Article #8:
Going Global and Surviving.

Every month, countless articles, workshops and service bureaus offer "can't-miss" or "hassle-free" tips for international marketing and sales. They are direc-ted at import/export loopholes, others offer personal experience and still others counsel cultural sensitivity. Many of these approaches are oversimplified, fact-specific and do not provide universal solutions.

For those of us in the trenches, there are no simple solutions or universal truths. Rather than seeking "one-size-fits-all" answers, companies seeking to go international would be well-advised to recognize the numerous challenges in doing so, and seek pragmatic answers for their specific problems.

It is indeed true that to be forewarned is to be forearmed. Listed below are some common problems that you may not anticipate. While some common sense solutions are offered as well, the most valuable aspect of this primer is to better prepare would-be internationalists for the resistance that they are bound to encounter &emdash; and therefore begin the creative problem-solving process.

Time, language and culture
For Americans, most major international markets (other than Canada and Mexico) are far-off places, which use one or more foreign languages and enjoy their own unique business and social cultures.

Distance can create numerous headaches, whether in person or through the phone/fax/mail. Communicating by regular mail is simply too slow and unreliable to be commercially viable. If you intend to compete abroad, you must either have a physical presence in those foreign markets or be able to pay the heavy cost of express mail, international faxes and the like.

Clients should be able to reach you at a time convenient for them. Keep a time zone chart close at hand to avoid embarrassing calling times.

One answer: Distribute the home numbers of senior-level employees who accept calls in the early morning and late evening. A standard sign-off to a letter may read, If the time difference makes it convenient, please feel free to call me at home between 06:00 and 23:00 hrs EDT (Greenwich Mean Time GMT-4).

When traveling, anticipate jet lag and plan your schedule accordingly. Do not meet clients or dealers half-asleep, or in a rush to return home.

While few of us speak second or third languages, it is courteous to show your clients that you care. Learn a greeting or salutation in your counterpart's tongue and, if possible, provide materials written in their language. While they are almost certain to understand English better than you will be able to communicate in their language, it is the effort - the demonstration that you care enough to try - that pays dividends.

Entire texts have been dedicated to the unique business and social cultures that characterize various regions. However, there is another way which may work even better, and which requires no special knowledge. Treat everybody with respect. When interacting personally, defer to their wishes. Never rush international clients &emdash; you will lose them. Make every effort to speak personally, and to visit face-to-face; do not rely exclusively on the written word. A voice and a face engender more trust and more loyalty than a sterile letterhead. People are people, and observing the Golden Rule can go a long way.

Learning from Omar
Omar Khayyam once wrote, "Take the cash and let the credit fly." That was in his Ruba'iyat, penned in the 11th century. It remains sound advice, 900 years later. As Khayyam observed, "Cash is better than a thousand promises."

For the average business owner, the decision to extend credit is always a difficult one. Credit checks can be time-consuming and unreliable, and egos can easily bruise when further credit is refused.

Extending credit to foreign dealers presents even greater hazards. There are even fewer reliable resources for financial background checks, and differing cultures may affect the accurate reporting of bad debt. Different cultures may also feel it appropriate to withhold payment under different circumstances.

Worse still, there is little practical recourse for pursuing debtors. For all but the largest debts, seeking oneีs remedies through foreign courts is, at best, cost-prohibitive. In addition, home court advantage can also mean "homer" refereeing. Sophisticated vendors impose, by contract, American jurisdiction and choice of law. These are of little value, however, when the buyer has no American assets to satisfy a judgment.

Establishing a firm policy that accepts only pre-paid orders or irrevocable letters of credit can save you an awful lot of torment. As a fall-back, you might try accepting partial pre-payment (to cover your cost of goods plus freight), preferably coupled with payment of the balance upon delivery, C.O.D. Never waive your policy, except for the most respected and reliable of dealers. Be sophisticated enough to recognize that even they may burn you. C.O.D. alone, even if coupled with partial pre-payment, is not always bullet-proof, since a refused shipment could mean a hefty round-trip freight bill, simply to reclaim your refused goods.

