Four steps to accelerate international business growth
US exports continue to grow, but many US companies lack the international business savvy to capitalize on this potential source of increased sales and profits. The proliferation of trade deals and a weakening US dollar have resulted in one of the most favorable export markets in decades. Foreign importers of American products report a growing demand for American products, from popcorn to pet food. The US has enjoyed 11 consecutive quarters of rising exports; however, with 95% of the world’s population residing outside US borders and an increasingly promising international sales outlook, experts wonder why only 5% of US companies are currently exporting. But how do we initiate and sustain growth in uncharted markets?
1. DEFINE STRATEGIC NEEDS
Tapping into new markets provides the opportunity to increase revenue and profits. However, this initiative must be consistent with the company’s overall strategy. Inconsistent, sporadic, or defocused deployment of resources directed toward international growth can result in an underperforming initiative that absorbs limited resources with little return. Barriers to entry (tariff, regulatory and trademark restrictions) must be identified and addressed. A SWOT analysis detailing the company’s strengths, weaknesses, opportunities and threats will identify and help maximize the company’s strengths, minimize its weaknesses and focus on the international opportunity.
An international growth plan consistent with corporate strategy will increase the chances of success. It is necessary to address the tactical aspects of international development, such as sales, distribution and marketing. International growth factors may be different enough from US models that a lack of familiarity can drastically reduce the chances of success. Above all, there must be clear direction, full management support and dedicated resources.
2. ENSURE APPROPRIATE ASSISTANCE
Small and midsize businesses starting or expanding into international business will find the US Government Department of Commerce (DOC) an enthusiastic partner in helping US companies succeed globally. This organization coordinates resources from 19 federal agencies to help US companies plan their international strategies in an increasingly global environment. In an unfamiliar foreign market with confusing regulations, uncertainty and risk, the DOC can help US companies navigate the foreign sales process and avoid pitfalls like payment defaults and trademark and intellectual property misappropriation.
DOC’s Trade Service provides a surprisingly practical range of quality services including in-country market research, trade events and missions, business opportunities, and introductions to potential business partners. The Export-Import Bank and Small Business Administration unit to assist in the financing of exports of US goods and services to the international market, enabling businesses to convert international leads into strong sales.
Companies that specialize in international business development can help drive expansion abroad. These firms are groups of highly trained and experienced professionals who offer hands-on, cost-effective assistance to companies committed to maximizing revenue and earnings potential through accelerated international growth. The range of services offered varies by company, but in general they help companies conceptualize, implement and manage international business development projects large or small. These services can range from determining the foreign market potential for a product to managing a company’s export sales and identifying and qualifying foreign strategic alliances.
A company wishing to penetrate the international market must allocate a fully dedicated resource to this initiative. This individual should be the hub that connects the resources, knowledge and culture of the organization with the international initiative. As the business develops, additional resources must be allocated to maximize the opportunity. These should be considered investments rather than costs.
3. DETERMINE THE MARKET ENTRY STRATEGY
The appropriate market entry strategy for a company will largely depend on its level of international development. For a company just beginning its international development, market penetration through domestic distributor sales may be the fastest and most cost-effective way to enter a foreign market. Selling through distributors in the country is relatively low risk and will provide valuable learning opportunities. Once the target country or region has been identified, a process that will follow naturally from the SWOT analysis, the selection process can begin. Various US government agencies and trade associations can provide a wealth of data to begin narrowing down the selection.
Trade publications and events are also an excellent source. Factors to consider when selecting a market may include criteria such as the regulatory environment, the size and potential of the market, the cost of entry, and the competitive environment. To further narrow down the possibilities, a visit to the country is required. Once there, the use of business leads, competitive evaluations, local government assistance, and interviews with potential candidates will provide additional information and insights. The main considerations when selecting a distributor are: willingness to allocate a dedicated resource, market leadership or track record, marketing knowledge, complementary and non-competitive products or services, site inspection, and financial stability.
The penetration of a new international market is often perceived as an extension of the existing national business. Consequently, many US companies bypass standard business guidelines that require rigorous market analysis. Only after extensive due diligence can a product or service offering and accompanying marketing programs be put together.
A company’s preferred mode of entry (domestic distribution, joint venture, merger, or acquisition) will depend on that company’s primary objectives, from opportunistic sales to positioning for long-term market-driven growth.
Economic globalization will increasingly lead to the creation of strategic alliances. American companies must ensure that potential partners share short-term and long-term goals to reduce the divergence of ideas and efforts. Common values and shared ethical/business standards will improve communications, transparency and effectiveness. Partners must have complementary strengths and weaknesses to build a stronger and more effective alliance. Principles and processes for conflict and relationship resolution must be drafted and agreed upon by all parties involved for the partnership to function smoothly.
4. EFFECTIVE MARKETING DESIGN
All markets have common points. However, effective international marketing begins with the awareness that markets are also different in ways that are not immediately apparent. The key is to understand consumers and identify their needs through culturally specific market research. Focus groups can be especially effective in identifying the wants and needs of the international consumer. The advertising agency used to develop the offer must be local or have local representation. Employees with a deep understanding of market characteristics and idiosyncrasies will be particularly effective in communicating the desired message and creating and enhancing brand image. Language skills and an affinity for different cultures are critical assets when marketing internationally.
Flawless execution is key. As a company executes international strategy guided by a strong business plan, it is important to celebrate milestones and benchmark against industry leaders.
Although not complete, these four steps will help serve as a guide to successful entry and growth in the international marketplace.