>Want to go global?
Fastening the learning curve
There are many reasons to look beyond your current borders. Below we highlighted some key reasons and hurdles. In all cases the learning curve is steep. It is beyond any doubt the area where experience and second opinions can make a big difference for your organization. Having lived and worked “globally” for more than 20 years, we have a significant and relevant network of contacts, that might speed up your learning curve. And we can save you from having to reinvent the wheel.
Key reasons to go beyond your home market
Make a difference in internationalization.
- To internationalize a business is for most of our clients an odd question. They are born globally from day one, competing all over the world. This is very typical for digital based businesses, particularly those that do not require a specific local execution. They are easy to scale in theory, however if they score an initial hit, very fast copy cats will follow soon, often from non-expected corners. This demands upfront consideration in protection or market roll-out speed.
- Other clients are forced to go global as important international clients demand global consistent solutions overnight. Despite the lack of the right internal resources they need to take a “jump”, a leap of fate. Who is going to Japan to support our client impacting 20% of our current turnover? Can we afford to say “no, not now”? Do we need a set-up in Argentina or can we cover Latin America from Miami, where financial control will be easier to manage? These opportunities are a test on the stretch of any growing organization, however, when handled correctly, they can form the base of significant growth.
- It often makes sense NOT to build the core of the organization in Belgium first because markets are developing faster outside of Belgium. In e-commerce for example, the UK is 5 years ahead, the Netherlands at least 3 years, speeding up your investment returns when establishing there first, as these markets are already significantly larger in scale. Innovation adoption for example is in our experience much faster amongst Swiss consumers versus Belgium consumers. So why not initially start in Switzerland to roll out your new concept?
- Another key reason to expand outside Belgium are simply costs advantages and production quality arguments. Belgium labor costs remain extremely high, particularly for standard programming work, manual labor or admin tasks. Hence Romania or Serbia might be a valid alternative. In manufacturing, the quality standards in China today can effectively often be better than our standards, although certification demanded by your customers might be lacking. And the machine base in Poland is in many industries more modern than in many other European countries. Also, some countries do surprise: the best performing manufacturing plant from a big world manufacturing organization with local manufacturing in 73 countries, was in Sri-Lanka…. In conclusion the footprint might change case by case, depending on the required criteria. In-depth knowledge is required to improve the quality in decision making.
- The go-to market cost are always a key consideration in a growing company. In the US for example the deal size tends to be twice as big and decision times are twice as fast. So your first people investment in account managers do have a 4 times higher investment return in the USA. Which is why we often recommend organizations to first establish their business in the USA. Brazil has a great young managerial talent base, happy to move to other parts of the world even in hardship countries. Their remuneration is way below the average European expat costs. Maybe an excellent reason to start up Brazil first, despite the local bureaucracy?
- Particularly, when the government sector is important for your business, looking beyond Europe could make a lot of sense. Belgium and many other European markets offers a significant handicap because of the elaborate supplier vetting process in the public sector demanding a.o. for published solid balance sheets over the last 3 years. Or, specifications are still based on old solutions, killing new and better versions. Or, specifications are written in such a way that they offer a significant advantage to a specific established competitor. The public sector beyond Europe / USA offers often a faster access. However, you need to ready your organization with a clear set of business ethics and norm compliances, in order to avoid classical pitfalls.
- Often the push and the demand for international expansion comes form the internal ambition and drive of the management team. This is often different from the owners’ vision and aspiration, seeing more risks with the opportunities, and not always witnessing big returns initially. Alignment is key to succeed and to manage expectations.
Key hurdles to take
We often witness 4 main hurdles, varying case by case in importance, however always present.
- Despite financial techniques such as hedging etc., currency fluctuations always increase the business risks significantly. They are unpredictable by nature and their importance is initially always underestimated, until the first “surprises” have a significant bottom line impact. Also import restrictions are on the rise again. We predict more and more import tariffs and market protection going forward after a long period of reduced “blocking” strategies by individual countries. This might be driven by privacy regulations, battles for protecting home markets from dumping, or the false notion that regulation can protect market disruption from new business models. In Banking, for example, this is most likely the case in Europe where after deregulation, we witness now a reverse trend “to protect consumers”.
- Have a trusted person on the ground and motivating him/her differently, is a constant battle.
- We had to mediate between local and international based managers, as central management underestimates the impact of “being alone out there, isolated from normal company decision making and sense of belonging”. And having lived with a family abroad for 20 years we have some idea that on a private level there is indeed reward but also punishment going abroad. Pay packages need to be aligned and evolve in localization and be “neutral” from an individual standpoint beyond merit compensation.
- The initial talent short cut’s of testing the waters locally through working with an agent or a local distributor, might be prudent on paper and can be part of a learning-by-doing approach, in practice they tend to be less and less successful. In the new digital area with more and more transparency, your clients see local third party representatives as an incremental cost that needs to be avoided. Companies are hampered in their client segmentation models with multimarket impact as agents/ distributors do not accept easily that some local business is beyond their scope. For example, hotel chains want to buy globally, so in the home-decoration market one has to exclude them in local agent contracts. Agent demands for exclusivity is often difficult to maintain, and they form a hurdle to establish a real direct client contact, vital to adapt to local market circumstances. And they do not want to be to overly dependent on your business, sometimes reducing market focus for your products voluntarily.
- With regulations growing everywhere and changing constantly, compliance market by market becomes more difficult. One of our clients is growing fast based on a business model providing companies in the food industry around the world a constant status update on compliance norms, both dictated by countries or by big retailers. Norms and standards still vary significantly despite the global nature of many industries today. The trend to litgate when not compliant is not helping either.
- In a world of global supply chains, speed to market and fast copy of success formulas and products are making it much harder to succeed. Mistakes in one market will have immediate consequences everywhere through social media. And services need to be of the same consistent level, regardless of the time one is present in a specific local market, as it might backfire to the core business. Global clients for example demand consistency regardless of geography. (This demands clear processes, standards and checks of inspections, and also for the same high standards and sophistication levels everywhere). Best practice can consequently be found everywhere and developing a talent pool which is less and less restricted by local boundaries becomes critical.