Four Critical Ways To Build a Global Enterprise
August 23 2012 by ChiefExecutive.net
The circumstances of global trade and commerce have evolved markedly in the last 25 years, but in many ways it is actually easier to operate successfully in the global markets now, even though the world is more complicated and competitive. Rothman, who has been doing business internationally since 1980 outlines four key areas to getting it right.
Many factors play into deciding how, when, and where to expand your U.S. business internationally. In his recently published “Out-Executing the Competition,” Rothman sets forth a core group of operating guidelines that can serve as a roadmap when embarking into global business. Prior to joining HP, Rothman was president and CEO of Compaq Financial Services and group president of AT&T Capital. He led the transformation that enabled AT&T Capital to become the second-largest lasing company in the world.
Follow the Money. When you go global, you’ve got to follow the money; pick your spots based on customer opportunities. Too many executives deviate from this essential rule, launching businesses in certain markets without assessing the long-term impact. These companies are the ones that pay the price for shortsighted thinking.
“One my second day as head of Compaq Financial Services, a phone call came in for me from the country manager for Compaq in Turkey, Rothman recalls. “You must come here immediately,” he demanded. So much for the niceties. “If I don’t get financing to support my business, I cannot possibly survive.” Here I was, a CEO with a brand new company, no assets, no sales staff. I had confidence that we would build a strong financing arm for Compaq in due time, but a trip to Turkey wasn’t in the cards anytime soon. We got up and running in Turkey but it was a tough road.”
Avoid countries without something a uniform commercial code or that lack strong banking laws and regulations. Licensing demands must be studied, and the type of government in place is critical for your success; dealing with a democratic, free trade-oriented country is far different from trying to swim against the tide of autocratic, even dictatorial regimes. And a divisive socioeconomic structure should be a definite nonstarter.
Investigate all tax breaks, incentives, or other forms of government assistance. While these are not essential for global success, they should always be welcome.
Give primary consideration to the availability and educational environment of a skilled labor pool. Take into account the cost of hiring, training, and maintaining a workforce, as well.
We chose to locate some of our European back-office capabilities in Wroclaw, Poland’s fourth largest city with a population of 600,000. At first glance the location might not seem to be a classic first choice. Young, skilled workers were fleeing the country for a promise of work and a better life in other European capitals, London in particular. Yet we saw boundless potential. It had an eager and plentiful pool of skilled labor, government incentives, an innovative spirit and a sense of political stability. In addition, the Polish government had made a remarkable conversion over decades to the principles and practices of capitalism. Many had the language skills needed for interaction with the rest of Europe.
On paper, Wroclaw may not have seemed to be on a par with Dublin, our primary location for our European operations. In fact, at one point I turned to one of our Irish managers who had joined me with the transition and mused, “you know Poland remind me so much of Ireland 20 years ago.” “No,” he replied, “They’re much smarter than we were.” He was right; they caught on even faster in Poland.”
Of course the fundamental question is, can your company make money in this country? Ask yourself, where exactly is my opportunity? What is my total addressable market? What resources will it take to roll out? How long do I have to wait for a positive return? There are innumerable factors that can make or break a proposed expansion. In some cases, the revenue opportunity is not substantial enough to overcome the risks. That alone can drop the idea to the bottom of your to-do list.
Remember that even with all the commercial and cultural variants, there are more similarities than difference among global customers. Either they will buy your value proposition, or they won’t, regardless of where you make your case. More importantly, they expect your products and services to be delivered consistently, efficiently, with minimal fuss, and at a reasonable price.