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The International Entrepreneur – Interview with International Business Development Leader, Matthias Leitzmann

Matthias Leitzmann, International Business Development

This week I caught up with Matthias Leitzmann, Director of International Business Development at VXi Corporation, a manufacturer of noise cancelling wireless and unified communication headsets. Matthias is a leader on the front lines of the ever-shifting landscape of international business. He is also a regular contributor to the weekly #GlobalBizTalk Twitter group.

 

Matthias, how did you originally get into the international business development field? What made it appealing?

I came to the US to attend college when I was 18. On my initial flight over, I knew I wanted to do something with international business – I just didn’t know exactly in what capacity and when. The thought of connecting and leveraging both my European background and my newfound American experiences seemed incredibly exciting to me. It still is today.

As I entered professional life, I always kept an eye on ways how I might be able parlay any of my skills into international business. As I was working as an executive search consultant/headhunter, the opportunity presented itself when one of my clients needed a suitable reseller for his company’s products in Germany. I jumped at the chance and haven’t looked back since.

 

What approaches work best for you to find & evaluate new international business opportunities?

My approach is a channel-focused model. It is the leanest and most cost effective model. It provides tremendous leverage and scope. When vetting and research show that there is a need for my employer’s service or product in a particular country, then I begin searching for in-country partners (i.e. distributors, integrators, resellers) that see the potential of our market opportunity and want to be part of growing it locally. In other words, I look for partners that want to make my business their business and with whom I have shared interest and trust. My success will depend on finding the right suitable partner and how well I am able to manage and grow the relationship.

 

As someone who works extensively in both North America & Europe, what are a few of the most important differences in doing business that you think our readers should know?

At the core, I find (business) people are very much the same here and in Europe. The goals of running a profitable and successful enterprise, of building something viable and sustainable, and the desire to earn money are all the same. These basic, universally common goals are buried under a web of cultural differences and experiences. Being able to penetrate, navigate and deconstruct those layers is the challenge. In that, it is less about differences per se than being able to understand and relate to those differences. Empathy in international business is very important. The faster you can begin to relate (if you enjoy the process of learning, respecting and working with the differences), the sooner you will be able to get to the core and speak a “common” language. The better you become at this skill, the more success you will have overseas.

 

What do you wish you had known about international business development when you started in this role?

Patience and romanticism. More of the former, less of the latter. Developing overseas business takes patience, along with a healthy dose of stamina or thick skin. Furthermore, it is easy to get romantic about the idea of running a global business. The questions that needs to be asked: is it going to be profitable and contribute positively to the overall goals of an enterprise?

 

Can you give our readers any advice on maximizing the potential of strategic international partnerships?

Besides looking for the obvious in a potential international partner, such as expertise, track record, capacity etc., the factor that can maximize the relationship is a common personal hook. This is something that builds rapport with that partner beyond the mere business relationship. It could be that the person you are dealing with in Europe attended college in the US. Or it could be that you both follow Champion League soccer. Or you could both enjoy reading the same international newspapers and so on. This rapport will contribute to making a long distance relationship seem so much closer and real. The more you can bond on a level beyond business, the more likely the relationship will thrive (and last). Minimally, it will result in both of you enjoying engaging with each other more and calls getting returned faster. On the other spectrum, such a deeper connection may very well contribute to both of you better navigating any potential rough waters that lie ahead. And as with any business endeavor (especially international business) there will be plenty of challenges you and your partner will need to overcome together.

 

About Matthias Leitzmann

Matthias was born and raised in Munich, Germany. He moved to Rhode Island in the late 1980’s to attend Bryant University’s business school. After a successful career in executive search, including having completed multiple international projects, Matthias began focusing on the sourcing, vetting, recruitment and management of international B2B and B2C channel partners. In his capacity as an executive search consultant and channel development specialist, he has successfully completed assignments for leading high-tech companies, such as Cisco, EMC, MKS Instruments, and Ericsson, and many smaller, venture-backed firms.

He is presently the Director of International Business Development at VXi Corporation, a manufacturer of noise cancelling wireless and unified communication headsets. A frequent international business traveler, and authorized to work both in the EU and the US, Matthias is fluent in English and German. He is currently based out of Boston. I highly recommend following Matthias on Twitter (@MLeitzmann).

