To use an Americanism, the reality is that the world is now “glocal”. As a result of the internet and other business links, Japan, South Africa, Brazil and Qatar are all countries that are now within reach of even the smallest of businesses with the right connections. However, with expansion comes risk, along with the potential rewards.
Defending against the gaps
It is important that your relationships with the parties overseas (be they suppliers, distributors and/or agents) is accurately documented. A contract within other territories should be on terms that you know and, most importantly, understand. For example, it is very difficult to enforce intellectual property rights in many countries (such as China) and you may find yourself commissioning packaging and manufacturing of your products overseas (with all the cost saving benefits) only to find out that the same manufacturer is copying your designs for a lower quality competitor to use. Were this to happen to your business, it would not only be incredibly frustrating, it could also be very damaging to your sales and your brand image (people may confuse the cheaper product for your own).
You may have heard the tales of golf clubs being made in China and some lower quality branded ones “finding their way out the back door”. Whilst some people may buy the “knock offs” knowing they are lower quality, others may associate these poor quality imitations with your company and this could damage the reputation of your goods.
There are also the more challenging local cultural issues that you and your contacts may face. People often refer to “customary payments” that may need to be made for goods to move in and out of a country. Whilst they may seem legitimate based on your discussions with local contacts, they could, in fact, be deemed to be bribes. This distinction is important because as a UK business you will be governed by the Bribery Act 2010.
How to take aim and hit your goals?
When looking to work with third parties overseas there are 6 headline points that can help you (a) consider whether it is a viable route for your business and (b) whether your business is protected from a risk perspective:
What are the local rules for trading in the territory? Many countries (such as Qatar) require you to have an incorporated vehicle in the country to trade directly into the territory. This means new subsidiaries for your business;
What type of arrangement do you need? Do you intend to contract with a supplier, distributor or agent in the territory? Each of these contracts differ and should be
Applicable Law. Make sure (unless you have experience with local lawyers in the relevant country) that your contracts are governed by the law of England and Wales and will be heard in the English courts if there is a conflict. International legal disputes can be expensive and time consuming;
Protect your business value. Make sure you have procedures in place to protect your intellectual property and confidential information. This may mean registering your intellectual property rights in the relevant country;
Do your research – make sure you engage the right people for your product, not just the one that comes to your door first; and
Remember the Bribery Act 2010. Make sure you have procedures and training in place to comply with this legislation.
A well rehearsed plan can help you launch your business around the world with millions of customers. However, without proper and careful preparation, you may, unfortunately, find yourself and your business knocked out of the market far sooner than you should have been.