Expanding a business overseas is not the same as expanding somewhere in the United States. The laws are different, the cultures are different, the languages are different, the education levels are different. Labor and management styles are different.

In fact, it often seems as if the differences far outweigh the similarities, so much so that
we begin to wonder why we're doing it in the first place. It all boils down to basic business decisions, though. When all is said and done, if there's profit in it, it's probably worth the risk.

That said, there are still some basic pitfalls executives need to be aware of when considering an overseas business expansion. To explore some of these areas, Expansion Management Magazine put together a panel of well-known international site selection consultants to discuss some of the things a company needs to consider before embarking overseas.

Countries With High Unemployment Are More Willing to Deal With Companies to Bring New Jobs

"Today, Europe's No. 1 problem is unemployment," said Jean-Claude Goldenstein, Managing Director, JCG International, Inc. "That has caused many governments to improve the incentive to international firms to create work for their citizens."

He sees more flexibility in attracting U.S. firms on the part of most European countries, particularly those that earlier have been reticent.

Country Borders Are Blurring as Regions Become More Important

Within Europe there is a rising trend toward regionality.

"There used to be only two choices -- setting up operations country-by-country, or operating in a pan-European, continent-wide style," said Goldenstein. "Now, for call centers, new firms are picking one key country in a given region, and siting operations that cater to a small number of culturally-similar and geographically-nearby countries."

As an example he pointed to Sweden for Scandinavia, Britain for the UK and Ireland, a number of options for serving southern France, Spain, Portugal and Italy, or a location along the French/German border for France, Germany, Switzerland and Austria.

Local Labor Laws Can Severely Limit Your Flexibility

In the last year or two, a number of factors have become increasingly important. In certain countries in Europe, for example, inflexible labor legislation can strictly limit staffing flexibility. The chance to raise or lower the number of employees is infinitely more difficult than in the U.S., according to Jan Scheers, Plant Location International, Price Waterhouse LLP in Brussels.

"If you need to have 200 people this year, but might need to later reduce staff to 150, that reduction could either be illegal, or cost you a fortune," he explained. "That's particularly the case in Germany, Belgium or the Netherlands. And, with the new Labor Government in Great Britain, likely job protection legislation could well add the UK to the list."

Currency Strength and Stability Are Critical

Another hot issue involves attempts to establish the European Monetary Union. With its goal of a common currency -- the "Euro" -- substituting for traditional national currencies among members who meet strict requirements such as deficit reductions, Scheers sees a raft of questions looming for U.S. site selectors:

Which countries will be in and which will not? What will happen to currencies of those who do not participate? And how will those currencies fluctuate against the Euro?

This summer, the dollar and British pound sterling (Britain has strongly indicated it wants nothing to do with the Euro) gained strength, particularly against the German mark and French franc. For Scheers, that indicates widespread apprehensions that the unified currency would be weak. Therefore, selectors must ponder what a potentially increasingly-strong dollar means to a company's export strategy. Or, indeed, its basic decision to expand overseas.

And, what would operating in a country with a much weaker currency mean to corporate strategy? According to Scheers, the countries he expects to ultimately employ the EMU include France, Germany, Belgium, the Netherlands, Luxembourg and Austria.

Also, though not directly tied to the Euro question, Scheers also points to instability among Asian currencies, particularly the recently-devalued Thai Baht.

"Monetary instability is something investors generally want to avoid," said Scheers. "When you put hard money into an overseas plant, you also want that country's currency to be as solid as the ground upon which you build."

Infrastructure and Stability Are Improving in the Third World

Farther afield, Scheers points to quiet rebounding in sub-Saharan Africa, long considered among the world's most challenging locales. Currently, investors are closely examining opportunities there, particularly in terms of mining and mineral exploration.

While infrastructure rebuilding or creation is a prime requirement, and corruption and civil wars a continual threat or reality, select countries -- including Gambia, Senegal and Uganda --have made significant progress. And, with stability returning to the mineral-rich Congo (formally Zaire), Scheers feels mid-continent Africa may be starting a long-awaited recovery.

It May Take More People to Do a Job Overseas

Labor is also a concern, particularly when it relates to precisely how many people it takes to do a job satisfactorily.

"In some Southeast Asian countries, crime and security is a real issue, and definitely can affect the number of people on your payroll," said Richard Greene, manager of international corporate real estate for Ernst and Young. "In one particularly unstable country, I know of a firm that hires security guards to watch the security guards!"

Also, Greene said that while individual wages may be low, site selectors should investigate precisely how many people are needed to get a job done.

"If it takes two low-salaried workers to accomplish the same goal as one U.S. worker, where are your gains?" he said.

Labor Markets Can Cross National Boundaries

You can also get tripped up by countries such as Luxembourg, where the unofficial unemployment rate is just 3.6 percent.

That might make Luxembourg appear to be a very tight labor market. But, the fact is that many workers in Luxembourg commute daily from neighboring countries with double digit unemployment rates. That, in turn, makes Luxembourg a place with many more potential workers than official statistics might indicate. That's just one example of why it is so important to really do your homework in order to get accurate statistics, Greene added.

