6/18/19

Five Tips for Conducting Business in an Emerging Market

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Attorneys & Professionals

Tom McDonald, a partner in the Vorys Washington, D.C. office and leader of the firm’s administrative and regulatory law and governmental policy practice, authored an article for Corporate Counsel titled "Five Tips for Conducting Business in an Emerging Market." 

The full text of the article is included below. This is reprinted with permission from the June 18, 2019 online edition of  Corporate Counsel © 2019 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.

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Five Tips for Conducting Business in an Emerging Market

In an increasingly complex global business market, where the Trump administration is utilizing tariffs more often, companies must develop effective strategies to evaluate whether or not to conduct business in emerging markets.  The criteria that go into the decisions to enter an emerging market are vastly different than the criteria a company may use to evaluate entering a developed or mature market.  This article outlines five practical tips to help in house counsel as they work to reach alignment with their corporate team on an emerging market strategy.

Look for the “Sweet Spot” 

When your company is initially vetting international markets to enter, look for countries that are not failed states but that also don’t have hyper mature markets. Some indicators to consider include determining whether the country has: a rising middle class; a younger population; a trajectory of economic growth; more disposable income; economic diversification; adhere to rule of law; and political stability.

Do your homework

Before you travel to further explore your business opportunities, use the existing resources at home to prepare, which is about 90 percent of the job. The federal government has a wealth of resources and insights available for U.S. businesses. These federal resources will help you better understand the targeted country’s relationship with the U.S. and provide you with trusted referral sources. The federal resources include:

The U.S. State Department can connect you with the officers stationed in the U.S. Embassy in the country where you are considering doing business. These officers are well versed in the culture and customs of the country and can provide you with a treasure trove of information.  They can also recommend legal counsel for you to work with in the emerging market.

The Department of Commerce’s Gold Key Program is available for U.S. companies exploring business opportunities abroad. For a small fee, the Commerce Department team can set up appointments with up to five interested partners in a foreign market and accompany you to meetings and provide a driver.

The U.S. State Department’s Overseas Security Advisory Council (OSAC) provides security to all of the U.S. embassies around the globe. They also can provide insight into the risks associated with travel in the country you are considering and advising your corporate team regarding on the ground security issues.  

If the U.S. Trade Representative has an office in the emerging market, it’s important to connect with the office in advance of any travel. The office is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries.  They can assist you in your endeavors and provide you valuable information as you weigh whether or not to enter an emerging market.

Conduct a thorough study

The legal and ethical protections will likely be far weaker than those available to businesses and companies in the U.S. In fact, in some countries the court systems may be corrupted to the point where it is routine practice for judges and/or government officials to accept bribes. When conducting business in these environments, it is quite possible that a commercial dispute could morph into a much more serious criminal investigation against your local employees. That’s why it is extremely important to have a vast understanding of the emerging country’s code of conduct/practices, and to have local counsel who understand the local laws and culture.

It is also important to review the country’s laws in advance so that you can understand the enforceability of contracts, the types of licenses you will need to obtain conduct business, the building codes you will need to follow, import/export laws/regulations, and any applicable employment laws.  You’ll also need to have an understanding of the steps you will be required to take to protect your company’s intellectual property. 

Understand the security implications

Knowing the intelligence posture of the country you are visiting is important information to have.  In many emerging markets, it’s necessary to leave your primary devices at home and work from “burner” devices while you are on the ground in the country. In some emerging countries, you could be under surveillance as soon as you arrive in country, your data could be hacked so you will want to make sure you are taking proper precautions in advance.