The universal goal for business owners, large or small, is to establish and maintain volume and profitability.  For the large or small company, domestic sources of raw materials, finished goods, capital, marketing and administration may be in short supply or not available in the right quality or pricing.  Or the company’s operations may work so well at home that expansion into foreign markets is the only avenue that promises to avoid ruinous competition.  Or competition may already be so intense in the domestic market that profitability is slipping below acceptable levels.

If profitability is key and political risk including the threat of nationalization is not acceptable, the industrialized nations including the United States are the mandated choice.  Lower return projections are probable here than in emerging economies, but common thought may see stability as enabling and political change as a deterrent to real profits.

Investment in emerging economies may be the better alternative when the investment possibilities are low in price and high in leverage.  When the durability of a stable government is in doubt, returns need to repatriate capital in less than five years and the assumptions of contingency costs should be very realistic.  The concept of very realistic contingencies means a laundry list of possibilities and a percentage which may exceed 100 % of the anticipated original investment.  I see projections of 100 % returns annually in the chaotic markets as the norm today.

The market risk of transporting a successful domestic organization to the foreign country is high and involves retrenching of the original plan in most cases.  Retailers seeking to transport successful strategies from areas with a wealthy populace to subsistence economies may not find the volumes required to sustain the required administrative and realty investments.

Capital markets foreign to the United States may not have the maturity to generate funds in sufficient amounts or at competitive costs.  Transporting your domestic source overseas may negate the advantages you get at home and you just wind up paying for your source’s education in the foreign market if they can perform at all.

And, finally, you may think that real estate in offshore urban areas with characteristics suitable for your retail stores may have a price advantage over the home market.  This assumption may be wrong as the competitive influences we enjoy here may moderate the domestic occupancy cost in comparison.

So, go ahead, move it out and over.  But do it like the pros do, look and think for a while before you leap.

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