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The International Entrepreneur – Is your company still an Accidental Exporter?

Accidental exporter, international entrepreneur

Joe rolled his chair over to company founder, Mary’s desk with a quizzical wrinkle in his brow. “Can we sell our security product to someone in Romania? We just got an email basically ordering 50 software licenses from somewhere called Timisoara?”  said Joe as Mary looked up from her multiple computer monitors.

Mary was just as surprised as Joe. The company had launched only a few months ago. How could someone from Romania have heard about their product, much less have decided to buy it? Their small team of developers were focused on a few potential clients in the United States.

Mary hadn’t even considered when the international would enter into the company’s plans. But 50 licenses was an order that was difficult to ignore. So Mary and her company became Accidental Exporters, taking orders from foreign clients without any real understanding yet of their global markets.

 

International Clients Always Arrive Before You Expect Them

A byproduct of the world’s Digital Revolution is that anyone anywhere can read your company website. As a consultant, I don’t travel to over 200 countries but this article will. Businesses and consumers now have access to product options and pricing information allowing them to make more informed choices. If you have something of value like Mary’s security software product, then clients from other parts of the world will begin to make contact.

Mary and her team will likely weigh the revenue of 50 licenses against the risks of doing business with these Romanian clients. Will the clients pay in dollars? How much interaction is needed for software implementation and service?

If like much software today the delivery is a SaaS model, then allowing access is easy. But are there any regulations related to doing business with Romania in terms of taxes, data location requirements or other restrictions? Most companies ignore compliance issues at first and focus on the money. (Tip: Always know what you’re getting into before you just move forward.)

 

Timisoara, Romania (photo courtesy of wikipedia.org)

Timisoara, Romania (photo courtesy of wikipedia.org)

 

Accidental Exporting Becomes the New Normal

Mary and her company take on the Romanian client, then soon a Canadian client, and on it goes. The company figures out ways to serve these foreign clients in the same way that they serve the domestic base; in the home country language, home country currency, home country customer service hours, and home market expectations. In my experience, this directionless approach is the international growth path for about 98% of small and medium-sized companies.

The surprising part of reactionary-based international expansion is how long this phase typically lasts: for years and sometimes decades. Companies often seem content to continue building their international client collection with little thought to the larger markets left untapped.

An extension of Accidental Exporting are overseas distributors who find your company through the website or a trade show; and offer to represent your product in their market. Now you have a distributor based in Australia who gets to build business for you in the APAC region for a 25% discount margin. Most companies just accept this new extension to the reactive model without any visit to the distributor’s offices or 3rd party background checks on their reputation. That’s just crazy and irresponsible.

 

What’s the Alternative to Accidental Exporting?

International expansion planning is the answer. And it needs to start almost as soon as your company initially opens its doors for business. In the start-up phase, a company needs to decide what it can and cannot handle in terms of orders from international clients. Can you convert foreign currency? Can you deliver your product compliantly using the Internet, air or ocean freight? Are there regulations for your product or industry that you should be aware of? For instance, you may decide that Canada is a market you can serve but that Germany’s laws regarding cloud data residing in servers located on German soil rule that market out for now.

Despite anecdotal evidence that startups can be “born global”, few are actually capable of true international market entry from Day 1. Instead, internationalization works best when a company plans for overseas market entry years before the first foreign subsidiary office is opened. Incorporate international considerations into:

  • Product development: Are there any additional product requirements to be compliant internationally (CE Marking, etc.)?
  • Company talent recruitment: Are we looking for candidates who also have international and cross-cultural experience?
  • Key outside resources: Can our accountants, attorneys, bankers and PEO providers also advise on international tax, legal issues, foreign exchange and international payroll?
  • Financial capital: Are we budgeting for our initial global market research and first market expansions?

Preparing for that eventual international rollout will make the transition much smoother.

 

When Should We Get Serious About Internationalizing?

There is no specific milestone that marks when a company should proactively begin its international expansion. But here are some general guidelines:

  • If you have a profitable company providing value to your home market clients
  • If international clients have found you and you are able to successfully serve their needs
  • If your home market is a small one, then you will need to internationalize earlier than large home market companies
  • If you have 100+ employees (this can vary by industry, but IT companies should heed this criteria)
  • If you have earnings, loans or outside equity to fund early expansion efforts

 

My hope is that by writing about accidental exporting it will prompt business leaders to examine their own company’s approach to international markets. With luck a few more “accidental exporters” can reach their greater global potential.

 

Onward & upward

Becky Park, The International Entrepreneur

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The International Entrepreneur – How to accelerate global expansion

accelerate global expansion, international entrepreneur, international business

It’s ironic. Anyone who has spent time and energy expanding their company into international markets can tell you that the process is anything but fast. Global expansions are notoriously slow, especially when compared to what American and Canadian companies are used to as their domestic time to establish a new business. Registering a new business in some American states can take 30 minutes online and US$50. In contrast, some business registrations overseas can take over 2 years and cost US$20,000+.

