Guidelines for Successful Globalization by High-Tech Start-Ups Part IV

Today’s post is the last of a four-part series on guidelines for successful globalization by start-up companies.  New companies certainly want to get their products and services in front of prospective customers in their target markets and the channel strategy discussed above is certainly a major part of those efforts.  However, companies that are new to specific market, particularly new companies with no track record or global brand recognition, need to be prepared to act aggressively to establish and continuously grow their profile and presence in the market.  In other words, they need to “get known quickly” and build a strong positive reputation in the market.  Obviously one way to do this is through marketing activities for the company’s products which may be done directly or through the company’s local agent or distributor.  In most cases though this is not sufficient and companies must engage with customers and other key stakeholders in the market by establishing personal relationships forged during frequent visits by founders and senior managers to the market.  The need to overcome the “liability of alienness” has already been mentioned and this process can and should begin even before the company’s products are formally introduced into the market.  Once the company has a working prototype of its initial product, founders and senior can set up meetings with large potential customers in the market, including potential agents and distributors, to introduce themselves and the product and elicit feedback on how the product might fair in the market and what changes in the design or features might be desirable in order to enhance the attractiveness of the product.  New companies should also establish a physical presence in the market—at least one local office or a network of offices in larger markets—even if they are relying on local agents or distributors in order to show commitment to the market, make company representative available for meetings in the market and, not to be ignored, to facilitate the collection of knowledge and intelligence about the market that is proprietary to the company as opposed to be owned by outside agents and distributors.

Not to be forgotten in all of this is the fundamental question of how foreign market activities should be managed on a day-to-day basis.  Given the importance of the initial foreign markets to the company’s success and survival, overall responsibility should remain at the very top of the company’s organizational hierarchy with one of the founders and/or senior managers, and is particularly important for that person to develop and maintain a high level of knowledge regarding the target market and the activities of the company’s local agents and distributors.  In addition, he or she should have direct communications and relationships with the company’s key customers in the target market and develop processes for accessing real-time information on the sales, expenses and overall business conditions in the market.  Decisions also have to be made regarding recruitment of local managers and other specialists who will be “on the ground” in foreign markets and become the face of the company and conduits for the flow of information back to the senior management team.  In general, the preferred approach is to find home-grown talent, either persons currently living and working in the foreign market or qualified expatriates willing to return to the market.  Whoever is selected should be adept at managing and motivating local personnel, networking with local stakeholders and communicating effectively with senior management at the main office.  The company should seek the proper balance between centralization and delegation of authority, which means determining the actions that can be taken by local personnel without prior consultation with the home office and which decisions need to be vetted at the home office before action is taken.  When deciding on how much autonomy will be given to local personnel, companies must be mindful of the need to move quickly but should avoid giving up too much control until they have developed the appropriate level of trust in the judgment of local managers, a process that will require continuous interaction and communication between those managers and the senior manager responsible for the market.

Finally, an internationalization strategy is undoubtedly expensive, at least in relation to limiting the focus of sales and marketing activities to a domestic market, and the founders and senior managers must seriously consider how the company will be able to finance all of the activities required to quickly and successfully penetrate foreign markets.  As mentioned above, the company’s initial strategic plan should include and address establishing a presence in foreign markets, the logistics of shipping products into foreign markets, and the establishment and maintenance of communications with company representatives in foreign markets.  In addition, costs of adapting the company’s products to conform to the requirements of foreign markets must also be calculated and included in estimated budgets.  Once all of the information has been collected, the company can approach external financing sources, such as venture capitalists, with a complete picture of the investment that will be needed in order to establish a global business.  The founders should assess potential investors closely and pay particular attention to whether or not they have a proven record of providing meaningful assistance to their portfolio companies with respect to advice on internationalization and introductions to potential customers, suppliers, agents, distributors and in-country managers in the foreign markets that have been selected as the company’s initial targets.

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