|
For
smaller companies, a first move abroad can seem enticing but daunting.
This article encourages you to explore and move ahead with your
international options, points out three pitfalls you might encounter,
and gives you some comforting advice on how to avoid them.
So bravo, you’ve made it big in your home market! You started
as a small company with a novel idea, worked diligently with those
first loyal customers to overcome teething problems and get things
up and running, and from these humble beginnings you’ve finally
crossed the sales and marketing chasm to arrive on the up-side with
a mature, proven product or service. After you’ve gone through
all that, attempting to bridge the international divide and expanding
abroad should be child’s play - you’ve done all the hard
stuff already. But don’t get so gung-ho about that big leap
that you ignore some of the pitfalls that may await you at your
new destination.
Now, don’t get me wrong, international expansion can be the
best decision any company ever made to increase its revenues and
market share, even though globalization has got a lot of ill-defined
negative press recently. As a quick comment on this hot issue, to
my mind the opposite of globalization is isolation, which long-term
never benefits any economy. I’ve never heard of anybody complaining
about being able to buy a bottle of French champagne in a U.S. supermarket,
so go global! You can do it!
However, cautious optimism and detailed planning is the best way
to ensure success, and of course learning from other people’s
mistakes is a more relaxing and less expensive way of conducting
business than devising your own trial and error crash course.
As a global expansion company that provides a range of services
to help you along the road to success, we can assure you that there
is a wealth of expert guidance out there that understands your current
position and can evaluate and facilitate your future goals.
So let’s look at three general pitfalls, and how to side-step
them. There are certainly a lot more specific issues out there,
but three is always a good number for broad blanket categories,
and this is a short article, not a novel, so here we go!
Pitfall #1: If our product sold at home it must sell abroad
Not a bad assumption on the face of it, and you may well be right.
Most developed societies have a similar infrastructure, and most
underdeveloped societies are striving to get comparable infrastructures
and efficient business processes in place as fast as possible. The
trend towards globalization also makes international commerce easier
at multiple levels, and some people abroad even speak the same language
as you, bless them!
However, if your company has grown organically, i.e. through steady
growth from inception to its current state, then there are differences
in the way a point attack on a new market should be structured.
If your company has grown through substantial mergers and acquisitions,
then this strategy can be replicated abroad, but you still need
to bear a few points in mind.
In your home market, your range of products and services complement
each other, but may be too broad as you expand overseas. For maximum
efficiency and chances of success in the new market, you need to
determine your core offering that best expresses your differentiator
in the optimal niche market and focus on that alone.
To increase your efficiency, you may also need to determine which
industry sector to focus on. For example, being a specialist for
the insurance industry may well be better than offering product
and services to the financial sector as a whole. Articulating business
benefits around an industry vertical gives you that extra competitive
edge when previous successes have been in that domain – credibility
is all-important and proven execution in a specific business sector
is what customers are looking for.
You may well have built up some brand loyalty amongst your customer
base. However, your reputation has less of an impact abroad, so
that your product or service has to stand on its own two feet in
its new market and against the established domestic competitors.
Support is also an issue – it’s possible to support a
wide range of products and services close to home, but more difficult
abroad, especially with language and time zone barriers.
So get lean and mean – resolve your core competencies and
product, and spearhead with that.
Pitfall #2: Too much money - we can't fail if we spend enough
cash on this
With just a hint of sarcasm, I can say that most people will agree
that this has become less of a issue recently -- in the current
economic climate there are substantially fewer companies suffering
from the thorny problem of having too much cash. There are in fact
substantially fewer companies period! However, be careful, you might
exceed your wildest expectations and find yourself in the fortunate
position of having a stack of loot and therefore being a prime candidate
for a headlong dive into this pitfall.
There are numerous examples of this from the bygone era where venture
capital funding was more abundant, generally taking the form of
a company moving into an extensive office suite and importing managers,
sales and support staff. Then everybody tries to figure out if there
really is a market for their product and services out there, where
exactly it might be, and oops, bumping against unexpected competition.
A common end scenario is a lot of vacant office space a year later.
The flip side of this coin, and to be perfectly honest a lot more
relevant these days, is that expenditure on international expansion
can be gradual and limited.
Spend some of that cash on testing the market first to determine
your best product/services profile, and then of course do some math
to figure out if you can really make a profit with it. This reiterates
a previous point - the most efficient spearhead for your new market
entry is a crucial decision.
Once you’ve made the decision to enter into a new country,
a lot can be done with a relatively small cash outlay during the
initial stages of implementation, namely seeking out first customers
and partners. You can use local sales consultants, who know their
own back yard better than you, and will probably have more rapid
initial successes than your hot-shot sales rep transplanted from
home base. The first intrepid flag-bearer from your headquarters
might in fact be a technical project manager, who can serve as pre-sales
support for the sales effort and work on project definition for
new contracts.
Setting up a full-blown subsidiary of your company might then come
at a later date, as you gradually ramp up the organization to keep
pace with prospective clients and new projects, when there is some
revenue stream and more certainty of long-term success. In addition,
tax authorities both at home and abroad start to take an interest
in what happens at the head office and the subsidiary, so keeping
it simple for as long as possible minimizes risks and headaches.
When you finally do need to commit to a strong local presence, then
it’s because you have the contract that will support that investment.
And finally don’t forget those local government subsidies,
incentives and tax breaks that are often available to foreign companies
that set up subsidiaries that create local employment and tax revenue.
Pitfall #3: I built up the company by myself in this country,
I don't need help abroad either
People who build successful companies have a lot of characteristics
in common – a belief in themselves and their business vision,
attention to detail, and quite frankly, they’re often control
freaks. They want to control the evolution of their company abroad
in the same way as they controlled it at home. But if you’re
the do-it-yourself type, then you’re going to be burning up
a lot of time and hard cash on the plane and in hotels, and you’ll
have to occupy all of your spare time on those planes and in those
hotels reading up on the way the locals do business if you really
want to set everything up personally.
Very often, the type of person that successfully grows a small
company from scratch to the point where there is a solid customer
base and a healthy revenue stream might not be the best person to
guide the company through the next level of expansion. Initial organic
growth may be replaced by more extensive partnerships and distribution
channels, as well as mergers and acquisitions. The successful recipe
for international expansion is definitely more akin to this second
phase of development than to the initial phase of organic growth,
with a corresponding requirement for a new set of managerial skills.
So learn to delegate. There are boutique firms out here that can
help you out. A boutique firm offers specialized services to a select
clientele, and you’re the select client who needs those specialized
services to make sure your expansion is carried out as efficiently
as possible. Your cash can buy excellent professional services rather
than round-trip fares.
Here are some of the core services that can help you plan and then
implement on the ground: Initial market assessment and strategy,
business planning, outsourced sales, office location assessment,
lease negotiation and set-up, legal counseling on international
business agreements between countries, interim financial planning,
accounting and tax planning, recruitment, ongoing human resource
management ….phew! Try doing all that yourself!
A happy Ending…
Making that international move is easier than you might think if
you plan ahead and take a step-by-step approach. Enlisting the services
of professionals who know how it should be done minimizes risk and
expenditure, and ensures that you navigate through the new business
terrain and realize your goals in the most rapid and cost-effective
way – go for it!
Keith Rayner (info@kemarra.com)
is Managing Director of Kemarra (www.kemarra.com),
an international business expansion firm headquartered in San Francisco.
The company provides a range of services for foreign companies looking
to establish themselves in the US, and also for US companies that
are pursuing local, national or international expansion. Kemarra
is also ideally positioned to help Economic Development Agencies
fulfill their expansion and investment programs.
| 
