Summary
Downturns provide significant opportunities for calculated growth by smart and aggressive firms. Global expansion, to be successful, must be calculated, targeted, and backed by willingness to persist.
Analysis
A textbook “conventional wisdom” reaction to economic downturns is to retrench and curtail growth initiatives. The predictable result is that companies with longer-term vision and more proactive risk management practices can seize the momentum from their more timid competitors.
One common tactic, highlighted in the Economist article is to ruthlessly slash costs and open their markets to lower-end customers, thereby gaining market share. There are several other ideas that innovative firms can employ to take their markets global and minimize the risk of single-market dependencies.
1. First, firms can eliminate non-cost effective channels and distintermediate non-value add middlemen. The most immediate and efficient way to accomplish this is to utilize an e-commerce site that is localized to the geographic territories the firm desires to penetrate. Direct marketing was the secret weapon in the extraordinary growth of Dell as the world’s premiere direct marketing computer manufacturer. Other examples of direct marketers with global presence include Amazon.Com, Schwan’s, FTD.com, Eddie Baeur, Blair.com, and QVC.
2. Customize business practices to local culture. Even the most effective cost cutting and down-market product design will fail if marketers fail to approach local markets “locally.” NUA indicates that 700 million of the current 1 billion global internet users are non-US. Communicating with Indonesia buyers of products and goods is fundamentally different than communicating with U.K. or American buyers.
3. Branding remains king. Many firms looking to capitalize on the opportunities of globalization overlook the importance of strong branding that transcends geopolitical boundaries. For example, the success of Tengzhong Heavy Industrial Machinery’s announced intent to purchase the Hummer brand from GM will depend in large part on their ability to leverage the Hummer name. Lenova, the PC brand that grew out of IBM’s divestiture of its PC business is a great example of successful brand transition.
4. Select global markets carefully. Globalization is not easy. It demands rigorous analysis, planning, and execution. Economic factors (including standards of living, credit, and income distribution in the potential target market), direct sales strategies, logistics, currency management, and monitoring are all key components.
5. Differentiate or die. Regardless of the product or the market, online or traditional brick-and-mortar, competition is fiercer than ever. This is true whether a firm goes global or remains domestic and competes with international firms encroaching on its market. The key to successful execution in this market is finding the differentiation point triangulated against the target market’s expectations. In low cost markets, a strategy on price may succeed but only until another competitor enters with a lower market. In high end markets, price strategies may actually backfire as buyers perceive lower value based on lower price.
A better strategy is to take an honest and unbiased view of the firm’s products and services and determine which qualities are truly better than the competition’s – then relentlessly attack competitors on those strengths.
The most promising markets for global expansion are:
- Asia Pacific (including India) – 3 billion people and growing.
- China – 1.3 billion people and the fastest growing consumer market in the world
- Singapore – ripe for telecomm and information technologies
- Latin America – Sustained GDP growth, Mexico’s current issues notwithstanding
- Immigrant Markets in the US
