Too often, U.S. business people want to start with the peak, leaping into foreign markets without first laying the proper foundation and building the necessary relationships. Recklessly, they follow competitors, cheap labor, or abundant resources without truly understanding the target market. While these factors are important considerations, they are but pieces in the context of a much larger and more intricate puzzle.
Laying the proper foundation for global expansion requires accurate and actionable information that is interpreted and applied correctly in context. Interestingly, 95%t of failures result from inaccurate or unreliable information. Unlike decades past, the challenge is no longer a lack of information -- it's too much information.
Today, the real knack for dealing with information is sifting through the overwhelming abundance of it and harvesting what is applicable and significant to a unique set of circumstances. It requires knowing exactly what information is necessary, where to find it, when to use it, and how to apply that information to a specific set of circumstances.
An Ohio Manufacturing Company's Global Success
One successful strategy for market entry is to follow existing clients when they expand into global markets. This accomplishes a win-win scenario as the company becomes a key resource helping to guarantee the success of its customer's expansion while also providing a solid base of business in the new market. Such a strategy was utilized successfully by an Ohio manufacturing company. While they initially utilized this approach to enter Mexico, it has since doubled international sales in the past eight years, while their 2009 forecast for their domestic sales is down about 12%. Their success is attributed to properly training select Mexican employees in the U.S. so they understood expectations, goals and quality standards. While the process was met with challenges, the company was prepared for those challenges, committed to the long term and patient with the process.
A successful U.S. company in the precision machine tool industry decided to expand into the global marketplace and selected Switzerland as its first international venture. Next, the company hired a local agent and assumed that sales would start flowing. The company's leaders understood it would take time to establish business in the new market and proceeded with patience. But after a year of no sales, they started asking questions: Is it poor representation by the local agent? Is it a marketing issue or a product issue?
In reality, the lack of success went even deeper. It was an irreparable problem that occurred the minute they chose Switzerland as the target market. Here's why:
Switzerland is the biggest competitor to the U.S. precision tool industry. Under no circumstances could any U.S. tool manufacturer successfully compete on Swiss turf -- not on quality, not on price, and not on any other competitive advantage. The Swiss are very loyal to domestic brands and associate quality and perfection with Swiss-manufactured products. Bottom line, the company wasted its limited resources including time and money, damaged its international reputation, and was forced to return to step one in its attempt to enter the global marketplace. This blunder could easily have been avoided with a little due diligence and the understanding of the target market culture and economics.
The Need To Balance Internal and External Environments
Even the "sure things" can fail without an ongoing adjustment plan to ensure their success, since current events may cause a 180-degree turn on your plans and unless you monitor and are in-tune with real-world current events, economic, political, or cultural, you are going to miss your target. One of the best ways to achieve this balance and align goals with actions is continuous market assessment and due diligence, acquiring the relevant strategic expertise to see it through the right prism, and interpret the trends and information in the context of the target(s), the external environment and your company.
That means a living, breathing plan that is constantly monitored for changes in both the internal and external environment-not a plan that is created, shelved, and covered in dust. Domestically, this is a major challenge and frequent obstacle on the path to success. Internationally, the challenge is further complicated by the speed of change and the added complexity of dealing with foreign surroundings.
The Difference That Makes All The Difference
As competition continues to intensify both domestically and around the globe, so does the need to identify key competitive advantages and focus on core competencies. Quality products offered at competitive prices, although important, will not guarantee long-term success. Rather, businesses must answer a critical question: "Why should customers buy my products/services as opposed to the competition, and what is my long-term plan to remain competitive and succeed in growing the business globally?" If this question cannot be answered with clarity, it is time to step back and identify a position from which your product can gain traction and be distinguished from all the other competing products. Developing the right competitive advantage is key, and will greatly improve your chances for success when launching into the global marketplace. Just remember that there is no one-size-fits-all solution.
Rather, the exact specifications of any strategy blend features from traditional models like cost leadership, differentiation, and focus to customize an approach suitable for the unique circumstances of your company, product, market, and culture of the target audience. Businesses with the skills to rapidly identify, innovate, and exploit new competitive advantages quickly and repeatedly will be formidable competitors both at home and abroad.
Conversely, by identifying a particular attribute that could appeal specifically to a new market and then developing a strategic plan to promote that attribute, a company can gain a competitive advantage. Or, another way can be identifying the market and then modifying your product to fit that market. Highlighting product differentiation, developing corporate recognition programs, and creating brand awareness are several methods that are tied directly to competitive advantages resulting in ongoing profitability. Fortunately, for globally minded U.S-based businesses, competitive advantages are unlimited and waiting to be discovered.
Set 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 conducting the appropriate due-diligence. 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.
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. Be sensitive to cultural nuances. I've witnessed many business transactions that come to a screeching halt and fall apart due to cultural misunderstandings and cultural ignorance. Don't assume anything, and do your homework.
Reality Check: Time to Market
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. You cannot put a time frame on building relationships and trust.
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 that is grounded in accomplishing specific corporate goals through the careful formulation of business development strategies.
Mona Pearl is a global strategic business development expert as well as the founder and COO of Beyond A Strategy, Inc., a company providing expertise to plan and implement cost effective and sustainable global growth that improves a company's bottom line and helps realize seamless international operations. She is the author of Grow Globally: Opportunities for Your Middle-Market Company Around the World. www.monapearl.com or www.beyondastrategy.com.
