The State of Manufacturing Entering 2012

By: Jeremy Michael, CPA

Manufacturers More Optimistic in 2012

I recently attended the Precision Metalforming Association (PMA) annual ‘Benchmarking, Best-in-Class and Profitability’ meeting for the Cleveland District (held on January 10, 2012) and thought I would share some interesting information on the state of manufacturing in 2011, as well as what to expect in 2012.

For those of you not familiar with PMA, they are a national trade association headquartered in Cleveland, Ohio, comprised of nearly 1,000 members representing approximately $113 billion dollars worth of precision metal manufacturing companies in North America. On an annual basis, PMA conducts a membership survey focused on areas of management, quality and productivity which is then compiled into a benchmarking report.

Before I jump into a few of the key benchmarking results, I wanted to share with you a thought-provoking polling question asked of the audience at the start of the meeting. The audience, comprised of key members of management within local manufacturers, along with service providers specializing in manufacturing, was asked to introduce themselves and explain their business’ expectation for 2012 sales.

2012 Expectations

What was the overwhelming answer?  2012 will be the same or slightly higher than 2011. The same group also indicated that they currently expect to hire skilled employees during the year. To me, this indicates a positive sign and signals that the manufacturing industry is continuing on its slow growth recovery trend in northeast Ohio.

‘Business Conditions Report’ Outlook

PMA also publishes a monthly “Business Conditions Report” reflecting the opinions of about 132 PMA members, and it has also indicated a positive outlook for 2012.

  • The report for January 2012 indicates that the outlook for the next three months is expected to increase for 41% of the members and remain the same for 54% of the members.
  • Those members also responded that compared to three months ago, January 2012’s average shipping levels are expected to increase for 30% of the members and be similar for 48% of the members.
  • They also noted their expected incoming orders over the next three months will increase for 51% of the members and be similar for 40% of the members.

Some highlights from the benchmarking data for 2011 compared to 2010 indicate that:

  • EBIT (earnings before interest and taxes) is up 6%;
  • EBITDA (earnings before interest, taxes, deprecations and amortization) is up 9%;
  • Raw materials turnover increased to 13.41 from 10.66;
  • Accounts receivable turnover increased to 8.47 from 7.46;
  • Employee turnover dropped from 22 to 14.6;
  • Average gross sales per employee increased to roughly $211,000 from $182,000; and
  • The value added per employee (excludes materials and outside processing costs from gross sales) also increased to roughly $106,000 from $95,000.

Certainly all good signs for manufacturers going forward!

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BCG Blogger, January 20th 2012 | Tags: , , , , , ,
Posted in Economy, Skilled Labor, Uncategorized

Important Tax Developments!

By: Tracy M. Fitzpatrick, CPA

Director of Taxation

The following is a summary of the most important tax developments that have occurred in the past three months (Fourth Quarter 2011).

Payroll tax cut temporarily extended.

The Temporary Payroll Tax Cut Continuation Act of 2011 was enacted late last year. It temporarily extends the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2% to 4.2% of wages paid through Feb. 29, 2012. Shortly after its passage, the IRS instructed employers to implement the new payroll tax rate as soon as possible in 2012 but not later than Jan. 31, 2012.

The law also includes a “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (i.e., two-twelfths of the 2012 wage base of $110,100). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2% of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100). Congress is going to try to negotiate a deal to extend the payroll tax cut for all of 2012. If a deal is struck to extend it for the full year, the recapture provision for employees would not apply.

Credit for hiring veterans extended and enhanced.

A law enacted last November extended and enhanced a credit for hiring qualified veterans. Before the law was passed, the credit would have been available only if the qualified veteran were hired before Jan. 1, 2012, and only certain veterans were considered qualified veterans.

The new law extends the credit for hiring qualified veterans, adds two new classes of veterans who are considered qualified veterans, increases the credit for hiring certain qualified veterans, “fast-tracks” the process for certifying that an individual is a qualified veteran, and provides tax-exempt employers with a credit against payroll tax for hiring qualified veterans. The credit amount varies depending on a number of factors. It can be as high as $9,600 for hiring a qualified disabled veteran. For an employer to qualify for the credit, the qualified veteran must begin work for the employer before Jan. 1, 2013 and other requirements must be met.

New rules for deducting or capitalizing tangible property costs.

The IRS has issued new regulations for determining whether amounts paid to acquire, produce, or improve tangible property may be currently deducted as business expenses or must be capitalized.

