Wednesday, March 31, 2010

Going International! - The Fundamental Rules of Business Still Apply

Over the past year I have met with several small and mid-sized international businesses that have chosen Metro Atlanta as their launch site for international growth into the U.S. market. Our high consumer spending rate, low relative business cost, and significant service industry focus makes America a prime destination for foreign companies who choose to grow their business through international expansion.

Germany, France, Israel, Brazil, Ireland, and the UK are the home countries of some of these businesses and in most cases I was thoroughly impressed with their product or service offering - it was unique and I could quickly see the value proposition. But their venture in the U.S. was not succeeding. I suspect some will soon give up and return home - having spent thousands of dollars on office space, computers, staffing, advertising, corporate legal fees, and travel.

So where did they go wrong? Some of this may surprise you.

 No plan – As big a deal as it is to go international not one of these companies had a strategic plan in which expansion into the U.S. was a critical and important element. In each case, the owner either arrogantly felt they had succeeded sufficiently in their own country and/or had some international success to declare it was time to expand into the U.S. market. Some, on the other hand, were “encouraged” to make this move by their prime global customer (i.e. we are doing business in the U.S. and we want our suppliers here as well.) Regardless, it was clear that little time was spent studying the business climate, understanding and defining the short and long term opportunities, the competitive threats, and how best to take advantage or minimize their relative strengths and weaknesses in this pursuit.

 They sent their best salesperson to launch the business … who quickly found themselves making critical operational decisions such as where do we best locate the company, what size and type of office space do we need, what accounting and law firms do we retain, what are our computer hardware, software and network requirements, phones, banking, our staffing needs and the appropriate compensation and benefits, etc…. This poor person whose skill-set is sales is forced to make significant and long lasting business decisions better suited for a COO or CEO. Worse yet, that salesperson has little time remaining to pursue critically needed sales.

 “Englishizing” their marketing material and sales presentations – If the message worked in Germany or France then, when translated (by our German or French marketing firm), it should work in America, right? Wrong.

 Poor/excessive fiscal spending – Rather than preserving capital these companies spent lavishly on office space and furniture, homes, office staff, new computers and networks. Sadly, several followed poor advice or purchased higher priced products or services than needed from supposedly trusted companies of similar nationality who they later discovered did not necessarily have their best interest in mind.

 Bad local hiring decisions – No written job descriptions with qualification and expectations clearly outlined was used when hiring their American leadership or sales staff.

 Poor support, if any, from the home office – There are few experiences more deflating than when calling the home office in Europe, looking for assistance, only to find everyone has gone home for the day.

Going international is a legitimate growth strategy whether you are a U.S. company or one from Germany. But the fundamental rules of business apply. First and foremost it starts with a plan.

About the author: Mike Gomez is the President of Allegro Consulting, an Atlanta-based business growth specialty firm. Allegro provides operating advice to businesses and organizations on a wide range of management issues that effect growth, such as strategic and organizational planning, marketing, sales and business process improvement.