On Management

Dec. 21, 2004
Going global? Do it right.

Companies that are successful in the U.S. market often conclude that the ingredients behind that success should enable them to expand around the world. But such thinking can be extensively (and expensively) wrong. That was the gist of a discussion I had recently with John Anderson, whom I once recruited to join Rubbermaid Inc. as international vice president of the Office Products Group. During a 30-year international career, John worked for five different companies. Since becoming a consultant, he has dealt with quite a few more. As we talked, he reflected on the striking similarity of mistakes made by companies seeking to become "global" competitors. "Companies of almost any national origin and size make common, basic errors when they try to grow their international business," John observed. "These mistakes are time-consuming and expensive. They usually stem from a combination of inexperience, ignorance, and/or arrogance." I asked John to help me construct a short list of common errors in pursuing globalization strategies. Here's the list -- along with some brief tips on how to avoid problems:

  • The company is "not willing to make the necessary commitment -- the investment in people or time -- to be successful." Solution -- Hire (or develop) people with international experience/exposure, and expect international developments to take longer than similar ventures would in the U.S. International business acumen should be regarded as a specialty, much like any other sophisticated managerial skill. Don't underestimate the complexity involved.
  • The senior executives, including the CEO, COO, and CFO, "do not get deeply involved until there is a crisis that affects earnings." Solution-- Senior management must be committed in a meaningful way from the start. It must take the risk of investment in faraway places seriously by putting a loyal, trustworthy financial or operating manager on site -- along with controls to protect the assets.
  • The international business is seen as "incremental" to the home-market business and given lower priority. As a result, the foreign operation "is developed with inadequate financial resources and management support." Solution -- Marketing and financing plans must consider the entire range of global markets, with the home market treated as an important one -- but not the only important one in the portfolio.
  • The company enters a joint venture or alliance with a local-market competitor, often taking a minority position. "After a few years, an adversarial relationship develops and the joint venture breaks up. The company then is blocked out of that market -- and often neighboring markets as well -- by its former partner." Solution -- Choose partners carefully, and make sure that any investment is proportional to the position desired in the future. A 50-50 deal is probably the best arrangement, because both partners have much at stake, but neither is subordinate to the other. Make sure that both partners can benefit from the joint venture -- or don't get involved.
These are just a few of the potential pitfalls that can trip up companies trying to become global. The key message in all of this: Don't proclaim your firm to be a "global company" -- gleefully handing out paperweights depicting the globe -- unless you fully understand the resources, commitment, and actions required to back up that proclamation. Attacking faraway markets wisely and prudently can generate growth and profits for years to come. However, half-hearted or ill-conceived globalization efforts may produce nothing more than a deep hole into which you'll pour money, time, and effort with little or no return. John Mariotti, a former manufacturing CEO, is the author ofSmart Things to Know About Brands(1999, Capstone Ltd.). His e-mail address is [email protected].

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