Chinese-American trade relations remained tense in September, with China announcing that it would impose $20 billion in tariffs on U.S. goods in response to the United States imposing $200 billion in tariffs on Chinese goods, the Wall Street Journal reports. As the two countries exchange volleys, some U.S. companies are caught in the middle.
One company particularly vulnerable is Apple, which has most of its products assembled in China. Apple has received an exemption from the U.S. government for tariffs on smartwatches and earbuds imported from China, but remains anxious that Chinese retaliation could impact iPhone production there, says MarketWatch.
As this illustrates, doing business internationally can create unique challenges. Companies seeking to expand their operations to other countries need to take these challenges into account when developing their business plans. Here are three keys to navigating international issues as you build a business with a global reach.
1. Considering Social and Cultural Supply Barriers
Apple’s dilemma over Chinese-American trade disputes illustrates the role that international issues can play in the supply chain. Apple’s supply chain is potentially threatened because of issues abroad that it has no control over. One way to avoid getting into this type of situation is to plan your supply chain to take potential social and cultural barriers into account. For example, if your company relies on materials that are readily available in multiple countries, you are less vulnerable to having your supply chain cut off due to developments in a single country. Having a domestic source for key components is prudent. For instance, relying on a domestic supplier of custom o-rings such as Apple Rubber ensures that there is no risk of having this key component cut off even if international issues emerge. It’s also wise to take into account potential cultural barriers, such as language barriers. For example, if you’re going to have parts made in Mexico, make sure your staff includes key personnel who are fluent in Spanish.
2. Dealing With Regional Competition
How to deal with regional competition is another factor to take into account when doing business abroad. American companies such as Apple doing business in China face not only tariffs on foreign imports but also other potential issues that favor Chinese businesses over foreigners.
For instance, Best Buy had to close its Chinese operations because it had not developed a marketing strategy that made it stand out from local retailers, and it had also failed to take into account how Chinese consumer preferences differed from American ones.
In contrast, General Motors has become China’s best-selling car manufacturer by cultivating joint venture partnerships with Chinese companies. When entering a foreign market, carefully consider how to adapt your brand to fit local consumer preferences, as well as how to leverage local business partnerships to support your marketing and sales strategy.
3. Handling Intellectual Property Issues
Intellectual property issues can be another challenge when doing business abroad. Microsoft is one company that has struggled in China due to IP theft, with four-fifths of Windows operating systems in China estimated to be pirated.
Piracy has plagued Microsoft’s efforts to compete with free knockoff products, making it difficult to sell Windows upgrades when the majority of Chinese users are using pirated versions predating Windows 8. To counter this, Microsoft decided to offer free upgrades to Windows 10 to all users, regardless of whether or not their current Windows version was legitimate. This strategy ironically paid off for Microsoft’s branding in China when pirated copies of Windows were hit by the WannaCry ransomware virus, while legitimate copies were unaffected.
Meanwhile, Microsoft has been able to gain ground in China by partnering with local businesses to promote its Azure cloud services, according to Tech Crunch, which is less susceptible than software products to piracy. If you’re going to do business in other countries, consider whether there are any intellectual property threats you may face, and how you will respond if IP issues emerge.
As in Microsoft’s case, one possible response may be having multiple lines of products that aren’t equally vulnerable to IP theft. Other IP best practices include doing an audit of your foreign IP assets, reviewing your company’s IP protection procedures, classifying assets by levels of sensitivity and making IP protection training part of your corporate culture.
Socio-cultural supply barriers, regional competition, and intellectual property issues are three challenges companies can face when doing business internationally. Developing a business plan that takes these challenges into account can help ensure sustained global growth and success abroad.