Internationalisation strategy: how to build it
Having seen what the benefits and risks of internationalization are, let us see how these factors can be managed.
The essential tool for this is the internationalization plan.
It is a document in which to condense goals, data and assessments relating to the company’s project.
Obviously, each reality constitutes a case in point, and this results in a different structure of the plan.
Before proceeding with its drafting, however, there is a fundamental step for every organization: the preliminary check-up. Let us see what it is.
Are we ready to be international?
The check-up is a process to assess the readiness of a company aiming to be international.
As we have said, this activity cannot be improvised, which is why it is necessary to know beforehand whether one is ready to take on the risks and opportunities of the project.
There are four elements that must be assessed:
- The level of commitment in the company: all company departments need to be convinced that they want to invest time and resources in the project. This is the only way to be truly aligned on the objectives and to deal with possible mishaps along the way.
- Real knowledge of the product/service: it is essential to really know your product or service, its strengths and weaknesses, the needs it has met in the domestic market, the way it has been sold, the requirements in terms of supply and beyond. Only in this way is it possible to understand whether and how to adapt it to new markets, in the case of export projects, or more generally what strategies to develop there.
- The ability to adapt to the international context: it is a matter of possessing (or being able to find) the skills with which to enter the foreign market. The first hurdle is that of language; management must be able to communicate in the correct way at all times, and it is often necessary to use specialists who can act as intermediaries.
- Financial coverage: any project requires the right funds. The initial check-up makes it possible to find out which funds are available for internationalization and whether external financing is needed.
The internationalization plan: the essential elements
Once you have checked that all the necessary conditions are in place, you can move on to drafting the plan.
Here are the elements that must not be missing from it:
- Goals setting: what results do we want to achieve abroad? In what timeframe? This process involves the analysis of both qualitative and quantitative information. Here are some examples: the turnover levels to be achieved, the number of new customers to be identified, the characteristics of the suppliers to be found, the specifications of the product/service to be developed
- Financial analysis: how are the project resources to be allocated? What costs are expected? What is the expected return on investment? What external sources are needed?
- Target markets selection: which areas are most suitable for the strategy? What characteristics do they have in economic and cultural terms? What business opportunities do they offer and what is their risk profile?
- Partners identification: which companies and institutions should be partnered with?
- Results evaluation: have the initial objectives been achieved? What are the problematic aspects to be corrected? Which ones need strengthening?
Starting from these questions, let us see how an SME can build an internationalization plan.
Developing the plan: an example from the B2B world
The structure of a small or medium-sized enterprise is not the same as that of a large multinational.
If the latter can manage an internationalization project independently, for example by setting up distribution centres abroad, the former will have to proceed differently.
Let’s imagine, for example, an SME specializing in moulds for rubber and plastic components.
With a solid presence in three EU markets, the company’s management decides to look at sales opportunities in the still unexplored Netherlands. At the same time, the company needs to reorganize its supply chain, opting for a foreign supplier offering specific machinery.
The first step is the check-up: is the company really ready to target a new market?
The product knowledge accumulated over fifty years of history and a budget allocated at the beginning of the year make it possible to answer the question positively. As far as the capacity to adapt to the market is concerned, previous experience in economically and culturally similar countries allows reducing cultural barriers.
Now is the time to define goals.
The sales department aims to find at least two new business customers by setting a minimum turnover threshold. For machinery, it is decided to conclude a new contract for the purchase of new mould milling machines by the end of the year.
Having precisely defined the budget available, we come to a crucial stage.
We are talking about the analysis of target markets, both upstream and downstream of the value chain in which the company operates.
The first objective is to identify potential customers specializing in the production of plastic fasteners for the automotive sector.
With regard to suppliers, on the other hand, for the first time the mould manufacturer will have to compare different countries and evaluate the most suitable one to acquire the machines that the current partner is unable to offer.
In both cases, the solution is a tailor-made market analysis. The first is aimed at mapping the Dutch manufacturers of plastic fasteners for the automotive sector, while the second provides a snapshot of the concentration of potential suppliers in three countries: Germany, Hungary and the Czech Republic.