Introduction
Introduction
I suppose it was my curiosity that launched me headfirst into international business.
My journey began almost twenty-five years ago on a flight back from a business trip with the COO of our company. We enjoyed a candid working relationship, so as I listened to him air his frustrations about our struggling operation in Mexico, I was asking questions and making observations.
As he talked about our struggles, I was struck by how “American” our approach was with what was truly a Mexican company. This wasn’t a maquiladora, a manufacturing operation on the Mexican border that exists to bring goods back to the United States. This company had its base of operations in Mexico City with a production plant in Tampico and served Mexican customers. Yet we operated as if the customers were Americans and played to those expectations.
I pointed out this disconnect to the COO. He paused for a moment to consider what I said before offering a response that changed the trajectory of my life.
“You should be the one running the operation in Mexico,” he said.
“Me?” I laughed, sure he was kidding. “I’ve never even been to Mexico!”
“Craig,” he deadpanned, “you can’t screw it up any worse than we’re screwing it up now.”
Having no international business experience, I wasn’t sure if that was true. But shortly after our initial conversation, I accepted a new position as the Director of Latin American Operations. My wife’s reaction to the news showed how unexpected my entry was into the world of international business:
“Isn't there someone at the company who knows more about this than you do?”
Once in Mexico, I saw mistakes being made and worked to correct them. Along the way, I made plenty of mistakes myself. We acquired a second business in Mexico, began distributing in Uruguay and Argentina, and created a bigger penetration for the company in Mexico by bringing products in from the U.S.
Things went surprisingly well for a guy with no experience. After our success in Mexico, I was tasked with turning around an equally challenging business we had in Italy. At the same time, I served as our company’s supervising representative for a manufacturing joint venture we developed in China.
I’d started as a guy whose curiosity thrust him into uncharted waters, but since getting my start in Mexico, I’ve developed a passion for international business that I’ve carried throughout my career. I left the company in 2005 and now work as a consultant, educator, and public speaker. In 2013, I was honored to be named the “Trade Educator of the Year” by NASBITE International.
Looking back, it seems the COO had been right—I didn’t screw it up.
Now I want to help you not screw it up with your international business endeavors.
You Don’t Need to Go It Alone
Many entrepreneurs, when they start a business, treat it like their baby. They love this idea they’ve brought to fruition with lots of sweat and tears and are understandably proud of their business and what it represents. They embody the timeless ideal of the self-made man or woman and we applaud their tenacity.
But there’s another side to this “do-it-yourself” approach that comes to light when owners try to tackle international business challenges all by themselves. Rather than use the resources at their disposal, they approach new problems like they’re the first person to ever face them. The go-it-alone approach may work in a familiar home market, but abroad, it’s frequently the fastest path to a company’s premature demise.
The other scenario is that people like my younger self are put in new positions and must navigate their unfamiliar surroundings with limited experience. Companies aren’t wrong to use international markets as opportunities to grow and develop promising talent, but they’re taking the wrong approach if they don’t equip their employees for success.
It’s true that “business is business no matter where you do it” in the sense that you’re using strategy and execution to earn a return on investment. But the context in which the business occurs has a huge effect on the right approach and the chances for success. If you want to succeed internationally, there is no “one-size-fits-all” approach.
In both cases, the key to not screwing things up internationally is to seek help when you need it and learn from the experience of others. That way, you avoid the obvious pitfalls that would sabotage your company’s progress in a new market.
Help Insure Your Success
If you’re an entrepreneur, you can’t go at it alone internationally; or if you’re like I was and find yourself in unfamiliar territory, you have to learn quickly on the job. Luckily there are numerous resources available that can make your life easier.
One that I’ll recommend is your local World Trade Center. There are 319 World Trade Centers around the world that are part of the World Trade Centers Association and most every major city has one.
Some, like one I’ve worked out of in Manilla, are like executive office spaces you can use if you need a place to work while you’re in town.
Others, like the World Trade Center Denver where I served as president for a couple years, offer training for companies of all sizes. We can help you with everything from international business and marketing strategies, to the nuts and bolts of how to do export documentation and regulatory compliance properly.
