Is Expanding A Company’s Business Internationally A Good Thing?

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Expanding a company’s business (or an aspect of its business) internationally might be a good thing. It all depends on a number of variables that need to be closely examined.

I happen to have some relevant first-hand experience in the area of expanding a company’s infrastructure across international boundaries, which, in a very real sense, is similar to introducing a new business or product line across international boundaries.

Several years ago I took on the responsibility of project manager for the implementation of a new ERP system in France, Holland, and Australia. These European locations were in fact subsidiary divisions for an American-based international company.

All in all, the project went very well. It was a fascinating project for several reasons.

First of all, the project at each of these locations took approximately six months to complete and gave me the opportunity to get to know and develop relationships with some of the local folks employed at each location. Over time this enabled me to develop an appreciation for the nuances in the local traditions and cultures. I am a strong believer that success at leading the completion of a project like this across international bounds depends not only on the technical aspects of introducing a new ERP system (anything “new”) but also on the sensitivities that the division personnel might have against changes being forced upon them from corporate America (which I represented).

I can assure you that customs unique to each area existed and presented challenges. For example, throughout the project to enhance ERP efficiencies, there was the concern that the Americans couldn’t be trusted and that they would all lose their jobs by the time the project was finished. (Didn’t happen.) This sensitivity, I’m convinced, was exacerbated by the fact that the folks in America were dictating changes.

To help you navigate these situations, I’d like to draw your attention to the following tips to keep in mind when expanding business operations globally, as noted by Michael Evans of Forbes:

Organizational Readiness

  • Evaluate the organization structure needed to successfully execute your strategy.
  • Develop policies, procedures, and handbooks that comply with local requirements while maintaining balance with overall company policies.
  • Develop competitive benefits and compensation programs to attract qualified local employees. (Note that in my project where we implemented a new ERP system there will be increased burdens on the IT group who will manage the ERP function).
  • Develop a local information technology infrastructure that is compatible with your domestic infrastructure.

Develop A Localized Strategy and Business Plan

As Evans notes: “each market has its own nuances due to economic, cultural, governmental, and market conditions. It is important to develop a localized strategy and business plan that drives local success while remaining integrated with the overall corporate strategy and objectives.”

Issues to consider are the following

  • Import/export pricing strategies.
  • Initial financing streams and anticipated revenues.
  • Legal, regulatory and licensure requirements.
  • Potential partnership or investment opportunities

Establish an executive team

In addition, global companies will often try to launch with executives from the parent company or quickly build a local team from scratch. Evans offers this warning:

This is time consuming, risky, and slows time to market. Using proven senior interim executives allows the company to hit the ground running, quickly validate assumptions, and drive key readiness initiatives while the company hires the right senior management team.

Identify and investigate target markets

In addition, it’s crucial to consider every possible factor, positive and negative, that will impact your ability to penetrate a market. As noted by the Young Entrepreneur Council (YEC) in this Forbes piece:

“Remember those widgets we talked about selling in Europe?” You might need to make adjustments, such as changing the manufacturing materials to meet environmental requirements in certain countries. Or, local content initiatives like those mentioned earlier might require you to refine your manufacturing, distribution or sales model.

Do I have the available resources and staff to focus on both expansion and my established business?

And as noted by Business News Daily, it’s also critical to be prepared for growth in staff–enough growth to handle the operation:

Trying to juggle an overseas operation while maintaining your current domestic customer base with a small staff is incredibly difficult, and you likely won’t be able to sustain your growth. Before you decide to expand, make sure you have the financial and structural stability to add staff members who can handle the new influx of work that comes with such growth.

“An organization should have a strong team solely focused on international growth that is ready to face challenges and fully support the expansion,” said Taki Skouras, co-founder and CEO of international wireless accessories retailer Cellairis.

Conclusion

Not every company or market is the same. There are resources, however, that can help you figure out the right path for your company. As the YEC notes:

Fortunately, the U.S. government, as well as many state and local governments and business-incubator groups, expends a considerable amount of time and energy helping businesses―in some cases, specifically resource-strapped, small and medium-sized businesses (SMBs)―penetrate foreign markets.

The YEC also notes the following resources that may be of use during your quest for an international presence.