In North America, we build our business processes and expectations around speed. Speed to market. Speed up the sales cycle. Speed in product development. Anything that slows us down is the target of constant complaint. Ask anyone who has been through a U.S. Food and Drug Administration’s approval process.

Despite frustrations, there are many compelling reasons why a company would still choose to expand internationally. There are new markets and customers overseas. The market may be global and market share requires doing business internationally. Global markets may balance out seasonal or economic cycles to keep the company’s revenue and growth on a steadier path. There may be strategic advantages for global talent, cost savings or a whole host of other reasons to go global.

REALITY CHECK: No matter how compelling the reasons to keep expanding into new global markets, you still need to expend the necessary time and resources to bring success. If you can’t commit to at least 2 years worth of work to get a new market off the ground, then I recommend that you don’t take your company global.

 

Here’s my advice for speeding up the international expansion process:

  1. Consistent Commitment. Nothing (and I mean nothing) will slow down your company’s global expansion more than the mixed messages of wavering leadership and financial support.
    This happened earlier this month to an international expansion director in the southwest United States. He had made all of the arrangements to meet with potential Middle East partners on a crucial trip. His company’s Board of Directors froze all travel and other international expenses for a short-term gain.  Now when this director can finally return to this high-potential market, he won’t find the same level of welcome or interest in doing business.
  1. Travel to Your Markets. If you truly want to expand quickly, then put your company leaders and expansion staff on planes to your chosen target markets. Face to face meetings with potential partners, clients and other influential stakeholders in country dramatically speed up the time taken to form these key relationships.
  2. Consider Strategic Partnerships or Mergers & Acquisitions. While partnerships and M&A take substantial time up front to establish the relationship and agreement terms, they can expedite market entry where they already have established client base. So for instance, let’s say my company wanted to enter the Thai market. I don’ speak Thai or know this culture which is quite different from my own. But if there were a compatible partner company, I could reach potential Thai customers by piggybacking on the partner’s products or services as a point of entry. I could learn from my Thai partner about the market and the best ways to sell my offering.
    On the M&A side, buying or merging with a company in a key market means that you buy their assets and also their internal processes and market knowledge. This, of course, is also dependent on keeping existing staff happy post-M&A so that the knowledge stays with the company. Obviously M&A requires support from your current and future financial resources.
  1. Laser Focus Normally Beats the Shotgun Approach to Market Entry. Many companies take the reactionary approach to international markets, they wait for foreign clients to find the company online and approach them with business. I am not saying that this is necessarily a bad starting point, but at some stage serving customers in 13 countries is less efficient than focusing on the 3 best markets and doing it at higher revenue and profit margins.
  2. Practice Agile Processes in Your International Expansion. Instead of starting and stopping every time there is a new challenge in a global market, I recommend using an agile process. Agile is a leading approach in software development where changes are made to code frequently to constantly improve the quality of the product. Marketing adopted agile because it allows for incremental performance evaluations and changes instead of annual reviews. I think this applies just as well to global expansion, where incremental changes can vastly improve results and speed up the process rather than waiting for a review from a large country roll-out.

While international expansion is an investment for companies with a longer investment time frame, there are definitely steps that can speed up the process. Consistency in support is a required foundation. Armchair expansion is much slower than sending staff into the field to meet and develop relationships with key in-country contacts. Focusing on key markets and partners is faster than waiting to see what drops in your lap. And always be ready to make changes based on the new insights you pick up during the new market entry.

I wish you all the best of success in all of your markets.

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The International Entrepreneur -The Globalization of American High Tech

international trade, information technology, globalization, international entrepreneur

This week I wrapped up a 3-week project researching American IT companies that expanded into international markets. Normally my clients hire me to focus on markets outside the U.S., so it was interesting to study the industry I serve.

Honestly, I thought I knew all about the American IT industry. I have spent the better part of the last 22 years working for American IT companies as an employee and contractor. What I learned about my home market and industry surprised me and I wanted to share it with my readers.

 

Market Insights from Studying American IT Firms

I identified 200 American IT companies that had less than 1,000 employees worldwide and were actively internationalizing into new foreign markets. Most of the companies picked for my study were recruiting staff both in the U.S. and in overseas offices. I did not choose any companies that were clearly locked in a 2-country model for outsourcing or similar purposes, with no plans for global domination. I did not target specific states or metro areas. I understand that this is not a study with full academic rigor, but still it was hard to ignore the trends.

Here’s what I discovered:

  1. Not all American IT industry clusters are producing internationalizing companies. Almost HALF of the internationalizing IT companies were based in 2 metro areas: Silicon Valley/Bay Area (68) and Boston (26).
    Then came Tier 2 Clusters of internationalizing tech companies: Los Angeles/San Diego (18), New York City (16), Seattle (8), and Chicago (6).
    What was just as interesting were the metro areas considered to be strong in IT companies that are disproportionately low in internationalization: Denver/Boulder, Phoenix, Portland (Oregon), Philadelphia, North Carolina, Twin Cities and Washington DC.
    Two notable additional bright spots were Manchester, NH and Salt Lake City, UT both coming in with 4 internationalizing IT companies apiece. Here is a map showing where the U.S. high-tech markets are. Clearly the internationalizing clusters are a subset of the whole.

