When it comes to international business, the writing is on many walls in the Greater Cincinnati region: Jump on board the global train or get left behind at the station.

On the outbound side, Tristate export sales of products and services increased significantly last year. According to recent data from the International Trade Administration, Greater Cincinnati and Northern Kentucky exports in 2006 were valued at $12.7 billion, a 13.6 percent increase that placed this region as No. 16 among 369 U.S. metropolitan areas. That export ranking places Greater Cincinnati ahead of Cleveland, Indianapolis, Dayton and Columbus.

That $12.7 billion in local exports of goods and services was a slice of a record-setting national total of $1.4 trillion in exports, and U.S. Commerce officials expect 2007 numbers to set a new record.

One of the surprising local growth sectors for exports are commodities such as scrap metal, biodiesel fuel, even animal and vegetable fats, according to Cory Speece, a vice president of the international banking group at U.S. Bank. “Chinese companies are importing raw lumber from the U.S. to make furniture sold back here,” he says, noting that the U.S. is far ahead of the Chinese in reforestation techniques to produce such lumber.

As for inbound business, there are local signs of increased foreign investment and partnerships.

“There’s been an incredible rise of foreign investment in our region,” observes Joseph J. Dehner, an attorney specializing in international business at Frost Brown Todd LLC.

Dehner is generally recognized as one of the top local experts on international business. He chairs his law firm’s International Services Group, the Southern Ohio District Export Council (known as SODEC) and the Cincinnati USA Regional Chamber’s Foreign Investment Attraction Team.

Dehner recently heard Ellen van der Horst, president of the Cincinnati USA Regional Chamber, address the topic. Even he was surprised to hear her predict that in the near future, half of new companies locating here will be foreign firms. “You wouldn’t have heard that five years ago,” he notes.

Globalization of business is ever evolving beyond traditional exports, imports and joint ventures. Dehner notes, for instance, how German companies — spurred in part by the strong Euro and weak dollar — are investing in U.S. ventures to manufacture products for both the domestic market and other countries. Dehner calls this “round-sourcing.”

Whatever it’s called, however it’s defined, Dehner says engaging in international business is not really a choice these days. It’s a necessity. U.S. exports grew almost 15 percent last year, compared to about 3 to 4 percent for domestic sales growth.

“Firms that don’t go into international business are taking a big risk. You can just get run over and put out of business,” Dehner comments. “It’s not just China. It is a global economy and everyone competes.”

That view is echoed by Frank Chaiken and Paul Allaer, international business experts at Thompson & Hine. Chaiken says in many ways, global business is much easier now. “Things that were not possible 20 years ago are now very common.”

Allaer and others say the most important driver in 2008 is currency, not the slowdown in the domestic economy. The lower value of the U.S. dollar makes the pricing of American products more attractive to foreign importers, and also makes foreign investment in the U.S. more affordable for companies from other countries.

“The weak dollar makes it very attractive for foreign customers to buy American,” Allaer explains. “U.S. companies want to capture their part of the upturn.”

Just as banks and accounting firms have become increasingly internationalized, so have law firms. Frost Brown Todd opened an office in China, and Thompson & Hine has resources “on the ground” in 80 countries, according to Chaiken.

“We have excellent lawyers at local firms who know the local laws and requirements,” Chaiken explains. “They know the problems that could arise, the pitfalls and ‘gotchas,’ the legal risks with issues of regulation compliance and forming contracts.

“We work with clients in progressing levels of involvement,” Chaiken adds. It’s not unusual for a company to begin with basic exporting, then advance to engaging in manufacturing ventures in other countries, or to purchase a company overseas.

COMMON MISSTEPS

Whether you’re looking to sell machine parts in Russia or form a network of software engineers in India to assist local companies, perhaps the biggest mistake businesses and entrepreneurs make is not seeking professional guidance. The big Fortune 500 companies have considerable in-house resources. For most smaller operations and enterprising individuals, assembling a team of experienced advisors and taking advantage of local international business resources is crucial.