The International Entrepreneur – Maximizing the Potential of a Global Strategic Partnership

Global Strategic Partnership

 

I glanced up from the conference phone positioned in the middle of the table to catch the expression of quiet resignation in Hector, my client’s new Strategic Partnership Director. Hector’s Sales VP was talking on speaker phone to a potential strategic partner’s sales and partnership team. I realized in that moment that Hector knew what was going to happen.

Hector’s Sales VP was ignoring all of the research and analysis on how to make the most of the fortuitous opportunity to partner globally with a company expanding into the same markets that was in no way a direct competitor. The opportunities for these two companies to leverage each other’s strengths made for an extensive list – a list that was literally on the table in front of Hector’s Sales VP. But that’s not what was being discussed.

Instead, we had a one-way discussion about how the potential partner could fit neatly into my client’s international channel distributor program. No matter how Hector, the other company’s team or I tried to steer the conversation towards other strategic collaboration points, the Sales VP veered back to his single-minded agenda. The potential partner was far from impressed and the conversation soon ended with a few token follow-up tasks. Hector and I glanced again at each other. We both knew that the opportunity had passed.

The Sales VP seemed genuinely proud of himself in showing us how these partnership conversations should happen. Now I understood Hector’s expression more completely. This company’s leadership didn’t understand what strategic partners were. Until they figured it out (or listened to any number of sources) they were doomed to cripple their partnership potential.

International Distribution Partners are NOT the same as International Strategic Partners

This is far from an isolated situation. We see it all of the time, companies that underestimate the value they can get and receive from partnering for further international expansion. Since strategic partnerships normally fall somewhere either under sales or marketing functions in most companies, they tend to stay close to the known well-trodden paths such as channel distributorships. 

Strategic partnerships should never fit into one specific model. Instead, they should fill in the weak spots where the partner has strengths. Here are examples:

  • Partner B has excess capacity in their overseas production facility. They rent out their facilities to Partner A for a reasonable compensation (monetary or perhaps a trade of some kind).
  • Partner A will be exhibiting at a key international trade show. It’s a sizable investment. Partner B only needs to meet with a few key prospects at the show. Partner A gives an exhibitor pass to B’s Sales VP to have access to those prospects.
  • Partner A has access to a government grant in their country that supports research and development. Partner B sends a key engineer to work for 6 months in Partner A’s overseas facility. The technology is used in both companies selling into their own respective markets.
  • Partner A has a strong presence in Europe while Partner B has built up the Asian market. Since they sell different products to the same market, they agree to help each other make key introductions to potential clients in their strong markets.

The possibilities are endless so long as there is benefit to both partners and the risks are manageable. Strategic partnerships work best when both partners are dependent on each other and breaking up would be painful.

Here’s an approach to maximizing the potential of your partnerships:

  1. Spend time up front to develop a trusted connection with partner’s key staff. This is critical to long-term success. There has to be trust between company leaders or the partnership will quickly fall apart. This means spending time together preferably in person or at least in video conferencing. There may need to be cultural adjustments in this process depending where your target strategic partner is based.
  2. Ask open-ended questions about the other side’s goals, capabilities, challenges, etc. You’re looking for opportunities and challenges here. What is happening in their business that would also help your company? Is it best practices? Specific expertise? Access to capital? Client base? Key connections? Successful marketing channels? What are the challenges that they face in terms of internal limitations or external threats? The more you know, the better you can position your negotiations.
  3. Inventory what your side can offer in exchange. In looking for what your company has to offer, think of what would be easy to give. Space in a trade show booth is a great example. So are some introductions to some of your client accounts where it makes the most sense. But look further into areas like production, talent, finance and logistics for opportunities to build off of excess capacity.
  4. Look for creative trades that benefit both sides. In international expansion, one company may already have a foothold in the market, creating the opportunity to share knowledge and initial connections. If both companies want to enter the same new market, there is an opportunity to collaborate on research, saving time and staff resources.
  5. Continue to evaluate and renegotiate over time. In any partnership, it is smart to periodically revisit the projects or programs that are still benefiting both parties and those that should be discontinued because they have become ineffective or irrelevant due to changing circumstances. This is also the time to see if new collaboration opportunities have surfaced.