  2. Internationalization seems to take place between 100 and 200 employee counts across a wide variety of IT markets. This includes companies doing everything from developing gaming platforms to offering SaaS business processes to security networks to storage technologies. There are 2 noteworthy exceptions: healthcare IT and B2G (business-to-government) industries. After reviewing dozens of both types of companies, neither internationalize until much later in their product cycles. It’s a shame, really, since both government and healthcare technologies are bought and sold all over the world.
  3. IT services offshoring companies rarely made the list of 200 companies even though their entire business model is based on globalization. The truth is that these companies may have Indian or Mexican operations, but they don’t sell into any market except the U.S.. Opportunities are being missed.
  4. There is no standard international expansion market pattern. Companies literally had a patchwork of offices and operations around the world. While there are definitely popular overseas office locations: London, Singapore, Toronto, Sydney, Amsterdam; companies seem to be weighing options in various markets instead of following a predetermined step-by-step rollout. In my option, that’s proactive and positive.

What is internationalization?

For quick reference, here’s my practical definition of company internationalization:

  • A company that is PROACTIVELY entering new foreign markets to sell products and services. This also applies to the supply management side sourcing materials and services from around the world.
  • A company that is actively engaged in understanding the market potential in various parts of the world.
  • While many companies begin their international expansion using in-country local representatives or distributors, I think true internationalization is when companies begin to expand directly to new markets with new offices and hiring in-country staff.

Why is internationalization important?

Globalization is a defining force of our time. Its momentum rides right along with the other primary drivers, technology and entrepreneurship, as changes that will affect our grandchildren’s grandchildren.

For companies, internationalization is a game changer. It means:

  • Having the choice to expand into international markets (internationalize) at much earlier stage than ever before.
  • Increasing your overall market size by somewhere between 100-500%.
  • Learning industry advances and operational efficiencies in one market that can be applied to the rest of the company’s markets (called “arbitrage”).
  • Access to investment funds and other resources not necessarily available in your home market.
  • Country portfolio risk reduction. Not all markets go through downturns and upturns at the same time. Multiple markets balance out the risks.
  • Access to the global talent pool to help drive smarter decision making and better leadership and management.

As I often discuss with IT company leaders, internationalization is like your planet developing “warp drive technology” on the TV/movie series Star Trek. Pre-warp-drive planets have a single planet view of what is possible. But once the planet’s scientists and engineers develop this high-speed capacity for travel, Star Trek sends an envoy to meet your leaders and welcome you into the larger intergalactic realm. Internationalization in a similar way opens up the business environment to the other 95% of our planet?s population.

So if you are an IT company leader or someone invested in a local IT cluster’s success, what does all of this mean for you?

  • It means that clusters like Silicon Valley and Boston have investors/VCs who expect internationalization as a company’s “Warp Drive” when they reach their growth stage. These industry clusters cultivate available resources to help make that happen. This can be developed in other markets as well.
  • It means that if your company has a headcount of 200+ and you don’t yet have international operations in at least 2 foreign markets, you may be late to internationalization and should actively be researching the advantages and risks involved. To expedite this, hire outside international business expansion consultants.
  • It means there is no one best way to expand internationally. Use your own competitive advantages and market research to optimize this process.

Now, in the immortal words of Star Trek’s Mr. Spock: Live long and prosper!

Becky Park, The International Entrepreneur

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The International Entrepreneur -Are Your Outsourcing Resources Ready for International?

The International Entrepreneur Asks Are Your Outsourcing Resources Ready for International?
Today’s companies tend to be leaner and more agile than those in years past. They often have to be in order to grow at a rate fast enough to secure the next round of funding or attract the right acquiring firm. How we do business has fundamentally changed to where many company functions like legal, accounting, HR and marketing can be outsourced to a large degree. But what happens when a company decides to enter international markets? Are these BPOs ready to join you on your international business expansion?

Here are some questions to ask your company’s law firm, accounting firm, marketing agency, bank, payroll service and any other business process outsourcing (BPO) providers:

  • Do you have any offices or partners in the markets we are planning to enter?
    If your home market is small like Singapore or Luxembourg, then likely any outside resources are well connected to the rest of the world. They have to be. For larger markets like the U.S. or Brazil, your local bank may not have the international connections or in-house expertise international currency and finance that you’ll need.
  • Are you able to serve staff based overseas with sound advice and similar services in international markets?
    Payroll is a great example of where this applies. Most payroll outsourcing companies choose to serve only their home market. But there are a handful of international payroll companies that handle the complexities of payroll around the world to help keep your company in compliance.
  • Do the contacts that you work with have international experience?
    Sometimes a law firm or accounting firm has the ability to extend to other parts of the world through sister offices or partner firms. But often when a company shifts from one market to global markets, the staff who serve the company may need to change to the more internationally experienced resources.

