Top Ten Dos and Don’ts for Companies Doing Business Internationally

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1. Understand that Doing Business Overseas is Different than Doing Business in the USA.
The vast majority of American business people and lawyers have no experience with business or law outside the US. This is not surprising. Only 1% of American college students spend even a single semester studying outside the US, and a miniscule number of US high school students study abroad. The US education system is notoriously poor at creating fluent speakers of other languages. On top of that, even the largest US companies rarely send US employees overseas for extended periods of work.

2. Do Appropriate Due Diligence on the people you hire to run your overseas operations and the people/companies you engage to sell distribute and service your product.
When you hire a Country Manager, head of Sales, head of Service or Finance or other senior manager for your operation in another country, what are the most important qualifications? For most US companies they are:

1) that he made his numbers in his last job, and

2) that he speaks fluent, only lightly accented English. Those are certainly important, but they do not mean this will be the right person for your company.

3. Train your employees – and your management – and your Board.
It is fair to assume that US business people will have, at best, a tourist’s knowledge of the foreign countries and cultures where your company does business – and no knowledge at all of foreign laws. American business managers are notoriously ethnocentric and chauvinistic. Many will not recognize that they need training and be unwilling to devote time to it.No matter how hard your company tries, it is unlikely many junior employees, let alone senior managers, will learn a foreign language on the job. But companies can provide incentives to learn more about the places where the company is doing business and how to do business effectively in the company’s foreign locations.

4. Consider Exclusive Distribution Arrangements –but agree to them only if absolutely necessary.
Many companies starting business in a new country are pressured by the prospective local distributor to grant exclusive rights to the territory. Granting a single company the right to market, sell and service your products in a country or territory may be the fastest, easiest and least expensive way to gain entre into a new market, but an exclusive distribution agreement is a marriage. You are new in town and do not know what is available in the field, so probably should only be dating rather than marrying the first eligible person you meet.

5. Consider joint ventures – but enter into them only if necessary.
Joint Ventures area another form of marriage – and may be a shotgun wedding for the US company. In some jurisdictions foreign companies wishing to enter the market are strongly advised or required by the local government to do so in the form of a joint venture.This can be an overt way of preventing market domination by foreign companies and subsidizing the local royal family or ruling elite.

6. Maintain responsibility for Finance, Legal and Compliance.
A US company will have Compliance, Financial and Legal obligations under US law and regulations that apply to its foreign operations. Even if your local employees speak fluent business English, it is doubtful they are going to understand the unique cultural intentions behind a US company’s Rules of Business Conduct, the nuances of ethical constraints on US businesses, the reality of laws such as US Export Controls or the Foreign Corrupt Practices Act or the need for accurate financial records and US GAAP accounting. The training provided by US companies for foreign employees in these areas is usually inadequate – if it is done at all. Does anyone really believe an employee has been“trained” on the Foreign Corrupt Practices Act by going through a 30-minute on-line program?

7. Understand Local Law and its Role in Society.
Americans often think that because Japan has very little litigation, Japanese companies are not concerned about contracts and legal rights. That is an enormous cultural misunderstanding that can lead to major business mistakes. In fact, Japanese businesses are very legalistic and concerned with preserving their rights – though they are not litigious, in part because the Japanese court system is slow, expensive and cumbersome.

8. Show Up.
In foreign countries, American business people are famous for being the ones who show up, act very busy for a short time, make a lot of promises, then leave and are never seen again. That is, if they ever show up at all.

9. Protect your business by Respecting the Foreign Corrupt Practices Act and setting up a real compliance program.
Bluntly speaking, in many parts of the world and in many industries, bribery and falsification of business records by US companies and their subsidiaries are very common. Even though most US lawyers and businesspeople know that paying bribes and falsifying company records are bad for business, the mentality of “Don’t ask/Don’t tell” is alive and well when it comes to corruption in international business. Corporate lawyers need to recognize this reality and stop kidding themselves that they work for clean companies who hire only ethical employees. Conduct that constitutes a felony violation of the Foreign Corrupt Practices Act is common and companies are well advised to set up a strong anti-corruption compliance program.

10. Conduct a Thorough Risk Assessment for your international business and keep it up to date.
Very few companies do a complete risk assessment before entering into new international business. This includes decisions to do business in extremely corrupt countries such as Russia, Vietnam, China and many other countries, where the legal systems are not impartial or free from political influence and where courts are not particularly good for resolving business disputes between local citizens, let alone cases between foreign companies and locals

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