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Internationalising Your Business: The Strategy

21st Century Growth™ will come not from Fordism (faster, better, cheaper) but instead from constant corporate reinvention that develops new products and new markets.

And it’s this second part – the markets – where corporations get it wrong, over and over. They might have globalised, but they haven’t internationalised. The distinction might sound semantic, but it is critical.

A globalising approach is one that, by and large, involves scaling up an existing offer or service around the world with only minimal changes.

An internationalising approach involves reaching new markets by carefully adapting and localising that product or service to the distinct and multifarious needs of local consumers.

Beyond-home-country growth in the 20th century, by and large, was dominated by a globalising approach; witness the ‘lift-and-shift’ model employed by American quick-service restaurants as the example par excellence.

There is nothing wrong with this approach, per se. Indeed, it has worked very well for many corporations. The challenge is that, in a world where both the digital revolution and the rise of Asia have commoditised, and will continue to commoditise, everything in their path, a globalising approach offers – at best – diminishing returns. Moreover, consumers, even in markets that have more recently ’emerged’, are increasingly less likely to simply accept whatever is served up to them, cookie-cutter style. In this respect, the big corporations are, at least to an extent, victims of their own success – educating and developing consumer tastes to such an extent that they risk diverging from the products or services that those corporations offer.

Internationalising a corporation’s offer, tailoring products and services and the way in which they are made available is, by definition, more expensive. But this is where 21st Century Growth™ will come from; better returns, better margins. The trick is to get it right – both the strategy, and the execution.

Our next paper will deal with the execution.

So what does an effective internationalising strategy look like?

The are two key considerations:

I) The right plan, in the right markets.

Boards need to ensure that corporate strategy for beyond-home-country growth is research-led, rationalised and clear. Not every market will be right for a particular product or products, regardless of the amount of tailoring that might be made.

Cultural, religious, environmental, legal and political reasons can all act as ‘no-go bars’ to entry, as can pre-existing, local, dominant competitors. This is not about corporate defeatism but the efficient allocation of resource in a way that is likely to maximise shareholder returns.

Boards must also demand honesty from executives as to why one or more beyond-home-country markets have been chosen. More than one corporation has been hobbled by over-eager, post-rationalised investment in a country to which a CEO has a personal attachment.

II) The right people, in the right place.

Even pure-play e-commerce ventures tend, at some point, to require physical outposts, if corporations are serious about a truly internationalising approach. Customers still expect some real presence in many instances, even if only as ‘back-up’ in the case that something goes awry.

Picking the right place, geographically and strategically speaking, is hugely important – issues such as distribution, delivery and returns networks, time zones and such need to be given close consideration: upfront, and before resource is committed. But by far the most important calibration centres around the people who represent the corporation in each beyond-home-country market.

A corporation needs to ensure sufficient understanding of its brand, systems, culture, corporate identity and values yet be able to blend this with a localised approach. This must be both linguistically and culturally appropriate (as language does not equate to culture, as any British visitor to the United States is quick to observe).

However, a frequent trap that corporations fall into is the unconscious establishment of a kind of ‘corporate apartheid’, where all the senior positions are held by staff from head office, leaving local employees to populate only the most junior roles.

Local staff, appropriately trained and experienced, need to be empowered to the greatest possible extent in order to guarantee a truly internationalising approach. Senior, local staff are better able not just to deal with, and overcome, tactical challenges and difficulties which are particular to their country (more of which in our next paper), but they are also able to advise strategically. It worth noting that, in spite of years’ worth of extremely detailed and abundant research which proved to Tesco that there was a market for Fresh & Easy on the West Coast of the United States, the business failed in part for want of local, senior expertise: all the board members were UK nationals.

So getting your business’ internationalising strategy right is hugely important and worth spending serious time on.

But, as with everything in life, it all comes down to execution…..

Monticello LLP

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