For all of your company’s business functions directly affected by the international expansion, you can decide between two approaches: Centralized and Decentralized Outsourcing.

Centralized Outsourcing is when your BPO resource has an extensive network of staff or trusted partners in all of your markets. The largest accounting firms fall into this category. And it helps to have one cohesive approach to accounting that leverages the specialized knowledge that these firms typically have in areas like international taxation.

Decentralized Outsourcing makes sense when in-country resources have the best perspective. This is often the case with marketing agencies. If I’m going to concentrate on the German market because I know that German businesses desperately want and need my product, then I should hire a marketing agency based in Germany to spearhead my marketing program there.

Some additional advice:

  • Be sure to ask specific questions of your service providers to learn their fuller international capabilities.
  • Don’t contort around a business relationship to avoid hurting someone’s feelings. Yes, the company founder’s best friend may have done the accounting for the last five years, but unless his firm can handle all of your transactions, currencies and tax reporting, it?s time to move to a fuller service firm.
  • Generally, companies keep all processes tied to their value chain in-house rather than outsourcing them. With keeping that in mind, some companies also choose to redefine their value chain altogether to fit what they actually do best. That’s at least food for thought!

I hope you found this article helpful. If you would like to receive additional tools and tips starting with a Market Entry Checklist, please click here.

The International Entrepreneur – Improving Agile International Project Management

agile global project management, international trade,
This week I caught up top global IT project manager, Sean Hull. Sean leads global teams on enterprise system implementations. His latest project involved a U.S.-American company implementing a customized system for an Australian customer that was developed by a South Korean team. I wanted to hear Sean’s insights about how agile management practices are used in global project implementations.

Like Sean, I have spent much of my career in and around large-scale technology industries. I know that any company selling enterprise-level customized software or other technologies needs a high-performance professional implementation services team – the company’s competitive edge.

I recently worked with a tech company that did not yet have such a team. Projects lost money instead of providing much-needed profit margins. Fulfilling the contract meant commandeering product development resources away from core product (that was already late to market) in order to write custom code. It was a first-class mess. Any improvements to project management methods literally hit the bottom line for the company.

“Software is worthless until it is used by a customer.” ~ Sean Hull

Sean went on to say that, in Agile Project Management, software is delivered in iterative code and documentation. Feedback from the customer is built into short “sprint” cycles. This requires vendor and customer staff to have instant contact. Tight delivery cycles and collaborative communications need to be exceptionally managed for all of this to be successful. One of the benefits of agile project management is that the customer helps to discover any issues much earlier in the implementation process. This saves time and resources overall.

 

Here are some of Sean’s tips for effective global project management:

Tip 1: Enforce your project management processes and tools. A project manager can choose from any number of processes and online tools to manage the project. Enforcing that nothing happens on the project unless it is communicated and documented according to the project rules is especially critical when the team is spread out geographically. One of Sean’s favorite project collaboration tools is Basecamp, which scales from small to very large projects.

Tip 2: Get to know your team. Meet in person, if you can, even if that means traveling to the same location. Be sure to draw up a process that would work for all involved. It is extremely helpful to know how your team members currently approach their work. Together with his team Sean likes to define: What does the baked pizza look like? It’s also a great idea to look for ways to make life easier for all involved.

Tip 3: Know how to collaborate with all cultures involved. In some cultures, the boss tells his or her team exactly what to do. In others, team members are expected to take more initiative and share their expertise openly within the team. Incorporate the various styles into how you work with your team. Sean recommends using the SCARF Model.

Tip: 4: Take advantage of the tactical tools from Agile methodologies. This includes how to run meetings, monitoring progress, etc. These work well as long as you take into the variation needed for culture and personality.

As global project management competency grows as a critical factor for business success, these skills will be critical to securing profit margins and loyal customers. I hope you find these tips useful in your company and projects.

For more information about how to expand your company internationally, please contact me for a 30-minute complimentary consultation.

Becky Park

The International Entrepreneur

The International Entrepreneur – Revitalizing Global B2B Social Media Strategy

 

Revitalizing Global B2B Social Media Strategy

As many of you know, I recommend incorporating a social media program into almost any business-to-business international marketing plan. Social media allows your staff to directly engage with current customers and targeted prospective clients, as well as intervene in a negative product or service feedback. Platforms like Facebook and Twitter have a global reach to markets companies never thought they would so easily access. Social media (both paid and organic) also significantly boosts a company website’s search engine optimization- a key element to your potential clients finding your site online.

But unless you’ve been living under a rock, you probably knew all of that.

Since social media rarely stops at the border, companies are able to engage with some potential business online. But that doesn’t mean that social media will necessarily help you reach your company’s goals. To do that, it takes a more targeted approach to social media in international markets. Here’s a start to reviewing your global social media strategy:

Make Sure You Have Social Media Goals

I am still amazed at how many companies do not have clearly defined goals for their social media program. Or if they do have a goal, it involves something warm and fuzzy like unmeasured brand awareness. Instead, consider both reactive functions like customer service response; as well as proactive goals related to new lead identification and lead nurturing. If you don’t have clear goals, you’ll never connect with your leads!

