For businesses looking for new sources of growth, especially
when domestic markets are cooling, the temptation to look overseas is strong.
And in fact expanding globally can be a major new source of revenue. But even
those organizations that succeed overseas typically do so only after surviving
a number of initial costly mistakes, and many never recover from them. Any
leader can add the line, “Expand internationally” to his or her company's
strategic plan. Converting that intention to profit is an entirely different
matter.
I'm speaking from experience here. My own organization was one of those that initially floundered in trying to build a global business, before figuring it out. So let me share some of the key mistakes that many leaders make when trying to establish a strong foothold overseas for their organizations.
1) Chasing hot markets. In spite of the world allegedly being flat, its many economies do not all move in lockstep, and some areas may grow faster than others. Experts fall over themselves to explain why that growth will continue. But be wary of these predictions—witness the sudden and unexpected cooling off in many formerly red-hot emerging markets over the past year. If your overseas growth plans depend on certain economies continuing to boom, you could be in serious trouble if and when the boom fizzles.
2) Misjudging risk. Doing business in other countries isn't inherently riskier—unless you fail to do your homework in understanding the real risks, and recognize that they can be quite different from those you're used to. If you've only been doing business in the United States, for example, you may be clueless about the risks associated with unstable governments, corruption, sudden shifts in regulation, erratic investment markets, and much more. In many cases these sorts of risk can be safely managed—but only if you know about them.
3) Cloning your business approach. Exactly what sort of business strategy and tactics will work for you in an overseas market is highly case dependent. But I can tell you right now what approach definitely won't work: Whatever it is you've been doing in your home territory. Everything is different in other countries—customers, competitors, the regulatory environment, logistics, even accounting practices. Go in with your eyes wide open to the fact that you'll need to figure out these differences and adjust your strategies, tactics and processes accordingly.
4) Overestimating the availability of infrastructure and personnel. You probably won't appreciate all the resources you have access to in your home territory until you set up operations overseas and realize they're absent. Infrastructure can be relatively lacking in any number of areas, including transportation, financing, health care and the law. But the one that's most likely to bite you is an absence of skilled, experienced personnel in your particular business. You can import your own people, but good luck with that—many home employees won't want to make the switch for long or at all. You'll need a plan for recruiting and training overseas.
5) Being insensitive to culture. As obvious an error as it may sound, business leaders typically fail to adequately appreciate just how important it is to learn about what people in other cultures consider respectful, and what offends them. In the United States, having the right product or service at the right price usually trumps all. Not so in other countries, where you can kill deals by, depending on the region, bringing up business too quickly
6) Intolerance of ambiguity and uncertainty. There is no way you'll be able to march into another country and set up shop without encountering all sorts of confusing and unpredictable situations. You're simply not going to understand a lot of what's going on around you, or be able to know what the consequences of all your decisions will be.
I'm speaking from experience here. My own organization was one of those that initially floundered in trying to build a global business, before figuring it out. So let me share some of the key mistakes that many leaders make when trying to establish a strong foothold overseas for their organizations.
1) Chasing hot markets. In spite of the world allegedly being flat, its many economies do not all move in lockstep, and some areas may grow faster than others. Experts fall over themselves to explain why that growth will continue. But be wary of these predictions—witness the sudden and unexpected cooling off in many formerly red-hot emerging markets over the past year. If your overseas growth plans depend on certain economies continuing to boom, you could be in serious trouble if and when the boom fizzles.
2) Misjudging risk. Doing business in other countries isn't inherently riskier—unless you fail to do your homework in understanding the real risks, and recognize that they can be quite different from those you're used to. If you've only been doing business in the United States, for example, you may be clueless about the risks associated with unstable governments, corruption, sudden shifts in regulation, erratic investment markets, and much more. In many cases these sorts of risk can be safely managed—but only if you know about them.
3) Cloning your business approach. Exactly what sort of business strategy and tactics will work for you in an overseas market is highly case dependent. But I can tell you right now what approach definitely won't work: Whatever it is you've been doing in your home territory. Everything is different in other countries—customers, competitors, the regulatory environment, logistics, even accounting practices. Go in with your eyes wide open to the fact that you'll need to figure out these differences and adjust your strategies, tactics and processes accordingly.
4) Overestimating the availability of infrastructure and personnel. You probably won't appreciate all the resources you have access to in your home territory until you set up operations overseas and realize they're absent. Infrastructure can be relatively lacking in any number of areas, including transportation, financing, health care and the law. But the one that's most likely to bite you is an absence of skilled, experienced personnel in your particular business. You can import your own people, but good luck with that—many home employees won't want to make the switch for long or at all. You'll need a plan for recruiting and training overseas.
5) Being insensitive to culture. As obvious an error as it may sound, business leaders typically fail to adequately appreciate just how important it is to learn about what people in other cultures consider respectful, and what offends them. In the United States, having the right product or service at the right price usually trumps all. Not so in other countries, where you can kill deals by, depending on the region, bringing up business too quickly
6) Intolerance of ambiguity and uncertainty. There is no way you'll be able to march into another country and set up shop without encountering all sorts of confusing and unpredictable situations. You're simply not going to understand a lot of what's going on around you, or be able to know what the consequences of all your decisions will be.
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