AZHCC Global Trade Best Practices White Paper 2016

GLOBAL TRADE BEST PRACTICES WHITE PAPER PRESENTED BY

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GLOBAL TRADE BEST PRACTICES: TAKING YOUR NEXT STEP IN THE GLOBAL MARKETPLACE PRESEN T ED BY

ARIZONA HISPANIC CHAMBER OF COMMERCE November 2016

RESE A RCH ED A N D WRIT T EN BY MIKE SLAVEN, PhD

I N CO L L A B O R AT I O N W I T H

SAPNA GUPTA, ASU Morrison Institute for Public Policy LUIS RAMIREZ THOMAS, Ramirez Advisors Inter-National LLC

CO L L A B O R AT I N G CO R P O R AT E PA R T N ERS CLARENCE MCALLISTER CEO, Fortis Networks DAWN NAGLE Executive Director, Metro Phoenix Export Alliance (MPEXA) EDUARDO GONZÁLEZ DÍAZ DE LEÓN Deputy Trade and Investment Commissioner, ProMexico Phoenix GLENN WILLIAMSON CEO, Canada Arizona Business Council HANK MARSHALL Economic Development Executive Officer, City of Phoenix JAIME CHAMBERLAIN President, J-C Distributing

KEVIN O’SHEA Vice President International Trade, Arizona Commerce Authority KRISTIAN RICHARDSON Director, U.S. Commercial Service Arizona LORENA VALENCIA President & CEO, Reliance Wire MARCOS GARAY Executive Director, Arizona-Mexico Commission MELISSA SANDERSON Vice President for International Affairs, Freeport McMoRan & Chair, Arizona District Export Council

ED I TO R

MONICA S. VILLALOBOS

C R E AT I V E D I R E C TO R CARMEN G. MARTINEZ

A research publication from the Arizona Hispanic Chamber of Commerce, www.azhcc.com, (602) 279-1800 Cover Illustration © kras99 — Fotolia.com

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EXECUTIVE SUMMARY Arizona’s

small

and

medium-sized

businesses

are

companies with stability and limits their exposure to

increasingly well positioned to grow by taking advantage

downturns in the domestic economy. The vast majority of

of opportunities in a global marketplace. While many

U.S. exporters are small or medium-sized, and in Arizona,

– naturally – feel hesitant to explore their international

there are a number of minority-owned businesses that have

potential because of what they don’t know about global

international clients.

trade, a whole array of organizations in Arizona exists to

From exporting products, to participating in global supply

provide concrete assistance to companies that want to take

chains, to licensing and contracting, to full-blown in-country

their next step in the international arena.

investments, there are many ways for companies to tap

This paper works toward answering some of the major

into international potential, with varying levels of risk and

questions Arizona businesses might have about global

resource commitments – allowing companies to grow into

trade, while also pointing out some of the easy-to-access

the global market over time and with a defined plan in

resources that can help businesses every step of the way.

mind. Given Arizona’s shared border with Mexico and

It further describes various things that companies that

strong business and investment ties with Canada, Arizona-

successfully enter international marketplaces do well, as

based companies have two very dynamic and growing

well as some of the things that companies that are just now

markets to explore. Besides direct marketing to consumers,

entering this space may not have thought about. One of

Arizona-based companies have the opportunity of pursuing

the best ways to prepare is to look at what other companies

sales through global logistic chains in key sectors such

have done and identify the best practices for global trade.

as aerospace, automotive manufacturing, fresh produce

Taking your next step in the global marketplace is ever

both Mexico and Canada are markets with high receptivity

distribution, mining, and renewable energy. Additionally,

more important because international trade offers dynamic

for American products and consumer goods. Finally,

opportunities in diverse markets. For many companies, their

Arizona has become a magnet for foreign direct investment

long-term survival and growth are greatly dependent on this

from

new business imperative: to think global. But companies

Mexican,

Canadian,

and

European

sources,

offering another gateway for local companies to establish

need to be proactive, commit resources, and do their

relationships with prospective international business partners

homework in order to minimize risk and create a framework

or customers.

for success.

A growing number of organizations – backed by the federal

The global marketplace offers tremendous prospects for

government, the state of Arizona, local communities, and

growth. The 95 percent of the world population outside

foreign countries interested in investment – have a presence

of the United States controls more than 70 percent of

in Arizona to provide individual advice and assistance to

world buying power, while the interconnectedness of

businesses looking to enter global trade. These organizations

the global economy makes international trade easier for

can help businesses to answer some of the main questions

smaller businesses. Diversifying customer bases provides

they have about entering global marketplaces, including:

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EXECUTIVE SUMMARY A HEAD START IN INTERNATIONAL MARKETS?

• Is there is demand for my product or service outside of the United States?

• Is my company ready?

• How do I find strategic partners in other countries?

• How can I connect with the specialized knowledge that I need?

Given the cultural linkages between Arizona’s

• How can I ensure I get paid?

Hispanic community and other countries,

• How can I find the capital I need to make the next step?

is it right to believe that Hispanic-owned businesses have a head start of sorts in global

With the help available, businesses should find that their

trade? This sense of familiarity may provide a

next step in the global marketplace might be easier than

foundation for some products or companies,

they think – or at least not as daunting as they thought.

but it is not a guarantee for success. U.S.

Once they decide that it’s time to move forward, their

businesses that are owned by immigrants

attention should turn to the kinds of thorough considerations

seem to find global-trade opportunities more

that successful businesses make. These thoughts should

often, and studies reflect that they export

include:

more than other comparably sized businesses.

• Diligently assessing potential marketplaces

Certain advantages do come with fluencies

• Compliance with the requirements to get a product

in different cultures and languages. “It’s a

to the new markets

definite advantage to know the language

• Being persistent and dedicating resources to the

in another market,” says Marcos Garay, the

effort

executive director of the Arizona-Mexico

• Traveling to new markets and being open to new

Commission.

business cultures • Finding reliable local partners and not being afraid

It is important to emphasize, though, that in

to ask questions

almost all cases there is still a learning curve.

• Guarding against risks relating to the supply chain,

Any business must undertake this learning

country risk, and intellectual property protection

process with patience and persistence to do

• Defining a clear logistics solution to get to market

well. “There are a lot of cultural ties between

• Building the right team to address legal, tax, customs

Arizona and Mexico, but they are sometimes

and logistics strategies

a little rusty,” Garay says. “When you’re here and you’ve been here for a while, even

This paper provides a guide to exploring global markets

if you’re second generation, it is a different

through local resources, as well as a checklist for business

world – there’s more and more acclimatization

considering expanding their international footprint. At the

to the United States. The Hispanic market in

end of this paper is also a description of the ecosystem of global-trade assistance in Arizona – the organizations and

Arizona is different than the Mexican market.

resources that are there to help you. With this support and

But, no doubt, there are certain similarities

knowledge, your next step in global trade may be easier

that are there.”

than you imagined.

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A WORLD OF OPPORTUNITIES: THINKING ABOUT GLOBAL TRADE is less than one percent of companies in the United States, according to the U.S. International Trade Administration.

Many businesspeople regard looking beyond America’s borders as beyond their comfort zone. Yet the benefits of international trade, including market diversification and diversity along with opportunities to find strategic partners, makes looking beyond our borders very attractive.

A wide array of resources exists to provide Arizona businesses with help in taking their next step in global trade. But why is it now a business imperative for every business – no matter its size – to seriously consider its international trade potential?

In many ways, the global economy is already all around us. As consumers, we don’t even notice that a large number of consumer goods that we purchase come from Mexico, China, Indonesia, or other parts of the world. Companies that offer their products or services online will at some point in time receive a request for their product from outside the United States. Yet many small or medium-sized businesses have local client bases and strong roots in a particular place. Why should such a company take a look at their global potential, and what does doing that even mean?

MARKET POTENTIAL IN INTERNATIONAL TRADE “Would you rather have five customers walk into your shop today, or 100 customers walk into your shop?” asks Kevin O’Shea, vice president for international trade at the Arizona Commerce Authority. “If you’re only selling in the U.S., you’re only going to have five customers walk into your shop, because only five percent of potential buyers are in the U.S. The markets outside the U.S. are huge – really huge,” O’Shea continues. It can be easy for U.S. businesses to lose sight of overseas markets because of the size of our domestic economy, but the 95 percent of world

The fact is that international trade represents huge potential opportunities, even for smaller businesses – but these opportunities often are overlooked. These opportunities are sometimes in international-trade sectors that are relatively self-apparent, like exports. Others lie in evolving international supply chains, or in multi-lateral trade flows where Arizona forms just one part in a network of investment and exchange spanning three or more countries.