Cloning Domestic Social Media Plans Will Flop

Social media works effectively when your content and conversations resonate with new and current customers. To be truly effective instead of merely reactive, that means taking on a decentralized social media approach on all platforms. So Facebook company pages, Twitter accounts and Linkedin company profiles should all be written in your target markets’ local languages and localized to the market’s preferred marketing and selling styles. If you don’t decentralize, then you’re only seeing a fraction of the potential from overseas markets.

Know the Market’s Preferred Platforms

I recently worked with a company that decided to expand a U.S.-based Linkedin paid media into Australia and New Zealand. Those of us who focus on B2B markets know that despite Linkedin’s lower global usage rates to larger platforms like Facebook, Twitter & Google+ it can be affective in certain B2B markets. While somewhat stronger in the U.S., Linkedin has not expanded internationally at the same rate as other key platforms. In Australia, for instance, only 9% of the population has an active Linkedin account. That compares with 40% of Aussies using Facebook.

In early 2015, We Are Social released a Global Web Index report on global social media usage. Not only does Canada have almost twice as many Twitter users (23%) over Linkedin (12%), but almost half of Canadians used Facebook in the past month of their study. The French don’t use Twitter or Linkedin nearly as much as Google+ and of course the global giant, Facebook. Japan uses social media much less with top activity going to Twitter with 16%. The bottom line – know your market before investing time and resources.

Global Social Media Strategy

Identify Local Social Media Resources, Then Train on Company Policies

If you are targeting the German market, then it’s time to find a local point person for German social media content creation and online communications. Your company may already be established in Germany and so you have staff or outsourced resources who can perform these functions. BUT, if this is new then consider finding a local marketing firm with social media services. To keep costs low, provide centralized content to be translated and localized.

When several local resources are managing social media, it is critical to have a written set of social media policies that state the boundaries on what a representative of the company can communicate to customers and leads. This includes branding guides, professional conduct code, what constitutes company secrets, etc. I recommend video training to reinforce these policies. Too many companies miss this step and regret retracting and responding to an inappropriate post or tweet!

The Good Guys Win in the End

Developing quality content on company website blogs is one of the cornerstones of any global social media program. One high-quality weekly post always trumps daily gibberish. And engaging social media staff who speak in their own authentic voice will attract far more qualified leads than any silly made-up personas. People can always spot the knock-off brand.

In summary, global social media has great potential to help a B2B company expand into new and existing international markets. To do this, be clear about your program goals. Consider a decentralized approach to content and communication. Pick your platforms carefully based on each market. Choose the right in-country resources, then train them on your company social media policies. And finally, deliver consistent substance and sincere engagement. Then enjoy the fruits of your efforts!
If you company needs a review of your global social media program or help setting up a program, please contact me.

Best of success in your international expansion!

Becky Park

The International Entrepreneur

The International Entrepreneur – 5 International Strategy Traps to Avoid

Wrong Way, nternational Strategy , International Entrepreneur, InternationalAs an International Business Consultant, part of my job is to detect patterns and trends. Is a foreign market going to expand or contract? Can we go viral with a referral marketing program? What are the buyer personas in a new market?

But there are more than a few patterns between unsuccessful international expansions. Some of these mistakes can jeopardize success in an overseas market. Others can destroy a company. Here are 5 classic international strategy traps everyone needs to prevent:

1. Slow Organic Growth into Competitive Markets
This may sound obvious, but international expansion costs money. Some companies are fortunate enough to have a steady stream of bountiful earnings to then fuel their international expansion. Others raise cash from either equity investors or on credit. But many expand very slowly into new markets, spending funds as they become available.

This raises two sizable issues: First, organically funded expansions are rarely consistent. Instead they trickle marketing and other operations. There’s no show of real commitment to would-be clients or partners. It’s difficult for the new market to take your company seriously.

The second and more ominous problem is the local competition. Instead of using a well-funded market launch to establish a clear foothold in the country, a slow entry gives the competition plenty of time to figure out ways to ensure your failure from taking their market share.

2. No Rainy Day Plans
International expansion is usually a sunny day activity. Business is good and opportunities are abound. The exchange rate is favorable and trade barriers are low. So now what happens when something shifts back and the rain begins to fall? Companies need to always be prepared for a range of possible international changes.

Canadians, this is especially important right now for you as the Canadian Loonie is low to the American Buck. While offering Canadian-level prices might seem like a great way to expand your American client base, eventually the exchange rate pendulum will swing the other way. When that happens, your margins will get squeezed. It’s better to prepare for both exchange rate scenarios and prepare for the long run.

3. Requiring Short-Term Gratification (a.k.a. The Toddler Syndrome)
Now normally this trap ensnares either newly public companies or internationally-inexperienced leaders. After an Initial Public Offering, the pressure is turned up by quarterly reporting requirements. It becomes vital to reassure current and future investors of the company’s financial health. International expansion does not run on a quarterly system. It’s decidedly messy as it grows and matures into steadier income streams – a bit like my teenage son’s room. Guiding an internationally growing company takes a steady hand, discipline… and definitely patience.

