SMG Solutions Review: International Expansion

July 4, 2012 - PRLog -- It is customary to approach this from a sales and marketing strategy viewpoint.
Expanding business globally requires slightly different international expansion plans than a plan based on stages of business growth over time. It is possible to consider a new business strategy perspective to formulate a more traditional type of business implementation plan.

1. Consider your market entry options. Will you engage in direct sales, or employ an agent or distributor? Will the distributor be exclusive or non-exclusive? Be careful about exclusive relationships, which can make you entirely dependent on a distributor before you are convinced they’re the right fit. Also, do not rely solely on your distributor for market intelligence.

2. Get to know the local business culture. Knowledge of the business norms, regulatory environment, import/export practices, current competitive environment and customer behaviours in foreign markets is key. Take more than one trip to visit potential customers, your competitors’ distributors, regulators and other people you’ll need to know. Make no assumptions about how to do business in a particular country; countries that seem similar when viewed from Canada often have dramatically different business environments and cultures.

3. Choose your international team carefully. Your team members are a bridge between your culture, values and business expectations and those of the local environment. They are your brand ambassadors in the country, so trust is absolutely paramount. Do they share your values? Are they great communicators? Will they tell you when things aren’t going well?

4. Be careful of any deals you sign early on. You can be relatively blind in the early days of doing business in a new country, and it’s easy to make mistakes based on ignorance or lack of context. It’s important to make sure these mistakes do not permanently damage your business. If you chose the wrong path to market, can you change? If your distributor isn’t acting the way you expected, can you change distributors easily? How and where are disputes settled? Are there penalties to change or get out of deals?

5. Have an intellectual property (IP) strategy. Protect your trademarks and patents. Make sure to control your online presence in the country you are entering, in the local language, and don’t hand your brand over to your distributor without the ability to get it back.

7. Extend your values and culture. Your company should have core universal values about how to do business, how to treat customers and how to treat employees. While there will be local variations, these values and your culture should be immediately recognizable in all of your sales subsidiaries.

8.Legal barriers. A country's legislation may not be conducive to the establishment of certain types of distributorship arrangements. Tax laws, customs laws, import restrictions, corporate organization and agency orliability laws may all prove to be significant stumbling blocks. Technology transfer laws and foreign investment laws may force a given business relationship to be essentially a joint venture, when it was originally intended as a master franchise or license.

9.Government barriers. A particular country's government may or may not be receptive to foreign investment in general or to certain types of distribution relationships. A government's past history of expropriation, government restrictions, high tariffs and limitations on currency repatriation may all prove to be decisive factors in determining whether the cost of market penetration is worth the potential benefits. You may need to review the tax treaties between your country and the targeted nation or even to seek governmental intervention.

Many entrepreneurs have identified international expansion as a critical component of their overall growth strategy. Many countries, even developing ones, take a positive view of the expansion of U.S. companies into global markets via partnering, alliances, franchising, licensing, distribution and local branches. Not only is it a way to import U.S. products and services, it's also a readily acceptable source of technological development and system support. Taking your company overseas can introduce American know-how to a fledgling business community in a cost-effective manner.

The economic interdependence created by a truly integrated international financial system and the advent of strong regional associations such as the European Union, NAFTA and ASEAN have also contributed to the need for companies of all sizes, in virtually every type of industry, to be thinking in terms of global business. Your next customer may be global, and so may your fiercest competitor. Your best solution for outsourcing may be an overseas company. Your next legal battle may take place in a foreign courtroom. Your next round of capital may be from a foreign investor and your next hire may be a citizen of another country, triggering immigration challenges and costs.

Geography no longer stands in the way of an emerging company's aspirations. However, it also no longer serves to protect local market share. Business growth strategies need to be built around a global vision where quality, pricing, service, distribution, etc. must be globally competitive but also be custom-tailored to meet local requirements and market conditions. Technological developments such as the rapid growth in the use of the Internet to facilitate international e-commerce, advances in telecommunications and videoconferencing and satellite technology have made that process considerably easier and less expensive.
The same principle holds true for location economies. Due to differences in feature costs, certain countries have a comparative advantage in the production of certain products. As an example, Japan might excel in the production of automobiles, the United States in the production of computer software, and China in the production of clothing.

For a company attempting to prosper in a global market this might mean that it would benefit by basing every value creation activity it needs in the country where economic, political, and cost considerations are most conducive for that activity. For example, if the most productive labor force for assembly operations is in China then any assembly operations should be there. If the best marketers are in the US then the marketing plans should be developed in the US.

Companies that use a strategy such as this can realize these location economies and in doing so they can lower the costs of value creation and arrive at a low-cost position.

Companies like Toyota for example found out that the small vehicles that were popular in Japan were not as popular in the US as the larger sized autos. They adjusted their product strategy to the US market and enjoyed the ensuing growth in market share and profitability. McDonald's adapted likewise in India where cattle are revered and the typical Big Mac was doomed as a product.