“Would you rather have five customers walk into your shop today, or 100 customers walk into your shop?” asks Kevin O’Shea, vice president for international trade at the Arizona Commerce Authority. “If you’re only selling in the U.S., you’re only going to have five customers walk into your shop, because only five percent of potential buyers are in the U.S. The markets outside the U.S. are huge – really huge.”

It’s clear that many of Arizona’s minority-owned businesses already do leverage these dynamics to do business extensively with international companies. According to the Arizona Hispanic Chamber’s 2012 Minority Business Enterprise report, 13 percent of Arizona minority-owned Arizona businesses have international businesses as clients, whether these international partners have their offices in Arizona, elsewhere in the United States, or farther afield.

Many of these businesses are small to medium-sized enterprises, with 5 or fewer employees.

Still, the fact that 87 percent of minority-owned businesses did not report any international clients shows there’s great potential for smaller and minority-owned businesses to expand more into global trade. To take another measure, while more than 300,000 American companies export, this

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A WORLD OF OPPORTUNITIES: THINKING ABOUT GLOBAL TRADE population that lives outside of the United States holds more than 70 percent of global buying power.

Here in Arizona, our border with Mexico puts one major international market at our doorstep, which makes it even easier for any business to explore its global trade potential.

Arizona companies can and do conduct trade in all parts of the world: Of Arizona’s $22.7 billion in exports in 2015, 40 percent went to Mexico and 10 percent went to Canada, and the remaining half went farther – to places like China, Europe, Thailand, and Brazil. In the 2012 survey of minority-owned Arizona businesses, among those who did business with international clients, 41 percent of these clients were Mexico-based and 29 percent were Canadabased, and much of these sales were to companies that are worldwide. Still, “The particular market right next door to Arizona, Mexico, is very large, and is a growing economy with a growing consumer class,” O’Shea says. “That’s a pretty compelling thing to be aware of when it comes to a business exploring exporting.”

For small and medium-sized businesses, this global group of potential customers is hardly unreachable. The vast majority of U.S. companies that export, for instance, have fewer than 500 employees, and these businesses account for about a third of all U.S. exports by value.

These companies typically aren’t running vast, complex multinational operations: Most export to only one other country. Despite the success that many smaller American companies are finding in the international marketplace, there is clearly room for many more. The initial legwork involved in assessing international markets and finding distribution channels may seem daunting, but the rewards can be well worth it.

MADE IN AMERICA

DIVERSIFICATION AND RISK MITIGATION

Businesspeople might not realize that American companies are particularly wellpositioned in global trade because of the positive reputation of American business and American goods in many markets around the world. Lorena Valencia, an Arizona-based businesswoman whose businesses export to Latin America, explains, “There is a lot of respect and demand for U.S.-made products.

As a U.S. business, there is a good chance that your product will be very well received.”

Melissa Sanderson, Freeport McMoRan’s vice president for international affairs and the chair of the Arizona District Export Council (DEC), puts it: “The majority of countries are still craving to do business with Americans. We are regarded as honest dealers and people who respect other people. Actually, people want what you have to sell because you are American. American goods are considered to be quality goods – ‘Made in America’ means something overseas.”

Beyond the opportunity to grow, greater involvement in global trade provides a way for businesses to insulate themselves against economic downturns, which can be vital to the sustainability of smaller enterprises. One study found that companies that export are 8.5 percent less likely to go out of business than similar non-exporting companies.

It makes sense why companies involved in global trade, regardless of size, would be more resilient: Having customers in different countries is a way of guarding against the risks that companies face if the domestic economy enters a period of recession or stagnation.

“Companies that export not only grow faster, but are more likely to ride out economic storms if they’ve diversified their client base,” says Dawn Nagle, executive director of the Metro Phoenix Export Alliance (MPEXA).

“Companies that export not only grow faster, but are more likely to ride out economic storms if they’ve diversified their client base,” says Dawn Nagle, executive director

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A WORLD OF OPPORTUNITIES: THINKING ABOUT GLOBAL TRADE of the Metro Phoenix Export Alliance (MPEXA). As Kristian Richardson, director of the U.S. Commercial Service in Arizona, relates, “Some markets, for example Australia, were still buying products during the downturn in the global economy. The U.S. companies that were struggling during that time could have potentially fared better had they had more exports.” As the ACA’s O’Shea puts it, “I’ve run into quite a few small businesses that have said what saved them during the recession was that they had some export markets they were selling to.”

product and its circumstances. Arizona businesses find success in many markets: There were 25 different countries where exports from Arizona were worth $100 million or more in 2015, when Arizona export growth far outpaced the national figure.

Exporting is an area where there is especially a lot of help available to small and medium-sized companies.

As this report explores, there are many organizations and initiatives that exist to provide individual help to Arizona companies that want to grow their exports.

THREE WAYS OF THINKING ABOUT GLOBAL TRADE

2. TRANSNATIONAL SUPPLY CHAINS “Global trade” might also mean doing business with companies that operate in the U.S. but partner with contractors in different countries to assemble a product sold around the world. Smaller businesses seeking to expand their global trade involvement in this sense are leveraging the global supply chains in which such larger companies are major players – without the smaller business necessarily shipping its goods to different markets.

“Global trade” is such a big and abstract topic that it can be difficult to understand what it might mean for a particular business. These three dimensions of global trade are ways to think about the concept that might help businesses imagine where they might fit in.

1. EXPORTS Perhaps the first thing that springs to mind when thinking about global trade is the classic concept of shipping a product to a foreign market. By exporting, a business takes advantage of a market opportunity in another country where there is demand for their product. Exporting is a relatively obvious global-trade opportunity for many businesses, especially those that make physical products. However, other types of companies that may not have considered it can also export. Companies in the service sector can often move their products electronically. An Arizona retail location is even exporting when it makes sales to foreign visitors who have come into the shop, with Mexican visitor spending in Arizona in 2014 totaling $2.5 billion.

Many transnational supply chains span the world, but in the case of Arizona, a regional supply chain has emerged from the production synergies between Arizona and northern Mexican states, especially our cross-border neighbor, Sonora. In recent decades, increasing education and productivity levels in the Mexican manufacturing workforce have attracted more sophisticated industries. This brings companies to Arizona who aim to seize upon the relative advantages of both Arizona and Mexico by dividing their production processes across the international border. These supply chains can be very integrated, taking advantage of NAFTA provisions so that products can move across the border many times before they become finished goods.

For Arizona businesses, Mexico is the biggest single export market. Arizona’s exports to Mexico have increased reliably since the start of the economic recovery, and Mexico’s growing economy, currently the 15th largest in the world, is projected by the World Bank to become the sixth largest by 2050.

The proximity of the Mexican and Canadian markets, and the ease of trading with them made possible by NAFTA, makes it easier for Arizona companies to explore their export potential. Still, the lowest-hanging fruit for each business will depend on its particular

Smaller companies can take advantage of these transnational flows by adding value somewhere along the chain. “If you are a company that can solve a knot in the transnational supply chain, you can demonstrate how you can save money for a big company, and the big company will listen to you,” DEC’s Melissa Sanderson says. As Marcos Garay, executive director of the Arizona-Mexico Commission, puts it regarding the Arizona-Sonora region: “With Sonora, it’s a

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A WORLD OF OPPORTUNITIES: THINKING ABOUT GLOBAL TRADE great opportunity because there’s so much going on.

Because of the aerospace industry, the IT sector, and the manufacturing sector for automobiles, there’s a counterpart – a supply chain – in Mexico, and there are plenty of opportunities to get involved there.”

THE BOTTOM LINE: LOOK TO YOUR NEXT STEP IN GLOBAL TRADE

Another end result of this can be that a business’s inputs become introduced to the various international markets where the final product is sold. “One of the quickest ways for a small or medium-sized business to get into international trade is to partner with a company that has something in market in another country,” Sanderson says.

Every company is different, and for some businesspeople, reaching a company’s global trade potential won’t be the highest priority on the agenda, for legitimate reasons.

3. FOREIGN DIRECT INVESTMENT

But the huge scale of potential opportunity in

A third way to think about the potential in global trade is to focus on the growth opportunities that foreign direct investment brings, on both sides of the exchange. Businesses aiming to grow by capturing the benefits of foreign direct investment look to expand their own productivity either by investing abroad, or by finding the market opportunities created by foreign companies investing in Arizona.

global trade does mean that it has become a business imperative for enterprises of all sizes to take a systematic look at their potential. For every business, global trade should enter somewhere into its business strategy or planning – even if due diligence ends up showing that the company isn’t currently positioned for such a move.

