Back in the day, companies used to wait until they were doing $50-60 million dollars a year in business and had been in business for several years before going international. And then the process of opening an international market took a year of planning and preparation. Now, we have clients that have been in business less than a year and they are moving to open two or more international offices almost immediately.

Is this a good thing? I don’t know. But it is a reality. Distributors expect you to go where their business is. But companies need to remember it is their business, they have to balance the demands of the distributors with the economic realities of opening many of these markets. There are good things in this “wild west—follow the business” environment, however it is important for companies to look at all of the issues surrounding each and every market the company enters. Let’s discuss some of the pros and cons of a company moving internationally.

Economy

If California were a separate country (and sometimes it seems they are), it would be in the top 10 largest economies in the world. This is something that a company must keep in mind as it plans to move into the international marketplace, don’t pass up the markets you are in to chase after less lucrative markets overseas.

The DSA (Direct Selling Association) has published a study, and in it, the results show that 90% of all DSA business is done in about 10 countries. Stop to think about that.

We see MLM companies opening offices in 10, 20, even 50 different countries. This is a very expensive way to do business because each different country has different laws, the labeling requirements for the product are different, you have to deal with that country’s equivalent of the Food and Drug Administration, etc. In some cases, it may not be worth it, because almost all the business is being conducted in 10 countries.

Differences in Per Capita Income

In different marketplaces, the way direct sellers do business is very, very different. You have to consider the income of the people to whom your distributors will be selling. You must also take this into account when you design your company’s commission plan.

For example, the per capita income of the United States is around $30,000 per year. Conversely, in a country like the Philippines or Thailand, income is one tenth of that. A company’s business model must adapt to handle each country’s specific differences.

This can be especially problematic for the commission plan. A plan that works well in a country with a high per capita income, like the U.S., may not work at all in the Philippines. This is because the qualifications for personal volume, group volume, and organizational volume are all designed around the consumer buying patterns of a country with an income of $30,000.

If you take that to the other end, some countries popular with direct selling companies have a per capita income of $3,000. If a company uses the exact same commission plan with roughly the same qualifications, then a distributor in the Philippines must sell to ten times the number of customers just to meet the qualifications!!

It is extremely difficult for a company to move into those countries without adapting to the differences and needs of distributors who are making $3,000 a year. The basic needs of these distributors are totally different from those of distributors in the U.S. Here, the distributor may be in the business to make some extra money each month—”mad money” that is outside of their family budget. On the other end, a distributor may be in the business to make a living and replace their entire yearly income!

Legal Issues

Opening a number of international offices creates a number of legal issues that a company must deal with. Although there are some ways to get around labeling and product approval laws, a company still needs to plan for different legal environments and regulations in each country.

For example, the “Not for Resale” business model allows people in other countries to buy product direct from a U.S. based company, as long as they don’t resell the product to people in that country. The company ships directly to them and thus bypasses the labeling, import, and product approval laws.

Although changes have been and are being made, South Korea strictly regulates the total percentage a company may pay out in commissions; a company cannot pay more than 35% of the wholesale price paid. This was a vigorously enforced law. So any company that enters the Korean Market that pays more than 35% must change their commission plan to meet this requirement.

In China, a new law is in effect that states that a salesperson has to be tied to a retail establishment and can’t sponsor anyone outside of their home area. Obviously, this is very different from what we are used to in traditional direct selling companies. Will the U.S. companies adapt to this new law? Absolutely—China is too large of a market to ignore. Will it be very different from anywhere else? Yes!

Worldwide Commission Plans

In the last 15 years, the standard in the industry has been for companies and distributors to push for seamless worldwide commission plans. The companies bragged about their worldwide plans; and the distributors demanded them.

The problem was that people assumed that if their plan was the best in the U.S., then it would naturally be the best anywhere in the world. But as we saw in the example about a distributor in the Philippines selling ten times as much, the same commission plan will not work everywhere. It has become apparent that the real goal for companies should be a seamless worldwide downline, instead of a seamless commission plan.

A worldwide downline means that a distributor can sponsor new recruits anywhere that the company is doing business, but he is being paid based on the rules of the country where the recruit lives. This allows a company to make changes in the commission plan for each country’s specific needs, but still allows the distributors to sponsor whomever they want.

It is plain that in order to be successful in many markets, a company must have multiple commission plans that adapt to each country’s needs. In most companies, the different commission plans will still be recognizable from country to country. They will most likely be based on the same general ideas.

To close, I’d like to say that just because technology and pressure from distributors has made it easy and imperative for a company to move into the international arena, it doesn’t mean that a company should just jump in with both feet. Making the transition takes patience and maturity and a good hard look at the issues that will come up in each country. In the world of tomorrow, more and more companies will change their commission plans to handle the extreme differences in the countries they move into.