4. The Ugly Market Exit
When sales and profits are flowing, it’s easy to be the good partner or vendor. But when an expansion goes badly, many companies will cut their losses during the market exit. They may leave a trail of debts, broken promises, contract breaches and spoiled relationships. This is bad “rainy day planning”. By saving a few dollars in the short run, this fleeing company burns bridges. But it’s more than just that. A reputation in that market and neighboring markets grows. Should the company ever decide later to go after international potential, they will find their reputation precedes them and doors will remain closed.

5. Decision-Making Based on Assumptions Instead of Research
It is truly staggering how often companies base major expansion decisions based on relatively arbitrary assumptions or shallow relationships. Staggering. There are two main assumptions that steer decision makers off course. First is the assumption of sameness. We often assume that the new market will behave like ours: same sales motivations, same sales cycles, same budget expectations, same legal structure, etc. But even countries with many similarities (U.S./Canada, Indonesia/Malaysia, Belgium/Netherlands, etc.) have plenty of differences too. Without understanding the differences there is no way to avoid costly mistakes.

The type of assumption is that which is based on stereotypes. While this trap is widespread, I see it often in the U.S. when talking about China. “The Chinese don’t respect the contract.” “The Chinese will steal your trademarks.” These stereotypes are based on many companies’ experiences, but completely miss the point of how to effectively do business with what will soon be the largest market in the world. Assumptions often take the place of both solid market research and utilizing outside international advisors. Advisors can help a company navigate what is real and what isn’t, as well as provide more concrete information on which to make smarter decisions.

All of these traps are common and detrimental to an international expansion. If your company is experiencing the challenges of international expansion and needs assistance, please contact me. I offer a 30-minute complimentary consultation to companies looking to expand or improve their international operations.  Best wishes to all!

Onwards and Upwards,

Becky Park

The International Entrepreneur -Building a Stronger International Strategy

Today’s reality: most companies don’t strategically plan their international expansion. Or if there is a plan, it’s often broad and filed in some file drawer collecting dust. Instead, it sort of just happens and employees are along for the ride. If you are wondering if this is true in your organization, here are some signs of absence of a solid international strategy:

  • Knee-jerk reacting to international opportunities. Throwing resources at the newest market or big international prospective client can put untold strain on company operations trying to cover what amounts to chasing your tail.
  • Unsolicited partnerships are the backbone of your expansion. If you don’t understand motivations, the wrong resellers & other partners can steal your intellectual property or otherwise spoil your international brand.
  • Financial surprises plague profits. When issues like Italy’s profit repatriation rules, Indian labor laws or a Brazilian lawsuit keep catching your company off guard, it’s a sign of lack of research & planning.
  • Flimsy market entry justification. My favorite in this category is breaking into markets with the highest GDP growth. Since a country can have high growth one year & sink the next, it leaves no room to build a market long-term. A boat that constantly changes course will never to reach goals or a final destination.
  • Pulling out of markets based on this quarter’s earnings. Exiting an international market not only burns bridges but also often leaves many local financial obligations and works against long-term efforts.

building international strategy, international business, international marketing

A Better International Strategic Framework

The good news is that there is a better way. The tail chasing can stop and your staff can productively work together towards the right goals. Here’s where I normally begin an international strategy assessment:

  1. What’s your company’s exit strategy?
    What’s your company owners’ exit strategy? Are you planning an IPO, equity buy out or acquisition? Or do you plan to pass on this company to future generations? What kind of company will your leaders be passing to its next owners? Knowing the window of time to exit helps to determine which opportunities make the most sense to maximize outcomes.
  1. What are the goals of the international expansion?
    Many companies measure international success based on the Return on Investment (ROI). If this is your situation, then your strategy needs to reflect the required Internal Rate of Return. But many companies choose to reflect multiple value-creation objectives. These can include building a global brand, increasing global market share, developing an international supply chain, and reducing dependency on a single market or currency. By defining the goals up front, you know exactly what port you’re sailing to before you leave shore.
  1. Do you know your real opportunities and costs?
    It is a rare company that takes the time to research the true potential of their markets and then the associated costs to gain market share. But those who do are typically the market leaders (no surprise, really). It takes internal staff or international consultants asking the right questions to truly unearth the new business environment BEFORE investing more resources.
  1. What are your company’s risk tolerance and comfort with foreignness?
    Inherently some international projects are riskier than others. Safe may be doing business between the U.S. and Canada, or between Germany and Austria. There are similar business environments, language, culture, etc. But at some point, success will bring opportunities that are further afield and rich in potential. When those potential clients call, is your company ready to do business in Mongolia or Mali? I recently spent time working with a software company where some of the front line staff quietly avoided following up on international leads. Needless to say, the close rates for international leads were incredibly low. The company CEO touted his global company, but there was serious resistance in the ranks.
  1. What are your financial resources for expansion?
    The best-laid plans in the world are reduced to dust when there is no money to pay for the international expansion. I am amazed at how many companies actually try the no-cash approach. In my experience it’s never successful. Ever. Most small and medium-sized technology and services companies finance their expansions slowly through retained earnings. This can be effective if it aligns to your end game plan. Some companies rely on either bank loans or equity investment to finance their expansion. This works well for a well researched, contemplated and executed plan. A fourth option that should always be considered is to look into your own government’s export promotion programs. There may be grants, low-interest loans or other incentives to expand while creating jobs in your own country.

