In a conversation between Sabit Tapan, Partner at Pedersen & Partners, and Emin Birsel, a seasoned international business leader with three decades of experience, valuable insights emerge regarding crafting a successful strategy for global expansion. Let's delve into their discourse and distil key learnings and guidance on entering international markets.
Emin's Experience and Insights
Sabit: Could you provide an update on your recent experiences and developments?
Emin: Certainly Sabit; indeed, it has been a considerable amount of time since our previous discussion. This year marks the 30th year in my professional career, allowing for a moment of reflection. Throughout this period, I've been engaged in leadership positions within international companies. These roles have encompassed responsibilities in managing and overseeing international operations, participation on local and international boards, and an array of executive duties. I've been involved with various regions such as Europe, the Middle East, North Africa, Russia, Central Asia, the United States, and the Asia Pacific, particularly Japan, China, and Australia. My primary focus has revolved around consumer goods and the food industry. Consequently, my journey has entailed frequent international travel and an immersive experience in diverse countries. For the past six years, I've been based in Amsterdam leading a multi-region business. These roles have allowed me to gain profound experience in creating strategies for growth, launching, expanding, and even turning around businesses. Additionally, they've enabled me to establish and foster high-performance organizations on both local and international scales. This firsthand experience has been instrumental in the development and execution of effective strategies for international expansion.
Motivations for International Expansion
Sabit: The motivation behind such a move is often rooted in the recognition of saturated domestic markets, or in the desire to diversify the risks and overcome limitations of a single market. At times, companies realize that the products or services they offer could fulfil unmet needs in other markets.
Benefits of Moving Towards Global Expansion
However, taking the step towards international expansion is a strategic initiative, necessitating an assessment of both risks and benefits. There are significant advantages, as well as potential challenges, to be considered. When discussing the reasons to explore international markets, I often highlight several key points starting with diversification of revenue streams.
Operating across multiple countries allows a company to distribute its revenue sources among various markets. This mitigates the risks associated with overreliance on a single economy's performance.
A geographic spread of operations also reduces the potential impact of political instability, economic downturns, currency fluctuations and even unforeseen disasters in a particular region.
Next to mention is the eventual access to larger customer bases and resources.
Entering new markets provides access to a broader customer base, revealing potentially untapped demand for existing products or services. This can have a significantly positive impact on leveraging the existing physical and intellectual assets of the company.
On the flip side, different countries offer diverse resources, such as skilled labor, raw materials, and technology, potentially different from the company’s domestic market. These can significantly impact a company's operational capabilities and costs.
Another top reason among others is the opportunity for the cross-fertilization of ideas and practices. Operating internationally exposes companies to varying business practices, cultures, and customer preferences. This diversity often leads to enhanced innovation and problem-solving, that can also find uses and synergies in the domestic market.
Risks and Rewards
While these benefits are substantial, it's important to acknowledge the associated risks in a new market. Among the potential pitfalls are currency fluctuations, unpredictable political and legal environments, regulatory challenges, and cultural considerations.
Example: Occurrence of Brexit
As an example, you can consider the occurrence of Brexit as an unforeseen event that had substantial consequences. And the magnitude of its influence was not foreseen, even within Western Europe. The decision to go international is complex and requires thorough analysis. Another aspect that has captured my attention in recent years is reputation and brand vulnerability. Negative occurrences in one country have the potential to cast a shadow over the company's image across all markets.
Instances have arisen where an advertisement launched in a specific country, subsequently surfacing on the internet, faces opposition in a different country where the product or ad is not even being promoted. It's intriguing to observe how this reputation and brand exposure risk has become a significant facet of the contemporary business landscape.
Strategic Approaches to International Expansion
Sabit: Exactly. When it comes to the risks and rewards, companies are entering this field for two main reasons. Some are confident they can gain financially. Others are going abroad to diversify risks of operating in a single country. You've probably seen companies doing both for different reasons. Could you talk more about how often companies do this to try new things, and how often they do it because they think they can make more money in bigger markets?
Emin: Let's approach this from a holistic view and discuss “when and how to go international”. First, it's crucial to understand that expanding operations to multiple countries is a strategic step that requires careful planning. It’s not a decision made overnight; it involves aligning company leadership and stakeholders with the expansion plans. This alignment is essential as it sets the direction for the company’s growth.