For growing companies, global strategic partnerships are a way to acquire new competitive advantages in most cases faster than developing those same assets your own. It does require company leaders to put egos and fears aside to talk about what would truly propel the company forward towards long-term goals. As for Hector’s company, leadership has yet to get past their own internal roadblocks, but Hector remains hopeful that they will. 
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The International Entrepreneur – Trump and other Branding Issues in International Business

 

International Entrepreneur, Branding Issues in International Business

Prime Minister David Cameron of the United Kingdom, President Barack Obama, Chancellor Angela Merkel of Germany, Jos? Manuel Barroso, President of the European Commission, and others watch the overtime shootout of the Chelsea vs. Bayern Munich Champions League final (Official White House Photo by Pete Souza)

I was waiting on the platform for the train from Bedford to London Heathrow. It was October 2004 and I struck up a conversation with a local businessman (staying true to my American stereotype of perpetual friendliness). After a few minutes, the gentleman asked me what was really on his mind.

What could Americans be thinking to not only have elected President George W. Bush once, but to be poised to reelect him for a second term?? To most Brits, it seemed ridiculous.

I remember standing on the platform trying to explain how our media had splintered into audience segments where an American could hear and read literally only the point of view that they already held. That the United States was politically split in half – sometimes leaving friends or family members on the other side of the opinion divide. My new British acquaintance seemed generally satisfied with that answer. But I was left to ponder about the effect that my country’s leader was having on American business in overseas markets.

Four years later, I was in Beijing and was surprised by the adulation the Chinese openly felt for Barack Obama. I see the same widespread enthusiasm for leaders like Canadian PM, Justin Trudeau and Pope Francis. It’s the type of branding that helps to open doors to new diplomatic relationships and in the case of the pope, new ideas.

This country “branding” issue/opportunity is not universal. Larger countries garner more regional and international attention than their smaller neighbors. Every country has local and regional issues, whether they be fishing rights or an upcoming presidential election. As Americans traveling internationally, we notice that our presidential elections receive press coverage literally all over the world. When a candidate like Donald Trump says something controversial meant to keep him as the top news story in the U.S., it is heard around the world and interpreted in many ways.

 

If all of this sounds like a distraction to most international business – it is.

 

Most of us avoid talking about politics, religion, and certainly any hot button issues when doing business abroad. We want to achieve our business goals. And alienating potential clients or partners with strongly-held contrary opinions is a recipe for disaster on any continent.

 

Here is advice on how to manage country branding in business:

  1. Most important: Do no harm. Don’t bring up controversial topics that need not be breached. No conversations about the refugee crisis with Europeans. No conversations with Brazilians about their recession. No AIDS talks with Africans. The list goes on, but this is where controversy stays in personal conversations rather than in business talks.
  2. Don’t take offense where none was intended. The temptation to react to statements about your country’s leaders or issues is understandable. It’s much more personal to a German to talk about Angela Merkel than for me to bring her up into conversation. Your German counterparts likely had a vote for or against her party’s election. When you would normally react, stop and first gauge the intention of the offender.
  3. Ask about the filters that color someone’s opinion. When an entire business dinner in Jordan stops talking and eating to hear your opinion of gun violence in the U.S., you can answer with the universal truth – it’s complicated. Then immediately start asking questions to learn what your fellow guests have heard and what they think about the issue. This will help you to carefully frame your answers to stay true to yourself and diplomatic to your fellow guests. If this sounds like too much hassle compared with a direct answer, remember that media, culture and personal experiences frame all of our perspectives. Do I know what a Jordanian thinks about this issue? Not until I ask.
  4. Always learn a country’s basic information before travel and doing business. This includes the country’s leader, their economic and social topics, and hot button issues. This takes the pressure off of your own country’s branding (if it’s negative) because you can ask questions about topics that your hosts should appreciate. It also is a signal that you have a basic respect for places where you do business (for more on showing local respect, please read my articles on Respect and also Social Corporate Responsibility).
  5. Pull the conversation back to how the subject impacts business and trade. As business professionals, this is usually a common area and one with less friction. And most leaders and topics can usually be tied back to it. For example, Are new immigrants helping the U.S.? Immigrants represent a significant number of working adults in our economy. Most are bilingual with the capability to serve multiple markets. While there are adjustment issues, the U.S. has always absorbed immigrant populations successfully. So I would answer yes. It’s a business answer to a question that has social, political and cultural implications. If the topic is a tricky one, then this business focused answer is a helpful bridge into another business topic that furthers building the business relationship.