The regulations will affect virtually all taxpayers that acquire, produce, or improve tangible property. They are comprehensive, voluminous and virtually rewrite the rules in this area.

For example, they provide detailed definitions of “materials and supplies” and “rotable and temporary spare parts” and prescribe new rules and elective de minimis and optional methods for handling their cost. They also have rules for differentiating between deductible repairs and capitalizable improvements, among many other items.

The regulations generally are effective in tax years beginning after Dec. 31, 2011. However, to add to their complexity, some of the new rules in the regulations do not supersede prior IRS guidance.

New foreign asset reporting guidance and form.

The IRS issued detailed guidance on the new law requiring individuals with an interest in a “specified foreign financial asset” during the tax year to attach a disclosure statement to their income tax return for any year in which the aggregate value of all such assets is greater than $50,000 (or a dollar amount higher than $50,000 as the IRS may prescribe).

In addition, the IRS issued Form 8938 (Statement of Specified Foreign Financial Assets), which individual taxpayers will use starting in the 2012 tax filing season to report specified foreign financial assets for tax year 2011.

The guidance consists of detailed temporary regulations. They define terms that apply for purposes of the reporting requirement; provide rules to determine if a specified individual must file a Form 8938 with their annual return; define what are specified foreign financial assets; detail what information needs to be reported; provide guidelines for valuing specified foreign financial assets; list exceptions to the reporting requirements; and describe the penalties that apply for failure to comply with the reporting requirements.

Standard mileage rates flat or lower.

The optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) is 55.5¢ per each business mile traveled after 2011. For 2011, it was 55.5¢ for miles driven after June 30 and 51¢ per mile for miles driven before July 1. Further, the 2012 rate for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction is 23¢ per mile.

For 2011, it was 23.5¢ for miles driven after June 30 and 19¢ per mile for miles driven before July 1st.

Withholding requirement for government contractors repealed.

A law enacted in 2005 was to have required the Federal government and the government of every state, political subdivision of a state, and instrumentality of a state or state subdivision (including multi-state agencies) making certain payments to a person providing any property or services (e.g., payments to a government contractor) to deduct and withhold 3% from that payment. Although the withholding requirement was originally set to apply to payments made after 2010, it was subsequently deferred to apply to payments made after 2012. A law enacted in November 2011 repealed the government contractor withholding requirement.

As always, if you need any clarification or further information regarding these developments, please contact a BCG&Co. advisor.

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BCG Blogger, January 18th 2012 | Tags: , , , , , ,
Posted in Uncategorized

IBM: A Model for Remaining Innovative and Relevant

By: Jason Tuma, CPA
Senior Manager, Assurance Services

Reaction to Warren Buffett’s $10.7 billion investment in IBM Corp. in 2011 was largely surprise that he was finally investing in a technology stock.

Here’s the truth about Buffett’s investment: It is entirely within his conservative character because IBM is not a “technology” company as defined by market analysts. It’s as much an old-economy stalwart as U.S. Steel and J.P. Morgan Chase.

Yes, IBM no longer makes personal computers, but this is because Sam Palmisano recognized years ago that IBM’s value proposition to customers was shifting from products to knowledge — knowledge accumulated over more than a century of serving other businesses. It’s because of this decision that IBM has virtually no direct competitors today. Lots of companies provide the types of services and products that IBM does; but none does it to the global penetration and cross-sector reach that IBM can, and probably no company ever will. Consider what happened to former Hewlett-Packard CEO Leo Apotheker when he tried to position that company to move away from products and more toward service — in other words, become an interloper in IBM’s sandbox.

IBM still manufactures commercial-grade hardware, but even this unit is driven by the company’s vast stockpile of knowledge. The message for other manufacturers is this: IBM’s game is innovation, and it has proven that combining product innovation with innovate delivery of knowledge and service can be an unbeatable combination.

This unique position did not come without pain, however. IBM’s decision to sell its ThinkPad business to a Chinese company in 2005 drew sharp criticism, but obviously, it was the right move.

In fact, part of mastering the innovation game is understanding the value of the knowledge your company possesses today versus tomorrow. At one time, IBM had a leadership position in laptops, but Palmisano recognized that the value of that knowledge was shrinking. Instead of letting that product die a slow and profit-sucking death, the CEO cut the cord quickly and concentrated on areas where the company’s knowledge was rising in value.