Just as bad is getting professional advice too late in the game, says Steven Bastin, vice president and senior global treasury management officer at PNC Bank. Too often, he observes, companies “bring in the risk mitigation and legal considerations too late in the transaction.”

“Experienced exporters realize the significance of having those service professionals in early on,” Bastin adds. “They’ll call me and say ‘what do you know about this marketplace?’ or ‘what are (a region’s) commercial risks and political risks?’”

Michael Capone is an assurance partner at Grant Thornton LLP who focuses on industrial products in the Midwest regions. He says his firm has the advantage of being a full-service provider in 110 countries, offering advisory services and risk management services, information technology and support on international tax regulations.

He agrees about getting the right people on board, early on. “You can’t plan enough” for the expansion of or entry into overseas business opportunities, Capone notes. His firm can cover a lot of ground for these companies. They offer business advisory services, risk management services, information technology and help with international tax implications.

Dehner says many Americans have a tendency to jump into business relationships too quickly because they tend to instinctively trust others. “A lot of the world isn’t like that,” he says.

Experienced law firms are a good place to begin. “We have years of experience helping companies go international — whether selling direct to customers overseas, or engaging a sales agent or finding a company to be your distributor,” says Thompson & Hine’s Chaiken.

Other expertise may be needed for other issues, such as a country’s technological requirements for products, Chaiken adds. Banks assist in working capital finance and federal programs such as the Export-Import Bank. “Credit risk management definitely is a key,” he notes.

So is awareness of currency risks, he adds. Last year, some companies committed to fixed-price deals with Canadian clients, then were stung by a quick 20 percent swing in that country’s currency.

Another important consideration: Keeping in line with the law. Law firms can help prevent exporters from running afoul of the anti-bribery Foreign Corrupt Practices Act. Other legal factors to consider include compliance with tax regulations, patent and trademark protection, adhering to product standards and guarding against liability claims.

Sometimes exporters make the mistake of giving away too much of a market to one distributor. “It can be horribly expensive to get rid of them,” Chaiken observes. “The laws [in other countries] are designed to protect the local guys.”

Americans also must be aware of other U.S. laws. If you think you’re exporting to Lebanon but the product ends up in Iran, you could be in for trouble from U.S. authorities. “If a Saudi customer just asks you to confirm that won’t ship through Israel, you’re required to report that to the U.S. government,” Chaiken notes.

Capone says other errors he sees companies make include overestimating the cost savings or the productivity to be gained from an international venture. Some of the support work can be outsourced. Logistics companies can perform “due diligence” on foreign suppliers, for example, but tread carefully, he cautions. If the imported products are defective, the importer could be held liable.

He adds that much of the work required to cover all these exporting bases can be “outsourced” to representatives or agents, as when searching for foreign suppliers. Logistics companies, for example, are becoming more sophisticated about conducting due diligence. But tread carefully, Capone cautions. If you import products or parts that become defective, for instance, your company could be held liable and suffer financial losses or harm to your reputation.

Bastin says, “The fortunate situation is that there are plenty of organizations around Cincinnati, nationally and in Ohio to provide assistance in finance.” Bastin counts PNC as a leader in that kind of financing. He also cites the Ex-Im Bank of U.S. and the Small Business Administration as having programs to help gain financing for overseas commerce.
LOCAL RESOURCES

Local international business experts give high marks to the Cincinnati office of the U.S. Commercial Service, an outreach arm of the Commerce Department’s International Trade Administration. Led by Marcia Brandstadt, this export assistance office helps local experts “every step of the way” in selling internationally.

Debbie Dirr, an international trade specialist who serves the office’s Dayton territory, says many local companies are finding that international business helps them diversity sales and weather global economic changes.

“We are well-positioned to help companies boost their bottom lines by making new export sales abroad,” Dirr says. “Almost every day, we save businesses time and resources by connecting them with qualified foreign buyers, agents, distributors and partners.”

The Commercial Service provides value-added services such as market entry strategies, guidance on understanding documentation requirements, and the latest information on trade agreements, barriers, tariffs, distribution channels, duties and shipping logistics.