 

No matter your political, cultural, social or economic views, managing key conversations helps further your international business dealings. Remember to (1) do no harm, (2) avoid taking offense, (3) ask for others’ opinions to understand their perspective, (4) know a country’s basic information and (5) pull conversations back to business topics as needed.

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The International Entrepreneur – Tips for Being an International Distributor

Tips for Being an International Distributor

A Kenyan distributor recently wrote to me asking for advice to build an in-country distributor business. He was interested in representing more products in the Kenyan market and wanted to find the right suppliers for his business. That is a great topic especially given both the opportunities associated with reselling globally-branded products and the risks of working with new supplier partners. Here is my advice:

 

Specialize by Client Profile and Seek Related Products

I remember traveling once in Italy and visiting Pisa with its famous vertically-challenged tower. The sky filled with clouds and all at once a heavy shower drenched every tourist in sight, sending everyone running for cover. The nearby Ethiopian entrepreneurs tucked away their packs of postcards just in time and switched to selling umbrellas covered with images of famous Italian sites. I still have my emergency Pisa umbrella purchased that day. These Ethiopians knew their target market: tourists like me. Our changing needs were their new opportunities.

This is true for business-to-business markets as well. All companies look for resources to help them find smart solutions to their challenges. Whether your clients are hospitals, schools, young tech companies or any other profile, learn what they need through conversations in order to identify the types of products you should be representing. If your company wants to expand to serve more diverse sets of clients, consider adding staff or even teams to address this new market rather than spread resources too thin across a disconnected base.

 

Define Your Geography

Distributors normally cover a specific region. In a large country, this may be a handful of states or provinces or even as small as a metropolitan area if the local product demand is high. But in some areas of the world, a distributor may be able to cover a much larger area because clients are located far from each other. In the case of Africa, a distributor with headquarters in Nairobi may hire employees or contractors in neighboring countries like Rwanda, Uganda and Tanzania to help him sell products in those countries. But whatever the size of the distributor’s covered territory, it is vitally important that they are able to support sales throughout the whole area with local language, on-site visits, etc.

 

Focus on Business Relationships Over Transactions

As a reseller for an international product, your business depends on both your relationships with both your suppliers in another country as well as the relationships with your clients. Transaction-based sales assume that you do not care if you do business with this client again. Relationship-based selling includes:

  • Building Trust. It takes time to earn a client or supplier’s trust. One of the most important components of trust-building is consistently delivering on what you say you will do.
  • Building Reputation. Your reputation is how others would describe you and your business. Do they see you as someone who delivers product on time? Do you work hard to find new potential clients? Do you contact target accounts regularly to find out their needs? A good reputation always leads to referrals to new suppliers and clients. It is a key long-term investment.
  • Caring about both suppliers and clients’ success. Long-term relationships as a distributor and supplier always should focus on how to help your suppliers and clients succeed. If you serve the hospital market, then how do your clients define success? What keeps them from being more successful in your market? Even if you can’t solve a problem like the need for investors, a lack of qualified medical staff or new government health regulations, it shows great concern and understanding to acknowledge challenges they face and to be looking for ways to help them be successful.

 

Find Suppliers You Can Trust Now and Later

Start on the right footing by carefully choosing companies and products you want to represent. Have a clear explanation about how each supplier and their products fits with the rest of your product offering to your clients.

Build international supplier networks with those you feel you can trust. Even the best product fit must also be met with a trustworthy staff. Does the supplier take time to talk with you? Do the company employees follow through with what they say and do?

