Growing internationally: your options for accessing new markets
One way to help you define your best route to your international markets is by first defining your objectives for such a significant undertaking. These might be objectives for profit levels, types of contract, human resource levels and degree of control over that operation, amongst others.
Should you decide you need a local partner to do so, what might be their agenda?
||Maximise over the long-term
||Reinvest for future growth?
||Detailed measurable results
||Brief, adaptable, ambiguous?
||Employ maximum number of local people
||Economies from production processes, not through people?
||Regular reporting on progress against objectives
||Retain 51 per cent of shares in the venture company?
Your main expansion options are:
- Agents, distributors, representatives
- Mail order catalogues
- Own office with own staff
- Own office with partner’s staff
- Contract sales consultants
- Joint venture/strategic alliance
For many design businesses, expanding into the US is a top priority given the perceived similarity of culture and language, though despite these, many British companies make the foray into that market but soon return home empty-handed, having neglected some fundamental cultural and structural differences which could have saved them large amounts of time and money.
Some considerations for you and your team to consider include the following:
- One option is the ‘go it alone’ route, which means putting your own managers and staff on the ground in the US and starting your office organically.
- Another option is the ‘alliance’ – also sometimes called a joint venture, joint marketing agreement or strategic alliance – which usually means finding a mail-order bride and then gambling that the marriage is a long, faithful and rewarding one.
- Then there’s the ‘virtual presence’ option, which involves having a US presence of some kind by way of a virtual office or staff who represent your interests in a more or less permanent way.
- And then there’s the ‘hired task force’ method, which involves paying a marketing consulting firm, contract sales force or marketing organisation for a fixed period to go out and find leads for you in the US and feed them back to your UK base.
- Or, you may want to ‘acquire’ a local company which already has a US presence in your target markets, some goodwill established and perhaps a reputation in the territory that helps your own products or services.
- And last, but not least, there’s E-commerce as one of your routes to expanding in the USA.
Go it alone
Let’s start with the positive elements of this approach. Not only does the ‘go it alone’ method mean you have management control on the ground, but it also means you have first-hand local market intelligence and direct access to customers.
On the down side, the learning curve for exceptional performance in that US market will be long and steep and you will find you need to meet the financial costs up front, which will be high, and the risks/failures are all yours. You will also need to start from scratch building your client base, which can take a great deal of time, energy and resource.
On the plus side, you have access to local market intelligence, access to customer bases through your partner and shared risk and rewards with another organisation, whether or not these involve customer development and retention. You might even find the alliance nets you some benefits in your UK market by way of your partner, reciprocally, needing your help to develop his UK business, or that the alliance gets you access to technologies you may not otherwise have.
On the other hand, with alliances you tend to lose some control as far as marketing, information systems, human resources and financial decisions are concerned.
The learning curve is a little shorter than the ‘go it alone’ path, but still pretty significant. The other factor weighing against your alliance is the fact that you are at the mercy of your partner’s reputation and actions in the local market, and what effects these will have on your brand, reputation and/or marketing strategy. Also let’s not forget that the time involved in screening and then negotiating with the series of alliance partners you’ll want to interview is extensive. You ought to budget about 12 months for the entire process, from courtship to marriage.
Not only is this a more affordable, ‘instant’ route to establishing your US base, it also gives the right impression to those with whom you are trying to do business – that you are taking the US market seriously enough to establish a base there. Your virtual presence might be as simple as an American freephone “1-800” number which connects your US callers directly to your UK office for a minimal monthly or per-call charge. It might also take the form of a US mailing address using any of the many post office box services based across the 50 states.
The costs, however, are not merely the office and answering service you hire, but the fact that you can’t respond personally to your clients/customers who might need your help at short notice. Your control, therefore, over problem-solving is fairly limited. Your learning curve is even steeper than the ‘go it alone’ approach since you probably have no one from your team dedicated to feeding back market trends and intelligence.
Hired task force
By hiring a SWAT team in the States, you are able to flatten your learning curve and establish your base cost effectively and rapidly. But, do consider the fact that your ability to control the quality and speed of response of such experts might be limited by distance and time zones.
Getting local market information may also be sporadic, as the team is focused on developing your business rather than providing you with market research, which is a different business activity. The trick here is managing these experts well and defining in advance what you want from them within a realistic time frame.
You have the option to buy that market share in the form of a competitor or supplier that is already actively competing in the United States. Not only does this get you an instant presence, local market intelligence, access to customers and complete quality control, you also acquire that company’s infrastructure such as its offices, staff, intellectual property assets, websites and inventories.
Against these benefits is the price tag of your target, which might be quite high considering the real returns you achieve. The time involved in identifying and researching these targets can be monumental, and this often distracts your senior management to the detriment of your on-going business in the UK. Yet another cost to be considered is the legal fees for completing the transaction, which can also be significant if there are many subsidiaries or companies that you are purchasing.
Lastly, you have the option to sell your products and services over the internet via your website. The advantages of this route are its low costs associated with adaptations for the American market (prices in US Dollars, shipping and credit terms, refunds and returns, size and description changes, American spellings).
The investment required will be the cost to equip your website’s operational capability – the “back-end” – for supporting electronic payments, credit cards, US addresses and zip codes. Additionally, it’s well worth investing the time to decide which of your products/services are relevant for your target US customers/clients. What works in your home UK market may not be totally successful in America, for instance colours, designs, descriptions and product sizes (metric vs. imperial measures).
Whichever route you choose, doing your homework by immersing yourself and your British colleagues in the American business culture and mindset will pay huge dividends, ensuring you avoid expensive mistakes and wasting valuable time in that large, fast-moving and profitable economy.
Thinking of exporting your design services overseas? Or already exporting but looking for new market information or strategy advice?
To make it easier for you to navigate the wealth of information available to exporters, we’ve pulled together the key details and advice relevant to the design industry and included signposting to further information and contacts.
8. Design business case studies and guidance
9. Country guides and contact details