Dirr says when she first meets with a company representative, she gains a quick assessment of the company’s export potential. Her advice: Do your homework first and consider questions such as who do you sell to in the U.S., where do you want to go, what does your market research show, and what are your short- and long-term goals.

“Marcia [Brandstadt] and her office pretty darn good,” Joe Dehner observes. “She’s a real go-getter. This is one example of where ‘I’m the government and I’m here to help you’ is true. It’s a much under-utilized resource.”

Dehner also says the Gold Key service, which helps exporters search for agents or distributors, is valuable, along with the services offered by people in the Commerce Department’s field offices worldwide. “They will get you four or five quality candidates, meet you at airport and even provide an interpreter,” he notes.

Another valuable resource is the Southern Ohio District Export Council, which has been helping local companies export since 1973. These District Export Councils organize local business leaders, appointed by the secretary of commerce, who have substantial knowledge of international business and will volunteer to provide free professional advice for local firms, especially small and medium-sized businesses.

Like many of the experts contacted for this article, Cory Speece at U.S. Bank is a SODEC board member. “They have a wealth of information to offer,” he says of the organization. He, too, praises Brandstadt, Dirr and the local Export Assistance Office. Before joining U.S. Bank, Speece worked for a Northern Kentucky telecommunications company that was exploring the potential of selling used equipment in Chile and Argentina. “I met Marcia at a conference, she connected us with the right people and helped us understand what we were capable or not capable of doing,” he recalls.

Local colleges and universities also abound with experts, information and connections that can give people advantages in international business. Northern Kentucky University, for instance, created an International Business Center, which helps companies in their planning processes, according to Dr. Stephen Mueller, center director. This year the IBC is building its consulting services for companies. A pending federal grant would help with that goal and support a formal business outreach office, Mueller says. The NKU center would coordinate with other trade-oriented groups in the area, including the U.S. Export Assistance Center.

ADVANCED BANKING

Major local banks are becoming increasingly sophisticated with international services including market research, credit and financing assistance, and currency exchange management. They’re utilizing their growing international networks of foreign offices and banking partners.
JP Morgan Chase Bank, for example, created an arm called JP Morgan Chase Logistics that offers a progressive array of products that go beyond banks’ traditional services, according to Carlos Sosa, local vice president of global trade and logistics services.

“Nineteen years ago, international banking was much simpler, mostly operating on a letter of credit basis, a collection basis,” Sosa explains. “We still had the Iron Curtain and the world of communication technology was not at our fingertips, like it has become.”

Chase integrates the physical and financial supply chains, Sosa says, and help with matters such as compliances with export-import regulations. Sosa notes that the U.S. Patriot Act made exporting more complex, with companies bearing more responsibility about what they sell, where and to whom.

Sosa adds that JP Morgan Chase is one of the few banks granted Fast Track authority under the Export-Import Bank’s Working Capital Guarantee Program (WCGP). Under the WCGP, qualified companies can get a 90 percent government guarantee on bank credit to buy or build goods for export that have to have at least 50 percent U.S. content.

Another example of advanced banking is called IBOS (International Banking-One Solution), an alliance of major international banks that offer services to members in the countries where they do business. “In effect, each IBOS bank is a building block in a regional or global treasury management solution,” says Brian K. Cobb, vice president and regional manager of the international banking group for U.S. Bank, an IBOS member.

“The result gives the client the ability to hold bank accounts around the world, establishes best practices on making and receiving payments, and allows for the management of these processes locally or from a remote location based on the company’s organizational structure and IT requirements,” Cobb adds.
FROM THE INTERNET TO THE PERSONAL TOUCH

It’s not uncommon for a business to receive unsolicited business proposals on the internet. More American professionals are conscious of online scans these days, but some still get taken. Joe Dehner recalls one man who was taken in by a web scam, and was ready to board a plane to Nigeria. He called Dehner’s office to ask if he needed a visa. Dehner says the man most likely would have been kidnapped or killed in Africa.

In another case, a Northern Kentucky manufacturer doing about $3 million in sales received an unsolicited e-mail from China. The messenger claimed to have an order for $2 million worth of products the manufacturer could supply. Dehner recalls how the company was on the verge of buying new molds, changing its product line and investing considerably more money to meet this China order.

