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Hong Kong
Speeches
Two ways of starting a business globally
Juliet
Goodfriend
Chairman, Strategic Marketing Corporation/U.S.A.
(Excerpted from a speech given at the Global
Summit of Women 2001 in Hong Kong on September 14, 2001.)
One way to get started is by using sub-contractors outside
of the United States. There are advantages such as there are no start-up costs
or legal hassles since you are using their structure. There are also no labor
problems because they are dealing with the labor. Without exception, I would
recommend that you start your global business by using local sub-contractors
wherever you can.
There are also disadvantages to using sub-contractors. You
are dependent on others. You do not have a larger employee pool. You lack depth
locally and therefore you are not competitive. You lack credibility with your
clients. Our clients who were very sophisticated knew that we weren’t really
global. We just looked global. We could deliver a global product, but we
couldn’t control it. Also, you generally have a lower profit margin when you
sub-contract.
The alternative, or second phase, is truly going global --
that is registered, representative offices in the different countries you want
to work in. There are serious disadvantages. There is tremendous red tape. There
are very high start-up costs and extremely high social and labor costs. From the
United States, we are not used to the labor laws that control labor in the
European Union. There are political dangers, cultural conflicts, and serious
currency problems as well.
However, there are advantages. You have real credibility
with your clients. You have real local knowledge through experts on the ground.
You also have a new labor pool and a tremendous amount of fun and pride when you
visit your offices in other parts of the world.
My suggestion is to go gradually by sub-contracting. Later
on, put people on the ground. Do it if your clients demand it and if you can
manage it both economically and from the human resource perspective. Do it if it
is something you are dying to do. Don’t do it if you think it will run you
because it takes a tremendous amount of time from your main core business to go
global.
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