For example, when a service-providing Arizona business opens a small office in another country – either to reach new customers, or better serve an existing transnational customer – this creates jobs in that country while also growing the business in Arizona. Many countries, including Mexico, have trade promotion offices that provide considerable help to U.S. companies looking to grow through making even a relatively small foreign investment.

Just as with any business decision, it’s an involved process to make sure that potential rewards of greater involvement in global trade outweigh the risks. At the very least, though, this means adopting a somewhat more global mindset. Each business can ask: Is there a major opportunity being overlooked? Does it make sense to look at markets outside of the United States? And, where does global trade fit in to the longrun vision of the business?

On the other side, when a global company expands to Arizona, local needs in the new location must be filled, creating opportunities for other businesses. A 2015 report counted nearly a thousand internationally owned businesses in Arizona, with Canadian businesses the single largest investors in this regard, followed by British, German, and Japanese enterprises.

“What you have is a group of companies domiciled in Arizona that operate internationally,” says Glenn Williamson, CEO of the Canada Arizona Business Council. “These companies drive truly multi-lateral trade, especially trilateral trade between Mexico, Arizona, and Canada.” No matter which way the investment is flowing, these trade dynamics create growth opportunities for companies of all sizes and sectors.

The next sections point out the resources that exist to provide individual help to you in thinking through such questions, and moving on to your next step in global trade.

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CASE STUDY

A WORLD OF OPPORTUNITIES: THINKING ABOUT GLOBAL TRADE

I N N OVAT I V E E N T R Y W AY S T O I N TE R N ATI O N A L MARKETS Clarence McAllister, the CEO of the Phoenixbased construction and engineering company Fortis Networks, is leading his company into global trade by finding entry points through partnering with a large, U.S.-based entity – the federal government. McAllister, a Panamanian American who first moved to America to attend ASU, has had an outward-looking perspective since founding Fortis Networks in 2000. “My background is one of the reasons I’m open to international business,” he says. “I have no problems working overseas since I know different languages and cultures, which makes me appealing to businesses in different countries as well.”

level of maturity that would allow him to provide the necessary focus. “From the beginning, we realized that to grow the company, we would have to look outside of Arizona. I had focused mainly on the U.S. market because I didn’t feel like we had the economies of scale to go international. But now that I have a good base in terms of employees and skills and past performance, we were very lucky to get our first overseas contracts through the U.S. government.”

Oftentimes, a smaller business’s best route into global trade will be through doing business with a larger, U.S.-based entity that has a global presence. This is a way of mitigating risk – since business is still largely done with U.S. currency and under U.S. laws – while providing businesses with critical exposure to other markets through their participation in a supply chain.

Though dealing with a U.S. entity, McAllister and his employees are learning crucial aspects of international business.

McAllister didn’t turn to potential international opportunities until his business had reached a

As Fortis Networks shows, there are a number of different ways – including through the supply-chain demands of U.S.-based entities – that a business might be able to mitigate risk, learn important lessons, and make an entry into global marketplaces.

“We don’t manufacture widgets, but we still have to ship materials overseas. We still deal with logistics and customs and things of that nature.

Sometimes we have to hire local resources,” McAllister explains. “So it’s a little bit different – but we see a lot of opportunities. I see more than anything the need for infrastructure that does not exist in other markets. Being able to see these needs from a safer standpoint where there’s not that much risk to us gives us that exposure, and allows us to establish local contacts and to be able to offer those services.”

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TITLE TAKING THE NEXT STEP: RESOURCES AVAILABLE TO ADDRESS COMMON QUESTIONS • FREE ONLINE DATA FROM TRUSTED SOURCES: Many U.S. government agencies have detailed data about foreign markets, available for free. The International Trade Administration’s Top Markets Reports (www. trade.gov/topmarkets) helps exporters explore their potential by comparing opportunities. The market data library available through www.export.gov is another extensive resource. Other U.S. government agencies’ websites – like the State Department (www.state. gov) and Commerce Department (www.commerce. gov) also have extensive datasets that can help businesspeople understand whether there is demand in various countries for importing products.

Even for businesses that sense their own international potential, it may be unclear where to begin. Or, it could be that you’ve given it some consideration before, but encountered an obstacle or dead end.

In fact, Arizona’s small and medium-sized businesses can turn to a large number of resources to help realize their potential in global trade, in ways that open up opportunities to businesses that may otherwise feel they don’t have the time or the information to succeed. These resources and their contact information are listed at the end of this white paper – and how they can help you is explained below.

Because of the importance of exports and international trade to the economy, many of these organizations will take an individual interest in assisting you in realizing your potential.

• TRADE ASSOCIATIONS: These can be important sources of information when it comes to the dynamics of particular industries’ supply chains, and can help smaller businesses to understand the lay of the land: What tiers of the supply chain it might make sense to aim at, and where the potential opportunities are.

Here are some common questions that businesspeople might have about going into global trade – along with the resources in Arizona that will help each company to find the answer that is relevant to them.

• LOCAL EXPERTS: Local resources, available for free, can help you find the information that you need, even if you find the scale of the information available overwhelming. The staff at Arizona’s two Export Assistance Centers – which together serve the entire state – as well as MPEXA (Metro Phoenix Export Alliance) can point you in the direction of the information most relevant to you. Especially when it comes to Mexico and Canada, there are experts everywhere in Arizona that know those markets very well. (The directory at the end of this white paper has many of them.)

HOW CAN I KNOW WHETHER THERE’S EVEN DEMAND FOR MY PRODUCT IN OTHER MARKETS? Oftentimes the first barrier that small businesses encounter is that they don’t know where to begin in terms of figuring out where they have potential. Once a business has an idea for a product of theirs that might succeed in another market, how do they find out if the idea is good?

“There are many free tools that exist to guide your thinking through the first step of, ‘Should I be thinking about exporting my product to country X? Or is there too much competition?’

If your answer is yes, that this is worthwhile, then the same resources can guide you further,” Sanderson says. In any case, the resources available are so abundant that any company can start exploring its potential.

In reality, finding relevant information – often for completely free – has become relatively easy because of the sheer amount of resources made available for small businesses.

This includes free online information that can help businesses explore markets, as well as services available that can later help them pinpoint more specific opportunities. “There is tons and tons of absolutely free information out there that businesses need, and smaller companies might not know that they have the right to that information,” DEC’s Sanderson says.

HOW DO I KNOW MY BUSINESS IS READY? For a business that has not explored global trade before,

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TAKING THE NEXT STEP: RESOURCES AVAILABLE TO ADDRESS COMMON QUESTIONS

it’s natural to wonder if it is prepared for making that step.

Every business is different, of course, but businesses that are prepared to expand into the international space tend to share some characteristics. Some of these are:

companies. Once you get to know them, and they get to know your operation and your product, they can help to give you some guidance.

HOW CAN I FIND PARTNERS IN OTHER COUNTRIES THAT I CAN TRUST?

1. A PRODUCT THAT HAS SOLD SUCCESSFULLY. Companies that are at the idea stage of product development should factor exporting into their conceptual plan, but for the most part, companies that are ready to export have a developed product that has already been selling domestically. “These companies have a level of success and an established client base, so buyers know the product is marketable and is selling,” MPEXA’s Nagle says. As the ACA’s Kevin O’Shea put it, “If you start thinking about exporting, folks will want to know: Are people buying that in Arizona?” Since the domestic market is almost always the easiest market to sell to anyway, a good track record in the U.S. provides vital experience that can then be put to good use exploring new possibilities.

Many businesses – even those that know they are very interested in global trade – are nervous about placing their trust in companies based in other countries, such as distributors or subcontractors. It’s natural to be wary of working in different business cultures and under different legal systems. How can a business know that a distributor or a contractor is trustworthy?

For companies whose next step would be to find such partners, there are actually a number of vetting services and “matchmaking” services – available at little or no cost – that can put interested U.S. companies into contact with foreign partners that have a track record of working successfully with other U.S. businesses. One is the U.S. Commercial Service, which can in particular find trusted agents, distributors, and resellers. “The assistance programs we offer identify individuals and organizations that are prevetted by the American government, that are established financially and are sound international business partners,” says the USCS’s Kristian Richardson. The USCS’s Gold Key Matching Service, which is available at relatively low cost, can set up meetings in other countries when you are working to make contacts necessary for seizing opportunities there.

Businesswoman Lorena Valencia, who has used USCS programs, describes such services as “basically, an extension of you because they have agents in country that can help you complete your market analysis by providing not only demographic data, but real psychographic and sociographic data which sometimes prove to be more important.”

