Following my opinion piece, “7 Questions You Need to Ask Before Expanding a Business to Emerging Markets,” which is targeted at small to medium sized companies, I have been asked to expand on the individual 7 questions.
The second question is: “Do we have the right people, are we generating sufficient resources and are we willing to invest in a geographic expansion?”
For many small to midsize companies the decision to expand into emerging markets is a good one, but it must be part of a strategic plan and the resources must be allocated and available to ensure the venture is successful. An old proverb says “Opportunity is where you find it” and Drucker1 adds “It does not say: ... where it finds you.”
Presuming you have identified a country, quantified the opportunity, and the market is both significant and growing fast in your key market segment, should you jump in with both feet?
Successful businesses understand what the costs are going to be, in terms of both people and resources, they weigh the cost against the opportunity and they ensure their best people are assigned to the best opportunities.
So who are the best people to manage a geographic expansion? Well, the perfect employee is not always available for a job at an appropriate price, so we have to judge which skills are the most important and most likely to bring success.
The minimum requirement is for experienced and open minded business people who are flexible in their thinking and implementation, and who take the time to listen and learn. Clearly a willingness to travel is needed and being fearless and adventurous would help. Also critical are cultural sensitivity skills. It would be best if the person has experience in emerging or international markets and local language skills. Ideally the person has worked and lived in the country targeted, and has built a network of senior contacts in the industry.
Executives with experience of working in the country will have the best understanding of the business culture, the opportunities and threats, and be able to put together a realistic plan and timetable.
For the business, working in a new culture will be challenging. While the business model is strong in the home country, it will almost certainly have to be tweaked for the new market. Therefore, senior management not only have to be supportive and involved in the process, they must have significant trust in the opinions of their international people, and be prepared to act on them.
Do not choose someone with rigid ideas who thinks that the new market will do business the way they are told. We have to adapt to enter a new market, not the other way around, the market will not adapt to accommodate us. However, the market may adapt to reject us!
We know the future will be different from our expectations. As we move into a new country and culture, our experience is certainly going to be different from our expectations, so perhaps we should count this as a double uncertainty. One thing we can predict with certainty, is that the experience of expanding into a new market will change the manager responsible and the company they work at. This will be a learning experience for all involved. Successful managers will need to work with their peers, bosses and subordinates to develop mutual expectations and trust and be able to influence the company to incorporate the new leanings to become a better business.
Expansion will require a commitment by the senior management in time, but also in resources. This should be spelt out in the plan, of course, but once initiated it would be a big mistake to divert resources to other projects. If you let down one customer, that customer will remember the experience for much longer than you, no matter how many good things you do subsequently. If you let down a country, you let down perhaps hundreds of customers, none of whom will be quick to forgive you in the future.
What kind of resources should we commit to provide? The most important for an ingredient company in the personal care business will be technical and marketing resources. The in-country sales and technical people must have all necessary documentation at their fingertips, preferably in the local language, including formulations that are appropriate for the local customers. (For example, don’t offer a heavy skin cream if the local market prefers light lotions; you have already shown you do not understand the needs of your customers’ customer.) Samples of product and formulations have to be prepared and available locally in sufficient quantities.
However, some very basic things may be different and we need to be sure we can handle them all. For example, if the local market buys in kilos, can our IT system handle that, if the home market buys in pounds? (From experience I can tell you that not all systems can.) If not, we must be willing to allocate the resources to improve the system to handle the new reality.
Marketing presentations must be modified for the local customers. Some countries will want for more technical details than your home market, and some much less. If your presentations do not meet expectations you will turn customers off quickly. The presentations have to be “tropicalized,” as they say in Brazil.
The local executives must have answers to their supply chain, regulatory, technical, financial and other questions in an agreed time frame. They must be fully trained in formulation with your products, the biochemistry, typical use levels and applications and be ready to answer the basic customer questions. You must also have your best technical applications people meet and work with the major customers.
If your company is already stretched and not giving excellent customer service, fix that before expanding. If your cash flow is not positive and strong, fix that too. If your regulatory department is trying to catch up, let them. The initial burst of activity that happens as you enter a new market must be handled by the team in their stride.
Your plan has determined the costs and the payback time, you need to ensure you have, or will generate, the financial and people resources to the implement the plan successfully.
And if the plan is executed successfully the person you chose to manage the project will now have excellent experience to take you to the next chosen market or to take on a more challenging position at head office.
1. Drucker: Managing for Results. Economic Tasks and Risk-taking Decisions. ISBN 0-88730-614-4.
About the Author
Chris Humberstone is principal of Chris Humberstone International, Inc. After working in senior executive positions for a number of personal care ingredients firms, he witnessed many of the frustrations and growing pains companies have transitioning from a national or regional company to one that acts on a global scale.
Experience taught Chris that navigating and winning internationally is not just a matter of following the same tried and true business strategy and game plan. There is almost always a steep learning curve, and numerous—and potentially costly—cultural obstacles that need to be identified and addressed in order to succeed.
After 30+ years of managing global business on three continents for others, Humberstone International was created in 2008 to offer hands-on assistance, expertise and market knowledge to those companies that want better international capabilities, connections and opportunities. Humberstone International works with specialty chemicals, mostly personal care ingredient manufacturers and distributors, and has successfully helped many of clients xpand their presence throughout Latin America, Europe, the US, Asia and the Pacific Rim.
More info: www.humberstoneinc.com