Another resource for American companies is the U.S. Export Assistance Center (USEAC), run by the Department of Commerce and the Small Business Administration. Most major U.S. cities have offices, and abroad, each U.S. embassy has a senior commercial officer and a support staff that advocate for American business interests in that country. They’re an excellent resource when you’re considering an international venture.
For example, if I’m a business owner in Denver and I’m looking for a distributor in China, I can visit the local USEAC office and connect with the commercial officer’s staff located where I’m looking to set up shop. The Denver office might also have an Asian market specialist who could prep me on taking my business to China.
Other government agencies also provide assistance. If you’re in the food production industry, for example, the Department of Agriculture has offices in many foreign countries and can actually be more of an asset to you than the USEAC. At the local level, most states have offices for economic development with an international trade component.
The Wrong Approach May Provide a False Sense of Success
At this point, you may be saying to yourself, “What can these offices provide me that I can’t find myself? I meet people at trade shows and through industry contacts. Can’t I partner with one of them?”
To answer that question, let me tell you a story about Tom, a small business owner who I helped as a consultant, and how his experience with a Chinese distributor he met at a trade show went horribly wrong.
To hear Tom tell it, things started off smoothly. The two of them hit it off at the trade show and decided to work together to bring his product to a new market. Tom would visit the distributor in China, and on his way back from each trip, he’d write himself a memo detailing how the visit went. His first memo reflected an upbeat attitude as things got off to a wonderful start.
Coming back from his second trip, Tom’s tone began to change. After traveling with a sales rep to visit customers, he began to think the distributor had been overselling the product. Things took a turn for the worse after the third visit, when Tom actively began using the word “negligent” to describe the distributor’s behavior.
He worried that his product, which essentially allowed pressure release in fluid flow manufacturing processes, could be installed incorrectly and cause an explosion.
After his fourth and fifth trips, Tom began to wonder if the distributor’s behavior was criminal. He weighed whether to terminate their relationship. On his final trip, he couldn’t locate the distributor or contact him.
When he visited a trade show, he found his original distributor’s relatives selling a knockoff version of his product.
“I don’t know why it was so difficult,” Tom told me. “He seemed like the right guy when we met. How else are you supposed to find a Chinese distributor?”
Ignoring the fact that China has plenty of qualified engineers among its population of 1.3 billion, I asked Tom if he’d consulted with anyone at the USEAC office.
He had no idea what I was talking about.
“What about the World Trade Center?” I asked him.
“The World Trade Center?” he replied. “You mean the building in New York City?”
Tom assumed that because his small business had a couple million dollars in sales annually in China, his approach was the right one. He was blazing a trail that—in his mind—nobody had ever blazed before. Had he consulted the local help that was available to him, he could’ve connected with a reliable Chinese distributor. Instead, he got a partner who knocked off his product and led to a messy legal action and even worse business situation.
Don’t make the same mistake as Tom. Seek assistance before going international.
What Happened to MySpace Could Happen to Your Space
You need to carefully consider many factors before taking your business international. Sometimes, subtle differences between cultures can cause businesses to fail just as quickly as those drastic, obvious differences.
Most of the time, when companies rush into new markets unprepared or select the wrong markets altogether, no amount of money can save them from failure.
MySpace provides a great example of a company that, despite vast funding and resources, faced numerous challenges abroad because they underestimated the impact of cultural context on their success. That’s not to say MySpace faded into obscurity due to their failures internationally, but that certainly was a contributing factor.
For those of you who’ve forgotten about the site (which is perhaps the point of the story), MySpace owned 75 percent of the U.S. social networking market as recently as 2006. Facebook was second at 12.5 percent.
In 2005, MySpace was acquired by News Corp, Rupert Murdoch’s global media conglomerate with roughly $30 billion in revenue and $62 billion in assets. News Corp made the acquisition because they saw that within a couple years, the social media market was set to balloon from a $280 million industry to a multi-billion-dollar industry.
If all MySpace did was maintain its market share, it would grow 400 percent in that time.
With the market leader in its pocket, News Corp embarked on an aggressive expansion of MySpace overseas. But instead of targeting areas where their product aligned with cultural values like it did in the U.S., they saw the world as their new market. Given their domestic success, every country must be dying to have MySpace … right?
