After many years in global business, I’ve noticed that companies get into trouble when they have a false belief that simply expanding the domestic execution strategy will translate into a successful international expansion.
Companies face challenges when there is a lack of understanding with regard to the business culture and customs of the target market, in addition to a lack of international due diligence.
Additionally, I have discovered that the business deals themselves are seldom the problem. Business leaders today have the skills and finesse to identify and execute great deals. It’s the soft issues that surface on the international stage that cause unanticipated and disastrous problems.
Global growth can be both daunting and rewarding. As such, pursuing opportunities in the global marketplace requires the right perspective, and acting on those opportunities requires the right skills and entrepreneurial instincts. Both of these, perspective and skill, take time plus experience to develop and mature. Most important, they require intentional learning and curiosity to explore. Learning should be a deliberate response to every experience, every environment and every opportunity. Then, through daily business activities, a global lens is developed that transcends culture, borders and mindsets.
How can companies and their leaders take one large step back and look into the global marketplace to discover and assess new opportunities and new avenues to generate growth? The following tips and steps will help you successfully begin your global voyage.
Asking key questions
Embarking on your journey to expand your business globally requires a significant investment of upfront resources to choose the right market(s) and target them correctly. “Be prepared” is not only a well conceived Boy Scout motto, it’s also sound advice for companies considering global expansion. The move is intricate and starts with understanding cultural habits and perceptions in order to accurately forecast sales, interpret trends and evaluate the existing competition and the potential for new rivals. It also involves understanding the region’s overall economy and how to best position your product/service in the present and in the future, as well.
What to do and how to prepare?
It requires effective strategic planning with a long-term strategy deployed with careful thought and introspection initially based on asking the right questions and getting the answers, followed by being able to interpret the data. For example:
- Where to go and why. With 200-plus countries to consider, where in the world should you start (i.e., where in the world are your next customers)? Also, if you choose one country over another, why is that the right destination? Knowing the “where” and “why” makes it much easier to develop an effective strategy for the “how.”
- With whom. Will you go it alone, with partners or follow a client?
- With what and how to decide. Will you continue with the same domestic product, make modifications or develop a new product/service to maximize appeal in the new market/region? Do you look at your product and choose a destination? Or, do you look at global market trends and modify your product?
- What are the other considerations? It’s important to think about culture, consumption habits and potential, transportation costs, distribution issues, calculating demand, competition and legal issues, among many other factors.
- And finally, what are the goals? How will you measure both the potential and overall success of your expansion?
While it may seem tedious and time consuming, the questions involved in this kind of upfront investment are key to avoiding costly mistakes and going global successfully.
Instead of gazing with fear at the global expansion process, focus with excitement at the opportunities and, most importantly, plan for success. Small and mid-size companies are greatly positioned for global growth, and here are the reasons why:
Small and mid-size companies are more flexible, innovative and able to change and adapt much faster than the large and multinational companies. Penetrating and developing an international market requires an entrepreneurial philosophy and drive— the same kind of philosophy and drive behind every successful startup business. Following that logic, small and mid-sized companies should be the champions and enjoy exponential global growth.
Also, the leadership in small to mid-sized companies is more entrepreneurial, intimately involved and in-tune with the daily operations. And, as companies of this size have fewer layers to go through, they can adapt, move and act much faster. In many cases, the core team that started this venture is still around, and there is more of a tight and personal corporate culture. Consider the following:
- Do you realize that your business is already competing globally with international businesses at your doorstep?
- Have you tried accessing consumers outside the United States? Remember, they will soon represent 95 percent of the world’s consumers!
- Have you identified one market outside the United States that would utilize your product or service?
- Are you willing to collaborate with businesspeople from another country?
- Can you look at global opportunities without being paralyzed and distracted by uncertainty and fear?
- Are you aware of what it may require of your company, in terms of resources, to go global?
- If your product is seasonal, your options may be limited in the United States. Therefore, why not choose markets that offer year-round sales potential?
- Your product/service shelf may have timed out. Why not look for markets where there is a need for your type of product to extend its shelf life? Not every market is appropriate for the latest and greatest!
- How about collaborating with other brains from around the world and thriving by innovation? You have a closer relationship with the target markets and will get ideas for products you could never generate in-house.
Social media: Friend or foe?
Social media is a great tool to create the first contact, but it takes the “personal touch” to establish a relationship, especially across borders and cultures. When people communicate virtually, it opens up the door to many errors, misunderstandings and misconceptions.
Social media doesn’t replace the personal relationships that occur when you meet face-to-face and where trust is established. Yes, it is a great thing and may save you from buying a ticket across the oceans to simply identify a person. However, the long term and long-lasting relationships you need to succeed when going global are B2B and F2F: back to basics and face-to-face.
Make or break factors A company contemplating a new product for a new market may seek answers to the following questions:
- Who are the potential customers (demographics, income, marital status, employment, age, etc.)?
- What are their needs and motivations for purchase?
- Who makes the purchasing decision? Is loyalty to national brands an issue?
- What features and options do they expect?
