Smooth the Going Global Voyage with an International Business Plan

While companies are often heavily involved in a specific transaction or activity involving a foreign partner or assets and resources located outside of the US, it is always important to remember that the goals and objectives of the transaction or activity should be consistent with the company’s overall international business plan and strategy.  While companies, particularly small ones, can globalize their businesses without a formal plan, it is recommended that management invest the time and effort necessary to develop an international business plan.  While all plans will differ depending on the company, its products and services, and the key purposes for conducting business outside of the US, an international business plan will typically include a comprehensive analysis of global competitive conditions and the current status of the company and then set out strategies for using foreign markets and resources as a way to improve performance across all the company’s business functions and activities.  The guiding principle in preparing an international business plan is recognizing that the markets and resources that the company needs in order for its business to be successful can be found, and must be pursued, all over the world.  The planning process also has other important byproducts, including identification of potential export markets and customers and overseas investment opportunities and organization and presentation of information necessary to obtain capital from outside sources to expand foreign operations.

The structure and focus of the international business plan will be influenced by the type of business engaged in by the company and its stage of development in its traditional US markets.  For example, for an established company, the international business plan will focus on identifying and penetrating foreign markets that are most likely to be quick adapters of the company’s existing products and services.  The plan for these companies is also more likely to include a search for opportunities in foreign countries to reduce costs of manufacturing and raw materials, while still concentrating sales activities on their home market.  The international business plan for product-driven companies, such as consumer goods companies or software and computer manufacturers, will focus on identification and exploitation of new foreign markets for their products and sources of labor and materials.  For these companies, effective competition will be based on rapid innovation, brand identity and development of local distribution capabilities.  For a service-based business, the planning process should be used to determine whether there is sufficient potential demand for the services in the target foreign market and what changes will need to be made to the company’s domestic service offerings in order to accommodate local conditions and cultural attitudes.

There are no formal requirements that must be satisfied in determining the contents of the international business plan; however, there are certain guidelines that should be followed in order to insure that necessary information is collected and all the relevant issues are considered.  While there are a variety of ways to organize an international business plan, it is generally useful to begin by describing the company’s current business, including activities already conducted outside of the US, and the main products or services offered by the company.  The next step is evaluating the company’s current position, both in the US and within the broader global industries in which the company competes.  This competitive analysis is crucial to determining the content of the balance of the international business plan.  For example, if the analysis points to softening of the US market for the company’s products, exporting strategies should be an important part of the action items in the international business plan along with the possibility of launching product development initiatives in foreign markets.  Organizational changes should also be addressed in the plan since globalization generally requires a substantial shift of resources and management authority away from US headquarters.  Finally, as with any other business plan, the working group should expect to prepare budgets, schedules and tactical plans.

While there are a large number of books and articles available on how to write an effective business plan, relatively little is available on the preparation of a business plan that is global-focused, or international.  An international business plan is quite challenging to prepare and maintain because the following key differences always need to be carefully considered:

  • While a domestic plan must acknowledge the need for market segmentation based on demographic differences within a single country, an international plan must account for the unique cultural and language differences in each of the countries designated as targets for products and services.
  • Since countries have different regulatory policies with respect to foreign participation in the local economy, the plan must include entry strategies for each of the new target markets that will satisfy applicable local law requirements.
  • An international business plan is inherently more risky due to problems in obtaining and analyzing information on local markets. As such, the company must explore different scenarios and attempt to anticipate a broader range of problems than if the company was active only in its local market.
  • While a domestic-only business plan tends to be product and sales oriented (i.e., what products should be developed and how should they be sold within the domestic market), an international business plan should be broad enough to include acquisition of resources that can be exploited back in the domestic market. For example, a company’s “business plan” with respect to a given country might be limited to acquiring low-cost manufacturing capacity or raw materials, as opposed to actually selling products in the country.

This chapter from the Sustainable Entrepreneur’s Library of Resources on Globalization covers the key steps in the development of an international business plan.  While companies can globalize their businesses without a formal plan, it is recommended that management invest the time and effort necessary to develop an international business plan.  While all plans will differ depending on the company, its products and services, and the key purposes for conducting business outside of the US, an international business plan will typically include a comprehensive analysis of global competitive conditions and the current status of the company and then set out strategies for using foreign markets and resources as a way to improve performance across all the company’s business functions and activities. The guiding principle in preparing an international business plan is recognizing that the markets and resources that the company needs in order for its business to be successful can be found, and must be pursued, all over the world.  The planning process also has other important byproducts, including identification of potential export markets and customers and overseas investment opportunities and organization and presentation of information necessary to obtain capital from outside sources to expand foreign operations. The chapter discusses the elements and special characteristics of an international business plan and the steps that should be taken to draft the plan and implement and monitor the plan once the drafting is completed.  Each of main sections of the international business plan is described with specific emphasis on content and focus that distinguishes an international plan from the plan that the company might otherwise prepare for purely domestic operations.

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