Expanding Internationally: 8 Points To Consider Before Going Global
Wednesday 12 December, 2007
Expanding internationally can be an attractive and lucrative business proposition. When carefully and strategically planned and executed, an international business unit will add to the value of your business overall.
Before you plan on expanding your business and going global, consider these 8 vital points:
- Are you a national player at home?
The demand for your business in foreign lands will correlate closely with the size and success of your company at home. In today's age of easy information access, consumers and business professionals in most countries are aware of what's popular and what's not. If you're a hot business here, chances are you'll experience pull demand for your brand "over there".
- What business model should you use?
Some require more labor or more upfront capital. Whatever model you choose will ultimately drive your earnings growth rate for years to come.
Business models each have their own pros and cons:
- Joint ventures
- Company owned
- Get the right partner
Securing the right business partner in each country is the number one rule for success. Be sure to check your potential partner's:
In smaller countries, be sure to also check on their political influence and history, since politics and business are often intertwined.
- Financial status
- Influence and reputation in the local business community
- Access to resources, and
- Experience in bringing your country's brand to their home turf
- Do your country homework
In some countries there may be tariffs or regulations that could inhibit your success. Be aware of the fact that the differences between countries can be significant. Don't get caught in the trap of referring to growth broadly (e.g. "Asia"), since neighboring countries within a geographic region can vary greatly.
Learn and know as much as possible about every foreign country you intend to enter before putting it onto your expansion list.
- Do you have a support infrastructure?
- Will your supply chain logistics at home support foreign expansion or will you need alternative sources?
- Is your financial department set up to handle foreign transactions and currency conversions?
- And if someone across the world decides to call in the middle of the night, will you have someone available to answer the call?
- Is your IT Department prepared to deal with foreign information operating systems?
- Do you have a replicable operating model?
Be sure to develop an operating model that's simple with main components that are clearly identified and benchmarked to your existing model.
When expanding internationally, it's important to realise that your cost structure will likely vary significantly. The following can all pose significant hurdles to your success:
- Supply costs
- Labor costs
- Real estate costs
- Don't rush!
Plan your growth by spreading risk with a balanced country portfolio approach. Make this similar to spreading risk when investing in the stock market. Otherwise, generating your growth opportunistically rather than strategically can result in:
- Poor and inconsistent communications
- Lack of field support
- Skyrocketing overhead costs
- Brand dilution, and even
- Lawsuits (Trying to manage a lawsuit that's 4,000 miles away in a foreign judicial system can not only cost you sleep but also pose a serious financial hazard)
- Don't expect an overnight windfall
Growing internationally is a continuous learning situation. Your business will experience entirely new challenges, questions and uncertainties. There will be setbacks. Most businesses, even the most successful here at home, experience losses in their early years of international growth. Approach your international development with a five-year business plan for success.
Robert Kendzior. As International Vice President for Dunkin' Brands, Robert Kendzior authored the 2001 International Strategic Plan for the Dunkin' Donuts and Baskin-Robbins brand, encompassing 4500 locations in 39 countries outside of the U.S. Contact Robert today at http://www.linkedin.com/in/robertkendzior and let him teach your group how to take your business global.