeze out
the last nickel in any business agreement abroad," says Poza.
"But down the line, the foreign partner will resent it and
find some way to take revenge." And since you're not
nearby to monitor the situation, it's important to implicitly
trust foreign partners, distributors, directors and employees. Poza
urges family businesses to craft an agreement that's profitable
to both parties and gives the overseas partner an incentive as the
business grows.
Worry #3:How can we get family members used to the
idea of globalization?
Develop an appreciation and understanding of a particular
culture and language. Some family businesses look to their roots as
a place to start learning more about a particular market. Others go
where family members have spent time or have a particular interest.
Poza tells of one family business that developed a business
interest in Chile as a result of a daughter's experience doing
social work there.
Taking the longer view, Poza suggests members of the family
business's younger generation should be expected to become
global citizens and be required to develop expertise in a number of
languages and cultures. Sending potential successors overseas for
travel and study might be one of the best investments a family
business can make.
"Family businesses should also pay attention to upgrading
financial and information systems," says Poza, who points out
that lower technology costs now make that easy to do. "Having
information formalized increases the level of trust when a family
business does enter the international market."
Patricia Schiff Estess publishes the newsletter Working
Families and is the author of two new books, Managing Alternative
work arrangements (Crisp Publications) and Money Advice for Your
Successful Remarriage (Betterway Press).
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