Step 1: Well Established Presence
However, before venturing into new markets, it’s essential to have a well-established presence in the domestic market. This means having a solid customer base, efficient operations, and sustainable profitability generating cash flow. International expansion demands significant financial resources and stability.
Step 2: Market Research
Conducting thorough market research is a recommended next step. This helps identify potential opportunities and assess demand for products and services in different countries. If there's a strong market potential that aligns with the company's strengths, then it might be a good time to consider international expansion. Furthermore, understanding competitive advantages in target markets is crucial.
Step 3: Finding Gaps in Market and products
Finding gaps in the market and offering products, services, or brands that consumers desire greatly enhances the chances of success. Nevertheless, the legal and regulatory frameworks of the target markets must be thoroughly understood and adhered to. Many companies have faced surprises due to unfamiliar regulations that affect everything from product labelling to ingredients. Compliance can be complex and require adjustments to recipes, processes, and more.
Step 4: Interaction with Unique Circumstances
Lastly, unique circumstances can present excellent opportunities for expansion, such as strategic alliances, mergers, or acquisitions opportunities. These allow strong companies to make their mark on the international stage.
Step 5: Use of external expertise and networks
When contemplating international expansion, companies must meticulously assess their readiness and align leadership with expansion plans. Thorough market research, identification of competitive advantages, and understanding regulatory frameworks are indispensable prerequisites. Emin advocates for a blend of local and international talent to navigate cultural nuances and forge meaningful connections in target markets. Strategic alliances and partnerships offer avenues for leveraging external expertise and networks, facilitating smoother market entry.
Deciding on Market Entry Strategies
Emin: The role of talent is undoubtedly a crucial aspect when embarking on international expansion. A key consideration revolves around the qualities of leadership steering the ship.
Strong Leadership
A company must ensure it possesses strong leadership with an international perspective, capable of navigating the intricate waters and landscapes of the international markets. These leaders should exhibit openness to diverse viewpoints, embrace cultural learning, and have the capacity to make informed decisions amidst the intricacies of diverse business environments.
Target the domestic Market
One must keep in mind that each target market is a domestic market for the majority of the customer and consumer base; and that is where the company must win. Hence local talent in the target market plays a pivotal role in this equation.
Hiring Talents
Hiring and nurturing talent from the targeted new market is a fundamental approach. This approach grants the company a deep understanding of the target markets, leveraging the insights and cultural nuances provided by local employees. This connection bridges gaps, fostering relationships with customers, suppliers, and stakeholders. It's a bridge to understanding the complexities that may not be immediately apparent to those entering from external markets. However, the journey shouldn't be undertaken alone.
Make a team of Senior leaders and Consultants
Companies should equip themselves with a team that includes senior leaders and consultants, some of whom have gained invaluable experience from past successes and mistakes. Their insights pave a smoother path for the company's expansion. An alternative avenue to explore involves forging strategic alliances and partnerships. These collaborations can take various forms, from local companies to distributors and suppliers, ultimately granting access to networks, distribution channels, and shared resources.
In conclusion, the human factor is indisputably at the core of successful international expansion. It demands thoughtful leadership, a blend of local and international expertise, and a commitment to collaborative partnerships that extend the company's reach and effectiveness.
Core Elements of International Success
Sabit: It's enlightening to delve into these critical aspects further. The layers of considerations, from the human factor to strategic models, are indeed extensive. As we wrap up our discussion, could you synthesize the essence of international success into a few core elements? Which ones are pivotal for triumph in international markets?
Emin: Summarizing, I would emphasize two pivotal pillars. Firstly, internal readiness stands as the cornerstone. It's essential to nurture a leadership team with an international mindset and surround the organization with advisors who foster cross-cultural competence. This readiness aligns with a company's ability to navigate the complexities of international expansion successfully. The second pillar rests on developing and seizing partnership and acquisition opportunities strategically. While this requires its readiness, it presents a valuable avenue for acquiring knowledge and expanding capabilities. Of course, integrating these operations post-acquisition remains a challenge of its own, one that we can delve into in the future. In the end, it all circles back to fostering a cohesive, winning culture that thrives in both domestic and international markets.
Conclusion
Emin Birsel's insights encapsulate the essence of navigating global expansion—an intricate way of strategic foresight, cultural acumen, and collaborative partnerships. As companies embark on their international journeys, Emin's guidance serves as a compass, guiding them toward sustainable growth and success in the global arena.
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