The 7 Deadly Sins of internationalization
Updated: Aug 11, 2021
I hope this article can save you a few million
After 50 internationalized companies, I have stories to tell. From small companies to multinationals, capital sins are quite similar. It's also hard to assume that things didn't work out as well as we imagined. We need to learn from the stumps to move forward and grow.
The entrepreneur still makes mistakes when internationalizing their companies and spends millions to correct them. That's when he doesn't decide to close the doors and come home. Internationalization is a risky business (like any other type of investment), and can work very well. But it can also go very wrong when it is done without planning.
I'm going to tell you the seven deadly Sins of internationalization and I hope this article can save you a few million.
Location, location, location
The art of choosing the perfect business address for your international operation is probably the most crucial point for internationalization. Especially when we talk about companies that work with retail (fashion, accessories, restaurants, cosmetics and the like). Knowing the economic profile of the site, the purchasing power of potential customers, the flow of people that will pass in front of your store is essential before closing a lease (usually medium term). This is very critical for retail companies, but also for service companies. You want to be as close as possible to your potential customers and thus build your local reputation.
The dream of having a business address in a premium area is not always paid.5th Ave in NYC, Chelsea in London, Palo Alto in California, or theQuadrilatero della Moda in Milan, are some of the most expensive places in the world. Better align the strategy with the company's core competencies and create an entry plan that can achieve the desired visibility and business goals. The most common effect of a wrong site location? go back home.
Home market, but abroad
Some companies aim at their International expansion in the international community abroad. Known as the "Nostalgia market", the strategy of attending British people abroad is extremely limited. In addition to the communities being small to have scalability and generate profit, bursting the "bubble of Brits" is difficult. A well-implemented internationalization project has as its main objective to be perceived as a local and not a foreigner. For example, large Brazilian brands are positioned on the shelf of Brazil at Tesco, one of the largest British supermarket chains. The challenge is how to get off the shelf of the "Brazilian bubble" to the British shelf. A brand known in Brazil is unknown abroad and it is necessary to create a new reputation. I commented with a client that the challenge of Açai was to replace the Brownie. But it's part of it. See this as something positive, a learning curve for long-term gains.
Another super important aspect is cultural adaptation. Use our flexibility to absorb the new way of doing business and thus be perceived as local. Objectivity is an essential trait for a killer pitch.
"One Size Fits All"
Assuming that the same product, service or business model that has made success in the UK can be exported without absolutely any alteration is one of the main mistakes committed. Having a product with global potential does not mean there will be no adjustments. Locating the product is super important. For internationalization, locating is a technical term to adapt your product to the new market. If it is a restaurant, the recipes need to be adapted to the local palate; If it is a clothing store or footwear, the modelling; If it is a marketing agency or services, the use of local expressions; If you are a technology company, the systems and websites in the target country's language; If it's a cosmetics and health company, the label and the chemical composition, and so on.
The important thing is to dedicate a time (and money) to the exercise and know that there will be attempts and errors in this process.
Each country has an order to enable the opening of a company. If you are sending someone from Europe to initiate international operations, the modality of the chosen visa dictates the order in which the processes need to occur (such as company registration, bank account opening, capital input abroad, Hiring of employees, operating records, etc.). If you take a wrong step, you may have to cancel everything and start over. Or worse, making it impossible to make processes that would be much simpler and cheaper if you had sought professional guidance from the beginning. I have seen the entrepreneur unviable a simplified visa modality because he had registered the company abroad before the issuance of the visa. And I have also seen entrepreneur losing the possibility of extension of the visa because he had not gathered the documentation to prove that he had complied with the minimum requirements of the visa. Bureaucracy is super important for your business to work. Do it once well and you won't have a headache.
Local employee, No. Competent Employee, please!
It's a myth you think you need to hire only local employees for your business to work. This view of American only does business with American, is limited. More important than having a local employee is to have employees with the right skills to lead your business overseas. Finding a Country manager isn't easy. It is usually someone with entrepreneurial skills in business administration and sales. For the first employee of the company in your international unit, it is important that the person is competent and someone you trust, regardless of your nationality. Bossa Studios, for example, is a game Company founded by Brazilians in London with a completely international team. The company bets on cultural diversity to create games that will succeed in the four corners of the world. And it works.
Right product in wrong country (or vice versa)
Miami or Silicon Valley are not always the best destinations for internationalization of your company. There are countless locations where your business can thrive. Understand the motivations and competencies of your company are the basis elements to determine your international destination. I have seen businessmen packing and returning to Brazil because they had an excellent product, but without adherence to the chosen market. This is clearer in the food and beverage or cosmetics sectors. Natura opened its first European store in Paris in 2005. But he forgot that the French are more faithful to Lâncome and Yves Saint Laurent than to sustainability. With the initial frustration, 13 years later Natura remade its international Strategy and now advances in broad strides in multiple countries successfully. On the other hand, multi-brand companies need to choose the right line of products to take out of Brazil. Not always the British sales champion will work out there. It could be the exact opposite. The least-selling product in Brazil can be your flagship to take your brand to the outside. Tramontina has more than 1,000 products in its portfolio and chose to enter theBBQ line in UK . With so many products exported, it's harder to choose what can work where. In Germany the same approach has not reached 100% of expectations. A well-done study can reduce the risks of failure, but it still requires an exercise of trial and error.
Wrong financial preparation
Last but not least, having a robust budget that takes into account mainly currency fluctuations is very important. In Brazil, our planning is from 6 months to 1 year. For an international operation, budget forecasting is required for at least 3 years. It's not because your operation didn't yield in the first year that you failed in its international expansion. With planning, I have had customers who have reached the break-even in 6 months, while others, only in 24 months. An operation that "pays the Bills" or "gives a lot of money" depends heavily on your sales cycle, average ticket, entry strategy and operation. Everything is adjustable in an internationalization process. Have patience and flexibility.
The seven deadly sins covered in this article are the result of countless testimonials I have heard from my clients. All of them can be overcome with good planning. At Sterna, we design international strategies for companies with global ambitions, so you don't get anywhere near these sins. Do you know other capital sins of internationalization?
Tell Me here. I see you in the world,
Sterna is an internationalization Boutique. We can help you open your company overseas. Shall we have a cup of coffee? email@example.com