US exports continue to grow, but many US companies lack the international business know-how to capitalize on this potential source of increased sales and profits. Increasing trade agreements and a weakened US dollar have resulted in one of the most favorable export markets in decades. Foreign importers of American goods report increasing demand for American products – from popcorn to pet food. The US has enjoyed 11 consecutive quarters of rising exports – but with 95 percent of the world’s population living outside US borders and an increasingly promising outlook for international sales, experts wonder why only 5 percent of US companies are currently exporting. But how to start and sustain growth in unknown markets?
1. DEFINE STRATEGIC NEEDS
Entering new markets provides an opportunity to increase revenue and profit. However, this initiative must be in line with the company’s overall strategy. Inconsistent, sporadic, or misdirected deployment of resources aimed at international growth can result in a failed initiative that absorbs limited resources with little return. Barriers to entry (duties, regulatory and trademark restrictions) must be identified and addressed. A SWOT analysis detailing a company’s strengths, weaknesses, opportunities, and threats will identify and help maximize a company’s strengths, minimize its weaknesses, and focus on international opportunities.
An international growth plan in line with the corporate strategy will increase the chances of success. Tactical aspects of international development such as sales, distribution and marketing should be addressed. International growth factors can differ enough from American models that a lack of familiarity can dramatically reduce the chances of success. Above all, there must be clear direction, full management support and dedicated resources.
2. PROVIDE ADEQUATE ASSISTANCE
Small or medium-sized businesses starting or expanding internationally will find the US Department of Commerce (DOC) an enthusiastic partner in helping US companies succeed on a global scale. This organization coordinates resources from all 19 federal agencies to help US businesses plan their international strategies in an increasingly globalized environment. In an unfamiliar foreign market with confusing regulations, uncertainty and risk, DOC can help US companies navigate the process of selling abroad and avoid pitfalls such as payment defaults and trademark and intellectual property abuse.
DOC Commercial Services provides a surprisingly effective range of quality services, including country market research, trade events and missions, trade contacts and introductions to potential business partners. The Export-Import Bank and the Small Business Administration are teaming up to help finance the export of American goods and services to international markets, enabling companies to turn an international advantage into solid sales.
Firms specializing in international business development can help jump-start foreign expansion. These firms are groups of highly trained, experienced professionals who offer practical, cost-effective assistance to companies committed to maximizing revenue and profit potential through accelerated international growth. The range of services varies from company to company, but overall they help companies to design, implement and manage large or small international business development projects. These services can range from identifying overseas market potential for a product to managing a firm’s export sales to identifying and qualifying foreign strategic alliances.
A company that wants to penetrate the international market should allocate a fully dedicated resource to this initiative. This individual should be the pillar that connects the resources, knowledge and culture of the organization with the international initiative. As the business evolves, additional resources need to be allocated to maximize the opportunity. These should be considered investments, not costs.
3. DETERMINING MARKET ENTRY STRATEGY
A firm’s appropriate market entry strategy will largely depend on its level of international development. For a company just beginning its international development, market penetration through domestic distributor sales can be the fastest and most cost-effective way to enter a foreign market. Selling through domestic distributors is relatively low risk and will provide valuable learning opportunities. Once the target country or region is determined, a process that will naturally follow from the SWOT analysis, the selection process can begin. Various US government agencies and trade associations can provide a wealth of data to begin narrowing down your choices.
Trade publications and events are also great sources. Factors to consider when selecting a market may include criteria such as the regulatory environment, market size and potential, entry costs, and competitive environment. To further narrow down the possibilities, a visit to the country is required. Once there, using trade leads, competitive assessments, local government assistance and interviews with potential candidates will provide additional information and insights. The main considerations in selecting a distributor are: willingness to commit a dedicated resource, market leadership or experience, marketing savvy, complementary and non-competing products or services, site inspection and financial stability.
Penetration into a new international market is often perceived as an extension of the existing domestic business. Consequently, many US companies bypass standard business guidelines that require rigorous market analysis. Only after detailed due diligence can a service or product offer and accompanying marketing programs be developed.
A company’s preferred mode of entry—domestic distribution, joint venture, merger, or acquisition—will depend on that firm’s primary goals from opportunistic sales to positioning for long-term market-driven growth.
Economic globalization will increasingly lead to the creation of strategic alliances. US companies need to ensure that potential partners share short-term and long-term goals to minimize differences in ideas and efforts. Shared values and shared business/ethical standards will improve communication, transparency and effectiveness. Partners should have complementary strengths and weaknesses to build a stronger and more effective alliance. Principles and processes for conflict and relationship resolution must be developed and agreed upon by all stakeholders in order for the partnership to function smoothly.
4. DESIGN EFFECTIVE MARKETING
All markets have common characteristics. However, effective international marketing begins with the awareness that markets are also different in ways that are not immediately obvious. The key is to understand consumers and identify their needs through culturally specific market research. Focus groups can be particularly effective in identifying the wants and needs of international consumers. The advertising agency used in the development of the offer should be local or have a local representative office. Employees with a thorough knowledge of market characteristics and idiosyncrasies will be particularly effective in conveying the desired message and creating and enhancing the brand image. Language skills and an aptitude for different cultures are critical tools for international marketing.
Flawless performance is key. As the firm executes an international strategy driven by a solid business plan, it is important to celebrate milestones and benchmark against industry leaders.
Although not all-inclusive, these four steps will serve as a guideline for successful international market entry and growth.