SB Informer
Monday, January 15, 2007; 12:56 AM
U.S.
exports continue to grow, but many American companies lack the
international business know-how to capitalize on this potential source
of increased sales and profits. Proliferating trade agreements and a
weakened U.S. dollar have resulted in one of the most favorable export
markets in decades. Foreign importers of U.S. goods report an
increasing demand for U.S. products—from popcorn to pet food. The U.S.
has enjoyed 11 straight quarters of increasing exports—yet with 95
percent of the world’s population residing outside of U.S. borders and
an increasingly promising international sales outlook, experts are
questioning why only 5 percent of U.S. companies are currently
exporting. But how do we initiate and sustain growth in unfamiliar
markets?
1. DEFINE STRATEGIC NEEDS
Tapping into new markets provides the opportunity for increased revenue
and profits. However, this initiative needs to be consistent with the
company’s overall strategy. Inconsistent, sporadic, or unfocused
deployment of resources directed toward international growth can result
in an underperforming initiative that soaks up limited resources with
little return. Barriers to entry (duties, regulatory, and trademark
restrictions) need to 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 give focus to the international
opportunity.
An international growth plan consistent with the corporate strategy
will enhance the odds of success. Tactical aspects of international
development such as sales, distribution, and marketing need to be
addressed. International growth factors can be sufficiently different
from the U.S. models that a lack of familiarity can dramatically reduce
the chances of success. Above all, there must be clear direction, full
management support, and dedicated resources.
2. SECURE APPROPRIATE ASSISTANCE
Small or medium firms initiating or expanding into international
business will find the U.S. Government’s Department of Commerce (DOC)
an enthusiastic partner in helping American companies succeed globally.
This organization coordinates resources from across 19 Federal agencies
to help American businesses plan their international strategies in an
increasingly globalized environment. In an unfamiliar foreign market
with confusing regulations, uncertainty, and risk, the DOC can help
U.S. businesses navigate the overseas sales process and avoid hazards
such as payment defaults and misappropriation of trademark and
intellectual property.
The DOC’s commercial service provides a surprisingly actionable array
of quality services including in-country market research, trade events
and missions, trade leads, and introductions to prospective business
partners. The Export-Import Bank and the Small Business Administration
unite to help in the financing of U.S. goods and services exports to
the international market, enabling companies to turn international
leads into solid sales.
Firms specializing in international business development can help
jump-start foreign expansion. These firms are groups of highly skilled,
experienced professionals offering practical, cost-effective assistance
to companies committed to maximizing revenue and profit potential
through accelerated international growth. The range of services offered
varies by firm, but overall they help companies conceptualize,
implement, and manage large or small international business development
projects. These services can range from determining the overseas market
potential for a product to managing a firm’s export sales to
identifying and qualifying foreign strategic alliances.
A company wanting to penetrate the international market needs to assign
a fully dedicated resource to this initiative. This individual should
be the linchpin connecting the organization’s resources, know-how, and
culture to the international initiative. As the business develops,
additional resources should be assigned to maximize the opportunity.
These should be considered investments rather than costs.
3. DETERMINE MARKET ENTRY STRATEGY
A firm’s appropriate market entry strategy will largely depend on its
level of international development. For a company just commencing its
international development, market penetration via in-country
distributor sales may be the fastest and most cost-effective way to
enter a foreign market. Selling through in-country distributors is
relatively low-risk and will provide valuable learning opportunities.
Once the target country or region has been identified, a process that
will naturally derive from the SWOT analysis, the selection process can
begin. Various U.S. government agencies and trade associations can
provide a wealth of data to begin narrowing the selection. Trade
publications and events are also an excellent source. Factors to
consider when selecting a market may include such criteria as
regulatory environment, market size and potential, cost of entry, and
competitive environment. To further narrow the possibilities, an
in-country visit is required. Once there, the use of trade leads,
competitive evaluations, local government assistance, and potential
candidate interviews will provide additional information and insights.
Major considerations in selecting a distributor are: willingness to
assign a dedicated resource, market leadership or track record,
marketing savvy, complementary and not competitive products or
services, site inspection, and financial stability.
Penetrating a new international market is often perceived as an
extension of the existing domestic business. Consequently, many
American companies bypass standard business guidelines requiring
rigorous market analysis. Only after performing thorough due diligence
can one elaborate a service or product offering and accompanying
marketing programs.
A company’s preferred mode of entry—in-country distribution, joint
venture, merger, or acquisition—will depend on that firm’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. U.S. firms must make sure that potential partners
share short- and long-term objectives in order to reduce the divergence
of ideas and efforts. Common values and shared business/ethical
standards will enhance communications, transparency, and effectiveness.
The partners should have complementary strengths and weaknesses to
build a stronger and more effective alliance. Principles and processes
for conflict resolution and the relationship must be drafted and agreed
to by all parties concerned for the partnership to run smoothly.
4. DESIGN EFFECTIVE MARKETING
All markets have commonalities. However, effective international
marketing begins with the awareness that markets are also different in
ways that are not immediately apparent. The key is understanding
consumers and identifying their needs through culturally specific
market research. Focus groups can be especially effective in
identifying the international consumer’s wants and needs. The
advertising agency used in developing the offering should be local or
have local representation. Employees with a thorough knowledge of
market characteristics and idiosyncrasies will be particularly
effective in communicating the desired message and creating and
enhancing the brand image. Language skills and an affinity for
different cultures are critical assets when marketing internationally.
Flawless execution is key. As a firm executes the international
strategy guided by a solid business plan, it is important to celebrate
milestones and benchmark against industry leaders.
Although not comprehensive, these four steps will help serve as a
guideline for successful international market entry and growth.