2. GOOD ORGANIZATION AND TIME. It won’t be a surprise that businesses that thrive in the internationaltrade arena are like those that can take on other new ventures successfully: They know their profit margins, are well organized in terms of bookkeeping and production, and can devote the necessary time and attention to the effort. A relatively mature operation – often built up through domestic experience – helps companies to undertake the complexity of a new challenge.

3. A GOOD WEBSITE. A company’s website is its face to potential customers across the globe. This puts any company, in a small way, on the global map. A good website also serves as a main corridor for possible international business. “Make it an easy, clean, not overly verbose website. And be prepared to receive inquiries from international markets,” O’Shea says.

This does not mean every request must be fulfilled, but companies should think about how they are going to handle requests from new customers in possibly unexpected places. “People may reach out to you. A small company needs to be prepared how to handle an inquiry they get from a mystery buyer,” O’Shea says.

Many organizations conduct trade missions – both bringing Arizona businesses abroad, and foreign businesses to Arizona – that provide smaller businesses with the opportunity to make contacts with foreign companies that have been vetted by the organizers of those missions and are known as reliable partners. Other services available through the US Commercial Service can also provide vetting on potential foreign business contacts made through other channels.

These attributes might provide a business owner with a sense of whether their company is ready to take further steps, or is at a different stage of development. If a businessperson isn’t sure, though, one thing is important to emphasize: The experts on the ground in Arizona can provide you with an opinion, based on their experience of working with smaller

The bottom line is that – by using services like these – partnering with foreign-based businesses is by no means a shot in the dark.

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TAKING THE NEXT STEP: RESOURCES AVAILABLE TO ADDRESS COMMON QUESTIONS

HOW CAN I FIND THE SPECIALISTS I NEED?

HOW CAN I FIND THE CAPITAL I NEED TO MAKE THE NEXT STEP?

Most companies that conduct trade across borders will need specialist help – for instance, lawyers who know other countries’ laws about packaging, people who can advise on licensing and tariffs, customs brokers who know the ins and outs of moving goods across borders, or financial institutions that know how to make cross-country payment arrangements. There is lots of such expertise out there, and Arizona businesses have resources at their disposal that can help them to identify this kind of assistance.

Sometimes expanding into global trade will be a relatively incremental expansion of a business’s scope. Other times some additional investment or liquidity will be required to make the step. In addition to a business’s normal banking partner – which will usually be its first option for new capital – there is also some help available from other banks that may be better versed in this financing.

The U.S. Small Business Administration has programs that offer loans for some export-specific activities, while government entities like the Export-Import Bank also may act to guarantee loans to small businesses so that they can expand their international trade activity. For companies looking to make foreign investments, the Overseas Private Investment Corporation (OPIC), a U.S. government entity, can sometimes help to provide financing. In any case, there are a number of other possible financing options that locally based export organizations can steer a business toward if their normal sources of funding aren’t particularly receptive.

MPEXA, which operates as a centralized hub for up-to-date information about exporting, gives small business owners the opportunity to get on the phone, explain their need, and receive a quick response that connects them with the service they require. This ranges from initial information about exports, all the way up to specialized inquiries. “We really streamline the delivery of export education and assistance programs. We streamline the delivery so companies don’t have to figure out where to get it on their own – at a very highly validated level from expert providers,” MPEXA’s Dawn Nagle explains.

THE BOTTOM LINE: HELPING YOU TAKE YOUR NEXT STEP

HOW CAN I MAKE SURE I GET PAID?

Any Arizona business that wants to explore trade opportunities will find that the resources exist to get its big questions answered.

Small or medium-sized businesses that are curious about their global trade potential have resources at their fingertips to get serious about their opportunities. While businesses may be hesitant to dive in for completely understandable reasons, the truth is that, with some help from readily available local sources, they can gain significant knowledge about their most serious questions.

This is a natural question when dealing with businesses operating far away and under different legal systems, but there are actually many different ways to guard effectively against the risk of nonpayment. Apart from using services that help you to find vetted partners, some financial institutions will be able to arrange international letters of credit that can help ensure payment. Insurance against nonpayment is available both from government sources like the U.S. Export-Import Bank and commercial banks.

The next section suggests some best practices when it comes to guarding against nonpayment. These can affect a product’s competitiveness in other markets or the cost of getting it to market, but the larger point is that there are a number of effective steps to take here, and advice is available on which may suit the needs of a particular business.

Those businesses that do decide it’s worth it to pursue more global opportunities will also find that these resources will help them avoid common pitfalls and undertake best practices, which are the subject of the next section.

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CASE STUDY

TAKING THE NEXT STEP: RESOURCES AVAILABLE TO ADDRESS COMMON QUESTIONS

IMAGINING – AND EXPLORING – GLOBAL TRADE OPPORTUNITIES Lorena Valencia, an Arizona-based businesswoman who owns several enterprises that either export or conduct operations in other countries, has made it a priority for her businesses to look internationally. But how do you move from being interested in global trade, to analyzing the opportunities that might exist, to actually taking the first steps to realize that potential?

lean on the expertise of those organizations that exist to help you understand who the leaders or losers are in your target space. You can also commission marketing studies from in country consultants that can do this type of detailed analysis for you,” Valencia explains.

Then it becomes important – if you haven’t already – to travel to that new market. “Go and set up some meetings. After ideation, soft validation, and an initial competitive analysis, then you go and you do an onsite evaluation to get a feel for the overall business environment,” Valencia says. Here matchmaking services provided by organizations like the MBDA or U.S. Commercial Service are a great help.

The USCS has commercial agents or allies in many countries and almost every major city.

“For a nominal fee, they will set up meetings with potential customers or suppliers.” Such services can work as an extension for a small or medium-sized company that may not have the resources to do this kind of thing itself. “They look at your business through the same prism that you do because they are focused on helping US companies export. To have meetings set up with key principals in the key markets you’ve identified at such a low cost is incredible,” Valencia says.

It starts with research that begins simply and then gets more complex through the validation process. “We actually start with a really simple AdWords search on Google, where you can drill down to see how often a specific word is being searched for in a particular country. For example, if you want to get an idea of how big the market might be for track shoes or collapsible bicycles, you can use a resource like AdWords to start looking to see if it’s trending,” Valencia says. “This data helps validate the amount existing thirst for the product you want to sell in that country. If it’s low, then you will need to take that into consideration when you’re developing your marketing budget. On the bright side, low interest can also mean low competition.” After you come up with ideas, “the next part is to do a soft competitive analysis, if you think you have something.” Here, again, you can take advantage of online market tools such as Google searches or Alexa where you can see specific URL website rankings. Next, you can start your groundwork by reaching out to small business resources in that country such as industry organizations and local chambers of commerce to gather more information. “You can

From here – though there are a number of other practical steps to undertake – that initial globaltrade idea is well on its way to becoming a reality.

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TITLE GLOBAL TRADE BEST PRACTICES: WHAT BUSINESSES THAT SUCCEED DO WELL When a business has decided it’s definitely interested in moving forward in pursuing a global trade opportunity, what are the things it should do?

“Time out – forget everything you know. Learn to look through the lens of clients, markets, and countries that you want to enter and serve. I am a big believer in the ‘measure five times, cut once’ approach. Be well informed, fully understand the risk and reward opportunity, know your options and be committed to the choice you make,” says Hank Marshall, economic development executive officer for the City of Phoenix.

Success in global trade will be a different story for every business. Still, there are certain commonalities that successful businesses tend to share – things that they make sure to do well and best practices that they follow. Here are some of the major steps that they go through.

DILIGENTLY ASSESS YOUR MARKET POTENTIAL – AND GO FOR THE LOW-HANGING FRUIT Businesses that make a successful entry into international trade have done their homework and rethought what they sell from a new perspective. How does a product fit into a different marketplace, where the needs of businesses and consumers are being met in a different way?

the product better? Is the service of the product better?

Is the price better? Is the delivery more timely?” All of this requires carefully assessing the product with an open mind: for instance, the price and competition landscape in foreign markets of interest, and the cultural relevance or compatibility of your product or service, may be different in foreign markets. “Time out – forget everything you know. Learn to look through the lens of clients, markets, and countries that you want to enter and serve. I am a big believer in the ‘measure five times, cut once’ approach. Be well informed, fully understand the risk and reward opportunity, know your options and be committed to the choice you make,” says Hank Marshall, economic development executive officer for the City of Phoenix.

“One of the first things a business needs to do is look at its market assessment, “ Dawn Nagle of MPEXA says. Free online tools such as Top Markets Reports (www.trade.gov/ topmarkets) or the www.export.gov data library can help companies make significant headway in conducting that kind of assessment, and services provided by the U.S. Commercial Service can go from there to provide more complex analyses.