- What quality is expected?
- How much are customers willing to pay?
- Will customers want several versions with different features in different price ranges?
- How will potential consumers learn about the product?
- How often will they purchase it and when?
Avoid costly mistakes
Mistake 1: Lacking clear objectives.
The reason to go global must come from a legitimate need to change that is based on accurate data, starting with the present and looking into the future. It begins with asking the right questions. Don’t skip this critical step. You can significantly increase your likelihood of success by researching the market and the competition. You can then use this research to set clear objectives, timelines, milestones and metrics to create a roadmap to success. Of course, all this information must be analyzed and interpreted in context. Data alone will not suffice. Make sure you define the right target market(s) for your product or service and choose the appropriate mode of entry.
Mistake 2: Forgetting the fundamental importance of cultural differences.
The differences that make all the difference are crucial to success. Anyone can see the tip of the iceberg, but it takes a trained eye to see what’s hidden under the water. Ultimately, a successful global expansion is dependent on a company’s ability to view the world in a new way and adopt appropriate polices and strategies to cope with different cultures. These are the sensitivities that can make or break a deal. Consider language, negotiation styles, gender issues and local business practices.
I’ve witnessed many business transactions come to a screeching halt and fall apart due to cultural misunderstandings and ignorance. Don’t assume anything and do your homework. Many times, the right way to handle issues is counter-intuitive to the American way. Businesspeople in an international business environment must not only be sensitive to differences in culture and language, but they must also learn to adopt the appropriate policies and strategies for handling these differences.
Mistake 3: Underestimating the time to market for your products/services.
Don’t put expansion plans at risk by budgeting too short a timeline. When this happens, inevitably, the business depletes available capital, and the upfront investment of time and money is wasted while your international reputation is blemished. Resist the temptation to be overly optimistic. Look at the ease of doing business (EODB) index for planning purposes, and focus on interpreting that information correctly and analyzing how it will affect your specific business plans. You cannot put a timeframe on building relationships and trust.
As the trade borders become seamless and the world becomes more dependent on technology, small to mid-sized companies must scramble to acquire the tools and skills necessary to survive and thrive in this increasingly competitive global market. The new frontier is that there is no frontier, and how middle-market businesses respond to this reality may have a significant impact on the economy as a whole. Savvy entrepreneurs will likely see opportunity where others see impasse.
It starts with the tweaking of the mindset: The United States is a huge country, but it’s not self-sufficient anymore. Companies seeking growth must look at the global market, and instead of feeling panic and fear, they should see an opportunity. Let’s stop peeking through the keyhole, open the door and step outside. Engage, play and succeed.
American businesses fail at a rate of three to four times the rate of other countries in their ability to expand globally. Even worse, the majority of U.S. businesses never make an attempt. Of all the obstacles to success abroad, the greatest hurdle is simply mindset. Our entrepreneurial drive, vision and expertise don’t compensate for our lack of global perspective, drive and success.
Many U.S. companies still consider going global an “option.” It’s not. Ready or not, almost every U.S. company is already competing with a foreign enterprise even right here on American soil. In a technologically connected world, the United States can no longer afford the luxury of global isolation—it must learn to play in the sandbox and launch successful international ventures.
The opportunities for global expansion are infinite and the potential for exponential growth is alluring. However, attaining success demands a well-conceived global expansion plan grounded in accomplishing specific corporate goals through the careful formulation of business development strategies.
Where do you start?
Perform a thorough market readiness assessment. Ask the right questions and perform due diligence in context to identify your potential customers and think locally. A detailed assessment will get your expansion right the first time around and avoid costly financial and opportunity losses. There is too much data available; therefore, the real skill is to know how to strategically interpret it in a global context relative to your company and then integrate it into the overall vision.
Plan and define the right opportunity for your company and establish realistic goals. Everything takes longer than expected. Do not underestimate the time and expense of launching products/services into the global marketplace.
Action: There is always a learning curve that can be optimized and shortened by getting expert advice to help you accomplish your goals across borders. Make sure you deploy the right team—a successful vice president of sales in the United States may not employ the skills necessary to navigate the global market. Adopt appropriate polices and strategies to cope with different cultures. These are the sensitivities that can make or break a deal. Consider language, negotiation styles, gender issues and local business practices. Remember, there is no one way to do business, and in order to be successful, you’ll need to master cross-border negotiation skills, a wide array of corporate growth models and know how to develop traction.
Implementation: Strategies fail in the execution phase, so being in-tune with the changing reality, charting actionable steps and having the best talent can deliver global growth.
Keep your eye on the ball. Maintain success, build on it and leverage growth.
In this increasingly complex and competitive global environment, exceptional skill is needed to evaluate the options, manage risks and execute a winning expansion strategy. Winners will reap the benefits, while expanding and executing growth strategies more quickly and more effectively than their competitors. What was won’t return, and there are new players and new rules in this global economy.
Be fast, flexible, innovative and motivated and enjoy the adventure! It’s a big world out there with lots of potential for businesses with a keen entrepreneurial spirit.