Yesterday I began my four-part series of posts on guidelines for successful globalization by high-tech start-ups by discussing the importance of gathering the necessary managerial experience to quickly and efficiently build a global business. Today I'm continuing with ideas regarding the integration of internationalization into strategic planning for the new company from Day 1 and making sure that the company anticipates the need for developing or otherwise acquiring the key technical and functional resources for building its business.
The founding team, along with the other senior managers, is the key determinant of the next factor that is essential to successful globalization: the development and implementation of the company’s strategic plan. Planning is important for any new business; however, for companies looking to undertake early expansion into foreign markets it is essential that the strategy reflect an intention to be a “Global Company” for the very first day and that the founders and senior managers create a scalable business model that can quickly expand in terms of volume and easily transition from the company’s domestic market into several foreign markets simultaneously as success is achieved. The strategic plan should include international sales, coupled with both actions and planning targets, from the very beginning and the founders and senior managers should select market targets based on projected aggregate international demand, not just the results that might be expected if the company confined its activities to customers in its domestic market. The plan should not be limited to just one foreign market, regardless of the size and apparent profitability of that market, since the evidence indicates that the emerging companies that are most successful with globalization are those that are ready and able to rapidly enter additional new countries once they have launched in the first foreign market. The initial strategic plan should incorporate an “international business plan” that addresses both exporting, including the most promising foreign markets for the company’s products and services and the appropriate distribution channel for each of those markets, and opportunities for using foreign markets to gain access to resources needed for the company’s entire business. For example, even if a product is going to be marketed and sold primarily in the company’s domestic market the company may find the raw materials for that product in a foreign market and/or select foreign manufacturers for the product in order to reduce costs. The strategic plan for a new company bent on internationalization should also include initiatives for getting known quickly and building global awareness of the company and its products to overcome what researchers have referred to as the “liability of alienness” when approaching customers in foreign countries customers that are likely to be very wary of entering into trading relationships with unknown firms.
The company’s strategic plan should not only identify prospective foreign markets and the specific strategies and tactics to be used in those markets, it should also carefully lay out a plan for identifying and acquiring the specific resources that the company will need to develop, build, market and support its products around the world. The company must have the necessary technical and financial resources and the skills and experience among the founders and senior managers to manage those resources and leverage them in a global marketplace. For example, the company must have the technical resources to develop products that combine innovative technology with usability and reliability and this requires a research and development team that understands the relevant technology and is adept at designing products that can transfer well over long distances to foreign markets with their own unique requirements. The R&D team should include members with direct experience in key foreign markets, since they would be in the best position to understand how potential customers in those markets would perceive and use new products. In that regard, resources should also be set aside to facilitate adaptation of the company’s products by foreign customers, including service and support and ongoing R&D efforts focusing specifically on reducing installation and maintenance costs. Internationalization also requires more capital than might otherwise be needed if a company was simply concentrating on its domestic market and the founders and senior managers should develop plans for financing uninterrupted ramp-up of the company’s entry into foreign markets. In particular, the company must anticipate additional costs in developing international sales and marketing activities, even when the company is relying on foreign intermediaries (i.e., local agents or distributors) as its initial distribution channel. The strategic plan discussed above is an important tool with respect to financing since a thorough analysis of potential foreign markets accompanied by clear and specific plans and tactics for entering each of those markets can be used in presentations to prospective investors.
The next post in this series will cover in more detail some of the things that new globalization companies need to consider with respect to R&D and product development.