Jun 1 2011
When entering new markets you have to start with a clearly defined strategy and an honest assessment of your organization's capabilities. Without this, any path forward is flawed.
I have seen too many businesses say they are expanding into international markets, without clearly defined objectives and processes to achieve success, 'well these are big emerging markets, with a lot of people, and there is not much growth in our home market...' Hardly a strategy.
The next step is to thoroughly assess the demand and competitive landscape for your product or service; is the product or offering that you have unique in some way, are consumers already aware of your product (and do they like it), and if there are competitors, are there barriers to consumers switching or barriers to entry, etc.? You will begin to see the picture, and the decision tree continues.
Capability and Partnerships
The second important consideration when entering foreign markets is to complete an assessment of the skills and capabilities available to your organization. Do you have experience of moving into international markets previously, is your product accepted in that country or are there cultural or other barriers to entry?
A great example of this type of issue was when big box stores (also known as superstores, such as Walmart and Target) moved into Asia 20 years ago. They came with the usual large family size packs that offered a month's supply for a good price. Two immediate problems were that a) consumers lived in small homes and did not have room to store such items (or freezers...), and b) most didn't own a car and so getting to these stores which were built on the outskirts of town was also a problem. As you can see, an assessment of the service and local environment becomes critical.
From this you will then be able to develop a detailed entry strategy. Most likely this will, at least initially, entail working with a local partner or distributor. While this means sharing in the revenue, it involves the least risk. The relationship can be expanded or terminated as you develop your product locally. This is the approach I would recommend if you have a small budget. Just make sure you have someone on your team who knows the market and can manage the relationships!
At the other extreme, if you have some unique, possibly patented product, and the demand is significant, then you may go with a more aggressive investment model to protect your IP and maximize earnings (though the start-up costs can be high). In such cases you may set up a local business unit directly, or form a Joint Venture which gives you some control over the direction of the business.
In all these cases, local knowledge is imperative. And when I say local knowledge, this means culture, relationships and industry. The upfront investment in time and effort to understand the marketplace, while it may seem to slow the process down, will pay big dividends down the road. This process should not be circumvented or short changed.
Equally, you need to make sure that the source of this insight is on your payroll and not someone else’s. In that regard, bringing in the services of someone who has been there, done that (if it does not exist internally) and has existing relationships is the only way to go.
Expat vs. Local vs. HQ
The context of the expat has changed a lot over the last two decades. Many of the people who play these roles today are either a) paid locally as locals and are living in the country, or b) are based in HQ and then travel to the markets on extended trips. Having followed both approaches in my past, there are pros and cons to both.
Personally, with air travel improvements, and the cost of relocating families, etc., I see that the approach of extended trips to markets is perhaps getting more common. After all, you can now fly non-stop from New York to Singapore in 18 hours...
Another benefit to being based in HQ, is that assuming the company is making a significant investment in these markets, you probably don't want this person sitting thousands of miles away where management and support staff can't meet face to face to discuss the business and issues that will arise. One way or another, this person will spend a lot of time in HQ.
However, eventually it will be imperative to hire local permanent staff to run operations following initial entry, and managing the talent pipeline will become equally important to a well formed long-term strategy.
BlueSteps Executive Guest Writer
Ian Swanson is a senior global operations and finance leader with a track record of success who can help build, strengthen and drive business results across international markets. Having lived and worked on three continents, Ian possesses broad expertise in driving and supporting business growth in emerging international markets within the consumer products and healthcare industries, and has a proven track record of adding value to growing organizations through improved systems, operational efficiencies, restructuring and acquisitions, contact Ian at email@example.com.
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