• Contract Negotiation Tips for Global Expansion

  • Businesses of all shapes and sizes are looking for ways to expand their reach with goods and services and in many cases their strategy includes expansion globally.  International expansion can often be tricky to execute successfully; it is certainly not for the faint of heart! The small business graveyard is littered with U.S. companies that expanded globally before they were ready.

    Let’s assume that the challenges of language, culture and regulations have all been dealt with and you are ready to negotiate a global agreement.

    1. Language and Law.  Establish early on what language will be used for the agreement.  An agreement that is written in English and drafted in the United States would have very different verbiage than an Agreement drafted in England for example.
    2. Pricing.  What currency will be used due to varying exchange rates, cost structures and taxation are complex questions that need to be answered.   Think about what it cost to fill a car with gas in New Jersey versus the cost to fill up that same car in New York.  Taxation in this example is the key variable; same country, different taxes.
    3. Culture & Negotiation Styles.  Culture is a significant factor to be considered when conducting business abroad.  It is an expected business practice to “lawyer up” for contract negotiations in the United States.  However, in Japan attorneys are used strictly as a last resort.  The last thing you would want to do is show up to a negotiation with your attorney when dealing with a Japanese firm.
    4. Guarantees and Service.  With varying cultures comes varying expectations.  Think about service level agreements with regard to response times or travel distance parameters, these would be variables to consider relative to fulfillment requirements and cost structuring.

    International expansion is on the rise and can be a key success strategy for businesses of all sizes.  Before taking that leap, a thoughtful and thorough vetting process is important.  What may seem routine to conducting your business and operations in the U.S. likely will not be on a global scale.  Enlist the support of a consulting firm for assistance.

    Global-Expansion FYI Info-graphic

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