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.
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:
- 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.
- 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.
- 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.
- 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.
- 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 DeStigter, MS, MBA
The International Entrepreneur