Business Plan Basics

Infrastructure encompasses many of the obstacles as well as modern facilities you may find in the target market.

Infrastructure

Construction Crane

Developing the right approach to your market requires thorough analysis of many factors such as customer demographics, legal barriers, geographic obstacles, foreign languages and cultural differences. The scope of a project will be tailored to your specific requirements. We invite you to browse through some of the issues we include in our analysis.

Geography

The landscape of a country or market shapes many of the physical barriers you might encounter in selling your product. The inhabitants of the islands of the Caribbean are very isolated and the shipping costs to supply the individual markets dramatically increase the marginal costs of any product. The Swiss and Italians overcame the barrier of the Alps when they built long tunnels under the mountains to accommodate automobiles, trains and trucks. But other countries such as Afghanistan, Chile, China, India, Mexico, Pakistan and many more do not have modern highways or railways through their mountains. Rivers, lakes and oceans can present other formidable barriers to transportation especially when the markets lie hundreds of miles inland.

Geographic barriers have isolated groups of people from one another for thousands of years. This separation fostered the development of separate cultures, unique languages and even genetically distinct tribes. Geography also affects the weather and what type of housing and clothing people use. Depending on the latitude, it also determines the types of crops and livestock the people can raise for food. So, even though the internet may promote instantaneous worldwide communication, there are still populations of humans who are completely isolated by land, weather and water.

Highways, Railways, Ports

Container Port of Miami

The Romans were one of the earliest civilizations to establish a network of well-maintained roads from the heart of their empire to the furthest reaches of their influence. Roads contributed to the rapid deployment of the Roman army and created an efficient pathway for communication. Eventually, Adolf Hitler modernized the idea and developed a wide network of well-maintained highways to move his armies and supplies. Today our road networks and freeways link trucking terminals to railway hubs to sea ports. Using containerized shipping technology, goods remain packed in the same container from the factory to the local market. But not all countries utilize these advanced methods of transportation. Donkey carts and horse-drawn wagons are still common sites in many of the most modern countries in the world such as China and India. Shipping methods need to be a major consideration when planning your distribution network. Time to market and refrigeration facilities are critical for perishable goods, and shock resistant packaging is essential for delicate high tech products. Make sure your transportation plans accommodate the barriers of the market and requirements of your product.

Electrical

Other than rolling brown outs and occasional power outages from thunderstorms or hurricanes, most Americans rely on 24-hour access to electricity to refrigerate food, light their homes, and communicate on the internet. But 80% of the world's population has to deal with frequent electrical interruptions and long periods of power failure. If you are manufacturing products overseas, does your plant or facility have its own power plant? Does your product require electricity to function and do your target customers have access to electrical resources? If not, you need to consider adapting your manufacturing plans, choosing a different market and / or selling accessories like external power supplies to launch your product.

Internet

The advent of the internet is one of those developments that has changed the world. Sales and distribution, order processing and targeted marketing can now simplify the sales cycle for both the company and the customer. But the internet relies on high speed communications lines, constant electrical power and an educated consumer with access to a computer to take advantage of it. As much of a miracle technology as it may be, it's only one link in a chain of communication between you and your customer.

Telecommunication

When China emerged from the Cultural Revolution in the late 1970's, less than 10% of the population had access to a home telephone line. With a population of nearly a billion people at the time (now more than 1.3 billion) the expense of wiring homes with individual telephone lines was unrealistic. By the mid 1990's, the development of cellular technology revolutionized telecommunication in China. China now has a higher percentage of cell phones per capita than the United States. Most older apartment blocks and rural villages still lack ground lines for telephone because it is much less expensive to build cell towers to accommodate large numbers of people. Whatever market you choose, telecommunications or the lack thereof will affect how you reach and keep customers.

Capitol Building, San Juan, Puerto Rico

Government

The rule of law is one of the foundations of western civilization but not all cultures have the same cultural heritage. Some traditions of government rule depended so much on an authoritarian system that the rules could change at the whim of the ruling authority despite any written code. Governments with a firm sense of the rule of law typically express the sentiment, "no one is above the law." However, there are governments today where some citizens are more equal than others. Such situations will have a major effect on whether the courts or other institutions of enforcement feel an obligation to follow a written contract or rather what the culture would define as "fair". For an American company that relies on the absolute protection of a legal system to uphold the terms of a contract, ignoring the values of a different culture can be perilous.

Democratic or Authoritarian

The phrase "one man, one vote" appeared only in the late 20th century, attributed most to the U.S. Supreme Court case, Wesberry v. Sanders(1) even though the concept can be traced back to many movements for equal suffrage for women and minorities. Previous systems we tend to equate with "democracy" including ancient Greek tradition, the Roman Empire, British Houses of Parliament all used a wide variety of methods to develop representative government. In most cases, wealthy, males have always had a privileged place in electoral politics whose "votes" weighed more heavily than poorer citizens, women and people of color. So, if you look at the concept in those terms, it is still a struggle to identify any country that subscribes to the concept in all cases. Most true "democracies" generally share the concept of the "rule of law" and that it should apply to all citizens.

Authoritarian systems including non-Parliamentary monarchies and military dictatorships tend to develop laws and regulations that favor the allies of a few ruling authorities. In the cases of "non-democratic" systems, it is a mistake to assume that the terms of written contracts will be upheld in a dispute. Business ethics and cultural values will weigh more heavily in negotiations and day to day commercial operations. Unless a business recognizes that the relationship with the owners and managers of a company outweigh the terms of a contract, there will be inevitable misunderstandings on both sides.

