Thinking Globally: Advice for Internationally Active Businesses
Mar 20, 2008
From the increasing cost of energy to the weakening of the U.S. economy and dollar, internationally active businesses are facing a number of challenges. Lou Longo and Scott Sneckenberger of Plante & Moran Global Services (PMGS) recently sat down to share their advice for these companies and discuss the opening of the firm’s Monterrey, Mexico office — the latest result of a continuous effort to help globally active clients thrive.
I understand Plante & Moran opened its Monterrey, Mexico office.
SS: That’s right. We’re very excited to have a Monterrey presence.
SS: We’ve been doing work in Mexico for more than 15 years now. There’s so much cross-border activity between the United States and Mexico, it was a natural move for us.
LL: Really, it comes down to our clients. We have a number of clients with both China and Mexico operations, and many have made comments about how helpful our Shanghai office has been — we saw a tremendous opportunity to provide similar assistance in Mexico.
What kinds of assistance?
SS: Everything from strategy evaluation and due diligence services to facility site selection and appropriate tax structuring. We’ve helped clients improve operations in times of business challenges, we’ve helped teach clients best practices in their native languages, we’ve even taken over as project manager, due to our extensive experience in doing business in Mexico and China.
Still, it’s interesting that your second international office is in Mexico rather than one of the “BRIC” (Brazil, Russia, India, China) countries.
LL: It was really a matter of client need coupled with proximity to the United States. And we’re not done yet. We’re actively looking at an office in Mumbai (Bombay), India. We’re also currently evaluating our positioning in Eastern Europe and Russia. We’re committed to growing our service capabilities and international locations to support our clients in all of their international concerns.
SS: We’ve gone from three full-time staff in one office, to nearly 20 staff speaking nine languages in four offices across three countries — all in just over five years. In addition, our global reach extends to more than 70 countries via Praxity, an independent alliance of more than 100 professional accounting and auditing firms worldwide, all of whom are committed to the high standards required in international business. We’re here to help our clients succeed and operate competitively, wherever their businesses take them.
What are the major challenges currently facing internationally active clients?
SS: Two of the most significant are the increasing cost of energy, which has a significant impact on logistics, and the weakening of the U.S. economy and U.S. dollar.
LL: The weakening of the U.S. economy and dollar is changing global buying patterns and making us an attractive market for manufacturing and exports. We’re the new low-cost country. We’re high efficiency, we have high skill sets, and we have a huge end market; because of these factors, we’re seeing manufacturers from large, multinational companies move from Western Europe to the United States, and given high logistics costs, we’re seeing Asian and European manufacturing moving back to North America.
SS: Which means there’s no simple formula for an effective global strategy. Each company needs to be aware of what its customers, competitors, and suppliers are doing. We specialize in helping clients determine how to take advantage of the opportunities out there to grow in these dynamic times.
What advice would you give clients contemplating their international strategy?
LL: Consider manufacturing within the United States and exporting elsewhere, particularly Western Europe. Look at alternative business structures, including agency relationships, licensing, and strategic alliances, to increase sales and profitability. You can do a lot with a little capital investment; you don’t necessarily need to have your own plant.
SS: It’s also important to have a business model that helps mitigate as much risk as possible, especially regarding things you can’t control —like currency rates, logistics, and energy costs. For example, we have one client who went to Eastern Europe to set up an operation (this was before they were our client). When the euro suddenly appreciated, they had to close the operation because it was less expensive to produce their product in the United States and export it to Europe than it was to manufacture it in Europe and sell it there.
LL: We understand that you don’t have a crystal ball; nobody can predict the future. But you can take the time to consider the impact those kinds of issues can have — up front — and consider making your investment in a way that allows you to be nimble and flexible. Instead of setting up an expensive operation, maybe only do a subassembly there or purchase from suppliers there that you can select or deselect as the currency begins to change. It can be as easy as using foreign currency and the international treasury function in which a number of companies just haven’t had past experience. The key is a proactive, flexible global strategy. If you don’t have one, we can help you get one.