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Beyond Budgeting: A New Approach to Annual Budgets
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Preparing For Change During International Expansion
It was Charles Darwin who once wrote: “It’s not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change”.
Business survival in the 21st century will depend on just how much firms are willing and able to compete in the global marketplace. Where at one time international expansion was a “desirable” element for senior executives of mainly large corporations, firms of every size can now no longer afford to ignore the consequences of remaining a domestic player. They realize that they must change, and accept the reality of becoming an international player.
The big question now is not whether to go global, but when. And that poses an enormous challenge for every Chief Executive, President, Managing Director, Partner and Entrepreneur. The clear message is – make steps to take your company into new international markets, or risk erosion of your own domestic market share by foreign competition and face the prospect of diminishing competitive advantage.
Of course, companies have been responsive to this reality. Many have succeeded, but many have also failed, realizing just how complex international expansion can be. On the one hand, there are those executives who fear just the thought of taking their company overseas – they believe they are a liability to their organization, and prefer to put off that task for another day, conjuring up any number of valid reasons as to why the firm should continue to concentrate on domestic business. And on the other hand there is the overconfident executives who bullishly take their firm into new markets, come what may, and with the simple philosophy that what works back home will surely be a recipe for success in new markets.
Both extremes clearly run the risk of failure – one through fear and procrastination, and the other, even worse, through blind arrogance. And in between these extremes there will be the normal corporate politics, errors in judgment, long lead times to market, failure to win contracts, spiraling costs, an “us versus them” attitude between headquarters and local subsidiaries, and so on.
Faced with this level of complexity, what elements form an effective blueprint for ensuring business success in global markets? With the increasing onus on small to mid-sized firms especially to go global, what is the best recipe for efficient and cost-effective international expansion? If the truth be told, there is no single recipe for success. Panaceas abound, and the collective effort in recent years by academics, scholars,
consultants and economic development agencies the world over to provide solutions is there for all to see. The problem is that very few executives have the time to really internalize the wealth of information out there and apply that information in their everyday working lives.
There are two principle ingredients for success in international expansion. The ingredient is associated with the process of entering new global markets, i.e. do I have a template in place for making most efficient use of my existing and available resources, and have I set realistic timeframes and budgets for achieving profitability overseas, whatever my market entry program?
But that’s not enough in itself. In fact, that’s only half the battle. With globalization as a fact of business life, there is an increasing emphasis on developing an effective international mindset within companies. That means making sure you have an international champion in your firm to build international capabilities top down. It means ensuring that HR and personnel strategies are in place to recruit and retain seasoned internationalists, and making sure these candidates have the proven international experience and linguistic capabilities they say they do. It also means training and providing your staff with incentives for overseas assignments. Above all, the creation of an international mindset comes through a willingness to learn, adapt and change.
The organizational learning curve is steep when expanding overseas. But if your management team and your teams embrace learning, adapting to new environments, recognizing that mindset and process are two interdependent factors of success, you are already responding well to change, and you have the basis for overseas success.
Renarc has just published a booklet called 104 Practical Considerations for International Success and can be downloaded from its website at www.renarc.com The busy executive should treat them as observations, a set of practical tips and a quick reference guide for constant referral at every stage of the international expansion process.
ABOUT THE AUTHOR
Trevor J. O'Hara, is the founder and president of Renarc, a consultancy that specializes in helping firms with international expansion. O'Hara is a seasoned internationalist, having lived and worked internationally for the last twenty years. Educated in Dublin, Oxford, Paris and Berlin, and with fluency in German, French and Spanish, O'Hara now speaks and writes internationally on how to achieve global success.
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