This article was written by Jeffrey P. Graham and originally appeared on Citibank's now defunct international business portal. Copyright © Citibank.  All Rights Reserved.

Assessing Your Potential

Overview

To develop export sales in overseas markets
To find less expensive sources of raw materials and/or components
To license technology
To sell franchises
To raise capital funds
To find strategic partners or venture partners

Choosing which method to use will depend upon a variety of factors such as what type of company and to some extent the dynamics of the particular industry. Unfortunately, too many companies decide to make the move into global markets because of a downturn in sales and/or other business activities in their principal domestic market. This is not advisable. The best time to go global is when your principal market is strong. On the procurement side, it is always better to seek new sources for components when you have excellent sources already. By adding possible new sources for components or raw materials, you are assuring yourself that you are not too dependent upon one or two primary vendors and it is also possible that you will inadvertently create some price competition as well.

Assessing your potential is an essential phase in getting started and it has three very important steps.

Self Analysis

The very first step in this phase is an internal in-house self-analysis. Many business executives will use the SWOT chart (StrengthsWeaknessesOpportunitiesThreats) to begin their in-house analysis and depending upon the specific skills within management , this method is perfectly appropriate. However, if your company is unfamiliar with the SWOT chart method, there are other ways to approach this task. Self-analysis is difficult under the best of circumstances because organizations and companies are like people. We tend to amplify our strengths and minimize our weaknesses. While it is possible for people to get through life in spite of a flawed self-awareness, organizations and companies are generally not so fortunate. Nothing is quite so unforgiving as the global marketplace. An entity that does not clearly recognize its strengths will fail to take advantage of good opportunities when they are presented. An entity which has failed to understand its weaknesses will be likely unable to compete effectively in a global marketplace that changes rapidly. Obviously, it is very important to recognize and enhance your strengths while constantly improving upon your weaknesses.

In the self-analysis phase, there are three key questions that need to be answered:
,/p> What is our position in our primary industry? This is an extremely important issue for several reasons. Most important of these, however, is the fact that it dictates how foreign organizations will perceive your entity. This is just as true for a trade organization as it is for a company. Position generally implies rank, but in this case it involves more than just rank. How many years has your company or organization been in existence and how much goodwill has it accrued as a result? Do you have any significant relationships that give you some amount of leveraged clout? What is your relationship with the industry leaders? Can you count upon the support of local government officials and the local business community? You're trying to draw a picture of your entity and its overall relationship to the big picture of its industry. Remember that most foreign businesses are accustomed to dealing with larger companies. This is especially true in the case of the United States. Therefore, these foreign companies have developed their own perception of what is important to them in terms of developing new relationships. How you address this perception will determine in large part how you present your company and in turn will have an impact upon whether or not you achieve success.
What are the skill sets of my employees? This is important because many small and medium sized companies do not have employees with significant international experience. Before you take any action, it is often quite helpful to list your employees' relevant international skills because they will definitely begin to add up and can become significant strengths later on. Foreign language capability is by far the single most important employee skill that could have an immediate impact on your capacity to quickly develop an international business capability. Next in priority would be knowledge of a specific foreign marketplace and after that comes social and/or business connections in the form of family, friends or business acquaintances. If you are uncomfortable with the lack of international business skills in your company or organization and need help assessing your employees, you have two options: a) hire an international business consultant that also has some human resources experience or b) visit an international business specialist at your local, state or federal government office.
What is our budget for going global? Going global costs money, time and human resources. Too often organizations do not factor in the human resources and time involved to launch a global presence. Yes, there will be some fixed costs that any entity would have to pay. But the failure to adequately assess the human resources needed is a very serious error that can push an entity towards failure before it has an opportunity to start. Some person or group will have to act as an internal liaison to top executives and other departments while some person or group does the same for foreign inquiries. Responding to both postal and electronic mail and sending out collateral materials will require a significant investment in time and will be an addition to the regular workload. Not budgeting properly for going global is a very fundamental mistake that too many companies make.