These questions are a starting point for building a better international expansion strategy. But to truly leverage your company’s competitive advantages and global potential, you should engage with business resources who can help your company plot the course to success.

If you would like to review your company’s international expansion strategy and plans, I offer a 30-minute complimentary conference call to learn about your opportunities and challenges. To schedule this call, please email me at [email protected].

 

Best of success in all of your international business dealings!
Becky Park, MS, MBA

The International Entrepreneur

The International Entrepreneur – 5 Tech Firm Strategy Myths that Need Busting

Have you ever wondered why international expansion results often are underwhelming and unimpressive? A tech company realizes that many international clients are proactively seeking out their products & services. They decide that it’s time to expand into new markets. I think it’s time to bust some myths in international business strategy that have plagued tech industries for far too long.

international strategy, international business, international marketing

Myth 1 – If the international markets don’t succeed in a year, we can just pull out.

First, international expansion takes at least two years to fully take hold in the first international market (if you’ve done it right). Expansion takes company-wide commitment to long-term growth and profits. Second, companies that come in and then pull back out often burn the bridges of partnership and government relationships that they would need again if they tried expansion at a later time. Not a smart plan.

Myth 2 – We can lower our risks by using local market reps to sell internationally for us.

In the right circumstances using international representatives or distributors can substitute for a company knowing how to directly sell in a foreign market. The local rep can also help with product information translations and use their existing networks to accelerate sales.

But here are the risks: First, anyone with detailed product information can also turn around and sell that information to your local competitors. For technology companies, that can be a huge business risk. Second, local reps want to represent your product if it produces a lot of revenue with little effort. If it’s a more challenging market introduction, they will likely put your product on the back shelf, thereby wasting precious time in the market with few results. And third, local reps may be more open to bribing officials or companies to get the sale. This is a direct risk to a company where corruption laws are stricter and hold the parent company responsible for any unlawful payments.

Myth 3 – We can sell technology using the same sales process as we do at home.

Sales expectations vary greatly from country to country. In a place like Australia, return on investment is often measured carefully. In Egypt, buyers expect to be able to negotiate a deal with a much lower price. Some countries use contracts as the foundation of the sale while for others the contract is a mere formality. In each new market entry, the sales process needs to be carefully reviewed for local expectations.

Myth 4 – We can just translate a webpage for each new language and that will give us access to the markets speaking that language.

Keep dreaming. In reality, markets look first to their local country TLD (top level domain) such as .de, .au, etc. And then they may search in their language too. Unless you have a marketing program that focuses on building brand recognition in that language, the one-page language is a mere footnote to your site. It will not inspire confidence that you know how to do business in the places that speak that language.

Myth 5 – Ignore the advice of your local staff or other in-country marketing resources

This one seems silly and I wouldn’t include it except that I’ve actually seen several tech companies miss the wisdom from their own local resources. Local staff and marketing agencies should be giving you advice on how to better tailor your product, processes, website, etc. to work better locally. A great way to make sure that the staff is right: A/B Test the change to see if traffic, conversion and sales improve.

International strategy is critical to the long-term success of a multi-national company of any size. If you have questions about any aspect of this framework, or would like assistance in assessing your current and future international capabilities,please contact mefor a free 30-minute consultation over the phone or Skype.

Best of success in all of your international markets,

Becky Park 

The International Entrepreneur

The International Entrepreneur – Interview with International Export Expert, Ed Marsh (Part 2)

Ed Marsh, International Entrepreneur, International Business

Ed Marsh, Consilium Global Business Advisors

Two weeks ago I posted Part 1 of my interview with international B2B sales and marketing expert, Ed Marsh. Today I share the rest of Ed’s insightful answers.

Q3: What’s the biggest mistake you see companies making in their online marketing for global markets?

A3: Most US companies make the same fundamental mistake globally that they make domestically. Their entire marketing and sales approach is built on who they are, what they do/make from their perspective. And that’s functionally irrelevant to any potential prospect in the world, including at home in the US. It makes them ideal 3rd bid participants, but not dynamic growth engines.

The solution is to really understand their buyers – and often assumptions are so firmly embedded in a company that outside assistance is critical to really understanding buyers’ challenges, perspectives, goals, etc. Buyer personas must be rigorously built, and then a complex “3D buyers journey” constructed. That’s the foundation for successful market development domestically which is, in turn, the foundation for global success.

