This is a guest blog by Mike Gomez (Global Success Centers and Allegro Consulting)
I recently gave a presentation to owners of American companies who were contemplating a global expansion strategy. I decided to share some lessons I gleaned while working with foreign companies struggling to be successful here in America. After all, learning from your mistakes is smart, learning from the mistakes of others is wise.
Here are my top three lessons from those who failed:
1. Exporting or Global Expansion Should be Part of an Overall Strategic Plan and Not Simply Done on a Whim
“Why are you choosing to go global?” “Why now?”
When asked these questions, I continue to be surprised how many owners do not have an answer other than to say “it was time.” In other words, they have succeeded sufficiently in their own country and now “it was time” to take on America. In some cases, these companies came to America on the heels of or at the urging of their biggest customer – another foreign company – who also decided that “it was time”.
Not surprisingly the vast majority who were struggling in the US could not answer such basic questions as:
- How well do you understand your relative strengths and weakness and the opportunities and threats associated with the American marketplace?
- What do you identify as the top barriers (regulatory, legal, or financial) to entry?
- What plan have you put in place to overcome these barriers?
- Who are you targeting first for new sales?
- What is the competition and how do you intend to compel customers to buy your product or service over that competition?
On the contrary those who were doing well had clear, crisp answers to these questions and a corresponding business and sales plan to guide their way forward.
To improve your chances of success abroad, take the time to study the market you are about to enter. As you build your strategy, get an outsider’s perspective (preferably a native of the country you are thinking about entering) to make certain you are being brutally honest in the assessment of your company’s strengths and weaknesses in the new market.
The Bottom Line: Have a well vetted, LOCALIZED, and documented strategy before you launch your foreign market entry.
2. Don’t Export More Than You Must
Your success in expanding into a new country will be determined by how well your product or service sells. If it is a product, you will need to show why or how your product is better than the competitors – price, quality, and/or capability. If it is a service, you will be emphasizing your unique process or intellectual capital, and why it is better than the competitors. This is what you are exporting.
Here is what you should NOT be exporting: your country flag, your people, your brochure, your sales approach, or even your website.
The only exception to this rule is if any of these elements can vastly improve your chances for opening a door, making a sell or closing a deal. Let me explain. If, for example, you are German company selling precision machinery in America, it is possible that emphasizing the German aspect could be a competitive advantage. The same would hold true for France and wines. However, if you are a Chinese company selling faucets or even solar panels here in America there is very little the Chinese element brings to the sale.
The Bottom Line: As an American going abroad, you may be fiercely proud of being an American and your American roots. But, there are few circumstances where the flagrant broadcast of the country of origin for the product or service actually contributes to the sell. On the contrary, it may cause an unwanted distraction or even negate any chance of a sale.
3. Beware of Ego Driven, Cash Sucking Business Decisions
More often than not the reason most foreign companies don’t succeed here in America is because they run out of the cash they set aside for this venture. To make matters worse, most of these companies actually did set aside sufficient money. Where they failed was in the choices they made, particularly in the first 12 months, on what, where, and how they spent that money.
- Elaborate office space, signage, furniture, leased vehicles and homes all for the purpose of “making a good impression” is one sure way to burn through lots of cash before you secure your first customer.
- The time taken flailing around trying to find a sales strategy and message that works in this market is another way to consume a great deal of cash.
Inevitably, these companies had entered the market first and started bleeding cash before they had understood the local market and decided on a localized business strategy appropriate for the market.
The Bottom Line: Conserve cash. Be especially lean until the strategy is in place and sales are coming through the door.
These lessons came from foreign companies who were attracted to America thanks to our large population, high GDP and median income, transparent legal system and single language. But, in America, like every country, there are subtle differences for how we do business and make buying decisions. And, like every country, one must guard against the vultures who will prey upon your naïveté. These foreign companies failed not because they did not have a good product or service. On the contrary, most did. They failed because of poor advanced planning, refusing to localize (their people, sales strategy, product), and spending cash unwisely and excessively.
Be wise and learn from their mistakes.
About the Author:
Mike Gomez is a co-founder of the Global Success Centers, a full service ‘nesting site’ for globally expanding small and mid-sized businesses coming to America. He is also President of Allegro Consulting, an Atlanta-based growth specialty consulting firm. Mike is a former military officer and served in an executive capacity with Fortune 500 companies. He also guided the rapid growth (from $8M to $35M in revenue in two years) of a small privately-held logistics company.