Currency and pricing risks
International currency exchange is a sophisticated, complicated and dangerous game. Whenever possible, don't play it. Accept payment only in U.S. dollars. Table 1 contains a list of selected currencies, valued in U.S. dollars as of this writing and one year ago, and the percentage change. While other currencies have not behaved this extremely, Table 1 demonstrates the wide currency swings that one can encounter, even when dealing in major financial centers. In contrast, a dollar will always be worth 100 cents. If dealing in foreign currencies is a must, select one or two traditionally stable currencies such as the Australian or Hong Kong dollar. However, beware that past performance is no guarantee of future stability. Those at particular risk should seek financial advice on the desirability and feasibility of hedging.

Above all, make sure you accept only universally convertible currencies. Foreign central banks often limit the amount of liquid currency available for conversion. Remember that there indeed is something worse than holding devalued rupees, bolivars or drachmas, and that is the inability to convert them into dollars at any price. If your client cannot generate convertible currency, they are frequently incapable of meeting your expectations anyway. Consider barter if your clients deal in complimentary products. When bartering, exchange rate takes on diluted meaning.

Pricing for international markets presents something of a dilemma. Because your cost to serve is invariably higher, the instinct is to raise prices to build a cushion against contingencies. However, duties, taxes, freight and other decidedly local factors can elevate landed costs by 100 to 500 percent of your FOB (free on board)&emdash; the location at which the client becomes responsible for the freight&emdash;in some regions.

You will therefore encounter tremendous price resistance, even on what you believe in good faith are competitively priced goods. Be prepared to negotiate to your best price, and be equally prepared to walk away if you cannot achieve a fair return.

Often, you can maintain reasonable profitability and still lower your clients' prices by finding local components that are compatible with your product. For example, if you sell systems at $200 (including your profit of $80) which includes a $60 filter (including your profit of $20), the addition of foreign taxes, duties and freight may elevate that part's landed cost to more than $200 in some places. Allowing your client to substitute a locally available $75 filter may sacrifice your $20 profit on the filter, but your client will save $125. If this saves the sale, it means $60 profit to you that you would have otherwise lost.

Beware of dramatic variance in shipping costs
Like currency risk, shipping abroad offers fertile ground for major hazards. Unless you are shipping complete containers, or using expensive air courier services, shipping prices for most products can vary dramatically from shipment to shipment. If you have followed the advice thus far, you will have required prepayment or an irrevocable letter of credit. Awaiting a firm shipping price for pre-payment will delay your consignment and put your business at risk. Quoting based upon estimates or previous shipments could put you at substantial risk if you have guessed wrong. To avoid this difficulty altogether, consider shipping freight collect. This may increase your client's shipping bill by 10 percent, but will provide the peace of mind of never estimating incorrectly. The major risk associated with this method is the same as that with C.O.D. shipments - what if your client refuses delivery? However, if you required pre-payment, this will not happen.

Otherwise, try to find a reputable, reliable freight forwarder. Build in enough of a contingency so that pre-paid freight is genuinely pre-paid, and emphasize to your clients the economics of larger volumes. This is simply a fact of international shipping, and may often result in larger orders for you.

Flexible products for varying circumstances
Abroad, water conditions can vary dramatically from country to country, city to city and even from day to day. Municipal water standards are anything but standardized. Wells can be polluted with anything from pathogens unknown to Americans to waste so toxic as to boggle the mind. Germ-infested roof cisterns are often used to make up for minimal water pressure and unreliable supply.

In these hostile environments, while there may be no sure recipes for success, there are some certain road maps to failure. First and foremost, do not make claims that you cannot support. Candidly disclose any product limitations to the best of your knowledge and ask for guidance from your local marketing partners to address unusual regional challenges. That is, show your local dealers respect - they know their market better than you do.