Many other types of companies have done the same thing. For example, metal-forming companies have readjusted their product mixes since the 1990s to sell more to growing industries, such as energy exploration. They took their knowledge of making tubes and other parts for consumer and industrial goods and applied it to newly developed energy equipment when domestic demand dropped in their traditional markets. Similarly, some textile producers in United States didn’t shut their doors when the clothing industry essentially left the country three decades ago; instead, they started making textiles for medical and industrial applications. In both of these instances, manufacturers replaced products that could be made cheaper overseas with products that require more knowledge, skills and customer collaboration.

As for innovative service, some manufacturers have found that by providing shorter lead times for smaller quantities of specialized products, they can beat overseas competition because these producers have much longer lead times and will ship only in larger quantities. Responsiveness and flexibility can beat cheap labor.

Buffett has said he doesn’t invest in products/services that he doesn’t understand. One can see why IBM’s offerings make sense to the world’s most levelheaded investor: They give the marketplace what it wants, and when circumstances change, they adjust without delay. That’s a strategy any manufacturer can benefit from.

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BCG Blogger, December 12th 2011 | Tags: , , ,
Posted in Innovation, Uncategorized

CFO On-Call: A Must-have for Manufacturers

By: Rick Kavenagh, CPA

Business owners wear many hats, especially if you’re an owner of a small- to medium-sized business.  As the business evolves, many owners begin delegating responsibilities that they once handled.  However, one of the responsibilities that many owners are still finding themselves in charge of is that of the finances of the company.

For many, this is a painful task—it takes away from your time in the operations of the company and might be something that you just simply do not want to do.   You may not have the proper tools to handle this responsibility and the “unknowns” are what keep you up at night.  Plus, if your company’s complexity, size and revenue, or financial pace (either downward or upward) begin to change, financial strategy could be vital.  In the manufacturers’ arena, things can be even tougher when pricing, inventory controls and shipping issues come into play.

So there comes a point in time when the financial responsibility of the company needs to be the responsibility of someone other than the owner, specifically the Chief Financial Officer (CFO).  Would you be able to recognize when that time has come for your company?

Financial Overload – When You’re In Over Your Head

Here are seven warning signs to help you decide when to delegate financial responsibilities:

1.       You find yourself wearing the hat of a financial analyst, an operations manager, a marketing coordinator, and a CEO.  Too many hats!!

2.      You’re worried that you may be missing important financial policy changes that could have an adverse effect on your company and its shareholders.

3.      You feel that the relationships between your company, banker, bonding agent and attorney are not being managed as efficiently and effectively as they should be.

4.      You stress about whether you’re making the right financial decisions.  Worse yet, is your company protected from any poor financial decisions that you may make?

5.      Your current in-house accountant is competent at accounting but lacks the expertise to be able to give you strategic business planning advice.

6.      You wish that you could have someone on board that has the financial experience that could help steer your company down the path of growth and success.

7.      You realize that you alone cannot foster and drive change throughout the organization.

The Affordable, As-Needed Solution

If you can relate to any one of the warning signs, you’re not alone.  Many smaller to mid-size companies find that they need the expertise a CFO can provide, however, the cost of full-time employment just doesn’t fit into the budget

But companies in this scenario can engage the services of a CFO on an as-needed basis by utilizing a resource called ‘CFO On-Call.’ These CFO On-Call services are growing in popularity for owners of small- and medium-size companies, due to the fact that they generally take financial burdens and limitations away from the CEO.

As the leader of your business, it can be lonely at times and often the CFO Service is best utilized as your unofficial board of directors:  bringing a different perspective on planning for future growth and profits.

Finding a ‘CFO On-Call’ Resource

According to BusinessWeek magazine, when choosing a CFO On-Call, seek:

  • a resource who can offer a comprehensive blend of financial services that accomplish your daily accounting needs, while working towards a corporate financial goal and mission.
  • an organization or firm with experience within your industry.
  • highly specialized, highly organized financial specialists with proven experience.

BCG&Co. Offers CFO On-Call Services

BCG & Company provides ‘CFO On-Call’ services based upon your needs – whether it’s assisting with cash flow management, developing accounting policies and procedures or simply helping you close the month, the BCG CFO Services could be the perfect business partner solution.

With a dedicated team of business advisors that possess in-depth financial experience, BCG&Co.’s CFO On-Call services could be the ideal fit for you.  We have assisted our manufacturing clients in the areas of costing systems, pricing studies and segment reporting, to name a few.  We are the business partner, financial resource, and affordable solution that will help you attain your goals.

