An interview with University of Washington International Business Professor Mike Giambattista.

Q: What aspects of international business have you been involved with?

Prof. Giambattista: I finished graduate school thirty years ago, and decided to go into international business. I started out in an American company's headquarters in Europe. I worked as the assistant to the president of the company, and traveled extensively throughout Europe to handle marketing problems. I then became Marketing Director for another multinational American-owned company acquired by a European company. Then, I was hired by an American company to set up their international operations. A few years later I became an entrepreneur, setting up my own company in Europe which I later sold. Since then, I have focused my efforts on international marketing and strategy consultant.

Q: Why does a company go into international business?

Prof. Giambattista: Well, all sorts of organizations can go into international business.If you ship an item across the border (from Seattle) to Vancouver,BC, you're in international business. Most small companies traditionally have not planned to go into international business, but because they have success in their own market they attract foreign interest. This can come from press releases, ads, trade shows or word of mouth. The Internet is also a means of getting your product seen internationally. If you have a web page you're an international business.

As business people we say, wow, what are we going to do with these opportunities? Most of us will say let's fill the orders. It is the first order that raises many of the questions associated with international business. They may want something different in the product:the safety standards are different, the packaging may have to be changed,the colors need to be different, and, of course, how are we going to get paid? You have all these questions to work your way through. You solve your problems as they come along both internally and often with consulting and other external advice.

Q: What kind of planning can you do after you have already gone "global"?

Prof. Giambattista: You have to step back and establish priorities if you have not already done so. A company cannot operate in all markets, only a very few can. So you have to target the markets you want to focus on, and set priorities. By this stage you may have set up an international organization, hired an export manager - a role that I have played a number of times. Another thing you can do is to assign a manager to a particular region. Eventually what the organization does is it evolves from passive market entry to active market entry.

Q: What do you think about the Internet as an international vehicle?

Prof. Giambattista: Within the last few years this has been a big change. It has caused traditionally local businesses to become international businesses more quickly. If you have a web page, you are an international business. E-commerce can also set up some distribution channel conflicts. With a web page you have a direct link to the consumer. But if you already have distributors set, you potentially could be bypassing them which usually is not in their best interests.

The question today is, do I need intermediaries at all? Am I okay without them or should I find distributors in my major markets? As long as the product does not require personal help, the web is a great intermediary.But, if your product requires training or some support, how is that going to get done? Are we going to send Americans to do the work in the foreign country, or can we train local people?

Q: What problems did you face setting up your business in Europe?

Prof. Giambattista: The biggest problem that comes up right away is distribution. If you have a popular product, who are your intermediaries going to be? You'll be bombarded with offers. Then you need to find out the credibility of these distributors. Is the organization or person that says he covers all of Asia credible, or is he really a retailer in Jakarta,Indonesia? You have to develop your own techniques and methods of screening your candidates, and have a consistent strategy of what you want them to do.

Another big problem is getting adequate financial information about potential distributors. What are terms and conditions needed for payment? The web can help here in collecting data of this type. Once you are ready to complete the transaction , you need to know how are you going to get paid. This is a big problem. In a company I managed we had our international customers put all orders on corporate credit cards.

To what extent does the product have to be modified? This is a critical issue too.

Q: How did you research the people you extended credit to?

Prof. Giambattista: Asked them questions, by phone, email, and by fax. I developed a format for a profile which gathered all of the key information about the organization, their distribution channels, and references. I asked them what other products do you carry and who are the principals for those products? Next I'd call and make sure those references are legitimate.If the references were valid, I'd usually get a ton of information on the candidate.

I would always update the files on our distributors. The process is dynamic. It often changes so it is important that you update what you know about distribution partners.

Q: What about legal issues in other countries?

Prof. Giambattista: Legal issues come right after the distribution issues. These are the problems that really get to small and medium sized businesses. You have to be careful about US and foreign tax implications. So one of the first things you are doing is to consult with your accountants. For example, if you want to do a licensing agreement with a company in France,what are the US tax authorities going to say about it. So you need to get your legal and accounting information up front. Another thing you have to find out is if the US and other countries have laws that will impede your business? The key here is not so much the law but is it enforced? You shouldn't break the law, but by getting advice both in your home and foreign country you'll know what the enforcement is like. So you then can assess your risks.

Q: Where can a small business starting out in export get advice?

Prof. Giambattista: There is a wealth of information out there. The US Export Assistance Center runs a series of workshops on how you get through many of the issues. You'll meet people, like myself,who have done this forever, who will be able answer you questions. The Trade Specialists at the USEAC will help with your questions and even have your primary research conducted for a very reasonable price.

Early stage exporters also should not underestimate the power of word of mouth and observation. Find out what your competition is doing and copy them. Then improve on it. With the information that is available, more companies will be taking advantage of the global marketplace, and so should you.

Thank you Professor Giambattista

Written by Q. Horton