With more checking, it turned out the China contact was a middleman looking to source product, but didn’t actually have a buyer committed, Dehner says.

NKU’s Mueller says such cases illustrate the errors of not doing the requisite research before wading — or jumping — into the international waters. “Many times these companies just fall into this, Mueller says. “They get a call or an e-mail from a company overseas and they react to that particular opportunity.”

The mistake here is “being reactive instead of proactive in pursuing international business opportunities,” he notes.

On the other hand, there are internet exporting success stories, Dehner points out. He points to Cinna Health Products, a division of Molecular Research Center in Norwood. Company founder Dr. Piotr Chomczynski developed a skin cream for rosacea called Noredol, and is totaling impressive internet-only sales.

“Sometimes a small-business person with a decent product and web site can avoid agents and distributors by selling strictly on the net,” Dehner notes.

In many global business endeavors, however, experts say establishing a direct, personal relationship is still essential for success.
“As you’re expanding, trying to develop relationships and increase sales, more often than not you want that personal touch,” Grant Thornton’s Capone says. “It’s hard to grow a business doing it remotely.”

In some cases, “If it’s important enough for you (your business) to go there, then it’s important enough too have someone from your company reside there,” Capone adds, citing the value of getting immersed in the culture, learning business nuances, building relationships, conveying your company’s values and keeping an eye on details.

“There’s no question that personal connection is still important,” Dehner says. In that regard, he says a helpful book is Global Business: Planning for Sales and Negotiations, co-authored by former Xavier University professor Dr. Camille P. Schuster and Michael Copeland of Procter & Gamble.
GET OVER THOSE FEARS

No doubt, some markets are easier than others. When exporting lumber, for example, judging the grade is subjective, and can cause disputes between buyers and suppliers, says U.S. Bank’s Speece. “It’s easier to sell scrap lumber to Mexico than premium grades to China.”
Venezuela is now seen as a risky country, he adds, “but we have the tools to do transactions with customers safely.”

On the import side, quality control is an issue — and not just lead paint on toys, Speece says. Importers of products such as household light fixtures need to ensure full compliance with manufacturing and safety standards.

Knowledge is empowering. “For all the information out there, there’s 10 times as much missing info,” Speece says. “But it’s getting easier and easier every day to find out what’s going on in another country.”

Some American business people still tend to think of globalization in negative terms, with “outsourcing” meaning a loss of U.S. jobs and declines in the domestic economy. Grant Thornton’s Capone says the shifting of some jobs overseas can actually benefit U.S. workers.
“Globalization, and the opportunity to sell our great products and technologies overseas, creates opportunities right here at home,” he says.

Joe Dehner points to return foreign investment, and Tata Consultancy Services as an example. In January, TCS announced it would locate its North American delivery center for information technology and business consulting in the Ridgewood Corporate Center in Miami Township (Clermont County). TCS is taking 150,000 square feet of what formerly was the James River Corp. building, and intends to employ up to 1,000 employees at good wages, Dehner says.

TCS, one of the world’s largest information companies, is just one of 96 Tata business units. “It’s a wonderful, amazing company,” he remarks.

Should more Tristate companies look into possible partnerships with foreign companies interested in investing here, “That’s exactly the kind of thinking local companies need to do much more of,” Dehner says.

Another example Dehner uses to illustrate the possibilities is a local client that is strong in manufacturing one kind of amusement ride. It formed an alliance with an Asian company that makes a different kind of ride. Dehner says this gives the local company rights to sell in China, and the U.S. firm becomes the Chinese company’s exclusive sales agent in the U.S.

He notes how Cincinnati Mayor Mark Mallory went on a trade mission to Dusseldorf, Germany, where he discovered that about 200 Chinese companies are now located. Hamilton County has two, Dehner says. “That’s going to change.”

“Do we have a problem with Toyota being in Northern Kentucky?” Dehner asks. “Cincinnati really is a world city, and we have to view it that way.”