To make such cooperation meaningful, never set anything in stone - prices, terms and most notably, product designs. Indeed, it is critical that you design goods that are flexible enough to adapt: Make sure that your merchandise is designed to accommodate condition-specific modifications and to accept locally-available equivalent components.

Learning the specific conditions in numerous territories is hard work, and so is designing a flexible product. It may require you to inventory more spare parts, offer and account for more inventory items or SKUs, and interact proactively with international dealers to find creative solutions to a wide variety of potential challenges. However, an unwillingness to give this kind of effort can result in products that work well on paper, but not under local conditions.

When uncertainty is the only sure thing
Succeeding in business anywhere is a daunting task, requiring hard work, skill, money and an awful lot of luck. Going global adds numerous complications to this already difficult mix. Besides those problems discussed above, there are international regulatory and bureaucratic frameworks to survive, difficulties in training local dealers, local competition (often times unfair by American standards) and even graft. In an environment where the only constants are unpredictability and risk, Darwin's law governs: Only the most adaptable, in all respects, will survive their entry into international markets. Unlike the dinosaur, however, who knew not what to expect, American companies that market and sell abroad can plan ahead and plan to adjust. While there are no methods that can guarantee success, failure to anticipate the complexities of international trade can ensure defeat.

Steven G. Singer is Chairman of SemperPure Systems, Inc., master distributors for Pure 1 Systems of Billerica, Mass. A graduate of the Harvard Law School and sum-ma cum laude graduate of the University of Pennsylvania, Singer spent over six years in the health care industry before joining SemperPure. Most recently, he served as CEO of a NYSE listed conglomerate. Singer has travelled and conducted business extensively around the globe.


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Article #9:
Selling POU Systems Overseas.

The developing world presents an obvious market to American companies offering water treatment products. UNICEF reports that over 1.5 billion people in the developing world - 30 percent of the population of developing countries and 51 percent of the population of least developed countries - lack access to safe drinking water.

However, expanding into developing foreign markets has always proven something of a challenge for American companies offering point of use water treatment systems. With only a handful of noteworthy exceptions, American POU systems have enjoyed sparse success abroad, particularly when compared to the achievements recorded by manufacturers of component parts such as filters, membranes and the like.

What's the Problem?
There are various explanations for this phenomenon, many of which are easily understood, if not easily overcome. Economic and social barriers, language problems, currency exchange risk and hard currency shortfalls all contribute, to varying degrees, to the problem. Worse still, many international markets are exceptionally fragmented, by American standards, with few local distributors accessible to represent American product lines. In better-developed markets, locally manufactured systems abound, often using imported American components. These products enjoy not only price advantages, but all of the marketing edges that nationalism can offer. Nevertheless, none of these challenges offer the full explanation of American POU failures abroad. It is not the uniqueness of each foreign market that American companies have failed to conquer, but the uniqueness of their numerous water challenges.

Despite much debate over what type of treatment works best here in the U.S., there are far fewer problems with the water in this country than outside our borders. To be sure, there have been pockets of polluted groundwater, outbreaks of water-borne diseases and heavy metal scares arising from deteriorating city water systems. While still serious health issues, these are blissfully still the exception rather than the rule, and often readily corrected. Moreover, the virtually universal immunization of children has greatly reduced the impact of some virus strains, even if they do continue to emerge from time to time. Therefore, most POU systems have a generally broad application for the type of use for which they are designed.

Abroad, however, water conditions can vary dramatically from country to country, city to city and even from day to day. Municipal water standards are anything but standardized. Wells can be polluted with anything from pathogens unknown to Americans, to waste so toxic as to boggle the mind as to its origin. Germ infested roof cisterns are often used to make up for minimal water pressure and unreliable supply. In many of the poorest areas, no safety precautions at all are employed. These conditions are aggravated by the lack of adequate infant inoculation programs in the developing world (as low as 38 percent immunization against some strains, according to the United Nations).

