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The impact of economic globalization can be seen everywhere in the United States. Virtually all states have subsidiaries of foreign companies and manufacturing plants. More and more American companies, including small to medium sized ones, engage in overseas business in the form of either manufacturing or the export/import of goods. The movement to offshore U.S. manufacturing operations has expanded to include research and development, customer service, service sector and professional operations. At an individual level, the volume of direct flights to foreign countries has accelerated the speed of globalization. People easily migrate between countries and invest their own funds into property and financial accounts abroad. No longer are international transactions a privilege of large corporations. As the United States' economic market become more mature and competitive, business people should look for more opportunities and faster growth outside of the United States. On the other hand, for foreign investors, the United States is an attractive consumer market, approaching 300 million people, and stable economic growth and political systems. The legal industry's global movement has paralleled that of the business world. As the United States' economy started to decline in the 1980s, many of the large United States and United Kingdom law firms opened Asian and European offices seeking both foreign clients doing international business as well as United States clients venturing abroad. Since that time, these firms have constantly and aggressively developed international clientele by acquiring both foreign lawyers and U.S. lawyers who practice international law in overseas offices and in U.S. offices. Medium and small regional firms followed suit by forming international alliances with other firms to expand their referral network. National U.S. firms have moved into London. The early 21st century coincided with the first transatlantic mergers, combining major U.S. and U.K. firms. Today, there are almost a dozen legal services firms in India in the business of providing U.S. legal services to law firms and directly to clients, at reportedly greatly reduced cost. Benefits of International Clients Besides potential economic opportunities, there are additional advantages to having international clients. The geographical diversification of one's practice by the addition of clients doing business in a different part of the world will protect the practice from a region-sensitive recession. For example, if America is hit by an economic downturn, there must be another area of the world that is obtaining the benefits of economic growth. In the late 1980s and early 1990s, many firms profited from million dollar transactions with Japanese companies. However, those lawyers who concentrated excessively on their Japan practice in the late 1990s had a hard time due to the current prolonged recession in Japan. Had they geographically diversified their practice, they could have shifted back to their U.S. clients. The diversification of a practice can also provide a variety of business opportunities and the exposure to clients in different geographical areas can strengthen one's professional experience and reputation. A major advantage of having foreign clients is a long term relationship. Culturally, foreign clients respect lawyers more than their United States counterparts and they attempt to build better business relationships with them. In addition, most law departments of foreign companies have a smaller number of in-house lawyers than their United States counterparts. As an internal constraint, they do not have ample financial or human resources to select outside counsel for different cases. The cost of switching among outside lawyers is too high for them. Differences of International Clients An understanding of a client's business needs is vital to serving the client professionally. The difference between American clients doing business in the United States and foreign and American clients doing business abroad is significant. Knowledge of a different country's law is required. In particular, foreign clients appreciate lawyers who can understand their culture and the differences between the political and social systems of their own country compared with America. American lawyers should also understand the differing roles of lawyers in different societies. The United States is a very litigious society, where lawyers play an important business role starting from the very early stages of a transaction. However, in other countries, the role of lawyers is focused primarily on only legal matters. Therefore, because U.S. lawyers are more heavily involved in business transactions, the legal fees seem surprisingly high to foreign clients who have never dealt with American lawyers. Cultural differences, differences in expectations, and the language barrier can all cause a communication gap between lawyers and foreign clients. The communication gap must be closed quickly by lawyers so that the frustrating burden does not fall on the client. To avoid such communication problems, legal documents are often translated into different languages and much overnight correspondence is exchanged. It is a time-consuming process to communicate with foreign clients. An understanding of the corporate culture and management structure of a parent company with regard to how it operates overseas transactions and international legal matters is another factor that affects the management of cases and interaction with clients. The structure of a group consisting of lawyers and clients is more complicated in international transactions. Often, a team consisting of international lawyers from different countries, sometimes from different law firms, is formed to negotiate a certain transaction. The organizational structure of each deal itself is diverse, depending on its size and complexity. Under these circumstances, the location of authority is more ambiguous and erosion of autonomy occurs more easily. It is more difficult to control the direction of an international transaction. With the unique organizational format of each contributing entity, the decision making process becomes more complex. It is unlikely that one can directly contact an individual with decision making power at will. Communication paths get clogged. The most frustrating fact is that, with all of these constraints, one must still maintain the quality of work. Generally, foreign clients prefer an