Conducting the Research

The second phase of the assessment process is conducting the research. Companies or organizations that ignore this step or fail to take it seriously, do so at their own peril. If you want to go global, your company or organization is going to have to do research in at least two areas: 1) international commercial practices and 2) market feasibility studies. Depending upon what you're trying to accomplish, you might have to do additional research in any of the following areas: intellectual property rights; country specific laws concerning enterprise formation and taxes, banking and securities law; and treaties and trade agreements. No matter how much the importance of research is emphasized, people almost always ignore it and always with disastrous results.

Why is research so important? Better yet, if research is so important, then why do companies try to avoid it? The answer is quite simple: money. Of all of the costs incurred when an organization decides to go global, research is probably the highest. “Work up” is the basic preparation work which is required to properly orient a company to be able to do all of the correct things when entering global markets. Because of budgetary concerns and incorrect assumptions, many companies frequently choose to spend less than an appropriate sum on doing the proper research and in the end spend more money instead of less. Traditional advisers such as a lawyer, banker, or an accountant can often help by offering sound advice, but in the end, there still remains the task of going to the public library or sitting at your computer and surfing the Internet. In order to properly finish the task one must know that for which one is searching and this requires knowledge of international business and some experience. This type of expertise costs a fair amount of money.

Strategic Assessment

The final step before getting started is to develop a strategic plan for assessment.

Two companies that might be very similar in size and goals will have very different strategic plans because there is no recipe for developing a strategic plan. For a company entering into global markets for the first time, the most important function of the strategic assessment plan is to act as a map. A map has clearly marked highways and roads with distance markers to tell you how far you have traveled and how far you have to go. So does a strategic assessment plan. The only difference being that a map will seldom change and a strategic assessment plan will almost always change along with marketplace conditions and changes within the organization.

When you start looking at how you're going to structure your strategic assessment plan, you should be looking at the following issues:

The most immediate effect upon a company or organization which has just undertaken a move into global business is the effect upon its people because going global does affect the roles of individuals within an organization. There is very often shifting of the hierarchy in unforeseen ways. People who might have been considered marginal suddenly become very important to the overall success of the organization because of a special skill. Others who previously were in more dominant roles might find themselves somewhat expendable. It is not at all unusual for top key executives to become more dependent upon even the lowest level employee to assume new responsibilities, which could ultimately determine the success or failure of the company. A good strategic plan must take all of these things into account and devise a management strategy which allows those employees with special talents to assume a more significant role while reshaping the roles of displaced employees to minimize disruptions and assure a smooth transition into global marketing.

Equally as important as managing disruptions to morale is monitoring the progress of the retraining of employees. Global business demands continually improving skills from everybody, starting with the top executive. A good strategic plan will set reasonable goals for the re-deployment of employees and will implement new programs as needed to accomplish this task. In some instances, emergency remedial assistance will be required to help an employee or group that is lagging in their development. At each step of the way, the strategic plan should provide a framework for assessing the employees' abilities, progress and demeanor and it should match its assessment to the long run goals of the company.

Probably the most difficult thing to do in implementing a strategic plan for going global is to estimate the budget. For numerous reasons, international trade requires an increased transaction time or business cycle. Because of this, the initial budget set aside should be very conservative in sales forecasts and should be structured to expect modifications as the effort to go global proceeds. It is extremely hard to anticipate all of the contingencies in global marketing. This is especially true when you consider that you're new at what you are doing and have little if any experience to guide you.

In all things, there is always an intangible. In assessing your potential for going global, the intangible is patience in setting your goals. International business involves an increased transaction time or business cycle. Therefore, sales and deals are not likely to occur as quickly as they might in your domestic market. While aggressive marketing & promotion can to some extent influence success in any marketplace, it is less likely to be a significant factor in global markets. Such things as local economic conditions, product localization, competitive factors or market penetration by local sales force and trade policy are more relevant.

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Copyright © 2004 JPG Consulting
Last modified: June 18, 2005