Along with identifying potentially receptive markets, as the ACA’s Kevin O’Shea relates, another basic question is, “What’s the value proposition you’re bringing? Is

Having taken a fresh look at what you offer and compared opportunities, making inroads into global trade – especially for a company entering this space for the first time – is made easier by going for the lowest-hanging fruit available to the business. This will depend on a business’s particular profile, but will often mean taking advantage of markets that are closest at hand and easier to access, or minimizing time differences or cultural barriers. This way, businesspeople can learn the ropes in the least intense environment. Some companies – depending on the product and the market

ACA’s Kevin O’Shea relates, another basic question is, “What’s the value proposition you’re bringing? Is the product better? Is the service of the product better? Is the price better?

Is the delivery more timely?”

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niche it occupies – might find especially outstanding opportunity in markets that are geographically very far away, but where their product is more likely to stand out.

Some may see that the closest opportunity at hand is to take advantage of supply-chain dynamics by partnering with U.S.-based companies.

For most smaller businesses, global trade “isn’t beyond existing capabilities of what they already have and are able to do,” says Kristian Richardson of the U.S. Commercial Service.

For others, the foreign markets closest to the U.S. – Mexico and Canada – may indeed offer the ripest opportunities.

For companies that are newer at global trade, minimizing travel costs, time zone disruptions, and unfamiliarity with other business cultures can be important things to think about. These considerations can be balanced in an assessment of which markets a business is best positioned to enter. “Markets are everywhere, but for a new exporter, go to the low-hanging fruit. For some exporters, this may be Mexico or Canada, but for others, those may not be the right markets. The advice to them is not to walk away from exports, but let’s find the right market,” O’Shea explains.

Still, to do it well, it needs to be a priority. “A small business has to be careful not to spread itself too thin,” says the ACA’s Kevin O’Shea. “When we are talking to a small business, we help them prioritize what markets they are pursuing.” Making global trade a priority of your business development means providing for a few key ingredients.

One is time – ensuring that those leading the business can devote enough time to conducting careful analysis, making new contacts, and traveling to the new markets where they are seeking to expand. Another is money. “You can do a lot of stuff by phone or by email, but you need to have some type of budget set aside. You have a budget for business development – you should have a budget for international business development,” O’Shea says.

As Marcos Garay of the ArizonaMexico Commission says, “It all begins with that research. Research is the basis for making the right choices and the right decisions.”

In this sense, whether it is the right time for a business to push into foreign markets will depend, in part, on whether the business can devote energy to it – what might be called the “capacity to deliver.” If not, then it is probably best to postpone the opportunity and reassess it at another time. A full and candid assessment is an essential part of the due diligence involved in making any market decision. Deciding that entering into a new foreign market is not the right move at a certain time is not a “negative thing” – “no” is a legitimate decision and position to take. “It simply means that is the conclusion of the assessment and due diligence that was conducted at the time,” says Marshall. Businesses make decisions each and every day, and whether or not to export is a decision – perhaps more complex than others, but still a business decision. As Marshall says, “Make yours and don’t look back!”

In any case, the decision about which opportunity seems to be the most ready to take advantage of will depend on analyzing the decision diligently, calling upon the help available to Arizona small businesses. As Marcos Garay of the Arizona-Mexico Commission says, “It all begins with that research. Research is the basis for making the right choices and the right decisions.”

BE SERIOUS AND INTENTIONAL ABOUT PURSUING OPPORTUNITIES

PARTNER WITH ORGANIZATIONS THAT ARE THERE TO HELP YOU

While it is easy to start in a small way – setting up a website and fulfilling orders from international customers who find you – maximizing the reward by intentionally pursuing opportunities in other markets takes time and persistence. For most smaller businesses, global trade “isn’t beyond existing capabilities of what they already have and are able to do,” says Kristian Richardson of the U.S. Commercial Service.

The resources that are available to small and mediumsized businesses aren’t just there in case you hit a dead end in your process – they can help you at different steps throughout the way, and they often have considerable

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overseas reach. Kristian Richardson of the U.S. Commercial Service recommends that businesses “get to know the staff at all the federal, state, and local resources that can assist your company in going global.”

and follow up with the leads you’ve generated from earlier visits.” Making sure you have time and resources to pursue international business development really comes into play when considering the time that it will take for investments to pay off.

Some organizations that function as resource hubs – like the U.S. government’s Export Assistance Centers in Arizona, or the Metro Phoenix Export Alliance (MPEXA) – can offer a general introduction to the universe of assistance that exists in exports, and can help companies get oriented. As MPEXA’s Dawn Nagle explains, “We’re like a concierge service – a centralized hub for information so companies have a landing point to find out more about what is available.” In addition to providing information and events where companies can make important connections, resource hubs can provide company-specific help.

TRAVEL TO THE NEW MARKET WITH AN OPEN ATTITUDE TOWARD NEW BUSINESS CULTURES Successful companies in international business realize that they have to know the business culture in the markets where they are looking to sell, and be flexible about ways that business might have to be done differently than in the United States. Understanding the nuances of how business is done in another country – and the details of how your product fits into a different market – is vital. It also won’t come right away. Visiting the country – and consulting with the people on the ground there who are available to you through partners like the U.S. Commercial Service – is important.

From the perspective of particular industries, trade associations can help to give companies a sense of the shape of global supply chains and provide insight about specific types of opportunities. “Companies should really be aware of all the trade associations that exist across international borders, to help them tap into international markets,” Richardson says. Trade associations in various industries will often conduct trade shows where foreign buyers come to the United States, or where small U.S. businesses can see and assess products that aren’t available domestically so they can understand what they would need to do to build a component. Oftentimes, “The U.S. Commercial Service will have boots on the ground at international trade shows, both in the U.S. and overseas, to facilitate introductions and business interactions between American companies and international buyers,” Richardson says.

“Companies that have a history of success in selling internationally have attempted to understand the perspective of those in the other country – to understand the needs of the international business partner, which is often much different than in the United States,” says the USCS’s Kristian Richardson.

Especially because the organizations that exist to help American companies do closely work together, getting involved in this network will provide a business with much greater market awareness – and much greater access to resources – than they would otherwise have.

“Companies that have a history of success in selling internationally have attempted to understand the perspective of those in the other country – to understand the needs of the international business partner, which is often much different than in the United States,” says the USCS’s Kristian Richardson. From one point of view, this is true when it comes to adaptations that should be made to a company’s product – to realize that there may need to be adjustments to meet others’ needs. “The willingness and the openness to understand what the needs are in the other market, and to be able to adapt to that market, are very important,” Richardson continues.

BE PATIENT AND PERSISTENT Sales often don’t happen as quickly internationally as they do domestically. International business development really makes sense as something long-term – because being in it for the short term is less likely to pay off. This underlines the importance of traveling to the new market in order to make lasting connections.

“Don’t expect a sale the first time you meet with a potential buyer,” O’Shea says. “Don’t expect a sale on your first trip to another country. Be persistent – go two or three times,

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through trade missions, which provide chances to meet potential foreign partners who have been selected because of their interest and reliability. “There are missions all the time from a number of organizations,” the AMC’s Marcos Garay points out, and being involved in the global trade promotion network – through organizations like MPEXA or local chambers of commerce – will provide an awareness of them.

More generally, an openness and a willingness to understand others is crucial from a cultural standpoint. “In my experience, you can do small or big deals around the world, and when you get the numbers down and the mechanics, and you’re ready to sign on the dotted line, the thing that has derailed things is often a lack of cultural understanding,” says Marcos Garay of the ArizonaMexico Commission. “The successful companies get to know the people and the culture.”

When it comes to visiting other markets, oftentimes these services will create introductions, set up meetings, and even provide an officer to provide a cultural briefing and escort a businessperson through a day of meetings in the country.

The U.S. Commercial Service often provides this through the International Partner Search or Gold Key service. “Not only does it give the American company face time with potential business partners, but it’s often a very warm introduction, since it is often the case that our staff already has a relationship with those businesspeople,” says Kristian Richardson of the U.S. Commercial Service.

When it comes to Mexico in particular, “where in the U.S. business is what we might see as more straightforward and ‘forensic,’ in Mexico, relationship-based selling is very important. In Mexico and Latin America, they want to get to know who you are, and a sense of whether they can trust you,” says Lorena Valencia, an Arizona-based owner of several border-spanning businesses. As Garay puts it, “It’s more of a familiar thing, where you can get to know the other individuals.” Cementing these kinds of relationships – or even understanding what you need to do in order to do to succeed in those markets – requires two main ingredients: repeated visits to these places, and an openness to others and their different cultural ways of approaching business. As Garay says, “It comes down to culture, and that’s essential.”

