By Tom Drucker, MA – Excerpt from the book, Cracking the Business Code
Planning is a process — not an event. It’s supposed to be a dynamic document, and not something that is prepared once a year then lives in a file that nobody refers to. It should be revisited frequently and updated along the way. If it isn’t, then something is usually wrong, since the world is fluid and so is a business plan.
Global planning and mapping requires an unbiased examination of your current sales, distribution strategy, and manufacturing costs, as well as a look at the various options available. A general assessment of the strengths and weaknesses of your firm as it operates today is a must before venturing out beyond your current borders. You’ll want to take a look at your readiness for a potentially changing global market, which includes looking at cultural needs, currency, etc. A SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis can help in order to see gaps and to play out various scenarios that could take place.
Don’t assume your current business model can just be replicated or exported. Harley Davidson, when they first began to expand globally, made a huge mistake that we can all learn from. They assumed that the brand recognition would carry them around the world into new markets. What they learned very quickly was that the Japanese found ways to reduce production costs and designed products that were valued vs. the brand alone. They realized what had happened, restrategized their approach, then retook the market place.
On the flip side, never underestimate the value and power of your brand. Playboy’s global expansion saved the company at a time when US domestic revenues were deteriorating. At the time, they were the 3rd most recognized brand in the world so they were able to spring board globally with new product offerings.
Swensen’s, a very popular, San Francisco-based ice cream company in the 1970s, virtually disappeared from the US while flourishing in the Asian markets. Leveraging and understanding your product and service is key when determining markets that might be shrinking while others are expanding. These considerations should be a part of your strategic planning.
A global expansion plan may be accomplished most cost effectively through acquisitions rather than internal expansion. Study your competition locally and take a look abroad. Acquisition could be a way to jumpstart global expansion and broaden your sales base very quickly if done right. VingCard Elsafe expanded by observing customer needs. They found that individuals when using a safe in a hotel room wanted to charge their electronic devices. They identified a power outlet company and purchased them. Pay close attention to customer needs since they can be a driving force for growth. Through discussion and planning, creative ideas can come about for expanding in an efficient and cost effective manner if one is open to considering various methods for reaching an end result you want. Many different sources of capital are available from traditional financing to relationships with private equity firms. Again, exploring these options require time and developing a network of trusted advisors. Conferences, trade associations and groups that set standards for your industry can provide a good source of contacts and sources of referrals for financial information and opportunities.
Remember — not everyone thinks like you! A company that is considering to expand their sales through expanding their global distribution should integrate into their planning team, people with different nationalities and a diverse spectrum of business experiences.
Sometimes expanding can be driven by happenstance of a passionate partner willing to take a risk. An example of that is when In-N-Out Burger had an opportunity to expand into Singapore. They were approached by a high net worth individual who thought the brand would be well accepted in that part of the world and was willing to make an investment. This didn’t cost the company any money and yet they were able to expand into a new region. The experiment can be repeated. Quality and customer service standards must be maintained in order to not erode the standards of the brand.
It is usually best to test your plan quietly. When beginning the planning, try to anticipate a variety of obstacles keeping the end goal in mind and work backwards. That way your team can discuss various scenarios and anticipate the agility required if changes need to take place as circumstances arise. You may need to slow down your plans in order not to damage the brands’ reputation if you run into trouble with supply partners or marketing/ launch plans. Develop contingency plans. The new normal is to have “soft openings” to open the new storefront, hotel, etc., with no advertising or promotion. Let the staff and locals become accustomed to the operation. After an appropriate settling in time implement a larger, more public opening with a full public and press event.
Please Don’t Rush
It is really important to not rush your global planning and expansion. A number of components come into play and need to be well thought out. Components such as employee development, market tests, supply chain partners and a thorough analysis in these areas that are just the tip of the iceberg. If done thoughtfully, the process can pay off by reducing the risk of your immediate investment and the ability to refine and learn as you go. An example of this is when Alcatel-Lucent spent over a billion dollars on a fixed cellular network that proved less effective and efficient than a standard cellular network, because they had built the technology and had staff in place, but neglected to market test the product in the rural areas it was intended to be used in and had insufficient government relationships to ensure contracts. Consequently, cellular contracts were more rapidly signed and built out, causing that business unit to be closed and a billion dollar write-off absorbed.
