Do your homework
Businesses often presume they should target big markets such as China, India and the United States. However, these are very tough territories to break into. European countries closer to home can be a much better place to start.
“I have joined clients on trade missions to countries such as Spain, Germany and France,” comments Kevin. “It’s a smart way to build contacts and scope out market potential.” Unquestionably, trade ‘recces’ of this kind in Europe require much less of a time commitment than looking at far-flung markets.
Before entering a market, do your homework and seek support and guidance from bodies such as the Department for International Trade (DIT).
Think of the consequences
It’s also important to have a robust and flexible model – and to be realistic about payback. It takes time to turn a profit if you’re building a factory or investing in developing your workforce. Remember:
- Be realistic about your commitment in-country: “Trying to run things from a distance sounds convenient, but it seldom works in reality,” says Kevin. In order to succeed, you will probably need a senior member of your team on the ground, capable of making important decisions. “That means they will have to take their eye off the core business for a while – or even for a long time – so make sure you’re happy with that,” adds Kevin.
- Ensure you have the right people: “Make sure you have the right talent to call upon within your existing team,” Kevin comments. “Think about the support you can give your rising stars to help them step up to the mark.”
- Think about your digital infrastructure: “Technology, of course, will play a big role,” adds Kevin. “Make sure your website is fit for purpose to sell internationally but also give thought to challenges such as running overseas payroll and accounts payable systems. In some countries, if you send an invoice in the wrong format, it won’t be paid.”
To buy or not to buy?
“The appeal of making an overseas acquisition is that it provides ready-made access to customers and suppliers,” says Kevin. “But it requires a great deal of time and effort to identify an appropriate target. And when it comes to striking a deal, there is the risk of overpaying. Added to which, it can be difficult integrating an overseas acquisition into your business.”
Clearly, acquisitions that are not well thought through may deliver poor financial returns and drain group management time. The KPMG Enterprise Going global report has a useful checklist of points to think about when you’re considering an acquisition.
For many companies expanding internationally, it makes sense to work with a local partner. Indeed, in some markets, this is mandatory. Be sure to conduct due diligence before a trading relationship begins.