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Best Route to Market
| 1. | Finance international expansion, as international revenues come in - and not before. | | 2. | Getting started/small companies should select a first-priority region and focus on building operations there; rather than try to expand into all regions at once. | | 3. | Assign one person to be responsible and with an overseer on the domestic front: hire a local manager to guide you in each area. | | 4. | With both domestic and local managers in place, decide whether to do business direct or through distributors/intermediaries.
Case for Direct - particularly if distributors won’t provide optimal care for customers.
Case for Distributors - particularly if it’s a market where they’ll only buy from fellow nationals (e.g. Japan). | | 5. | Hire an outside Consultant to identify, negotiate and work with resellers. Pay them a retainer plus percentage of revenue generated by the resellers they select. | | 6. | Try closing the first clients quickly by making deals as attractive as possible for them; they will serve as references for others. When others sign up, you can begin marketing and adding staff. | | 7. | Many companies do a poor job developing a strong understanding of the unique cultures that exist within the countries they plan to do business in. | | 8. | Few have top marketing teams that include executives from the various countries they do business in. Only some have effective processes for knowledge transfer across countries. | | 9. | Think global - act local. Run the business as a local company, competing with local players. | | 10. | Buying the right local company can really speed up entry and growth in a new market (to add a new product, technology, service or customer segment). | | 11. | Miscommunication problems can arise - exchange teams to spend time in one another’s shoes, get people together regularly to exchange ideas. | | 12. | Globalisation of your e-support site for interaction with non-English speaking clients/suppliers/dealers means professionalisation of your website:
User Interface to the support site; language choice & character sets. for example using the colour green on your website would be offensive to some Muslim countries (where it is sacred). Check and double check your site for symbols and cues that may have entirely different meanings elsewhere. Make it easy to pick a language (don’t use a national flag to represent it. German speakers in Switzerland won’t be impressed by a German flag). Be concise and always simplify - elaborate messages and fancy graphics can confuse ‘foreign’ audiences. Use local offices, partners and outside consultants to test and validate your site - first impressions are very difficult to retrieve.
The e-support applications; search engine adaptation to recognise non-English character strings and search multiple multilingual databases. e-Mail, forums and chat applications also need to be internationalised.
The underlying content: e-support content encompasses everything from FAQ’s to white papers, technical tips and technical articles. Anticipate changing content and it may be prudent to work with an outside globalisation/translation expert to assist in developing the site strategically | | 13. | Make sure your product name, slogans and concepts ‘translate’ in target countries and cultures. For example Coca Cola’s launch 'name' in China translated into 'female horse stuffed with wax'. | | 14. | Gather information and data on the following: Economic trends Political environment Currency ratesForeign investment and approval procedures Restrictions on termination and non-renewal Access to resources and raw materials Availability of transportation and communication channels Labour and employment laws Technology transfer regulations Language/cultural differences Access to affordable capital and suitable sites for units Government assistance programs Customs, laws and import restrictions Tax laws and applicable treaties Repatriation and immigration laws Trademark registration and protection Costs and methods of dispute resolution Agency laws and availability of appropriate media for marketing efforts | | 15. | Take precautions. Review qualifications and credentials of possible partners, get help from overseas credit bureaus, industry associations and commercial attaches. Always ask for multiple references. Try to build a trial period into the contract (to cover ‘due diligence’). | | 16. | Be realistic in valuing what an overseas partner will pay for the right to distribute, license your technology or serve as the subfranchisor. | | 17. | Tax is an integral part of international expansion and amongst the many issues to consider and address are the following areas: People: Employment packages and benefits, linkage to employment laws. Share option schemes & other equity based remuneration. Patents: Personal and company income flows and treatments.
Property: Financial commitments and arrangements.
Corporate Structure: Taxable activity, transfer pricing, manufacturing relief. International Distribution Methodology for Affiliates, non-Resident Holding/Finance/Royalty Company.
Local Compliance: filing requirements / payroll taxes, VAT or Sales taxes, Property taxes, accounts and business registration. | | 18. | 'New Products' can be a 'FUD' sale (i.e. the buyer is fearful, uncertain and doubtful and therefore is exposed to a high risk of getting the wrong outcome). Marketing & Sales Strategy has to demonstrate and validate the product and its benefits very clearly in these situations - physically demonstrate, independent appraisals / validations, testimonials, references and credentials. 'New Companies' can also be a FUD! |
"Insight" generated from the session.
Key Learnings - Chris Horn - When it comes to organising your Management structure, Chris strongly recommends that you have “Head of Functions” as to opposed to “Heads of Geographies” when structuring your board. For example, The Head of Engineering in the US would report to the Global Head of Engineering based in Dublin. The same would apply for the Head of Product development, Sales & Marketing. Another interesting position Chris highlighted was the fact that they have 2 CTO’s in their organisation, an Internal and an External CTO. The External CTO deals with the Public at events such as trade shows, conferences and client interaction. The Internal CTO makes sure the product works and that all the processes and standards are in place.
- It has been Chris’s experience that your business model will NOT be the same from one country to another and be prepared to adjust accordingly.
- From the start you should design your service business as part of your product offering and not as a separate business. Iona encountered a number of problems when they were offering a purely billable service. Chris recommended that you concentrate on your service offering and work out the billing process based on the solution offered afterwards. 1. Your Team is your most valuable asset. You must be very comfortable with your Management. 2. Having a Quality Product and delivering on service is imperative to the success of your business.
Key Learnings from Nigel Piercy - When recruiting a Marketing Director you should be looking for someone Creative and resourceful who thinks outside of the box! People with MBA’s and degrees don’t necessarily give you these qualities. Value Proposition. This is your Competitive differentiation and positioning. "If you don’t have a competitive advantage, don’t compete." (Jack Welsh, then CEO, GE) When the market is not stable you must stay in touch with your customers through simple yet effective mediums such as monthly newsletters.
Key Learnings from Michael Meehan of Ernst & Young - Tax Adviser’s comments - There are many tax planning opportunities and potentially significant tax exposures when expanding your business into foreign jurisdictions.
- It is important that the tax implications are considered before any agreements, structures or alliances are finalised. Some companies have made the mistake of waiting until the foreign operation has become profitable before addressing the tax issues, by which time it may be too late to maximise the tax planning opportunities. Examples of how Timely Tax Advice is important: Scenario one: Corporate taxes (CT) in the USA can range between 30% to 40% depending on the State. When compared to the Irish CT rates of 10% /12.5% (from 1 Jan 2003), it is important that appropriate structures are put in place to minimise the US profits and maximise the profits left in Ireland. However, careful structuring is required to meet the significant and complex US Transfer Pricing legislation. Scenario two: Without proper structuring, withholding taxes could arise in certain foreign jurisdictions on, for example, license income paid by the foreign entity/customer to the Irish company. If such withholding taxes are in excess of the company's Irish tax rate (likely to be 10%/12.5%), then such withholding taxes can become a real cost affecting your bottom line profits. It most cases it is possible to structure the business model/structure to minimise or eliminate withholding taxes. However, it is important that this issue is considered before any agreements or structures are finalised. A "Financial Performance Optimiser" session which is available to all Excellerants through the programme will help identify all such tax issues and will identify appropriate tax planning mechanisms.
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Structuring
