Mona Pearl SLWTA Oct.22.2009

Global Expansion – Get it Right the First Time Around SLWTA October 22, 2009 Mona Pearl (312) 642 4647 BeyondAStrategy.com

In the very near future, U.S. businesses will fall into one of two extreme categories: 1) Skilled players in the global marketplace, and 2) Tentative players that forced themselves out of business. A wait and see mindset is nothing short of organizational suicide. On the other hand, a reactionary, ill-conceived global expansion is no improvement. That too spells disaster.

When KPMG Global Enterprise Institute surveyed U.S. middle market companies in late 2007, it found that 58% of all businesses surveyed planned to increase their global presence over the next five years, and one-third planned to maintain their current global presence. Interestingly, in the same survey, fewer than half of all respondents said their expansion efforts over the past two years had been successful; therefore, 50% were unsuccessful! With failure rates like these, it’s time to ask “What are we doing wrong?” Most importantly, what must be done differently to improve chances for future success in the global marketplace?

Top challenges companies face: 1. Overseas acquisitions fail to deliver 2. They struggle to expand lacking the knowledge and data as to where in the world they should go and what tactics to implement 3. Money and management effort is wasted, often because of unsophisticated management approaches Why companies face these challenges? 1. Unclear strategic direction 2. Underestimated risk 3. Poor alignment between vision, mission, resources, strategy and operations

Phase one – Phase two – Phase three – Phase four – Preliminary Adapting the analysis and Developing the implementation marketing mix to screening: plan and control target markets matching company/country needs Environmental Matching mix Marketing plan Implementation, uncontrollable, requirements development evaluation, company culture, measurement, Product Situation control and screening. Price analysis Host country (s) Objectives and Promotion Objectives standards constraints Dist./place Strategic options Assign Company culture Tactics responsibilities Physical Evidence Budget Measure performance People Corrective Process action

Why Go Global?

Decision Making 1. Determine international demand • Is there demand for your products/services abroad? 2. Adapting to customer needs • If so, should those products be adapted? 3. Entry strategies • How to enter into global markets?

Before You Go

Options

Market Expansion Strategies The decision to expand by: – Seeking new markets in existing countries – Seeking new country markets for already identified and served market segments

Seriously, why go global? Proactive: Reactive: ! Increase profit ! Competitive ! Take advantage of pressures product lifecycle ! Overproduction ! Achieve Economies and excess capacity of scale ! Declining domestic sales ! Saturated domestic markets

Social and Cultural Environments Culture, at its basic level, is the collective mental programming of people in an environment. “Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster." Prof. Geert Hofstede, Emeritus Professor, Maastricht University.

Researching and Analyzing International Markets

Market information • Market potential • Consumer / customer attitudes and behaviour • Channels of distribution • Communications and media • Market sources • New products

Competitive information • Competitive business strategy and goals (mission and rationale of the company) • Competitive functional strategies and programs (target markets, marketing mix, etc.) • Competitive operations (morale, employee transfers, i.e. detail)

Foreign exchange • Balance of payments, interest rates, etc • Prescriptive information e.g incentives, controls, regulations. • Country monetary and fiscal policy • Expectations of bankers, traders, analysts, etc • Government policy in relation to its own competitiveness

Resource information • Human resources • Money • Raw materials • M&A’s, joint ventures

General conditions • Economic factors - e.g. growth • Social factors e.g. customs, attitudes • Political factors e.g investment climate • Scientific and technological factors - major developments and trends • Management and administrative factors e.g. report procedure

Sources of information There is such thing as too much information.

Five rules for international research • No. 1: – What information do I need? – Where can I get this information? – Why do I need this information? – When do I need this information? – What is this information worth in $? – What is the cost of not obtaining this information?

• No. 2: Start with desk research • No. 3: Identify the type of information that is available from overseas sources • No. 4: Know where to look (or find somebody that does) • No. 5: Do not assume that the information that you gain is comparable or complete.

Entry evaluation procedure Stage 1 - Country identification Stage 2 - Preliminary screening Stage 3 - In-depth screening Stage 4 - Final selection

Negotiations Across Countries High context culture – The meaning of individual behaviour and speech changes depending on the situation – Nonverbal messages are full of important meaning (read between the lines) – Contracts. Written contracts are not always enforceable as new people move into executive positions Low context culture –Intentions are expressed verbally –The situation does not change the meaning of words –Contracts

Measuring & Controlling Performance • Set targets – quantified objectives and/or budgets. • Determine the method(s) of measurement • Measure the results at the end of each period • Compare results against the targets and identify variances • Identify and implement any necessary corrective action

Techniques for Measuring & Controlling Performance • Financial analysis e.g. ratio analysis, variance analysis, cash flow, monitoring capital expenditure. • Market analysis – i.e. market demand, market share, marketing resources. • Sales analysis – e.g. sales targets, selling costs. • Physical resources analysis – analysis of plant and equipment utilisation, other measures of productivity and product quality • Systems analysis – consider the effectiveness of implementation and application of your resources. • Others. . . . . .

Just Do It! “The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try. Once you find something you love to do, be the best at doing it.” Debbi Fields Trends Challenges Opportunities Differences/ Winning Growth Similarities Business Industries Strategies

Mona Pearl SLWTA Oct.22.2009

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