Contact a BCG&Co. business advisor to discuss CFO On-Call services – BCG CFO – and the implementation process in greater detail: BCG&Co. Business Advisors.

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BCG Blogger, October 31st 2011 | Tags: , , , , , , , ,
Posted in Uncategorized

4 Benefits Microsoft Dynamics GP Brings to Distributor

BCG Systems, Inc.

Distributors face unique needs with their business processes. Feeling limited by your system?  So did Winncom Technologies, a distributor of networking solutions available through 8,000 resellers.  They turned to BCG Systems, and together, transitioned from Sage MAS 90 to Microsoft Dynamics GP. Let’s look at a snap shot of their situation and the outcome that was realized with Dynamics GP.

Business Situation
Winncom Technologies has 200 employees and distributes networking solutions worldwide. They increased their revenue from $30 million to $64 million over a period of 6 years. With their rapid growth, Winncom’s existing Sage MAS 90 system struggled to scale. The system could not automate order processing and track vendor rebates, forcing Winncom to perform manual processes, which only became more complex with growth. Because order processing was largely manual, Winncom sometimes could not offer same-day shipping and lacked real-time insight into sales.

Solution for Success
Winncom deployed Microsoft Dynamics GP and a range of solutions, including Microsoft Dynamics CRM, to build an end-to-end distribution system that provides real-time insight into operations. They now have a system in place that meets the challenges posed by the company’s rapid growth. How does Winncom feel about the solution they selected? “When we implemented Microsoft Dynamics GP and Microsoft Dynamics CRM, we changed the culture of our company,” says Vladimir Fedorov, Director of Finance. “The system brought a contemporary feeling and responsibilities to our company that make us much more competitive in this market.  Our competitors are companies 10 times larger than we are, and we can still compete with them.”

4 Benefits Realized

1. Achieved a full ROI in six months – The ROI comes from increased sales, reduced expenses due to manual processes and human error, reduced monthly operating expenses due to introduced budgeting systems and real-time track of expenses incurred month-to-date, and an overall improvement in operations.

2. Improved customer service, increase in sales. By automating the rebate process, Winncom can now provide real-time status updates to manufacturers. Why is this significant? Fedorov explains: “When the manufacturers see that a lot of rebates are coming through, they give us more leads. Since we can accurately and quickly process sales-related information, they give us more leads and we generate more revenue. We saw growth of 10-15% in different product lines. And even though the economy is now down, we have been able to maintain our sales at the same level.”

3. Automated and streamlined common tasks, reduced errors, and saved time – By eliminating manual processes through automation, Winncom has reduced its 15-20 percent error on orders to 0.0001 percent.  Also, sales staff now process orders in seconds rather than hours.  Orders are paperless and approved electronically. For the first time, Winncom now offers same-day shipping, giving it a further competitive advantage.

4. Improved financial management, gained real-time insight into operations. Because all business information is stored in one database and updated in real time, Winncom now has comprehensive insight into operations. What does this mean for Winncom? Now, they can see gross profits, margins, and how many rebates they need to claim at the end of the month. They are also now able to report on percent completion and adhere to generally accepted accounting principles.

Winncom’s Take on Microsoft Dynamics GP

Fedorov shares, “With Microsoft Dynamics GP, very difficult processes are handled in a simple way. Everything is straightforward, with minimum data entry and maximum visibility.”

Hear more about this case study and how Dynamics GP can help write your story of success too. Register today for Dynamics GP2010: Meeting Unique Needs of Distributors, a free event on Thursday, September 29th. Attend the webinar or live event. CPE credit hours available.

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BCG Blogger, September 23rd 2011 | Tags: , , , ,
Posted in Technology

Economist Narrows in on Potential for Economic Growth

By: Jason Tuma, CPA

In case you missed it, the recent Impact Manufacturing Forum (sponsored by BCG&Co.) brought some interesting perspectives together in one room, to share with manufacturers and distributors the outlook on where our current economy stands, and its potential for growth, as well as its restraints.

Economist and president of ClearView Economics, Dr. Ken Mayland, spoke about the reasons for the slow economy, and offered some potential solutions and possibilities for growth. Ty Haines, vice president, manufacturing services at the manufacturer advocacy group WIRE-Net also spoke to address the challenges and opportunities for manufacturers in emerging markets, and John Schober, director of innovation at the Manufacturing Advocacy & Growth Network (MAGNET) presented creative innovation strategies for manufacturers in today’s economy.