For companies that are looking to establish operations or otherwise invest in other countries, these countries often will also have economic development agencies that will facilitate contacts in a similarly thorough way. This type of service is offered by ProMexico, Mexico’s trade promotion agency, which has a newly opened office in Arizona. “Once a business starts thinking, ‘I should open up something down there,’ we can provide personalized business agenda, we can go along with them to look at potential sites, we introduce them to lawyers, accountants, chambers of commerce, economic development offices, to find partners for the business,” explains Eduardo González, from ProMexico’s office in Phoenix.

FIND TRUSTED, RELIABLE LOCAL PARTNERS

Most companies doing exports will need to work with businesses that are based in another country – oftentimes a company that provides an American business with a distribution channel into a foreign market. As mentioned already, there are a number of services available that can help you to find trustworthy partners, and they will often go farther than you might expect in helping you to establish relationships.

Even if you’re looking to find out about a potential partner in another country who has approached you, there are ways to conduct reliable checks of such companies. “Our International Company Profiles are in-depth investigations into a potential business partner, where our overseas offices can work to determine their legitimacy and financial viability,” Richardson says. “They can often be returned in a matter of weeks from when they’re requested.” Nonetheless, the best matches for your company are likely to come through a more proactive strategy that takes advantage of the expertise and experience on offer.

Most of the time, it pays to be proactive. A number of organizations can help you with doing this, depending on your particular need – whether you are looking to have business interactions facilitated at trade shows, to find a distributor to export to a different market, or to make local contacts who will help you invest in another country.

Organizations that can help in this way are listed in the directory on pages 25 and 26.

An online tool that can provide connections to partner businesses in Mexico and Canada is BIEN (www. connectbien.com), which is free to use and provides an extremely easy way to make connections across borders for a variety of purposes, whether creating supplier relationships or sharing ideas. Other opportunities closer to home come

TAKE TRIED AND TRUE STEPS TO ENSURE PAYMENT “A very important facet of international business is to ensure that companies are aware of how to get paid – what

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FIND TRUSTED PROFESSIONAL HELP THAT KNOWS THE NEW MARKET

the different methods are of being paid,” says the U.S. Commercial Service’s Kristian Richardson. As discussed previously, there are many ways to protect against international nonpayment risk, and the best methods will depend on a company’s situation.

“The technical side of things, I would leave to the experts,” says Marcos Garay of the AMC – and when it comes to international trade, there can be a number of technical sides.

“Obviously the best way to guarantee payment is that you don’t ship before you get paid. But if I’m trying to be as competitive as I can in the marketplace, I may be in a position where I have to start thinking about payment terms for my customers, and if I do that, I’m starting to incur a bit more risk,” says the ACA’s Kevin O’Shea. At this point, while having trusted partners whom you know can provide peace of mind, companies should start thinking about using different tools that can help to ensure payment.

• MOVING GOODS: When it comes to shipping or having goods cross borders, finding a customs broker or freight forwarder will usually be essential for fulfilling anything more than the smallest orders. These are the people that know the technicalities of moving goods across borders, and can help to ensure that your goods reach customers and don’t encounter costly hang-ups crossing into new markets.

• LEGAL AND TAX ADVICE: When it comes to having operations in other countries, having qualified legal and tax help is necessary. As Eduardo González of ProMexico puts it, “in any country, when it comes to import law and tax law, , good-faith actions do not exist”” – meaning that in any other market, businesspeople will need qualified professional help to do it right. As Lorena Valencia, an owner of crossborder businesses, says, “Doing a deep and thorough tax, legal and regulatory assessment is critical if you’re looking to expand into other countries. In other countries, things are done very differently and these elements are sometimes open to interpretation, so vetting information through multiple or dual sources is vital.” These experts will be able to give you an idea of what your obligations will be, and can help the business on an ongoing basis.

Sometimes, a financial institution – either your current bank or a larger one with experience in this area – will be able to arrange an international letter of credit. This is an internationally binding agreement where funds are agreed to be transferred from an overseas financial institution on a certain date, usually pending the completion of part of an exchange. Alternatively, companies can purchase insurance against nonpayment risk (export credit insurance) – either commercially, or from government sources like the U.S. Export-Import Bank – which will normally reimburse 85 to 95 percent of an unpaid invoice. While such risk-mitigation expenses should then be built into the price of your product, these services can help substantially reduce nonpayment risk. “I encourage all companies to look at things like export insurance,” O’Shea says.

Companies that succeed in the international space have prepared themselves not only with knowledge of the market, but also of their obligations. Having an idea of these ahead of time forms important background knowledge for business decisions, because it helps businesses to understand what kinds of costs will have to be built into the price of the products in order to maintain their profit margins.

GUARD AGAINST RISKS ALONG THE TRANSPORT CHAIN Another risk particularly associated with international trade is transporting a good across borders. “There are real risks in the transport chain,” says DEC’S Melissa Sanderson.

“The longer the transport chain is, the greater the risk is.”

When it comes to finding qualified technical help, again, businesses are not alone – the same matchmaking and vetting services that exist to help U.S. companies find other foreign partners also work here.

Especially if the product moves across a number of borders and encounters more and more layers of bureaucracy and officials – or if it is a relatively small shipment that might get bumped in favor of larger purchase orders – the possibility rises that the transport chain could introduce significant risk or could significantly delay an order and thus, possibly, payment. “All of this gets to the point of having insurance,” Sanderson says. Insurance against risk in the transport chain can be provided commercially, and particularly when it comes to political risk, the Overseas Private Investment Corporation (OPIC) can also help to insure small businesses.

PROTECT YOUR INTELLECTUAL PROPERTY Many companies moving into a new market will be selling some good or service that reflects significant intellectual property – whether a patented product or process, or a trademark. Businesspeople must factor in the risk that such intellectual property might face in different markets across the

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world, and take steps to protect this property. “Businesses need to understand that just because they’re protecting their intellectual property in the U.S. doesn’t mean it’s protected overseas,” says Kevin O’Shea of the Arizona Commerce Authority.

SEVEN PILLARS FOR INTERNATIONAL TRADE

It is perhaps obvious – but important to emphasize – that the strength of intellectual property protections differs across markets; some are very low-risk and some much higherrisk. “If a company has the luxury of having a product that has pretty mass appeal across many markets, and they’re new to exporting, I encourage them to focus on what I would call low-risk markets rather than high-risk markets,” O’Shea says. “But, for some companies, those higher-risk markets are the right markets, in which case they need to prepare adequately to mitigate the risk,” he continues.

As a simple example, in Mexico, employee non-compete agreements can be difficult or almost impossible to enforce.

“If your business depends on sharing a lot of proprietary know-how, this is something you might be sensitive to that should be part of your discovery in your due diligence,” Valencia says.

Luis Ramirez, president of Ramirez Advisors Inter-National, offers a basic framework for companies to consider as they prepare to expand internationally.

These “Pillars for International Trade” ensure that companies build the right team, hedge against risk inherent to international markets and confirm that companies make the long-term commitment to pursuing these opportunities.

1. LEGAL. Consider mitigating the risks that come with the ways that business is regulated by other countries, by enlisting legal help. On the U.S. side, and particularly on the international side, legal advisors can help make sure you in compliance with another country’s laws and the implications of this compliance for your business. These implications include possible differences in laws governing contractual agreements or the protection of intellectual property. It may be worth asking your current U.S. law firm if they have any international relationships with in-country law firms in the markets you are interested in entering.

The legal help companies will need to protect intellectual property in new countries is available through the kinds matchmaking services described earlier. Still, businesses need to consider whether actually using those protections is realistic from market to market. “This is the importance not just of patent protection, but also knowing the trade dispute resolution mechanisms, and whether these work for smaller businesses,” says Melissa Sanderson of Freeport McMoRan and DEC.

HAVE A WEB PRESENCE THAT WORKS IN OTHER MARKETS Having a website – any kind of website – introduces your business to global markets. Having a well-designed website puts a good face on your company. To focus on selling in international markets, though, it is worth thinking systematically about the kind of online presence that will help you in those places.

2. TAX AND ACCOUNTING. Finding qualified partners who can help you with issues such as taxes, payroll, and bookkeeping will be necessary for many companies engaging in international business. International tax strategies can ensure that there is no double taxation on foreign income. Tax reporting requirements can also differ from country to country. Professional expertise can help you discern whether you have the right tax structures at home to complement foreign operations.