Xerox Corporation, when expanding into underdeveloped markets, had a very disciplined process. They would turn to local high potential people for developing a plan over a period of twelve to eighteen months. That team would identify talent at all levels within the local organization. Together with seasoned professionals from more developed regions, they would build an organization ready to launch a sophisticated operation that could be successful from the beginning with pride in their brand and positive revenues within the first year of operation.
Recruiting Talent Abroad
This can be very challenging and yet filled with opportunity. It is critical to define the job, independent of culture, and look for “job fit” in the context of the culture. This means it’s vital to understand the goals and objectives of the job and how they will be executed in that specific culture. Recruiting firms that specialize in global search can be helpful, as well as networking with supply chain partners who have a vested interested in helping you identify potential employees.
It is also helpful to do in-depth work style and personality assessments to see how the individuals will fit into the team. Ideas for interviewing can be gleaned from the data and save valuable time and money, so you can focus into specific areas to probe during the interview and for reference and background checking. The information can also help in reducing the learning curve for managing individuals from day one.
Sourcing correctly and understanding cultural differences can make or break the expansion process. For managers at all levels having a high awareness of emotional intelligence on a global basis can reduce misunderstandings that could turn into missed goals and opportunities very quickly.
Books like Culture, Leadership and Organizations, can help your planning team and onsite managers gain insights that will help improve effectiveness at an interpersonal level.
This Is Not A Fad
It is highly important to be fact and data driven rather than being caught up in the emotions of wanting to expand your sales beyond your current boundaries. Gathering market and consumer data that can be purchased or commissioned from reliable sources could be an essential cost effective tool, rather than assuming that your business model and assumptions are translatable to other countries and cultures. Mining the data can help in mapping out a pathway to success. Success for your firm might be a decision not to move forward with global expansion.
Years ago, when McDonald’s was first introduced in France it was not an immediate hit. Sales in France dramatically increased when they started selling wine. They found that adult customers would go into a location when they knew they could have a glass of wine with their meal. This met the need of the culture and the perception for going to a McDonald’s as a family changed dramatically.
Collection formation from customers is often called “the voice of the customer.” It is a fundamental part of any world-class organization, either local or global. It is an essential and never-ending stream of data that must be honored and professionally executed. This is particularly critical when moving into new markets.
Sustainability is not just implementing a recycling program, as important as that is. It’s a mindset. It’s particularly significant when you’re considering expanding into new markets. The conditions, regulations, standards and policies of regions and countries are distinct and evolving. The mindset for the company is often described as an attention to the triple bottom line: a concern for social welfare, profitability, and ecological and environmental concerns. These factors should be taken into account in the planning process so that there are no surprises as you get closer to costing out your budgets and understanding the true cost of operating from different regions of our interconnected planet.
Have An Open Mind Policy
When thinking globally, you’ll want to look over your shoulder and over the horizon to see how your various ideas fit into a coherent plan for your business. Smart people know they don’t know everything. Global strategic planning requires a good combination of talent both from inside and outside your company. Many rapidly growing companies have lost significant money and momentum by not seeing their own blind spots. The key to minimizing the risk of global expansion is to being open to a diverse outlook of ideas and inputs. Thinking collaboratively, learning from others and getting various perspectives through different people’s eyes can help in making a good decision to move forward or to approach your vision in a fact based and professionally managed way.
Permission is needed from Lighthouse Consulting Services, LLC to reproduce any portion provided in this article. © 2020
Tom Drucker is a Senior LCS Consultant and works with leaders to achieve business success by leveraging the strengths of their people and overcoming the very human, yet often unseen, obstacles that get their way. Tom has degrees in both psychology and business (from UCLA) and blends these skills to deliver usable insights that have lasting impacts on their business and most importantly on the hearts and minds of the people he works with. Tom has well over 30 years of experience working with Fortune 500 companies, mid caps and start-ups. You can reach Tom at Tom@lighthouseconsulting.com.
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