As it turned out, even their base assumption was wrong—companies elsewhere had also figured out social media and had established a foothold. Suddenly MySpace wasn’t the big player who owned the market; they were a well-funded startup trying to unseat competitors who had a massive head start in their new markets.
In the United Kingdom, for example, they were quickly eclipsed by Facebook, who targeted England as one of their first markets abroad and had left little room for MySpace when it arrived. In other markets, there were already homegrown social media sites gaining traction and much more in tune with local cultural norms and tastes.
In Russia, MySpace saw a market where the number of internet users had exploded. What they didn’t see was that the online advertising market that MySpace depended on for revenue hadn’t matured there at the same rate it had in the U.S., so the actual opportunity in that market was far smaller than they’d anticipated.
In non-English speaking countries, the language barrier was a huge stumbling block, both in terms of the words on the site and the coding needed for such changes. The best example of this issue popped up in Israel, where the people not only speak a different language, but read right to left instead of left to right. MySpace had to redesign its site infrastructure just to bring its product to customers in one small market.
Then the company ran into cultural issues that weren’t readily apparent. The Japanese culture, for instance, values the group over the individual. A website that emphasized the individual as much as MySpace did was a total mismatch for their cultural values. Something as innocent as choosing your favorite bands or books on the site would be seen as differentiating yourself from your group identity and making it all about you.
In an effort to match those cultural values, MySpace tried to change its value proposition and became more like “OurSpace” in Japan. As we’ll discuss in the next chapter, very rarely can a company change its value proposition to fit a new market and expect to succeed.
Countries in the Middle East, where relationships between men and women are policed differently than in the U.S., also posed a significant challenge. If your product is built around the open exchange of ideas between all people, how can you expect to find traction in a country where that concept is more tightly regulated?
Unforeseen problems also popped up surrounding the complementary infrastructure that allows MySpace to function, like fast internet. Not every country MySpace went to had fast enough internet to support the site, which undermined the user experience. At the other end of the spectrum, South Korea had high-speed internet that already supported streaming video, so the MySpace experience underwhelmed users in that country.
It would’ve been crazy to say in 2006 that MySpace would end up as a footnote in the annals of social media history, but their sloppy approach overseas combined with the ascension of Facebook sealed their fate. Now they exist as a People/Entertainment Weekly-owned entertainment site that caters primarily to musicians.
MySpace is also a sobering case study for small and medium-sized businesses that can’t afford to absorb the losses that News Corp did with MySpace. Since their margin for error is much thinner, they should learn from the mistakes MySpace made.
You May Have Only One Chance to Get It Right
One of the lessons we can take from the MySpace example is that a surface-level understanding of the cultural context in your new market is not enough to establish business operations there. You need an intimate knowledge of the worldview held by customers there, so you can determine how your value proposition might resonate.
This truth applies to businesses of all sizes. One of the amazing developments of the past decade is that, thanks to the internet, the global marketplace is now accessible to even the small mom-and-pop operations doing business out of their garage or basement.
In my work as a consultant, I got to know a husband and wife team in Denver who sell baby carriers and 70 percent of their sales are in Europe. Isn’t that incredible? Of course, their success wouldn’t be possible if they hadn’t researched new markets, scouted out the competition, and focused on the market that was the best fit for their product and business. They took the appropriate steps to ensure they were not only filling a need for new customers, but doing so in a way that was profitable for them.
It’s a cliché to say business owners should think globally and act locally, but that’s the mindset you must adopt in order to succeed. What we see as the global market is in fact thousands of local markets, each with their own set of cultural drivers that will dictate if your international venture is profitable or falls on its face.
If you fall on your face in a new market, that’s probably the end of your opportunity there. MySpace didn’t get a second chance to make a first impression in countries like Israel and Russia. The former market leader gave users such an underwhelming experience that they could never recover against competition like Facebook or more focused regional competitors.
There are exceptions to this rule: global companies like Coca-Cola, Apple, and GE can have hundred-million-dollar mistakes in international markets and find success down the road with a new approach. Most small and medium-sized businesses can’t throw millions at the wall to see what sticks in a new market—it would destroy their existing business.
In that sense, you have one shot at going international with your business. You owe it to yourself to plan accordingly so you can get it right the first time.
