Overview: How Business goes Global.
I’m Geoff Runcie and at the start of 2015, I was lucky enough to be involved in a series of sessions with the International Trade expert, Murdo Beaton. We were accompanied by Abdul Mann, whose team has built a range of international trade solutions under the brand EDGE. Abdul helped to explore some of the ideas Murdo presented in his answers on How Business go Global.
Today you’ll hear one of ten questions presented to Murdo, but if you want access to the entire session or future sessions, there is a link at the end of this blog. Alternatively, feel free to drop me an email on Support@morgangoodwin.com or visit our blog.
A full transcript of this session has been provided below.
OK gentlemen, taking a company international is a daunting process, so how can I tell if my business is ready to go global?
Taking the statement, “Taking a company international is a daunting process”. This to me sounds rhetorical and may not necessarily be true. I think that over the years, we have developed here in the UK a mindset that going overseas seeking business, securing business, is a daunting process. Now, it need not necessarily be a daunting process. Yes, there are certain issues that have to be taken into account, but these are all issues that can be very comfortably navigated, and there is a lot of help available to companies who wish to consider going global with their economic objectives. So I wouldn’t necessarily agree with the statement that taking a company international is a daunting process. There are issues as I said, but it’s a challenge! It is a challenge, there’s no doubt about that, but not one that companies should actually back away from if they’re of a mind to actually expand their activities into the global arena.
When does a business actually know that they are ready to go global? I don’t think a company will ever know in definite terms that it is ready to go global. I think much depends on the commitment that a company has in terms of its own strategic objectives. If the domestic market would appear to have been reasonably exploited in terms of the market share that a business can expect, then of course it is going to be necessary for that business leader to actively consider where further expansion can be achieved. If not through the introduction of new products or new technologies, then it must surely be with the expansion of their market place into other global areas. Now, a business can be determined as ready to go global when in actual fact it has achieved the margins that it thinks are possible in its own domestic market. But it also must analyze itself in terms of,
- Do they have the commitment within the framework of the business to actually go global?
- Do they have the human resource that may be necessary?
When such questions are asked, then it is quite obvious that the business leader will have to execute an initial feasibility exercise to determine exactly whether the company, as it currently is, is compatible with the likely demands of the overseas market. In general terms, a business watching the behavior of its competitors, watching the behavior indeed of its suppliers, may well determine that it ought to be considering following them into global markets.
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I guess the other thing you’re saying Murdo is, it’s a mindset. So the mindset of management to turn around and say, do we want to go global? Are we ready ourselves, emotionally and psychologically ready, to take our product to an international place. We discussed earlier how easy it is to be able to do that thanks to the leverage they can obtain through the internet and the easier communications, making the world a smaller place. So, I think the psychological hurdle is probably one of the first ones for people to get over.
Yes, there is a big danger for businesses, and that is when the business leader has a personal ego that wants to drive the business into areas where the business is not yet ready to go. Now, there are many instances of that where the leader of the business for one reason or another thinks that going global, as it were, is absolute. “This is what I want to do. I want to be up alongside my peers, to be able to say that I am exporting.” This is not a game we’re playing. We are actually in the business to make money and we have to be careful about what we do in order to safeguard any monies that we are likely to make. The business leader has to approach this without this mindset of “I’ve got to get into the export market because other people that I know, leading businesses have gone into the export market.” The main thing for the business leader is to make sure:
- The business is healthy.
- The business has resources,
- The business has human resource capabilities.
- The business has a product that is likely to have potential in overseas markets.
There is no point in saying “Am I ready to go international?” unless I already have some indication that what I’m ready to go international with, is something that is likely to create a demand for my business in the overseas market. If I’m making a widget that has no attraction in the overseas market then why am I going to waste my time and spend valuable resources going into an overseas market?
I guess what you’re saying is also then, apart from the psychological mindset of the management and people in the company, the next thing under human resources, is to also look at what systems they have in place. If they don’t have a sales process that scales, or systems that allow them to scale internationally and the only thing they can do is the domestic market, then they really need to look at how their system enables them to be able to efficiently grow into an international sales process. Eventually, you’ll be selling something to overseas markets, and you need to be able to do that and understand that process, and know whether your processes will support international trade. That’s key as well before you also embark upon the market research of it. Would it be better that you prove your product in the domestic market? A lot of people say “If you can’t make it at home, there’s bound to be a customer for it overseas, so let me just go overseas to start with.”
Yes, we always suggest to companies, maybe you should first of all try and secure business in the domestic market and exhaust the potential that the domestic market might offer you. It may however be that for the product or service that the company is actually providing, that the domestic market is too competitive. This can happen! The option in actual fact is to go into the overseas market, where the potential is greater and the competition might be less, for whatever reason. So this is all part of business management. This is up to the business leader to determine, you know, “Is there a market for my product in my home market, and if so what level of potential should I be suggesting I should achieve? If I achieve that level of potential, then I know I have done it with a business model that is sustainable in all its elements.”
But that business model has then got to flex as well because it’s got to take the dynamics and the cultural differences, it’s also got to take the foreign exchange elements into it, letters of credit and so on.
Indeed, but it has already proved that with its success in the domestic market it has the core components with which to do that. So, if new systems and new processes are likely to be required, then the business leader will have confidence in knowing that his business is capable of implementing these requirements.