Before signing on as a distributor, be sure to check a company’s reputation in both their country and yours. A third party investigator can verify this for you. Also, you can ask to talk with other distributors currently working with the company.

 

International distributors is a popular option for growing companies to reach new markets. It is equally beneficial for those companies in the overseas markets wanting to represent new offerings. As a distributor you will want to focus on a specific client profile and geographic region. Focusing on identifying and building business relationships with overseas suppliers is more important than those early sales. Only work with those you can trust!

The International Entrepreneur – Setting up Your International Distributor Program for Success

international distributor partner representative

 

Your company may use a partner, channel, distributor or representative (rep). They all may follow slightly different selling structures. But call them what you want. If they are bringing in new profitable clients, then you love them.

I’ve talked with many young, growing firms who manage an international distributor program as a way to quickly expand into new international markets. There is a strong case to be made for this approach. The costs are low – much lower than setting up a local subsidiary, hiring staff, making local connections and managing local compliance and tax regulations. Distributors already have local network connections. They know how to sell into their local market. It can be a great early-stage market entry approach to help rapidly expand your company’s global footprint.

Now that was the Disneyland Version of international partners. For most companies, their distributor outcomes are more mixed with some partners performing beyond expectations, others selling literally nothing, and some requiring high levels of staff support that eat through any profits they may have produced. While I cannot guarantee your success with all partners, here is my advice to improve your partner success rate:

1. Proactively recruit your international representatives.

Once a company signals that they are doing business internationally, foreign agents of many types will want to be your exclusive distributor to their home country or region. But just because a Brazilian agent approaches you does not mean that they are qualified, connected or otherwise the best representation available.

It make take a little more work upfront, but it is definitely worth the time and energy to proactively seek out Brazilian rep options. Then it is just as important to properly vet these potential partners for their reputation, connections, legal standing, etc. As I’m sure you all know from your own experiences, partner turnover is costly.

 

2. Develop a close relationship with your partners.

This may sound counterintuitive to some. After all, the less time spent with a rep means less support costs. But that’s the Accountant’s Approach to international expansion and a self defeating one at that. Strong channels mean much higher sales potential, which normally outweigh the costs by many fold.

Instead, try to arrange to visit each rep at least once a year in their home market. This will set you apart from the majority of other companies your distributor represents. A rep likely represents a few dozen to a few hundred products. You want to make sure that your products are top of mind when he or she is talking with potential clients.

It also helps greatly if your business relationship with a rep grows in complexity and integration between your companies. If the relationship is basic and remote, then when either side falls on tough times or the first sign of challenges, they will leave the arrangement. It is much better to have reasons to stay and strengthen your channels.

 

3. Work together to decide on the right in-country messaging and supporting materials.
International representatives have every reason to help you figure out the best way to communicate with local potential buyers. It is not unusual for buying and selling patterns to shift significantly from market to market.

The place to start is with your company’s current marketing assets. What can be used without any alterations? Is there anything that can be easily created by you or your country rep to suit their selling process? It may be something as simple as a localized phone script or a few slides changed in the sales slide deck. Try to keep any localization changes simple at this stage and plan for more involved marketing if your company eventually sets up a foreign subsidiary.

 

4. Find individual (and group) motivational tools.
As business leaders, we already know that our employees are each motivated by different triggers. Joe, your customer service manager, may want an extra week of vacation time instead of its equivalent cash bonus OR he may prefer a paid executive coach to mentor his career as reward for professional success. Partner-specific motivations is an area of channel management where creativity pays off.

You may have two competing distributors – one in Sydney and the other in Melbourne – who have a cultivated rivalry. Buy an obnoxiously large trophy and offer the trophy plus bragging rights to the distributor who sells the most of your products by the end of the fiscal year.

Your rep may be motivated by title promotion. Honestly, I would call a rep a Chief Selling Officer of Thailand if they doubled their Thai sales this year. It’s relatively easy to change and costs nothing. This may be useful in combination with other incentives.

Sales departments have been using the “President’s Club” motivator for years. Those who exceed quota are invited often with spouses to a luxury trip paid for by the company. There may be some creative version of this concept that could work for high performance channel partners.