For a recap of the forum highlights, you can read the Akron Beacon Journal article: “Solutions to Slow Economy Include Tax Reform, Pro-drill Energy Policies, Economist Says”

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BCG Blogger, September 8th 2011 | Tags: , , , ,
Posted in Economy, Government Regulations, Innovation, Uncategorized

Challenges Small Businesses Face With Fortune 500 Companies

I recently read an article - “I Turned Over Financial Statements to a Fortune 500 Company: My Biggest Mistake” - in the Cleveland Plain Dealer and I wanted to share it with our clients and friends in the manufacturing industry.

This article touches on just one of the challenges small business owners face in dealing with Fortune 500 customers/vendors, as well as the importance of obtaining council from your CPA when dealing with financial issues.

Click here to read the full article:

http://www.cleveland.com/business/index.ssf/2011/08/i_turned_over_financial_statem.html

Jason Tuma, CPA

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BCG Blogger, August 31st 2011 | Tags: , , , , ,
Posted in Uncategorized

‘Made in the U.S.A.’ Is Making a Comeback

Increasing labor costs abroad and total-cost-of-ownership models are driving new thinking on sending production overseas.

By: Jason Tuma, CPA

There are a multitude of reasons why the number of U.S. manufacturing jobs has decreased by the millions in the past decade, but a favorite villain is offshoring — replacing goods made by relatively highly paid Americans with the same goods made by foreigners earning significantly less. Asian countries benefited greatly from this trend early in this century. Now, we’re seeing a bias toward bringing some of those jobs back to the United States. Instead of offshoring, manufacturing leaders are reshoring as a way to become more competitive.

Harry Moser, a retired machine-tool manufacturing executive who now runs the Reshoring Initiative, is a leader in this trend. Moser travels the country to speak about reshoring, works with individual companies to evaluate sourcing options, and maintains a Web site with costing tools that companies can use to objectively calculate total cost of sourcing. The Reshoring Initiative (www.reshorenow.org) does not promote protectionism. Rather, its aim is to educate OEMs and suppliers about how much it really costs to buy goods that have been manufactured overseas that ultimately will be sold in the United States.

Much of the offshoring that happened a decade ago shouldn’t have, Moser said, because executives were copying the competition rather than making objective, informed decisions.

“For years they followed the lowest labor costs; a herd instinct occurred,” Moser said. “There were lots of cases of CEOs who would have a bad quarter and then announce to Wall Street that they were going to offshore one third of their production.”

How much reshoring is going on?

No one has a definitive answer on the number of the jobs that have returned, but ample evidence points to an increase, including publicly announced plans by large companies to return existing jobs and keep new job growth at home.

Two drivers are behind this, the first being a realization that sourcing overseas has inherent risks and logistical and operational requirements that can offset labor savings by driving up costs for inventory, transportation, insurance, taxes/tariffs, and damaged and obsolete goods, etc. Additionally, there’s the cost of decreased flexibility and responsiveness due to long lead times, which has a direct effect on customer satisfaction and revenue-growth potential. The same companies that made knee-jerk decisions to offshore are finding it much more costly than first assumed when they apply such total-cost-of-ownership principles.

Secondly, the labor-cost gap is closing. According to a report released this May by Boston Consulting Group (BCG), Chinese labor costs are rising, as is the value of the yuan. Meanwhile, more flexible work rules and government incentives are making many U.S. states more competitive with low-cost countries.

For example, according to the BCG report, NCR Corp. announced in late 2009 that it was bringing back production of its ATMs to Columbus, Ga., in order to decrease time-to-market, increase internal collaboration, and lower operating costs. And toy manufacturer Wham-O Inc. last year returned 50 percent of its Frisbee production and all of its Hula Hoop production from China and Mexico to the United States.

“All over China, wages are climbing at 15 to 20 percent a year because of the supply-and-demand imbalance for skilled labor,” said Harold L. Sirkin, a BCG senior partner. “We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015. As a result of the changing economics, you’re going to see a lot more products ‘Made in the U.S.A.’ in the next five years.”

According to the BCG report, after adjustments are made to account for U.S. workers’ relatively higher productivity, wage rates in Chinese cities such as Shanghai and Tianjin are expected to be about only 30 percent cheaper than rates in low-cost U.S. states. And since wage rates account for 20 to 30 percent of a product’s total cost, manufacturing in China will be only 10 to 15 percent cheaper than in the U.S. — even before inventory and shipping costs are considered. After those costs are factored in, the total cost advantage will drop to single digits or be erased entirely, Sirkin said.

