What resources do I need to commit?
A company that trades internationally may reach a point where investing in a foreign territory appears to be a logical step. Take care to avoid the pitfalls and ensure that you are not over-reaching yourself, says Tim Hiscock, European Sales Manager at Foot Science International.
Am I ready to export?
When your business is achieving significant results in another country, there can sometimes be great advantages in having a presence in that country. This may involve employing someone, setting up a subsidiary company, or investing in a joint venture with a local partner.
There is plenty of evidence that such steps can boost performance considerably – increasing sales, improving service, reducing costs and increasing profits. But at the same time it’s important to never underestimate the risks and potential complications.
Investing in a business venture in another country is a much more significant step than just selling abroad. The investment itself will be subject to local laws and exposes the business to political and economic risks that are considerably greater. You should not be daunted by the complications, but consider the implications carefully from the start.
Conducting market research will be an important thing to do, but also consider this question ‘Am I ready?’ Do you have the resources needed to export?
Time, and plenty of it, is the most crucial resource you will need, particularly in the early stages. The actions you take in the first weeks and months will determine the success of the venture. Now is the time to make your mark on the way your venture will operate. If your business has a quality manual, take steps to incorporate the new venture into it and define procedures carefully.
Information and communications technology
Information and communications technology will also be crucial. Ensure you have a robust plan that will allow the IT systems to do what’s needed of them, and that the business possesses the necessary skills to operate and maintain the system at both locations.
Understand and respect the cultural differences of the market. Ensure that employee skills include a good grounding in the business environment. Try to highlight any major differences in culture or practice that may impact on the way you work, and have a plan for them. (Read our article about understanding and recognising cultural differences in new markets for further information and guidance).
Professional legal advice
Take professional legal advice on all aspects of the new venture, from premises, employment, insurance and legal responsibilities. Resist all temptation to cut corners. It is essential that you know the operation is going to run in accordance with local laws and practice. It will not be enough to rely on the assurance of others.
Allocate a budget for travel. You will be visiting a lot in the early days. And when you are not visiting, keep in touch frequently. It’s vital to establish a strong working relationship with the remote operation. While you don’t want to give the impression of breathing down everyone’s neck, it’s important for people to know how important the new venture is. Ask questions, give encouragement and offer advice.
How long might it take to see a return?
It’s impossible to be sure. Experience seems to suggest that most business forecasts are on the optimistic side, and this is even more so for investments in foreign countries. Much will depend on how well you understand the market from the start, but be prepared for several years of hard work before seeing any significant returns.
Investing in a foreign country typically takes place when a business has already established some custom in the territory. Keep foremost in everyone’s minds that you are doing this to provide a better service to your customers, so make sure that’s actually happening. Make a special effort to get feedback from key customers, understand their expectations and act on them.
To establish an overseas venture successfully depends on a genuine understanding of the key strengths of your business and ensuring they are replicated in your new market as far as possible.