Over the years I have sat in many boardroom meetings discussing our global expansion strategy. It usually ends up in an animated discussion as every participant looks at it from their own perspective and experience. Common themes range from "let's just hire a guy/gal with lots of experience in our product" to "we need a full blown research and market strategy".
Everyone is so excited about the possibilities and opportunities this is going to create for our company, that the key question that is never answered is "Why?". Sure, its part of the conversation and everyone has an opinion, however, its soon forgotten and pushed into the background, rather than being the measuring stick for every decision.
So why do companies fail in their expansion strategy?
Reason #1: Expansion for the wrong purpose.
Whether it be financial, legal requirements, competitor pressure, partnerships or just a great next step for the business, an in-depth discussion and fully understanding "your why" should be the first step of any expansion strategy. Simon Sinek’s “Start with Why” has been one of the most inspirational TED Talks and ideas ever since the publication of his book “Start with Why: How Great Leaders Inspire Everyone to Take Action” back in 2009. This concept is universally applicable and especially in understanding your purpose for expansion.
Reason #2: Underestimate the success requirements.
So, you understand "Your Why" and have the board fully committed to building your expansion plan. What's next?
Ensure you have the right assumptions about the nature of the market. While the US is a very large country, Europe is not one country and further complicated by language, culture, media and regulatory regimes. For success, it is important to identify one to three key market segments either by technology, vertical, location or other demographics as the area in to focus your products and services can bring the greatest value. After gaining market success and penetration in one area, this success can be replicated to new markets in an efficient and profitable manner.
Europe is not the US. A great example of failure is Best Buy. With huge plans to move into Europe and China, it's failed in both markets — mainly because consumers don't like megastores, as reported by Business Insider 2011.
Another example is American beer maker Coors, who discovered that slang doesn't always translate well as reported by Business News Daily When bringing its cool "Turn It Loose" campaign to Spain, it appears executives forgot to ensure the translation would resonate with consumers. When translated into Spanish, the tagline used an expression that's commonly interpreted as "Suffer from diarrhoea." While the campaign did make its mark on Spanish shoppers, it was for all the wrong reasons.
Reason #3: Insufficient Marketing & Sales Budget.
Launching into Europe is like starting your business again. Expecting doors to new customers to open easily is irresponsible. Many, US-based companies have tried to avoid costs by using the same marketing materials and sales presentations. For the UK, even if the English is correct, the message and content needs to address that market. If launching into other European markets then you can't make the same mistake. Not investing in market specific material is a formula for disaster.
Reason #4: Expecting significant cash flow too soon
The worst nightmare of the CEO is to run out of money. This happens to CEOs of companies coming to Europe for the first time if they underestimate the funding required to reach cash flow break even. Just because you have been successful in one part of the world does not mean a different market has the same recognition of your brand or products. The amount of time from initial market entry to revenue in Europe is a minimum of 12 -18 months. Any executive team considering the European market should be prepared for the time and financial investments for 18 months prior to generating a steady revenue stream.
Reason #5: Spending money needlessly on activities that can be outsourced
I am always astonished at what companies budget for their launch into a new market. Typically, they spend more on taking a new product to market than their new market launch budget. This does not make sense. Other common mistakes for companies launching into Europe include underestimating the operating costs in the market, ineffective sales execution, going it alone and spending money needlessly on activities that can be outsourced.
While outsourcing might not necessarily result in lower spending, at least the dollars go toward the talent that is critical for success: the marketing teams, sales channel developers, account managers and technical writers that will make the company appear to be local to the European customers. Selecting a partner that is experienced in the market, can provide you with exceptional talent, is flexible, willing to integrate into your culture and has a vested interest in your success is crucial.
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