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BCG Blogger, August 25th 2011 | Tags: , , , , , , , ,
Posted in Globalization, Uncategorized

The Only Constant in Life is Change

By: Tracy Fitzpatrick, CPA

A major change has happened: The Ohio Use Tax Voluntary Disclosure Agreement (VDA) program is no longer. But, change can be good.

The Ohio legislature has now created a Use Tax Amnesty program.  This program was recently established by the Ohio legislature as part of Ohio’s biennial budget bill that passed in early July 2011.  The Use Tax Amnesty program replaces the VDA program and will save on interest and penalties.

The amnesty program is one of the most pro-business programs ever enacted by the State of Ohio.

  • This new provision has essentially shortened the statute of limitations.  Under prior law, the statute of limitations was seven years for consumers owing use tax.  This benefit applies regardless of whether you participate in amnesty or not.
  • The Use Tax Amnesty Program will last from October 1, 2011 to May 1, 2013.
  • The program will allow consumers who are unregistered to come forward and pay their Ohio consumer use tax liability for taxes owed from January 1, 2009 to present. Unregistered consumers qualifying under the program will not be subject to interest or penalties. Consumers registered for the use tax prior to June 1, 2011 may participate in the program but may be subject to interest and penalties.
  • This new provision is also effective for consumers that are currently under audit, provided that an assessment is not issued prior to October 1, 2011.
  • Consumers who do not participate in the amnesty program will be subject to a use tax audit for taxes, plus interest and penalties, owed from January 1, 2008 to present.

The details of how the Use Tax Amnesty program will operate are still being worked out; the Tax Commissioner will release forms and instructions regarding the amnesty program as they become available. So, stay tuned…we’ll have more information as soon as its released.

 

     

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    BCG Blogger, August 3rd 2011 | Tags: , , ,
    Posted in Government Regulations, Uncategorized

    The Outlook for Manufacturers Doing Business in Emerging Markets

    By: Jeremy Michael, CPA, Manager Assurance Services

    “Progress always involves risk; you can’t steal second base and keep your foot on first.”

    — Frederick Wilcox

    I recently attended an impressive presentation by Chase Bank on ‘Doing Business in Emerging Markets’ – specific to China and India primarily. The consensus of the emerging market experts who presented predict that while these emerging markets are fast-growing and contain a lot of risks, there is also a tremendous amount of upside – especially for a privately-held manufacturer struggling with how to grow their business in a highly-competitive, aging U.S. market.

    In order to understand the immense potential for growth, you need to first have an appreciation and understanding of the major emerging markets and what they have to offer. The presentation focused primarily on the emerging markets in BRIC nations (Brazil, Russia, India and China), as this group of nations represents approximately 40% of the people on the planet.

    Economists predict that the BRIC nations are expected to grow from a combined 17% of GDP in 2010 to about 50% of the World’s GDP output by 2030. In fact, they predict that the BRIC’s GDP growth by 2050 will be so great that they will have replaced four of the current G7 industrialized nations (France, Germany, Italy, Japan, United Kingdom, United States and Canada), with the U.S. and Japan remaining on the list.

    Since entering these markets can be challenging, risky and contain enormous hurdles to overcome, it is critical that a business performs its due diligence upfront. This means arming your business with a very experienced and diverse team of experts. It’s important to recognize that in these emerging markets the environment is highly regulated, which means obtaining licenses to conduct business along with obtaining financing, injecting cash to fund operations, and pulling funds out can be very challenging. To confound the issues, rules are subject to local government body interpretation and differ depending on what region you are conducting business within the country. Therefore, it is important that a business does not try and rely on a single firm or expert. Instead, assemble an “A-team” of experts, including, but not limited to, lawyers, accountants, bankers, interpreters, and experts in the country’s social, political and cultural environment.

    To sum up any new venture into an emerging market, I believe Jon Huntsman, U.S. Ambassador to China, says it best, “I’ve come to the conclusion that ‘China expert’ is kind of an oxymoron. And those who consider themselves to be China experts are kind of morons. So you take what you can, you learn what you can, and you begin to pull all the pieces together -and still it remains sometimes a somewhat-confused environment.”

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    BCG Blogger, July 11th 2011 | Tags: , , , , , ,
    Posted in Globalization, Uncategorized
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