Otsikko

Otsikko

19 December 2013

Ass laden with gold and other means to conquer new international markets

Philip, Alexander the Great 's father, is said to have remarked that with a gold laden ass one can conquer an invincible castle. Such tactics are not appropriate in today's market conquest, but instead, this post presents some ideas on how a company can make its path to international markets easier.

As a prelude an example of GSM system sales in Germany early 1990s. Initially, our main target was just licensed mobile operator, Mannesmann Mobilfunk or briefly D2 (now Vodafone Germany). Our starting point was not good. As a system supplier, we were very poorly known in Germany, and we did not have anybody in the country to promote our business.
But after all, we had something over there: TV product development, manufacturing and maintenance, PC maintenance, cable machine operations and much more. Some of our German operations were also global market leaders, e.g. in rubber mats for airport luggage carousels. We utilised these assets to build our marketing messages: our local presence, commitment and capabilities to support mobile operators. But we were beaten. That time we did not win the D2 deal. But we learned and gradually built a more solid foothold in Germany - and as a result won very significant deals with Telekom (D1), E-Plus - and also with D2.

In the following paragraphs we take a closer look at where companies can find building blocks to break into new markets.

Other businesses 


A company, which already has an existing business in a new country, should make use of it. Typically, a new business is not known, it lacks credibility, it is not seen trust-worthy and it is missing connections with potential customers and other business-critical players.

An existing country commitment sends a strong signal that also the plans related to the new products are serious and long-term. Secondly, local company infrastructure, such as offices and websites, can be used as stepping stones for building local presence. Thirdly, it is possible to use the relationships and contacts created by the already established businesses and their key personnel to lower the barriers to create new customer relationships and other partnerships. Although in the German example above, we were not immediately able to achieve positive results, credibility and support created by our other German businesses greatly reduced the time to close the first deals.

Local partners


If a company does not have prior operations in a target country, also partners can become helpful. Besides rapid establishment of activities, partners can provide, for example, complementary resources, required local flavour or existing relationships with target customers. For example, we managed to win a GSM system deal with Austrian Federal Telecommunications Authority (ÖPTV) through partnerships with local Kapsch, Schrack, Siemens and Alcatel. The biggest benefit was getting involved in local, slightly political decision mechanism, but the partners contributed some know-how assets and customer understanding, too.

The spectrum of potential partnerships is very broad, ranging from agents and representatives to manufacturing cooperation and mergers and acquisitions. Besides longer term goals, also risk and control are important factors to consider when selecting partnership models. For example, a local distributor or reseller responsible for customer sales minimises risk, because there is no need to invest in offices, distribution, sales force, marketing and customer support. On the other hand, control of the market is reduced: for example, what kind of market activities are conducted and how much customer and market understanding is accumulated. All this limits degrees of freedom in company's future market operations. Greater control generally requires greater own investments - this also makes it possible to better define company's  future aims.

Piggybacking


It is also possible to follow internationally domestic or other established market business partnerships. This is called piggybacking. Typically, customers and distributors are the players that you should look at.

When a principal company expands its operations internationally, its suppliers often have an opportunity - in practise often an obligation - to follow it. Especially in the B2B markets, this is a useful model of internationalisation. It is usually assumed that a supplier will invest enough in new markets. Besides sales and customer support, it may mean building of operations and R&D capabilities. But there is a risk that resources are too much focused on the original client company. This makes it difficult to acquire new customers in the territory and exposes the supplier too dependent on one principal's business fluctuations. Nokia mobile phone business and its subcontractors are an excellent example of this. Nokia pulled for example, Elcoteq, Perlos and Savcor to new markets, where these companies were not able to adequately expand their bridgehead positions.

If distributors, system integrators, retailers and other distribution chain players manage to create on one of the markets healthy and successful business with a company´s products, they have a strong incentive to try to repeat the same in other areas too. Distribution partners may be already present in these new countries or the countries may be for some reason easily accessible for them. If a company does not create own understanding of new market needs and potential, its long term operations and success may be at risk. As an example of distribution cooperation we look at the Spanish system integrator, Omnilogic. Over the years, we had successful cooperation in Spain, where Omnilogic took care of close to all customer contacts and deliveries. Later, the company expanded into Mexico and South American countries, thus opening the markets also for our products.

Other opportunities for international expansion may appear, for example, through technology vendors and financiers.

Digital tools


Digital marketing and sales, as well as compelling content, are a great way to pave the way for the creation of new markets. The key is to create in the target market company awareness among potential customers, their trusted thought leaders and other key stakeholders. Company website, localised for the new markets, is the centre of all action, providing target groups with important and interesting content. The target is to attract visitors to the website by participating in discussions both on traditional and social media.

In many cases, it is also possible to acquire customers through the web. A localised, or even an international online store, together with content marketing, can attract leading-edge customers. These are very important as the company penetrates more deeply into the new markets.

Modern inside selling tools can be used to sell also quite demanding products without a local presence. If, however, the complexity of the product, or other factors require local support, inside sales can assist to successfully pass the first customer decision criteria, thus creating better pre-conditions for the expansion to new countries.

Different business model


Business models that are different from the ones used in established markets are often a good way to penetrate challenging markets. There can be changes for example in monetisation logic, ways to approach customers and company's offering.

Licensing is natural for the companies that own a specific factor that is important for competitiveness. Such factors may be the brand of a product, its design, technology or manufacturing process. Licensing is also a risk-free way to get a new product on the market and customise it to local requirements. A locally established licensee partner gives an end product a local flavour, so licensing is particularly suitable for countries with high entry barriers. The challenge is the legacy that licensing creates, if a company later tries to build deeper market operations.

Franchising is a fast way to build a presence in new countries. Typically, it is used for providing consumer or business services.

Nokia's U.S. market entry utilising Tandy - Radio Shack brand and distribution chain is an example of complying to local requirements in customer interface. In a similar manner, Nokia cooperated with Alcatel and AEG in GSM base station development and marketing to create access to new, previously closed markets, such as France and Great Britain.



Spearheads


Spearhead tactics can build a beachhead in a new country. The goal is to use a selected product or service to create relationships with first customers and then deepen this relationship by selling more. Since the first deal is not yet meant to produce profits, pricing can be aggressive or the product or service can be even provided free of charge. Low-cost experiments, or pilots, are often used to reach the same target. The Internet makes it easy to create free service offerings, whose sole purpose is to market a company and make actual product sales possible.

The last example is from the same country as the first one, Greece. We sold the local Telecommunications Authority, OTE, a cellular network planning and measurement tool. The sale was not as such profitable, but it enabled us to create a client relationship and also awareness of our capabilities in the market. Later, we were rewarded handsomely.

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