Secular or Theocratic

When the Islamic Republic of Iran was established in 1979, it joined a very small group of openly theocratic governments including the Vatican (the "Holy See") and the Tibetan Government in Exile. As such, Iran is the largest theocracy responsible for governing the lives of its country's citizens on a daily basis. The supreme "Leader" of Iran who holds the highest position in government, uses unquestioned authority in appointing certain government officials and approving political candidates.

In the case of the Vatican, the Pope's direct governance applies only to residents of the Vatican and officials of the Roman Catholic Church. Even though the Pope has legal authority over a relatively small population, he influences the lives of hundreds of millions of followers who live in other countries, who in turn influence the policies of their respective governments. As the exiled leader of Tibet, the Dalai Lama has even less legal authority than the "Leader" of Iran or the Pope, yet all three religious leaders influence a larger population than the ones they directly govern.

Since so few countries are true "theocracies" does that mean all other countries are secular and follow some other system of laws? Of course not. As previously mentioned, the governments of the Kingdom of Saudi Arabia, the United States, the state of Northern Ireland, Turkey, Indonesia and many others answer to voters who accept guidance from theocratic leaders. Northern Ireland has endured hundreds of years of conflict between the Protestant (Anglican) majority and the Roman Catholics. Modern Turkey was established as a secular state but over 90% of the population believe in some form of Islam. Indonesia is the country with the largest Muslim population in the world which influences the laws that the people and corporations must follow. Therefore it would be a fallacy to assume that a "secular" state would ignore the values instilled by the majority religion(s).

Common Law or Civil Law

British law has developed gradually over the last 800 years since King John was forced to concede some royal authority when he accepted the framework of the Magna Carta in 1215. However, British law stems mostly from the collection of individual acts of Parliament and court judgements. It is still considered a "constitutional" system of government but there is no single document like the U.S. Constitution as amended. "Common" law generally establishes principles which courts must follow but also includes specific prohibitions and rights. In a Common law system, citizens and companies can be held to the standards and principles of the laws regardless of whether a specific law allows or prohibits a particular action. Such flexibility gives courts tremendous power but most governments have established limitations on the exercise of judicial authority and have the means to overturn judicial decisions.

Civil law on the contrary includes very specific rights and prohibitions and courts may only make judgements based on the written law. Civil law is therefore much more comprehensive and unless actions are formally allowed, they are generally considered prohibited. Common law societies generally grant any rights to their citizens that are not specifically prohibited.

Knowing which type of legal system a country uses is very important. In a Common law system, detailed written contracts are required to avoid any misunderstanding because the laws are more flexible. However under Civil law, the conditions and rights of contracting parties are proscribed in the law and cannot be changed by contractual agreement. It gets very complicated when a company based a in Common law country contracts with a company based in a Civil law country. For example, Canada, the United States and most of the former British colonies in the Caribbean follow Common law principles but Latin American countries, former colonies of Spain, including Mexico, follow a system of Civil law.

A concrete example how the differences can affect a company may be illustrated in a distribution contract between a U.S. and a Brazilian company. Under U.S. law, the terms of termination of a contract will be detailed in a contract between the parties including compensation for a distributor which is terminated by the U.S. company. But under Brazilian law, distributors have the right to specific compensation for termination regardless of the reason for termination. Unless a U.S. company realizes this difference, they may find themselves liable for thousands if not millions of dollars in compensation payable to the former distributor. On the positive side, the compensation is limited by the law and the U.S. company should base their pricing on the eventuality of termination even establishing reserve accounts for termination expenses. At least U.S. companies can feel more secure that a court would rarely award any punitive damages in the course of normal business operations unless the distributor could prove fraud on the part of the U.S. company.

Central or Federal

The United States and Germany are federal republics where the central or national government has the right to establish laws that cover a limited number of issues including national defense and international diplomacy. Other governments like France and Russia are very centralized where the national government establishes uniform laws for the entire country. The federal system in the U.S. was developed as a compromise after the failure of the Articles of Confederation and in contrast to the centralized nature of the British Empire. As such, companies that conduct business in many states frequently have to follow very distinct rules from state to state. In a centralized governmental system, although national laws may be uniform, local authorities would have little influence in affecting changes for new types of businesses.

As a U.S. company, entering a market with a centralized government will likely allow faster access to the whole market as long as no special exceptions or modifications to the law are necessary. When entering a market based on a federal system, be careful to investigate all aspects of business if planning to promote products across provincial boundries.

Education

How people teach their next generation will determine appropriate levels of technology that you can sell in that market. The idea of "appropriate technology" is an internationally recognized concept to define classes of products that may be easier to sell in any given region. Critics argue that it is a concept created by the developed world to keep high technology out of the hands of developing nations. One example that relates to education may help illustrate the point. To manage a nuclear power plant, employees must be highly trained in areas of physics and chemistry at college if not at the post-graduate level also. In order to sell a nuclear power plant in a specific market, it will be easier to choose a country with educational institutions that teach those subjects. Granted, it is possible for citizens to receive advanced education outside of their home country, but selling the nuclear technology will depend on labor trained abroad at least for the short term.

Literacy

Along with education, the general level of literacy in a country will determine the kind of promotional materials used to sell products and the form of product information you provide to customers. Where literacy is low and the product is intended for a mass market, bright graphics and animated instructions will provide more appropriate information than volumes of black and white text which customers may not be able to read. Instruction manuals, recipes and other types of communication with cartoon characters mimicking desired tasks will convey the intended message more clearly to the target audience.