 

Regardless of your approaches to building your international selling team, I hope that you find some of these ideas useful. It’s best to just keep an open mind and an eye towards creative solutions. A strong network of international sales will help propel your company towards greater growth and profitability.

 

For more information about growing and supporting your international company, join the International Trade Tribe:

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The International Entrepreneur – 9 Ways to Improve Your International Presentations

international presentation, audience, international trade

Your big prospective international partner has agreed to let you present your company’s ideas on how to work together. Everyone goes through the formalities of introductions. Now it’s time for your presentation. But as you start to go through your standard presentation, the executives look increasingly disinterested. Some even look a bit agitated. You can feel the heat rising in the room. After the presentation, the audience seems much less engaged in the partnership idea. What has gone wrong?

Let’s go back to the preparations you made before the big presentation. An international presentation requires some key adjustments to be successful. Here are 9 ways to improve your presentations to international audiences:

Know your audience. Are you talking with a German industrial company where technical details are more important than any emotional appeals? Or is this a Brazilian services company where emotional appeal is actually more critical? Should it be fast paced for Americans or slower for an Indian audience? Should I show higher modesty levels for East Asian or Latin American listeners or should I show more confidence for the Lebanese? Cultural and industry variances are important to your content if you want to be in harmony with your audience.

Slow down and simplify language. Those of us who are English speakers need to slow our rate of delivery down for presentations. This is not because our audience is in any way less intelligent than us, but that listening in another language takes concentration away from formulating analysis about your content as well as any questions audience members may have.

No idioms, slang, humor, or other cultural references. These things just don’t translate well. Americans, that means no baseball references like “hitting it out of the ballpark” or “pinch hitting”. Humor varies enough from one country to another that it’s better to avoid the risk of the joke falling flat altogether.

Know the color and symbol references. A few examples: In China, red and yellow are generally positive colors. Green is associated with Islam in many Muslim countries. But don’t show an image of someone with their thumbs up in Turkey: it’s considered vulgar.

Use examples from the natural world. I read this suggestion a while ago and if I knew the source I would credit them. Great suggestion. The entire world understands concepts like predator and prey, animals knowing in advance of a natural disaster, etc. If there is a chance to use examples to make your point from nature, it is likely to be understood and remembered.

Know if there is a status order. In many cultures, the highest-ranking leader in the group gets deferential treatment. That means that you acknowledge their importance in the room and focus your presentation on their attention. This would be true in places like Thailand, Egypt, Argentina and Kuwait. In some countries the opposite is true- everyone gets the same treatment and respect. This includes places like Canada, Australia and Sweden.

Presentation slides should be written out in full sentences for non-English audiences. Many non-native English speakers learned to read and write more than listen and speak. This is especially true in many parts of Asia. Your audience may get much more from reading your slides than from what you say.

Leave behind full-color handouts of your presentation. If this presentation is critical to your company, then by all means have the materials also translated into the local language. This will help you to stand out from your competition!

BE PREPARED. This may sound obvious, but reviewing and practicing before the presentation will help you to stay more engaged with your audience. If possible, do a rehearsal of your presentation with an in-country contact who can give you feedback on how your presentation will be received.

Presentations can help build a key business partnership or accelerate a sales process with an important client. But done poorly, it can cause you to stumble and lose credibility. I hope this article was helpful. If you need help as your company moves into new international markets, please feel free to contact me for advice. I offer a 30-minute complimentary session to talk about your plans and challenges.

 

Onward & upward,

Becky Park

The International Entrepreneur

The International Entrepreneur – 3 Ideas for Building Rapport with International Contacts

international business rapportHave you ever been working with an international partner or client and suddenly found yourself in an unexpected conflict? This often happens in cross-cultural communications. It can lead to awkwardness and strain in the business relationship. This happened to me last year when working with a team of Chinese business professionals. Unfortunately I couldn’t directly ask the group what was wrong, but clearly things had gotten off track. It took a while to realize that what I had requested from the group’s leader was actually impossible to get and caused him to lose face. The entire group dynamic was shot for the day and I worked furiously to get us back to a pre-embarrassment point.