Always Plan an Exit Strategy

Greene also pointed to the need to appreciate "exit strategies" when hiring for a European location.

"It can be an infinitely greater problem to shut down a plant overseas than in the United States," he said. "To do so in Europe, you might have to prove that your reason is economically valid. And, be prepared to cope with time-consuming legal measures, plus significant sums to laid-off workers."

Watch Political Changes Closely

Greene also urges selectors to watch political changes for major trends.

"The more socialist-oriented new French government will likely put in place more worker-protective laws, something that would never have happened under the former government."

However, the Netherlands, according to Greene, is experimenting with flexible contracts, allowing workers to be hired on a temporary basis. Somewhat like tenure in U.S. education systems, these "contracts" allow a grace period in which a U.S. firm could see if expected staffing needs match reality.

He also urged selectors to look past the "usual suspects" and consider the widest possible range of potential countries. He particularly pointed to Portugal, an EU member where inflation is down, business is relatively inexpensive to conduct, and politics are stable.

Make Sure Infrastructure Is in Place

Bill Lutrell, Senior Manager, Western Region and Asia Pacific, Deloitte and Touche Fantus Consulting, advises clients to set up shop in countries with infrastructure well in place. But they must also consider situations where one's goods can actually get to market within a reasonable period.

Places where those challenges are most prevalent include Thailand and Taiwan. There, traffic within capital cities is so congested that gridlock is virtually a permanent facet of every business day.

"There are some exceptions, such as Hong Kong and Singapore, which boast two of the world's finest subway systems," said Lutrell. "But while that lets people move relatively easily within the cities, truck traffic can, even here, be a serious concern."

There's Often a Trade-off Between Infrastructure and Skilled Labor

In Asia, demand for skilled labor has made labor turnover a growing concern, according to Lutrell.

"Nowadays, once you train someone in your systems, they become very valuable commodities," said Lutrell. "Indeed, much of your training efforts might go to helping another company. This is particularly the case in more developed areas such as Malaysia, Singapore and Thailand."

Indeed, the availability of skilled labor is just one factor that affects overall productivity.

"Sometimes you have excellent labor, such as in Vietnam, but the infrastructure is very undeveloped," he said. "Weighing the pluses and minuses of a given location is a never-ending challenge in this part of the world."

Labor Availability Doesn't Mean it is Skilled

Back in Asia, Robert Price, a principal of Lockwood Green Consulting, agrees that labor availability is a major regional concern.

"It's directly impacted by dramatic economic development trends in what were formally called developing economies," said Price. "Today, there is little available skilled labor for small projects requiring, say 200 workers."

In the urban areas -- where the infrastructure is established and companies tend to congregate -- everyone is competing for same limited supply of areas, he said. Many firms rely on labor contractors, who drive up costs. Others put together transportation routes -- sometimes as much as 40 miles long -- that bring workers to and from work sites. Frequently a group of local companies partner in these minivan or bus efforts.

Part of the problem, Price emphasized, is that with large numbers of American firms seeking out skilled competent labor, wages have, not surprisingly, gone up.

"When you're looking for someone to do more than just stitch up sneakers, you're talking about trainable skills, skills that are appropriate for operations within electronic, chemical, food processing or similar Pacific Rim plants," he said.

He also cautioned that, while seeking skilled laborers who will work for a good deal less than U.S. counterparts, companies also must ensure they can handle tasks that are sensitive to operator error.

"No one wants another Bhopal," said Price, referring to the Union Carbide chemical plant disaster in India -- attributed to worker error -- that killed hundreds and subjected the company to horrendous publicity and seemingly-endless lawsuits.

Check Beyond Salaries to Determine Total Worker Compensation

Of course, Price added, wages aren't the entire picture when determining worker compensation.

"In fact, actual weekly wages may not even be the largest pay component. Other items can include cost of living adjustments, or bonuses," he said.

In South Korea, for example, Price said it's common to pay a bonus every other month, equal to one's monthly salary.

For companies assuming they've sited a plant where they have competent employees working for half of U.S. compensation, Price said that finding out about such local bonuses after the business is established is the kind of shock most locators would clearly want to avoid.

Protect Your Intellectual Property Rights

Even more important, Price stressed, is protection of corporate intellectual property rights.

"It's absolutely vital for companies to protect their proprietary processes," he said. "A worst case scenario would be investing $2 billion in Asia, and then find out your neighbor has stolen your secrets. The risk of losing control over your technology is very real in some areas. And a little investigation will define those nations in which this is a major concern."

Most of these unwanted "technology transfers" occur during licensing procedures in which documents submitted for government approval somehow find their way into competitors' hands. Price said that Singapore is particularly vigilant about ensuring protection against such happenings.

"U.S. companies must vigorously do their homework to make sure it doesn't happen to them," he added. "For if it does, then all the subtle advantages you thought you gained by siting overseas will have been blown right out of the water!"