Partially this means a web presence that is optimized to show up for searches for your product in other countries.

It also means understanding the platforms that people in these other markets are using to buy products. If you are selling to consumers, for instance, “in some other countries, mobile is huge – the infrastructure is such that everyone does things over mobile, and if you don’t have a mobile app, or it’s not easy to buy on a mobile app, you may be shutting out a big portion of your potential consumer base right from the start. Understanding the overall business landscape and how consumers buy products in your target country is crucial,” Valencia says.

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TAKING THE NEXT STEP: RESOURCES AVAILABLE TO ADDRESS COMMON QUESTIONS

SEVEN PILLARS FOR INTERNATIONAL TRADE (CONT.)

3. INSURANCE. One of the most overlooked aspects of international business is insurance.

Oftentimes existing insurance will not cover international operations, and it is important to think through how to insure against new risks in entering an international market. This ranges from nonpayment risk, to country risk, to whether a company’s vehicles will be covered if they cross into Mexico.

There may also be in-country insurance requirements.

logistics networks and ensure that your product gets to your customer on time and on budget.

6. BANKING AND FINANCIAL SERVICES. When it comes to financial services for global business, it is beneficial to work with banks that are well-versed in handling the intricacies of international business. It is also important to find good deals on any necessary currency conversions, and to have a partner that understands exporters’ capital needs. It might help to shop around, or in many cases to look at government-backed financial institutions, such as the ExportImport Bank, OPIC, or loan programs supported by the Small Business Administration that can help mitigate currency risk and receiving payments from foreign clients.

4. CUSTOMS BROKERAGE. Customs brokers can make sure that the process of moving any goods across borders goes as smoothly as possible.

Customs brokers are experts at handling the practical and bureaucratic matters of moving goods across borders correctly and efficiently. Customs classifications can have an impact on the price of the product and can determine if there are specific licensing or permitting requirements, particularly for food and pharmaceuticals. A customs broker who knows the ins and outs can avoid mistakes and reduce the cost of exporting.

7. BILINGUALISM AND BICULTURALISM. Business is business, but how business is done from country to country may be very different. Having someone that has direct in-country expertise, including language and cultural understanding, can help forge strong in-country relationships and ensure that nothing is lost in translation. Many companies make the mistake of turning to a staff member that was born in that country, but that fact alone does not mean that they have the necessary in-country business acumen and expertise. If the team is not complete internally, who can I bring in that completes the team?

5. INTERNATIONAL LOGISTICS AND FREIGHT FORWARDING. Moving goods internationally often involves new layers of logistics, which is where freight forwarders can often offer substantial help. Products need to move to market efficiently, on time, and with as few hiccups as possible. Many businesses will benefit from the expertise of freight forwarders, who operate as an exporter’s agent in often-complex

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LOCAL HELPTITLE WITH GLOBAL TRADE: ARIZONA’S ECOSYSTEM OF INTERNATIONAL TRADE ASSISTANCE If there’s one thing to have gathered from the information in this white paper, it’s this: the sheer extent of the help that’s available to small- and mediumsized businesses in Arizona can provide you a major boost in realizing your potential in global trade.

for international markets and advise them on next steps.

• Organizations providing this kind of advice are the Arizona Commerce Authority, whose international office provides counseling and guidance to individual small and medium-sized businesses about their next steps in exporting, as well as the Phoenix Minority Business Development Agency Business Center, which has been recognized with awards for its export leadership.

Some of these resources are online information that lets a business person indulge their curiosity. But many of these organizations will take a very personalized interest in individual companies – they know your name, learn about what you do, and apply their considerable knowledge and connections to help you.

• In addition, the Export Assistance Centers and MPEXA can also provide this kind of guidance. These organizations often work together to make sure that business owners are talking to the people who can do most to assist them.

All of these organizations work together to form a local ecosystem of international-trade assistance. While online tools are very helpful to many businesses, especially if you are new to international trade, make sure to take advantage of the local and in-person guidance that is available to you.

MARKET INFORMATION: As discussed earlier, oftentimes businesses don’t know where to look for the kind of information that can help them to judge whether there is a market opportunity for them.

Many of these resources have been discussed already in this paper, but here is a brief rundown of some of the major resources that are available.

• Online sources of reliable, government-gathered information abound. These include:

INFORMATION HUBS: Some organizations are designed to serve as hubs for information about exporting or global trade.

• Top Markets Reports by the U.S. International Trade Administration and the Market Intelligence library at Export.gov

Their websites will have centralized information about events – including trade missions, trade fairs, seminars, and others – but they also have staff whom you can contact directly and who will provide you with personal guidance on whatever question you have. Two main ones to know are:

• The Commerce Data Hub at commerce.gov, particularly the international trade section.

• Locally, AZ-MEX Indicators, part sponsored by the ACA and Arizona-Mexico Commission in partnership with the U of A Eller College of Business, provides up-to-date information on trade between Arizona and Mexico.

• Export Assistance Centers. These are run by the U.S. Commercial Service, and there are two offices in Arizona: The Phoenix/Scottsdale Office that covers the Valley and Northern Arizona, and the Tucson office that also covers the rest of Southern Arizona.

• Trade associations often publish detailed market data on industry-specific supply chains. Know the trade associations for your industry and consult with their publications.

• The Metro Phoenix Export Alliance (MPEXA): This exists as a centralized hub for export-related information in the Valley, and also serves as a “concierge service” that will work quickly to answer any export-related question a business has.

• Market intelligence reports are available from the Arizona Hispanic Chamber of Commerce (AZHCC).

EXPORT COUNSELING: A number of organizations provide counseling and advice to small and mediumsized women and minority-owned businesses looking to expand exports. These organizations can provide business owners feedback on their state of readiness

• Sister City programs and delegations can be a source of information and personal contacts about a market’s business climate and cultural considerations, as well as for potential distribution channels.

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LOCAL HELP WITH GLOBAL TRADE: ARIZONA’S ECOSYSTEM OF INTERNATIONAL TRADE ASSISTANCE

• The Arizona Trade Office in Sonora is operated by the AMC and can provide business with export assistance, including helping them search for suitable contacts and letting them know about investment programs in Sonora that might be available.

MATCHMAKING AND PARTNERING SERVICES: When a business has already carefully considered its market potential and decided the next step would be worth taking, it may be at the stage of looking to partner with foreign businesses. A number of organizations in Arizona make it easy to find trusted partners.

• These are in addition to the federally supported programs provided through the U.S. Commercial Service, which are present in Mexico as well as many other countries.

• BIEN is an online tool created by the Maricopa Association of Governments that allows companies to list their company and basic information in an online directory and thereby create a possible network of opportunities with Canada and Mexico – from idea-sharing to building supplier relationships.

OTHER COUNTRIES’ TRADE REPRESENTATIVES IN ARIZONA: While U.S. government agencies can help Arizona companies looking to trade with many parts of the world, other resources that have an on-the-ground presence in Arizona can help companies looking to expand their business with our largest trading partners.

• The U.S. Commercial Service – especially through the Gold Key Program, which companies can enroll in at affordable costs – provides companies with vetted on-the-ground contacts when they visit foreign markets to build their export business.

• The Arizona Commerce Authority also provides business matchmaking, leveraging its presence in Sonora especially.

• ProMexico, the trade promotion arm of the government of Mexico, has opened an office in Phoenix that works with Arizona businesses looking to invest or expand in Mexico. In addition to matchmaking services and counseling, ProMexico also partners with many other organizations on missions and trade events, helping businesses to find the right suppliers and companies to start joint ventures that reduce the learning curve for doing business in Mexico.

TRADE SHOWS AND TRADE MISSIONS: For companies that are ready for global trade, another key way to build connections is through events sponsored by organizations in Arizona or elsewhere that look to bring together businesses from across borders. In Arizona, these are conducted by a number of organizations mentioned, usually partnered with one another.

• The Canada Arizona Business Council is a nongovernmental association of Canadian companies doing business in Arizona and vice-versa, which has links with government as well as industry.

The Canadian Consulate in Los Angeles covers Arizona and can help put businesses in touch with a Canadian trade commissioner.

• The Arizona District Export Council, the Phoenix Minority Business Development Agency Business Center, the ACA, and ProMexico often partner on these. Following these organizations’ websites is a good way to keep informed about upcoming events.

