'Globalise Your Business - The five-step approach to be successful in international markets'

Expanding to international markets can be hugely rewarding – it is often the dream of many ambitious entrepreneurs. Expanding into uncharted territories may seem daunting at first, but if done right, the rewards are worth it.

While the path to foreign market entry is by no means as straightforward as this post makes it to be (and be prepared for the variety of curve balls that will come your way!), the following steps lay the foundations for globalising your business.

Step 1: Organization review and readiness assessment

The first step to your firm’s global aspirations begins at home (or in your office, as you prefer). Ask yourselves the following questions:

• Is the organization ready for international expansion? Think in terms of management bandwidth, employee mindset and even, possibly, your company’s mission and vision. Are you ready to think global let alone – go global?
• Is the current production or service capacity adequate to cater to the new market?
• Do you have the requisite manpower (whether it is sales, production, service or operations staff) to cater to the new market?
• Do you have the financial wherewithal to invest and grow in the target market? Entering a new market often requires investments and resources to succeed. Does your organization have the cash flows to sustain a new market entry? If not, what funding sources can you tap?
• Most importantly, which target markets do you select for your product/service? If you have been in the industry long enough, you would have some idea of where your product/service could have potential demand. Having a few destinations in mind would be useful in evaluating the best markets for your product/service.

Step 2: Target market selection and market study

It goes without saying that product-market fit is key to any successful business. You might be a Canadian company making the best parkas in the world, but you wouldn’t have much success selling them to a man in the desert! Or if the market is a red ocean crowded with businesses offering the same product/service like yours, your energies are better concentrated elsewhere.

Identifying the right market for your product/service is therefore key. If you don’t get this piece right, your global market aspirations could prove to be a costly failure. Hiring a market consultant with deep expertise of the target market will enable you to accurately assess the demand for your product/service. Market entry consulting firms like Indigo Consulting have the expertise and knowledge to steer companies in specific geographies on product-market fit, market trends, market entry strategy, product localization and even local buying behaviour.

A good market study should ideally capture the following:

• The macro-political and economic environment and the key socio-political trends shaping the economy of the target country.
• Broad industry and/or technology trends in the target country to help you identify opportunities.
• The size of the market for your product/service. Is there a rising demand for your product or service in the market? Demand and supply gaps, if any.
• Are there any sub-markets in your target market where you could initially focus your efforts? This is especially useful in large markets like the USA, India or China where you start small, understand the market and scale up gradually to other parts of the country.
• Who are the players in the target market – foreign and domestic? What are their pricing, marketing and sales strategies? What are their capabilities?
• Identify any entry barriers in your target market. Are there any tariff and non-tariff barriers?
• How easy/difficult is it to set up a business? Are there dedicated government departments to help/guide foreign investors in the market?
• Does your product fall into a regulated sector in the target market? If this is the case, make sure you understand the rules and ensure your product/service meet local guidelines.
• Ascertain if the government in the target market offers any incentives for companies and products in the sector you are targeting.

Step 3: Development of the right entry strategy

Based on the findings of the study, the company management along with its Consulting team can plan the market entry strategy. At this stage, it is also useful to revisit step 1. Based on the company size, production capacity, manpower availability and financial strength, some of the entry alternatives are highlighted below:

• Subsidiary: Do you want to incorporate a subsidiary in the target market? What are the tax and legal implications of such a move? It is useful to take the advice of legal and accounting professionals as you decide on these matters.
• Local Manufacturing: Is there a local manufacturer who can build the product to your standards? Weigh the costs of shipping the product from your home market vis a vis manufacturing it locally. Do not forget to factor in customs, duties, and shipping costs.
• Joint Venture Partner: Do you want to tie-up with a local partner? The joint venture partner should have a strong domain expertise, deep market knowledge and an established business network. Tying up with a local partner would give you access to their business contacts and quickly gain some early customers. It also helps your team understand the best business practices of your target market during the initial phases.
• Distribution Partner: How do you plan to get the product or service to your end-user? Where is the product accessible to customers: retail stores, online shopping channels, or third-party vendors? For some products e-commerce is a highly effective and easy distribution channel. Where do you plan to distribute/sell the products initially? For most products/services, urban markets are easier to crack than a rural market, for example.

Step 4: Partner shortlisting and selection

Depending on what your market entry strategy is, you may have to find a local partner to commence operations in the target market. Most international market entry consultants (including us at Indigo Consulting) highly recommend it. Whether it is distributors for your product, local implementation partners, joint venture partners, local manufacturers, sales agents, or a master franchisee, finding the right business partner(s) to represent your business is key to succeeding in foreign markets.

When trying to finalize a potential business partner in the target market, it is important to consider the size of their business, their financial health and pedigree, track record, customer testimonials, and minimum sales turnover thresholds. Check how well they are connected in the target market. Do they have a deep understanding of your sector in the market? Are they as excited and passionate as you are about your offering for the target market? Is there a good level of compatibility between your firms? Do your sales and revenue goals align? Do you have a similar vision of success? Making sure there is a good cultural fit between the two organizations is equally important.

Remember that a local partner represents your business in the target market. It is therefore paramount that you choose a reliable and trustworthy business partner. We cannot stress this enough: a wrong partner could make your foreign entry plans go awry.

Here it is useful to engage the services of boutique consulting firms like Indigo Consulting to help with partner search and selection. Indigo’s origins as an India-based management consulting firm has enabled it to build deep relationships with key players across different sectors. This network, built over four decades, allows Indigo to handpick ideal local partners depending on your business’s needs.

Remember, having access to resources with the deep market knowledge and strong on-ground connections is critical to the success of your exporting journey. Once you finalize a local partner, finalize the terms: fee sharing, royalties, distributorship territory, copyright protection, responsibilities of all the parties involved, a split ratio of marketing expenses, among other things.

Step 5: Commencement and continuity

With the Market entry strategy finalised, it’s time to fire on all cylinders! Hire a local team and lease an office space, as necessary. Delegate a person/team at your headquarters to monitor the performance of the local partners team in the target market. Make sure that the local sales and marketing teams have all the tools they need to succeed in the market. If you plan to set up local manufacturing, work with a reputed law firm or agent, as the case maybe, to complete the necessary paperwork to make the plant operational.

Take the time and effort to understand local customers. The needs and behaviour of customers in your target market could vary from customers of your home market. Depending on the scale of your ambitions and your budget, consider hiring local advertising firms as they tend to have a better understanding of the local customers. You may have the best knowledge of your product but trust the local marketing team to communicate the value proposition to your customers in the target market. Trust the advice of the experts. And as always, be open to learning lessons from each of your markets.

At Indigo Consulting, we wish you the best as you take your business to international markets! If you have stories or tips on your international business adventures, feel free to share them.