The good news is that when you spend time to cultivate strong bonds, many smaller conflicts and misunderstandings can be cleared up based on built-up goodwill. Likewise, some misunderstandings never come to pass because communication lines are more open. In the long run, building rapport saves time and money with faster deal making and more effective conflict resolution.

Here are ideas for building rapport that are proven to work:

  1. Consistent Contacts

When I say consistent, I’m talking about both periodic visits to meet with the contacts face to face AND keeping the same people connected to the relationship. I see many tech companies missing both components. Video conferencing, phone calls and emails can never take the place of building rapport in country. And when there is a major problem, it helps greatly to travel to the source of the issue to help resolve it. It shows great commitment to the partners, clients and suppliers involved.

The second critical piece is keeping the same company staff connected to key accounts or suppliers. Even when Joe gets a promotion from sales manager to VP Sales, he should take an active role with accounts he cultivated. Otherwise, the rapport building starts over. In most of the world, relationships are between individuals, not companies.

  1. Learn the Cultural Rules

This may seem like a given, but you’d be surprised how much today’s execs don’t necessarily know about their international counterparts. Last year I spoke with an American CEO who was baffled by the English. He had been spending time south of London with a company they were acquiring and stumbling through simple cultural differences. For example, don’t ask an Englishman about his life outside of business. It’s considered none of your business.

  1. Never Underestimate Shared Experiences

Share experiences can take on many different forms depending on the cultures involved. Some prefer to build rapport outside of work. For instance, the Chinese like to take their special guests on tourist trips to get to know the area. The Japanese like to go out drinking (the Russians as well). Businesswomen all over Latin America often watch Mexican Telenovelas. Others focus on joint business activities. German counterparts may like to do some sales calls together. Regardless of the activity, getting to know your contacts will serve you well during any challenging times!

The International Entrepreneur – International Expansion: Organic or Acquisition?

You may be asking yourself if your approach to international expansion is the right one. Should you grow organically by the strength of expanded international sales? Or would the right company acquisition in the local market be a shortcut that provides instant market access?

As with most questions in international business, the answer is:it depends.

Why (or Why Not) Grow Organically?

The International Entrepreneur ?International Expansion: Organic or Acquisition?

Shanghai – old & new

There are two main reasons why you would want to grow organically. First, it usually requires less upfront capital investment than buying a local company. Since many growing companies are low on unused capital and may have limited access to debt financing, organic growth could be the better fit. Second, going it alone allows your company to control everything: brand, client relationships, finances, processes and your company culture. For some industries, control is paramount to manageing competitive advantages like intellectual property or internal efficiencies that lower cost structure.

Motivations for NOT growing organically include slower growth. For companies that need aggressive growth as part of their exit strategy (ex. acquisition or merger), then organic growth might not be assertive enough. Also, the organic growth path has a higher chance of making cultural or market-related mistakes. The company may not understand the market’s buying patterns or time frame. A local company would already understand how business is conducted & avoid this risk altogether.

 

Why (or Why Not) Acquire a Local Company?

Acquiring a local company gives you immediate access to local markets, revenue streams and likely to required local connections to government and business resources. The local company already understands business cultures, language, etc. And not every company is strapped for cash. Post-IPO or after an investment round a company may have need to put capital to work as soon as possible. Acquisition may be a strategic shortcut for companies like these.

I see two main challenges for your company doing foreign acquisitions. First, there’s a sizable risk of being oversold on the local company’s value. Other countries valuate differently. Plus as a company is sold key players might leave, creating a hole in client relationship management or other vital functions. This is also a point where a departing employee may take intellectual property outside of the company, thereby reducing company value.

The second main risk I see is one of integration with the new company. Many companies choose to have the local acquired company operate independently of the parent firm in order to avoid integration issues. But there are still likely to be numerous cultural misunderstandings and reduced productivity over integration issues.

For Either Approach, How to Mitigate Some Big Risks

Market Research

It is critical to extensively research your foreign target before market entry. This includes both analyzing secondary data collected by government and industry sources, as well as primary research conducted in country. If international market research is a company forte, then you should do it internally. If not, then outsource this critical step to a qualified international advisor. Intimate market knowledge will make organic market entry and acquisitions much more successful.

