As startups and emerging companies expand, they inevitably face the question of how to grow in international markets. Too often, companies haphazardly build their international businesses and are frustrated by the results. International strategy requires surveying the market and weighing a number of considerations. A good international strategy will address the following:
- Starting Point: In what region should you start? Traditionally, US companies have started in Europe, and more specifically England, since the market is similar to the US and numerous commonalities exist. Over the last decade, companies have looked at the BRIC countries as the best starting point with the huge growth opportunities in these markets. With the fluctuations in some of the emerging markets, careful analysis is required to assess the best strategy for your product.
- Direct or Partner: Should you enter a new market directly by hiring a few local sales people or through partners? The most common path is finding a partner, since partners already have an established customer base and market knowledge. However, for new technology, proper partners may not exist. Additionally, partners may require you to bring them the first few deals to prove there is a market and it is worth their time.
- Seal Team Six or Operation Overlord: How should you distribute your resources across the globe? With the global market opportunity, many companies take the “Seal Team Six” approach and send sales people across the globe to win one-off battles in individual countries. This approach can be effective for testing potential markets for your product; however, this ultimately leads to frustration that sales don’t grow exponentially. The opposite approach is the “Operation Overload” (code name for the D-Day invasion) approach, where you marshal your forces to establish a beachhead and back it up with the resources to dominate one particular market. Overtime, you will win the market. However, while this leads to exponential growth in one region, you may be exposed in other regions where the competition may gain traction.
Type of Partner
If you decide to head down the partner path, new sets of strategic questions arise: which type of partnership is best? The typical choices include:
- Distributor/Reseller: Traditional distributors and resellers are the easier path. However, many of these companies are “box pushers” and simply fulfill orders. You may be required to handle demand generation, which can defeat your purposes for partnership.
- Joint Venture: These are sometimes called “a marriage without love”. Joint Ventures can make sense under certain circumstance; however, they are notorious for misaligned incentives and falling apart after failing to achieve success.
- Referral/Independent Sales Rep: Hiring an individual or small firm to land your first few deals is often used. Many times, these individuals are former executives from your potential customer who promise access and influence in buying decisions. These can be effective, but often times the former executive’s influence is less than promised.
M&A: You can always look for a competitor or similar company in the market. If the ideal candidate exists, this can be an effective strategy. You may face difficulty if you buy a company that is not a direct competitor, as you might inherit a product and team that distracts you from selling your product in the market. Also, the integration process can be challenging if not handled correctly.
Choosing the best international strategy will significantly increase your chances of success. Of course, strategies are never effective without good execution. You should tie your strategy and execution together into an integrated approach to ensure you achieve your goals.