individual lawyer with good legal skills and varied business experience over a big-name firm. Foreign clients also prefer a lawyer who is client-oriented and a good team player. Individual abilities carry more weight because human contact is a vital factor in building a long-term, trusting relationship between an outside counsel and a foreign client. Firm-Wide International Strategies International marketing strategies must be aligned with the firm's general strategies and supported by firm-wide efforts in order to maximize the advantages of having foreign clients and minimize the firm's exposure to potential risks. Depending upon the level of commitment to international strategies, some projects may involve a significant number of lawyers and support staff as well as much of a firm's time in developing plans. Everyone should understand the mission of a particular project and support the firm's international strategies; otherwise, it is difficult to sustain the high level of effort and harmony necessary to bring the project to fruition. If the international strategy is not aligned with the firm's other strategies, it may be difficult to prioritize these strategies, thus causing confusion and, eventually, discouragement. Consequently, the project, not the system itself, will be blamed for the inefficiencies. Firm-wide strategies which create a system to facilitate the project should be carefully developed before execution of the project. Additionally, the speed of business development in other countries is generally slower than it is in America. Despite an excellent business proposal, it is often difficult to immediately form an agreement because the client may be unfamiliar with the subject matter. Therefore, extensive firm-wide support is necessary to maintain the project until it is determined whether it is worthwhile to continue. A long-term commitment also helps the firm train lawyers to perform tasks in a more productive way. It is important for lawyers to learn how to function in a team in order to accomplish the firm's international mission. Due to the long-term nature of international business development, training the next generation of lawyers can make a difference in the future. Types of Global Expansion[a] Acquisition The acquisition of a lawyer, a group of lawyers, or even an entire firm with books of international business is a quick way for a firm to gain access to the new field. As a result of the acquisition, the acquiring firm can learn international business development skills and legal skills from the acquired lawyers. The acquiring firm may also have an opportunity to cross-sell a variety of its existing practice areas which the acquired group did not have. A major disadvantage of this form of expansion is a possible cultural mismatch of the two different entities. If the acquiring firm's support for its international strategies is not firm-wide or consistent, the project will be frustrated by misunderstandings and mistreatment. The new firm may experience defections by unsatisfied lawyers or merely continue to coexist as two separate entities. The merging of two different firms takes a great deal of management effort to create synergies.[b] Branching Branching provides several benefits to a firm and its clients. If the purpose of opening a new branch abroad is to follow existing domestic clients in outbound transactions, the benefits to both the firm and the clients are instantaneous and tangible. For a law firm, this is the safest means of overseas expansion; for the client, the close proximity to one's lawyer is convenient, particularly when starting a business in a new country. While the globalization of legal services makes this less likely, there are still areas where opening an overseas branch will provide akin to first mover advantage. There is a chance that the firm can attract both inbound and outbound transactions from other clients because of its high visibility in that locale. The costs of maintaining a branch office and sending a partner there are factors that must be taken into consideration, however. Choice of a branch head is crucial for business development as well as home office-branch management. Does the branch head have proper language, cultural and political skills? Which skill is more important than the other in reaching the firm's goal? Often, the commitment to a foreign market may be too high to exit the plan before incurring unrecoverable losses. Alienation of the branch and decentralization of management control are other possible consequences that may increase the costs of the operation.[c] Alliances The formation of an alliance with other firms is a common method among the second tier firms when entering a new foreign market. Forming an alliance may be beneficial because of the low risks involved. With lower risks, it is easier for firm management to get a consensus from the other partners or the management committee. There are no expensive physical commitments as there are with a branch. The formation of alliances is a good pilot method, particularly for a firm that doesn't want to commit too much in the earlier stages. Allied firms can maintain a great deal of autonomy and independence from each other and avoid direct competition in the targeted market. The alliance is a typical way to expand an international referral network. Alliances, however, are not without their disadvantages. Results may be slight due to the lower level of commitment. The bond between the participating firms may not be strong enough to take full advantage of one another's strengths.