But that’s also where trouble arises, because companies proceed to use that same foundation globally. Partially because it’s a lot of work to build it properly in each case, and partially because it takes deep market familiarity and extensive interviews to construct – it doesn’t get built for target markets. Then they compound that with translation.

Effective global content isn’t translated, or even localized. It’s trans-created, or created in the local language based on the local persona and optimized around the native and intuitive keywords which describe the market specific business challenges prospects there face.

So exporters need to think of digital marketing as a process of continuous improvement and innovation – instead of a website. They need to really nail their domestic program first. Then they can incrementally internationalize what they have – experimenting and adjusting based on metrics each step of the way.

Q4: What are you recommending to U.S. clients worried about the strong dollar affecting their export potential?

A4: Interestingly I don’t hear many concerns expressed about the strength of the USD. Certainly today’s cross is less favorable than the rates over the past several years, but I don’t have the sense that it’s impacting projects…at least yet.

But I suspect that specific concern may be implied in uncertainty around the bigger topics of foreign exchange and payments. Those are perennial areas of considerable worry to US companies. Often the resources to whom they naturally turn for advice, their accountant and commercial banker, are unfamiliar themselves. That creates a real barrier to export success.

So in general I recommend that they find other resources/advisors/service providers for that expertise, and further that:

  1. They embrace hedging – it’s neither some whizz kid MBA complicated thing, nor some dastardly Enron approach. It’s simply agreeing today to buy currency at some point in the future for a given price. Companies can easily and inexpensively lock in today’s margin on a deal and let the FX market do as it will. A good currency trading resource will be inexpensive, responsive and proactive with business recommendations. And international customers will appreciate your flexibility to work in their currency.
  2. They secure foreign receivables insurance – not every deal can get done with cash in advance. Banks push clients into L/Cs which can be appropriate, but are expensive, complicated, often have gaps…and ultimately are more in the bank’s interest than the clients’. Insuring foreign receivables (details vary by policy) not only protects the seller against buyer default and other risks such as non-convertibility of currency, but it also allows companies to use a higher portion of receivables in the asset base upon which their borrowing capacity is calculated.

Q5: Any last advice you’d like to share with growing B2B companies currently expanding in international markets?

A5: Four things. The first is a small, simple one. The way to grow exports is to look for profitable customers to add. It needn’t be some huge, expensive, protracted project with an ephemeral payoff years down the road. Make it easy for the right buyers to find you, work through the transactional details, and start making money globally.

The second is a bigger, more strategic topic. A huge percentage of US SMBs are owned & managed by baby boomers. They’ve grown accustomed to a sellers’ M&A market over the past few years. But research shows that a majority plan a transition over the next five to ten years – and when they simultaneously move in that direction, suddenly the inertia will shift and it will be a buyers’ market. That means that companies need to move proactively to achieve key strategic positioning steps which will help to competitively distinguish their company from many others in a crowded market. That’s where global diversification is key. Not only should their global sales contribute rising revenue and profits (key to valuation, particularly among competitors with stagnant or anemic earnings) but also the diversification itself will create value – perhaps even enough to position a company as a strategic acquisition target for acquirers seeking further global diversification themselves.

The third is practical. Current US debt levels will almost certainly result in increased tax burdens on SMBs, particularly on pass-through entities commonly used by privately held SMBs. That means that tax reduction strategies should be at least part of business planning – and exports could be hugely beneficial through the IC-DISC structure that’s been around for years and was recently made permanent. It offers companies nearly 16% savings on profits from export sales. That’s probably appealing just based on today’s rates – but almost certainly will be more so as rates are likely to rise.

Finally is the value of lessons learned. 1:2 babies born in the US today is Latino. But there is no monolithic Latino culture – rather it’s a diverse group of cultures and languages from throughout Latin America and the Caribbean. There’s no better way to learn how to successfully market and sell to those US consumers than to dive deeply into the markets from which they come. And there are many other product, service and application lessons which can be learned in foreign markets which will spawn R&D and successful new product offerings for the domestic market.

About Ed Marsh

Ed was going to be an architect because he loved the nexus of engineering and design. That was before he was going to be an engineer; before he graduated from Johns Hopkins; before he was an Army Infantry Officer (Airborne Ranger); before he set B2B industrial sales records; before he was partners with a German capital equipment manufacturer; before he founded a distribution/rep company for industrial products in India; until he decided that managing a business and employees wasn’t what he enjoyed. Now that Ed’s got all of that out of his system he runs a consultancy that helps US manufacturing companies grow by applying process excellence to business development,  completing the full circle back to an engineering & design combination. His practice is built on a unique methodology which combines powerful digital marketing methodologies (a HubSpot partner) with his extensive international biz dev experience. Ed is also Export Advisor to American Express

About Consilium Global Business Advisors: Consilium assists American manufacturers in applying process excellence to their business development. In other words we help lean, well managed companies with rock solid bottom lines effectively and consistently grow their top lines to match. We work primarily with mid size industrial manufacturing companies, guiding them through a journey of designing and executing business grade B2B inbound marketing and focused, profitable global market expansion.

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