BANKING AND FINANCIAL SERVICES: Many small businesses need more capital to undertake their global-trade initiatives, and most will need some kind of insurance against risks in international markets. While oftentimes these services will be available commercially – and counseling services in Arizona can help businesses to figure out where to find financing right for them – a number of federal programs provide services to small and medium-sized businesses in this area:

• Similarly, ProMexico – Mexico’s economic development agency, with a new office in Phoenix – will conduct the same kind of on-site cross-border matchmaking services for U.S. businesses looking to invest or expand in Mexico.

• Seminars or presentations on particular export or global trade-related issues are often available through the same organizations.

• The Export-Import Bank is a federally backed financial institution that offers a number of services Arizona businesses may need, including insurance against nonpayment risk (export credit insurance) and against political risk, and guaranteeing loans to small businesses from private financial institutions.

ARIZONA-SPECIFIC RESOURCES ON THE GROUND IN MEXICO: In addition to the many organizations that have strong cross-border links, a number of Arizonabased organizations have people on the ground in Mexico to assist Arizonans doing business there.

• The Mexico City Trade Office staffed by representatives by the Arizona Commerce Authority and the Arizona-Mexico Commission are working to expand Arizona’s trade relationships with Mexico, as well as to assist businesses in export trade with all parts of Mexico.

• The U.S. Small Business Administration has a number of loan programs that can fund export transactions. Local Export Assistance Centers work closely with the SBA to help administer these programs to qualified businesses.

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LOCAL HELP WITH GLOBAL TRADE: ARIZONA’S ECOSYSTEM OF INTERNATIONAL TRADE ASSISTANCE

• The Small Business Administration’s website contains a number of useful items, including a self-assessment tool and export business planners.

• The federally backed Overseas Private Investment Corporation (OPIC) offers financing to qualified small businesses, as well as insurance against political risk.

ADVANCED TRAINING: Companies that are highly prepared to take their next step may take advantage of some more intensive international-trade training offered in Arizona. While not all businesses are eligible to participate, these programs give prepared businesses a strong familiarity with many aspects of international business.

ONLINE TRAINING MATERIALS: Businesses that need more in-depth assistance shouldn’t hesitate to reach out directly to the local resources available. Still, for businesses that are still exploring their options or are at an earlier stage of interest, there are a number of online tools available, some of which include:

• The ExporTech export boot camp – sponsored by the Arizona Commerce Authority and the City of Phoenix – can provide a limited number of owners of small and medium-sized businesses more intensive export training.

• Export.gov’s basic guide to exporting can provide businesses with a sense of many of the issues and considerations involved in exporting.

THE CASE FOR MEXICO In 2015, Arizona’s trade relationship with Mexico exceeded $16.8 billion – $9.2 billion in exports and $7.6 billion in imports. More than 46 million people, 17 million cars and 780,000 trucks crossed the border in both directions. Mexico represents an obvious international market for Arizona businesses, and it is worth emphasizing that connectivity with the Mexican market is on a trajectory of significant improvement.

are crossing the border in an average of 25 minutes. That means that in Arizona, increasingly, the border operates at the speed of business.

This connectivity strengthens the supplychain dynamics that foster international businesses in the region. Many companies are looking at the Arizona-Mexico corridor as a possible area of investment in order to tap into the Mexican and U.S. markets from a strategic pro-business location. Thus for Arizona based companies, they are already located within one of the most advantageous locations to do business in and with Mexico.

The State of Arizona, in partnership with various federal agencies, has invested more than $700 million to modernize ports of entry with Mexico and road connectivity to the federal highway system. Additionally, the Mexican government has committed $1.8 billion to modernize Highway 15, which connects the border at Nogales to Mexico City, making the Arizona-Mexico corridor second to none.

The corridor crosses through six key states in Mexico: Sonora, Sinaloa, Nayarit, Jalisco, State of Mexico and Mexico City, representing a regional GDP along the corridor that exceeds $1 trillion and close to 40 million consumers. Additionally, Mexico’s demographics means that it is a very young country, with a median age below 26 years, ensuring a growing consumer and industry market. As trade relationships between Arizona and many parts of Mexico stand to grow, the Mexican market will present many opportunities to Arizona-based businesses.

Arizona is also at the leading edge of programs that make the border crossing experience better and more efficient. A historic test underway in Nogales, Arizona allows for Mexican customs officials to conduct inspections alongside US Customs officials inside the US federal inspection compound.

Trucks under this program

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DIRECTORY

ARIZONA

COMMERCE AUTHORITY www.azcommerce.com (602) 845-1200 KEVIN O’SHEA, Vice President for International Trade, kevino@azcommerce.com

ARIZONA DISTRICT EXPORT COUNCIL

www.exportaz.org

(520) 670-5808 ARIZONA-MEXICO COMMISSION

www.azmc.org

(602) 542-1370

Arizona State Office in Sonora (Hermosillo): (662) 213-0692 ARIZONA HISPANIC CHAMBER OF COMMERCE

www.azhcc.com

(602) 279-1800 ARIZONA

TRADE OFFICE IN SONORA (HERMOSILLO) www.azmc.org/hermosillo-office (662) 213-0692 JUAN CISCOMANI, Director, jciscomani@az.gov

AZ-MEX INDICATORS

http://azmex.eller.arizona.edu BIEN

www.connectbien.com

CANADA-ARIZONA BUSINESS COUNCIL

www.canaz.net

GLENN WILLIAMSON, CEO, gwilliamson@canaz.net CANADIAN CONSULATE, LOS ANGELES

www.can-am.gc.ca/los-angeles

(213) 346-2700

Lngls@international.gc.ca

EXPORT ASSISTANCE CENTERS (U.S. COMMERCIAL SERVICE)

http://2016.export.gov/arizona/ Phoenix: (602) 640-2513, office.phoenix@trade.gov Tucson: (520) 670-5540, office.tucson@trade.gov

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DIRECTORY

EXPORT-IMPORT BANK

www.exim.gov Field office in Irvine, Ca. (covers Arizona): (949) 660-1341 MARIANNE HUGHES, Regional Director, marriane.hughes@exim.gov

INTERNATIONAL TRADE ADMINISTRATION

www.export.gov see Export Assistance Centers for local presence

MARKET INTELLIGENCE LIBRARY

www.export.gov/Market-Intelligence

MEXICO CITY TRADE OFFICE

www.azmc.gov/trade-office-in-mexico-city/ (5255) 5511-5737 VICTOR AGUILAR, Representative, victor@azcommercemexico.com

MPEXA (METRO PHOENIX EXPORT ALLIANCE)

www.mpexa.com DAWN NAGLE, Director, (602) 321-9978, dangle@mpexa.com

OPIC (OVERSEAS PRIVATE INVESTMENT CORPORATION)

www.opic.gov info@opic.gov OPIC InfoLine (202) 336-8799

PHOENIX MINORITY BUSINESS DEVELOMENT AGENCY BUSINESS CENTER

www.phoenixmbdacenter.com (602) 248-0007

PROMEXICO PHOENIX

www.promexico.gov.mx/en/mx/phoenix (602) 242-7398 Ext. 254 phoenix@promexico.gob.mx

SMALL BUSINESS ADMINISTRATION, ARIZONA DISTRICT OFFICE

www.sba.gov/az (602) 745-7200

TOP MARKET REPORTS

www.trade.gov/topmarkets

U.S. COMMERCIAL SERVICE

See Export Assistance Centers GLOBAL TRADE BEST PRACTICES WHITE PAPER

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ALL NATIONS ENVIRONMENTAL LLC AMERICAN EXPRESS ARIZONA DEPARTMENT OF TRANSPORTATION (ADOT) ARIZONA DIAMONDBACKS ARIZONA PUBLIC SERVICE (APS) ARIZONA STATE UNIVERSITY (ASU) BANK OF AMERICA BANICKI CONSTRUCTION CO. CITY OF PHOENIX, AVIATION

CITY OF TEMPE JPMORGAN CHASE & CO. COX COMMUNICATIONS NAVAJO HOUSING AUTHORITY DAP CONSTRUCTION RYAN COMPANIES US, INC. ENTERPRISE LEASING COMPANY OF PHOENIX, UC SALT RIVER PROJECT (SRP) FREEPORT-M c M o R an SOUTHWEST GAS HENSEL PHELPS SUNDT CONSTRUCTION HMS H ost TOKA (TOHONO O’ODHAM KI:KI ASSOCIATION) HUNT-AUSTIN JOINT VENTURE WALMART JE DUNN WEEMINUCHE CONSTRUCTION AUTHORITY – ARIZONA JOHNSON & JOHNSON WELLS FARGO

NOTES

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NOTES

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DATOS TUCSON THE ARIZONA HISPANIC CHAMBER OF COMMERCE

THE ARIZONA HISPANIC CHAMBER OF COMMERCE

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