Which of the following is the first step a firm should take when deciding whether or not to go global?

By Dennis Day and Michael Evans

"Going global” is defined as the worldwide movement toward economic, financial, trade, and communications integration. The concept of globalization can be traced back as far as the Roman Empire. More recently, the concept was popularized by Thomas L. Friedman in his book The World Is Flat, in which he argued that the pace of globalized trade, outsourcing, and supply-chaining was speeding up and that its impact on business organizations and business practices would continue to grow in the 21st century.

For small and emerging businesses, going global is a significant undertaking that could disrupt existing business activities. Thus, it is for crucial for CEOs and business leaders to understand its full impact and determine if the rewards outweigh the risks. Stakeholders across the organization will be called on to carry more responsibilities to continue to execute on day-to-day activities in addition to the global initiative.

Taking a small business global is an complex and dynamic process. Gaining a deep understanding of the targeted markets, the competition, current local market trends, and the requirements to successfully launch and drive growth lays an important foundation.

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1. Perform a “Deep Dive” Due Diligence

Before going global, it is critical to understand what the full impact on your business will be.

  • Prepare a market segmentation analysis to determine if your product will sell in the local market.
  • Prepare a product gap analysis against local products. Is there a demand that is not satisfied by a local company?
  • Perform a SWOT analysis against competition. Your product will likely be higher priced than local products. Will the market buy your product?
  • Consider market opportunity/sizing. How big is the market and how long will it take you to capture your targeted sales?

2. Develop a Strategy and Business Plan

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.

  • Define short-, medium-, and long-term strategy. Set reasonable goals to measure progress and cost/benefits.
  • Define goals, objectives, and success metrics.
  • Complete the business model and structure. Decide if you set up a separate company, a branch, or a sales office.
  • Develop a top-down annual budget.
  • Develop a tactical project plan with commit dates.

3. Establish a Beachhead Team

Many global companies try to launch with executives from the parent company or rapidly build a local team from scratch. 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.

  • Bring on senior interim executives with deep domain expertise or outsource interim leadership to executive leadership organizations.
  • Establish the financial infrastructure—consider outsourcing this to local service providers.
  • Begin the recruiting process for the permanent leadership team.

4. Product Readiness

Based on the product gap analysis, take the necessary steps to market-ready your offerings to achieve high-impact product differentiation.

  • Review government- and industry-specific regulations to ensure that compliance and certifications are obtained if needed.
  • Determine if any localization of the product is needed. Pay close attention to the translation of the name of your product in the local language.
  • Initiate a patent and trademark review—some countries are known for “copying” good ideas.
  • Initiate testing and quality assurance review based on local standards.
  • Consider a local logistics and distribution network. Who will sell your product and how will it get to them?

5. Organizational Readiness

Cultural differences, whether it is language, regulations, or customs, requires a firm to be flexible in the policies and procedures implemented in an international operation to ensure employees are engaged and executing on the company’s plans. The “one size fits all” mindset can have short-term benefits but will have negative long-term effects.

  • 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 programs to attract qualified local employees.
  • Develop competitive compensation packages based on local standards and customs.
  • Develop a local information technology infrastructure that is compatible with your domestic infrastructure.
  • Manage payroll and human resource functions—again, a process that lends itself to outsourcing.

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6. Establish a Go-to-Market Strategy

The effective selling and marketing of your products or services requires a comprehensive, cohesive strategy that addresses sales strategy, sales delivery, branding/value proposition, marketing strategy, marketing programs, and pricing, which together create clear market differentiators that propel market acceptance and revenue growth.

  • Determine your optimum sales model: direct, indirect, OEM, distributor, hybrid?
  • Determine your sales methodology: solution, feature, consultative, price?
  • Determine if a new brand will be created or whether you will use the parent brand.
  • Develop a comprehensive marketing plan and KPIs.
  • Evaluate your pricing model—consumers in less developed countries are very price conscious and your product may not fit the local economic environment.

Some countries are known for being highly litigious, so it is critical that strong legal processes are put in place to minimize unnecessary commercial risks. Also, government agencies have strict requirements that necessitates legal documentation be in place prior to operating within the country. Being proactive does require money upfront, but this more than offsets downstream risks and liabilities.

  • Create localized commercial agreements.
  • Review industry-specific regulations to ensure compliance and certifications are obtained if needed.
  • Perform general corporate services such as dispute resolution, immigration, customs, and shipping.
  • Maintain corporate records and governance—again, an outsourced function might work well.

8. Tax and Finance Readiness

The proper tax and finance infrastructures need to be set up early on to ensure that you are receiving timely reporting and that your foreign entity is adhering to local corporate policies and procedures.

  • Consider outsourcing accounting, payroll, and tax.
  • Establish local banking relationships.
  • Develop a risk management plan.
  • Develop a transfer pricing study.
  • Develop a cash repatriation plan.
  • Prepare and report sales and VAT taxes.

9. Prepare Your Final Budget Preparation

Results from the above steps should provide sufficient data for stakeholders of the foreign company to develop a final budget that is aggressive yet attainable, and one that will be owned by your local team.

  • Develop a 3-year budget and a 12-month business plan with detailed key performance indicators, and update every 6 months.
  • Perform quarterly operating reviews.
  • Establish a real-time (or at least weekly) budget to actual reporting with variance analysis.

10. Establish Close Relationships with Local Businesses

Gain a strong competitive advantage by creating a supporting ecosystem of complimentary products and services, which can come via third-party relationships. These relationships can support the scaling of the organization while minimizing the financial risk.

  • Negotiate alliance/partner/distributorship programs.
  • Develop an ecosystem strategy and business model.
  • Build an internal alliance team to manage and foster relationships.

Expanding your business overseas is not for the fainthearted, but for most businesses it will be inevitable as global markets offer greater opportunities for growth. By paying attention to details and outsourcing administrative functions, the difficult job of “going global” can produce great results.

Dennis Day is the Head of Strategic Alliances at TMF Group.

Read all of Michael Evans’ articles on AllBusiness.com.

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