No Universal Solutions
For the POU company, these challenges mean that, in addition to the issue of which treatment to select, the expected efficacy of that method and whether it will be defeated by local conditions and local needs must be considered. For example, reverse osmosis systems, particularly if coupled with proper pre-filtration and post-membrane disinfection, can eradicate numerous micro-biological, organic and chemical dangers. However, when treating water in areas where water pressure rarely exceeds 1 bar (15psi), and electricity for pumps is either non-existent, unreliable or too expensive, the world's best RO system has little application. As another example, consider the use of iodinated resins. In areas where the risks are largely pathogenic and not chemical, iodinated resin offers a highly effective disinfection alternative. However, iodine elution (and therefore a system's efficacy and life span) can be dramatically affected by pH, chlorine and temperature levels. Therefore, water conditions that appear within "normal" ranges can nevertheless prove harmful to even the best iodinated resin system.

Although RO and iodine treatment are among the finest treatment methods available when properly used, the fact is that all of the leading treatment methods, from chlorine and ozone to UV, distillation and ion exchange, suffer from similar limitations. It is simply unrealistic to believe that any technology, designed with a specific set of objectives in mind, will react favorably to the plethora of variables found in water samples across the globe.

How Can You Compete?
There are two ways for an American POU company to succeed abroad. Historically, companies have developed products that seemingly work well enough at home, and then put so much marketing clout and local distribution support behind them that the relatively small handful of system failures have, for a time, gone unnoticed. While the obvious lack of ethics of this approach makes it unthinkable for most water professionals, it is, sadly, something of a time-honored tradition. It is a remarkably short-sighted strategy, which can only offer near-term success. Over time, the failings of such products inevitably lead to their demise.

In the hope and faith that long-term success can only be derived from quality products, backed by attentive customer service, there is another alternative. First and foremost, do not make claims that you cannot support. Asserting that Brand X can be everything to everybody is simply reckless and is bad business. Candidly disclose the limitations of which you are aware, and inquire about other conditions which you might not have anticipated.

Second, work with your local dealers, not through them. Make sure they know how your product works, and the circumstances under which it will not. Solicit field testing and look for problems up front. This can well mean a lot of additional work for your local dealers, however, experience teaches that those unwilling to accept your technical support are not likely to succeed anyway. More importantly, if you learn about specific obstacles to success in advance of consumer sales, you can always correct them. In contrast, if your dealer sells your product only to then learn of its shortcomings, you will lose his trust - and his future business - forever. One way to ensure proper field testing is to insist on shipping small initial sample orders before filling larger orders. While it may break one's heart to refuse large orders when entering a new market, it can break one's pocketbook to do otherwise.

Third, once you learn of specific challenges, make sure that you have access to potential solutions, and discuss them with your local dealer. Test them out before offering them as panaceas.

Finally, design systems that are flexible enough to adapt. Make sure that your system is specifically designed to accommodate the sorts of additional pre- or post-treatment options which circumstances may make necessary.

Hard Work Pays Off
Alexander Dumas once wrote rather flippantly that "nothing succeeds like success." In fact, that maxim is not quite as silly as it seems, when considering that success can be measured in many ways. In the international POU market it is indeed true that nothing succeeds, financially, like that which succeeds technically.

With foreign water conditions similar to Forrest Gump's box of chocolates ("You never know what you're gonna get"), the only recipe for technical success is hard work. Learning the specific water conditions in every potential market, working with your dealers to examine your product under those conditions, and responding proactively to the anomalies that are discovered, can make all the difference between a product that works perfectly only on paper, and one that addresses your customers' needs in the field.

Steven G. Singer is chairman of SemperPure Systems, Inc., Master Distributors for Pure 1 Systems of Billerica, Mass. He is a graduate of the Harvard Law School and the University of Pennsylvania. Before joining Semper-Pure, Singer spent over six years in the health care industry, most recently as CEO of a NYSE listed conglomerate, and has travelled and conducted business extensively around the globe.


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