Consider branching into international markets to increase your bottom line
By Mona Pearl
Need an antidote for shrinking domestic markets? Consider international markets. They offer unparalleled opportunity for growth, increased sales, diversified markets and increased profit for successful businesses.
Unfortunately, many U.S. companies gaze with trepidation at the process and surrender to fear before making an earnest effort. The main problem is simply a mindset, which contributes to a lack of experience, talent and confidence on behalf of U.S. business people to navigate emerging global markets. Smaller countries around the world, however, have operated globally with success for generations.
Are you ready to go global?
Unlike smaller countries that think globally from the beginning of a product’s life cycle, U.S companies typically consider global expansion only after achieving domestic success.
In this scenario, a well marketed product or service already exists, but new markets are needed to continue upward profitability. Before starting the new market search, however, businesses must administer an honest self-assessment to include commitments, budgets, human capital, international expertise, and global objectives.
Given the assessment results, the precise time may not be right; but, being aware of the risks as well as the opportunities is important. In today’s economic climate, no rock can be left unturned in search for new opportunities.
The million dollar question is the same: “What markets will generate the greatest success for my company?” While there is no “one size fits all” solution, in-depth research and expert advice can attempt to answer this critical question. Too often, the lack of adequate market knowledge leads to failure.
Secondary market research consists of information collected from published sources such as books, newspapers, market reports, studies and the Internet. Primary market research fills in any gaps through direct personal contact with local industry experts, customers, trade commissioners and other local persons with the requisite knowledge to assist. It’s also important for businesses to tap into resources such as local trade associations, lawyers, experts in the field of global expansion, accountants and potential partners.
While in-depth research may seem tedious, it ultimately saves time, money and other valued resources. Without a solid base of research, businesses will be unable to anticipate issues and answer difficult questions such as:
•Where in the world should I go?
•What is the best global direction for my business / specific products?
•What paths lead to sustainable growth?
•How can ROI projections be fully realized?
Effective research allows these difficult decisions to be driven by evidence-based data.
Selecting a market
Choosing a target market(s) starts with knowing the product/service and what range of functionality it can offer the global community. Then, scan the markets suitable for that product. Another excellent starting point in evaluating potential countries/regions is gauging the U.S. government’s attitude toward them.
For example: Does the U.S. government maintain a line of credit with the country? Are there export controls? How is the country ranked internationally? These broad questions will narrow down the list of potential target countries to consider.
The next step of research involves a more detailed analysis of risks and opportunities for those markets that emerged as potentially good targets given the product/service under consideration.
You will want to look at these key issues:
•Attitude towards foreign investment and R&D
After a country/region is selected, it’s important to further identify their strengths and weaknesses relative to your product and business. This process will prepare you to anticipate potential surprises and be equipped with a carefully planned response instead of a hasty reaction when, not if, they occur.
Product adaptation—“know” the target audience
Various international audiences have different needs, unique preferences and diverse ways/nuances of conducting business. This includes, but is not limited to, learning their culture, traditions, practices, philosophy, preferences and their way of conducting both life and business. Only with a thorough understanding of the target market can you make wise and sustainable economic decisions about product adaptation and, ultimately, success.
Each product, in every respect, needs to be tailored to suit the local tastes, customs and preferences. This includes packaging, branding, pricing and after-sale servicing. Become thoroughly familiar with the local people; it may avert an expensive, and potentially embarrassing, mistake.
Market entry: a “dynamic” actionable plan
While there are many important decisions to make when launching into a new international market, two are particularly critical. First, decide whether to enter the market alone or seek alliances with existing local businesses. Secondly, choose an appropriate distribution channel.
In both of these, there are tradeoffs in terms of financial commitment and control over the product as it reaches the end customer, as well as general cultural and other integration issues. Due diligence is important as the perception of any foreign organization is filtered through whom they partner with locally—team up with the wrong partner and failure can strike before any business is conducted.
A local partner can also provide insight, contacts and expertise. A strategic alliance also provides more effective market access, resulting in higher foreign sales in less time. Not surprisingly, as the pressure to rapidly exploit new technology and products has increased, so have the options for businesses interested in franchising, joint ventures, mergers and acquisitions or other strategic alliances. While the flip-side is less control, it forces cooperation with local business which can be a recipe for success.
Secondly, distribution is one of the most crucial decisions in a global expansion strategy. It represents a significant overhead cost and lies at the heart of the connection between what the market wants and what the market gets.
Ultimately, both decisions will be guided by the international business community, the type of market for the product (mass market or limited), available capital, sales volume and access to information technology.
Access to talent—a limiting factor
One emerging trend to watch is a shrinking pool of talent. This promises to be a major obstacle for organizations looking to expand globally. In fact, several companies report “the only thing limiting growth abroad is that we cannot find enough people—engineers, sales staff, and marketing—who are bilingual, globally orientated and willing to live abroad.”
The U.S., more than ever before, lacks professionals with the global experience necessary to bridge cross-border operations.
Focus on opportunities, not obstacles
As international leaders in innovation, it is important for U.S. businesses to look at the world from a fresh angle with a new perspective. “A global mindset is the opposite of economic isolationism. We are part of the globe, and should stop looking inward, but look out,” commented Carlos Gutierrez, former Secretary of Commerce.
It’s time for U.S. businesses to take the next step internationally through the development of a winning expansion strategy—a practical approach that eliminates surprises and gets it right the first time. After all, there is no challenge too great for a country that has proven itself over and over again. So, let’s start the journey.
Mona Pearl is an author, a global strategic business development expert as well as the founder and COO of Beyond A Strategy Inc., a company providing expertise to plan and implement cost-effective and sustainable global growth that improves a company’s bottom line and helps realize seamless international operations. She can be reached through www.monapearl.com.
***Includes excerpts from “Grow Globally: Opportunities for Your Middle-Market Company Around the World.” Copyright (c) 2011 by Mona Pearl. Reprinted with permission of John Wiley & Sons, Inc.***