How to Plan for Doing Business in Iran
Based on frequent conversations with Iran-focused multinational companies, there are five notable challenges that deserve immediate attention in order to reap the benefits of the Iranian market:
- Updating global compliance policies. A comprehensive compliance strategy is the essential bedrock for building and implementing a successful Iran plan. Companies need to confirm that their policies are compliant by consulting with an external sanctions lawyer.
- Overcoming a lack of market data. Companies looking to enter the market should identify and track leading macroeconomic indicators of specific customer segments. Focusing on data such as population growth, inflation, and GDP growth is a way to anticipate market developments.
- Finding the right local partners. While it is possible to set up a direct presence, using local distributors at first is strongly advised. The best way to identify new partners involves in-person due diligence. Companies are increasingly considering a “Dubai model,” in which they use local partners in the UAE to connect with distributors in Iran. Many foreign companies have already employed a similar approach through a “Turkish model,” involving partners based in Istanbul.
- Reclaiming brand equity. Customers may have distorted views of foreign goods that are in Iran illegally. Senior executives should be ready to trace the origins of and combat grey market trade and counterfeits of their products in Iran. Otherwise, companies risk facing challenges related to pricing, value, and positioning against competitors.
- Accessing foreign exchange. Often, local companies spend weeks waiting for access to foreign currency to import goods from their foreign partners. Without access to the U.S. financial system, this pressure will not ease in the near term. Moreover, this problem is likely to persist because Iran is unifying dual currency exchange rates while also seeking to protect local producers from volatility.
Iran presents an important opportunity for multinational companies that operate in emerging markets. But managing expectations about the country’s trajectory is crucial for building an effective strategy. A smart approach will find the sweet spot: advancing ahead of competitors while sidestepping first-mover mistakes that often plague companies in unfamiliar, rapidly changing, high-stakes business environments.
FAR law firm