A-D-D:The Solution

If your entity wants to avoid the problems which usually follow the decision to participate in global business, there is a very simple solution. A-D-D

ANALYZE YOUR ORGANIZATION

The first step towards success in global business requires a detailed analysis of the organization. What are our strengths and what are our weaknesses? What does our organization do well and what do we do poorly?

Why do we offer this advice? Well, the answer is quite simple: organizations 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 are generally not so fortunate. Nothing is quite so unforgiving as the global marketplace. An entity which 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 unable to compete effectively in a global marketplace which changes rapidly.  Obviously, it is very important to recognize and enhance your strengths while improving upon your weaknesses.

What is our position in our primary industry? This is an extremely important issue because it dictates how foreign organizations will perceive your entity. This as 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 accrued as a result? Do you have some significant relationships which 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.

What are the skill sets of my employees? As we have already stated, many small and medium sized companies do not have employees with significant international experience. However, your employees may have some skills such as foreign language capabilities or relatives and/or friends in foreign markets which could be very useful. 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.

What is our budget for this project? 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 which any entity would have to pay. But the failure to adequately assess the human resources needed is a very serious error which 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 is not an easy task in spite of what some people will tell you. All of this activity will require a significant investment in time and will be an addition to the regular workload.

These are the most basic issues which most entities will encounter when making the decision to go global. Depending upon your particular circumstance, there might be other issues as well. The most important thing to consider is that your organization is going to undertake a project about which it knows very little. Of course, there are numerous vendors who are ready, willing and able to sell your entity a wide variety of international business services. As with anything, you should exercise caution. Those who are reputable will know that you are unable to make a quick decision because you have not properly evaluated your requirements. Beware of companies who try to push you into a quick decision regarding anything international. As you will learn, global trade deals are not done overnight.

DO THE PROPER RESEARCH

Companies or organizations which ignore this step or fail to take it seriously, do so at their own peril. Yet, we almost always have a fight on our hands when we inform potential clients as to exactly how much the research will cost.

"Are you joking?" is our favorite response. We are not joking. 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; 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 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. Companies will always fight about what some consultants call "work up". 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. You can not go global without the proper research. Nonetheless, 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.

You can not go global without the proper research.

The work up is so contentious because under normal circumstances there is nobody within a company with the expertise to do it. This means that the company must go outside of itself for expertise. Some companies will go to their traditional advisers: a lawyer, banker, or accountant. This seems logical and is actually a good decision. All of these business advisers can 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. It is boring and it is time consuming and to properly finish the task one must know that for which one is searching. This requires a knowledge of international business and some experience. Such knowledge and experience cost a fair amount of money.

The two crucial areas of concern are 1) international commercial practices, how business is actually conducted in international markets and 2) feasibility studies, determining whether or not the product or service is appropriate for the market in question and what is required to successfully market it. In the case of practices, there is a wide body of knowledge about global marketing in general and even more about the specific markets in question. There are many WWW sites now available (you will find links in other areas of this site) which make gathering this information much easier for the uninformed. Anybody who can read and has the patience to learn a new business jargon is quite capable of learning about international commercial practices, given some time and a little guidance. Feasibility studies are somewhat different because they combine a general understanding of the product or service with a more specialized knowledge and insight into a specific international market. A dedicated college student could find the necessary basic information about international commercial practices. However, an experienced international trade specialist is required for the feasibility study. Companies who start from scratch must retain the services of somebody qualified to do this work and must be willing to pay him/her reasonable fees to accomplish the task.

A good international business consultant who is bilingual or multilingual will normally charge at least $125-$250 per hour. One way to save money is to break the work up into two parts: basic background on international commercial practices and the market feasibility study. Ask the consultant to prepare an outline of the required information about practices. A good consultant can do this in about one hour's time at most. (Many already have an outline in their head, if not on paper.) You can hire a student who studies international business and knows the territory in a library and on the Internet for much less than the consultant. In this way, the consultant can really focus on gathering the information necessary to help you increase your sales, buy your supplies at lower prices or develop a strategic business alliance, which is why you are doing this anyway.

DEVELOP A STRATEGIC PLAN

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

"Different strokes for different folks."
Mr. Sly Stone was absolutely correct. Two companies which might be very similar in size and goals will have very different strategic plans. 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 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 plan. The only difference being that a map will seldom change and a strategic plan will always change.

Generally speaking, the feasibility study will determine the most effective marketing approach to use in a particular market. When you start looking at how you're going to structure your strategic 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. International trade can and does affect the roles of individuals within a group, often shifting the hierarchy in unforeseen ways. People who might have been considered marginal suddenly become very important to the overall success of the firm because of a special skill. Others who previously held an exaggerated sense of self importance become 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 which 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 is to estimate the budget. For numerous reasons, international trade requires an increased transaction time or that period which begins with the first solicitation and ends with an actual order. 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.

Our experience has been that it is almost impossible for any company to set reasonable sales goals. There are two distinct reasons: 1) all companies are in love with their product or service and earnestly believe that it gives the consumer good value and 2)most companies who are trying global markets for the first time are totally unprepared for foreign customers' reactions. As we have previously said, it is far more preferable to be conservative in your forecast. Not only does this prevent disillusionment, (which can have a very negative effect) but it also tends to limit the urge to over compensate when unreasonable goals are not met.

In all things, there is always an intangible. In going global, the intangible is patience. International sales normally take a long time to develop and a company which has newly entered global marketing must be very patient. If you do the things outlined here and follow up with some of the other common sense ideas which you will find at this site, you too can go global without much trouble and within a budget which is right for your company.

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Copyright © 2004 JPG Consulting
Last modified: January 28, 2004