Set Aside Additional Budget

No matter how much a company expects to invest into market expansion, it is wise to set aside additional funds for the unexpected (and there is almost always several unanticipated expenses).

Troubleshoot In Country

In any market or subsidiary there will be issues that arise. This is even truer in international markets. The distances may be challenging financially or logistically, but going to visit in person often can clear up issues quicker than a phone call. It’s easier to see a problem and to understand it in context. Again, if you or your team members can’t travel consider sending an experienced international business advisor to investigate and recommend solutions.

A Third (Middle) Option for Expansion

Another option between organic and acquisition would be to seek out a strategic partnership with a local company. While such a relationship needs to be defined and cultivated with great care, it eliminates some of the disadvantages of both organic growth and acquisition. First, there’s no large upfront capital outlay like in an acquisition. The right partner would have both the immediate cultural and market knowledge to help speed product acceptance and avoid the organic method’s slow growth and cultural missteps. And when the partnership is no longer needed, there is no need to dispose of assets.

To explore potential strategic partnerships, consult with your local government export office, industry organizations or an international business advisor for referrals and advice in how to proceed.

As an international business advisor to B2B technology and professional services companies, I can help your company with any of the following:

  • International market research
  • Troubleshooting international operations or marketing/sales issues
  • Searching for potential strategic partners and developing an action plan

I can be reached at: Contact – The International Entrepreneur

Best of success to you in all of your international business efforts!

 

– Becky Park, The International Entrepreneur

The International Entrepreneur – Exit Strategies for International Ventures

business exit strategies, international trade, international entrepreneur

As your fiscal quarter or year is coming to a close, it’s a particularly good time to evaluate the effectiveness of your company’s various international business ventures. Many companies from countries with short-term business decision cycles (US, Australia, etc.) may be tempted to exit markets that are yielding lower than expected returns on investment. Here are several options to consider:

Exit as Quickly as Possible

If your company is about to fold or is significantly cash-strapped with few financial options, then by all means consider closing down some or all underperforming overseas operations. Keep in mind that there may be additional taxes or penalties owed for any workers’ wages, unemployment insurance, previous tax incentives owed to the local, regional or national government.

Another issue to consider is any future need to do business in that country. Business reputation takes a long time to build and a short time to destroy. The reputation is not only that of the company, but any individuals from the company who did business in that country. If Mr. Smith closes down operations in Indonesia and leaves partners, suppliers and customers in a bad position, then Mr. Smith not only earns a bad reputation for the company, but also for himself should he need to go back into Indonesia for a different company. A negative reputation is very hard to shake in most places.

Ease Out of a Country’s Operations

If a country’s operations is performing poorly and there is no reason to think that it will improve long-term, then another option is to slowly disengage from partnerships and suppliers in-country. This can occur when contracts come up for renewal or by renegotiating a smaller amount of goods. The idea is to preserve relationships and to also avoid costly fines from the local government. This is likely a better option than the quick exit when you want to preserve goodwill in country. Plenty of companies failed in their first attempt to establish a specific market. But oftentimes the same company will return years later and remember lessons learned (like Starbucks’ second attempt in China).

Stay and Make it Work

All new international ventures are challenging. One of the best options if you can afford it is to stay in-country and find new ways to improve your in-country operations. Also, there may be strategic reasons to engage in a low-performing market.

An example is the beer industry in China. There are hardly any profitable foreign beer producers operating in China. So why stay? The Chinese beer market increases by 30% each year. The average income of Chinese workers continues to increase and foreign beer is a status symbol of sorts, especially in the “night market.” Premium beer may not be profitable today, but in 5-10 years beer producers’ investments will likely pay off.

Consider renegotiating relationships with partners, vendors and customers to improve your profitability. It will benefit your partners to renegotiate often instead of losing your business altogether. Look for new ways to increase demand. This includes new ways to use your product or service or different packaging size. Personal items like razors can be sold individually. Consider renting instead of selling a product. Services can be repackaged as seminars of information instead of delivering it individually.