Unlocking Your Market Potential

Ensuring your First Success in International Business Development
(with some comforting advice on avoiding three common pitfalls)

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Pitfall number 2: Too much money - we can't fail if we spend enough cash on this.

With just a hint of sarcasm, I can say that most people will agree that this has become less of a issue recently -- in the current economic climate there are substantially fewer companies suffering from the thorny problem of having too much cash. There are in fact substantially fewer companies period! However, be careful, you might exceed your wildest expectations and find yourself in the fortunate position of having a stack of loot and therefore being a prime candidate for a headlong dive into this pitfall.

There are numerous examples of this from the bygone era where venture capital funding was more abundant, generally taking the form of a company moving into an extensive office suite and importing managers, sales and support staff. Then everybody tries to figure out if there really is a market for their product and services out there, where exactly it might be, and oops, bumping against unexpected competition. A common end scenario is a lot of vacant office space a year later.

The flip side of this coin, and to be perfectly honest a lot more relevant these days, is that expenditure on international expansion can be gradual and limited.

Spend some of that cash on testing the market first to determine your best product/services profile, and then of course do some math to figure out if you can really make a profit with it. This reiterates a previous point - the most efficient spearhead for your new market entry is a crucial decision.

Once you’ve made the decision to enter into a new country, a lot can be done with a relatively small cash outlay during the initial stages of implementation, namely seeking out first customers and partners. You can use local sales consultants, who know their own back yard better than you, and will probably have more rapid initial successes than your hot-shot sales rep transplanted from home base. The first intrepid flag-bearer from your headquarters might in fact be a technical project manager, who can serve as pre-sales support for the sales effort and work on project definition for new contracts.

Setting up a full-blown subsidiary of your company might then come at a later date, as you gradually ramp up the organization to keep pace with prospective clients and new projects, when there is some revenue stream and more certainty of long-term success. In addition, tax authorities both at home and abroad start to take an interest in what happens at the head office and the subsidiary, so keeping it simple for as long as possible minimizes risks and headaches. When you finally do need to commit to a strong local presence, then it’s because you have the contract that will support that investment. And finally don’t forget those local government subsidies, incentives and tax breaks that are often available to foreign companies that set up subsidiaries that create local employment and tax revenue.

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© January 2003, Keith Rayner