[d] Targeting Inbound Transactions Focusing on inbound transactions is another means to internationally diversify a firm's practices. When a firm lacks the necessary resources to open a branch or to engage in foreign transactions, inbound transactions, which require mainly knowledge of familiar local law, can bring benefits of global economy to a firm. In this case, a firm may not need any extra preparation when inviting foreign clients to do business in the United States. Although networking is important in gaining initial access to foreign clients, the generation of this type of business can be done via a personal contact or even by chance. Furthermore, particularly for a small to medium size specialty boutique, it is possible to attract foreign clients who are looking for local assistance in a specific field of law at lower rates. Marketing Strategies In developing international marketing strategies, a firm should conduct preliminary market research. Conducting market research initially reveals whether there are potential benefits in investing in a certain area. For example, are there any positive economic trends in the area which would indicate that the firm should pursue a long-term investment? Does it have favorable industries for the firm? What are the rules of competition in the legal profession and the likelihood of changes? You should also define who the competitors in the marketplace are, how they are conducting business, and how they will react to your investment. Most importantly, you should consider ways to finance the marketing strategies internally. Based on this preliminary market research, you should decide which foreign markets to target for implementing your strategies. As a second step, reevaluate your firm's core competencies which can be delivered to the targeted potential markets. Methods of conveying information regarding your firm's practices and services can vary in different markets. Do you need an introduction by eminent business people or do you need to hold a seminar? At what time do you submit a business proposal, how long do you have to wait for an acceptance and how do you follow up on it? Answers to these questions will vary for various countries and different transactions. Careful consideration should be given to the advice of an expert in each field. Internal marketing planning and training are necessary firmwide to facilitate the business development process. As international business development is a long-term process, it is never too early to encourage young associates to start networking. In addition, you must pay attention to marketing team formation. Marketing team members should relate and interact well. In meetings with clients, the team should not be a mere assemblage of several individual lawyers, but rather a group sharing tasks and roles. When developing new foreign clientele, it is important to clearly communicate to potential clients the values your services will add. You must ensure the quality of those services and explain how you are going to produce work of such caliber. Thorough knowledge of a client's business and specific needs is mandatory in order to propose a service plan. An advanced discussion of a fee arrangement is equally important, keeping in mind that better quality work with reduced costs is attractive to all potential clients. Finally, you have to know when to terminate a marketing strategy. Although marketing strategies may involve long-term efforts and significant investments, you must not become overly committed; otherwise, you may lose an excessive amount of money and time on a futile venture when they could better be utilized for other purposes. Teamwork and frequent communications will help abate the potential loss of time and resources. Communications The delivery of quality legal products and services is a key factor in gaining client satisfaction. Good communication skills are a critical component. This factor is amplified when dealing with foreign clients because of potential language and cultural gaps. In order to understand the nature of a client's business objectives and styles, it is useful to work together to establish project strategies. During the process of creating such strategies, both sides can become acquainted and clarify the decision making process and communication paths before working on an actual project. As a part of creating project strategies, it is important to formalize communication paths and appoint a liaison or a neutral facilitator to organize a team of members from clients and lawyers. This person should form a cohesive bond between both parties and should be able to stress commonalities rather than differences, as well as discuss the priorities of tasks. The liaison also has to be able to eliminate the "us" versus "them" concept. Successful communications can break barriers and lead a transaction toward mutual goals. Technology will also help develop speedy and efficient communications. Computers, including hand-held portable technologies, are largely bypassing the problem of having clients in distant time zones. Messages and work product can be sent from virtually anywhere in the world, be edited by the other party and sent back for review. Computer communication is especially effective for clients who dislike international telephone conversations, particularly those concerning complex legal issues. International Marketing for Small to Medium Size Firms International client development is not exclusive to big firms with generous funds. Economic globalization is not only driven by big multinational corporations, but also by small and individual businesses. Small to medium size law firms can build their practices by stressing their inexpensive, personalized services. A small company has great potential growth in an industry. A firm can symbiotically grow with a small company. Regional firms can be attractive in terms of local connections and knowledge. Some foreign clients prefer a firm which has no other competitors with the same national origin. Since many of the nationally recognized big firms may be perceived to have existing conflicts of interest, opportunities exist for small to medium size firms. Through increased visibility and access to the market (e.g., participation in local level business associations), small to medium size firms can expand into the international market and compete with big firms. Conclusion International marketing will work if you know whom to target and how to develop and implement strategies. As economic globalization continues, it is essential to internationalize your clientele in order to compete in the legal industry. At the same time, the international legal market is becoming increasingly competitive. Multinational clients who can afford large international and United States law firms' fees are more sophisticated and have adopted American corporate law department strategies. Unless you have your own specific core competencies which can be marketed to foreign clients as a high end and unique service in the marketplace, the result will be easily predicted, fee discounts and smaller profitability. With marketing research and strategies, risks and benefits should be identified and analyzed, and then strategies should be implemented with firm-wide support in order to maximize opportunities.
*2008 Update prepared by Jane DiRenzo Pigott of R3 Group LLC, Chicago, Illinois.
The source of this article is “How to Manage Your Law Office.” Lexis.com subscribers can access this publication online.