From increased revenue and a competitive advantage, to decreased costs and access to talent pools, there are numerous advantages to international expansion. However, business leaders must be careful not to jump the gun on global growth. Opening operations in a new country without being fully prepared could quickly take funds away from the bottom line. Gregory J. Newell, chairman of the International Commerce Development Corporation (ICDC), advises, “we have to look at the process, the fundamental underpinnings by which a company can rationally, strategically consider going abroad.” Newell offers three important elements of a rational approach to international expansion—vision, mission, and strategy.
Newell claims, what is “most important is for a company to have a vision of a global enterprise. Without vision, you’re really dealing just opportunistically as opposed to strategically.” Organizations must establish why they are going abroad before they start taking steps to make it happen. They must have a clear purpose in expanding their operations on a global scale. If international expansion is not built into their vision, organizations will likely falter once the circumstances that enabled their entry change.
What should an organization’s vision look like? According to Newell, the ideal vision is both broad and deep. He claims organizations must broaden their visions as new contributors take the places of original founders and as circumstances change in the world and society. Newell asserts that the problem with organizations’ visions is that they tend to be situational and founded in the surface level desire for short term results tied to money rather than revenue. They are not broad or deep enough.
With a clear, deep vision in place, an organization can then develop its mission. What is the difference between a vision and a mission? Newell answers, “a vision is what you see, and a mission is what you do to achieve or realize the vision.” Missions develop as organizations translate their vision into action items. If a company’s vision entails global expansion, then their action items will involve reaching individuals and markets overseas. Consider the TOMS corporation as an example. After seeing the hardships of children without shoes in Argentina, TOMS founder, Blake Mycoskie, established a vision to “improve lives” around the world. With this vision in place, the organization has developed and grown its mission: to improve lives by giving shoes, providing eyewear, delivering clean water, and training birthing assistants for those in need, wherever they may be.
Sometimes organizations must consider multiple routes through which they could work towards their mission and choose the ones most closely aligned with their circumstances and available resources. As companies carefully develop their mission statements, their vision will transform, turning grand ideas into tangible realities.
Strategy is how organizations execute their missions. To be successful, the organization’s strategy must be clearly tied back to its specific mission and vision. Companies can’t just deal opportunistically. Newell emphasizes this need by recounting how one organizational leader almost got sidetracked away from a strategic foreign market entry by a seemingly grand opportunity. The organization was planning to enter Japan when this leader realized that his connection with a commerce official in Peru would make the entry into Peru less expensive than entry into Japan. The problem, however, was that entering Japan would be significantly more successful at achieving the company mission and vision—with entry into Japan reaching a market of around 600 million dollars while entry into Peru would lead to a mere 10-million-dollar market at the most. The choice was clear when strategy was weighed above circumstance.
With the vision of a global enterprise, and appropriate missions connected to that goal, international expansion will both be a piece of the company’s overall strategy and require a strategy of its own. To develop a complete expansion strategy, organizations must consider a wide range of factors. For example, Newell and the ICDC look at population, culture, language, GDP, GDP growth rates, purchasing power parity, ease of doing business, legal environment, rule of law and respect for contract, transparency, political stability, company infrastructure to support international expansion, pricing, parallel import considerations, taxation, repatriation of funds, risk capital, and the requirement for extraordinary patients. That’s a hefty list but missing one important detail could lead to disaster for a company expanding internationally.
Failure to consider such factors can lead to unsuccessful expansions. According to Newell, many U.S. companies have failed trying to enter Canada because they approached the country as a “51st market” in the United States—rather than as it is—a separate country with different regulations, policies, and procedures. Newell explains, “every market has nuisances that differentiate them, even from their neighbors.”
International expansion offers many benefits but can be deadly for organizations that jump in without much forethought. In order to successfully expand abroad, organizations must establish their vision and determine if global expansion is a part of that vision. Further, international expansion itself requires strategic planning. Newell’s summary point is that organizations must, “form—based on deep research—the rationale to enter markets which makes sense for [their] goods and services abroad.” Further, they must focus their actions on strategic development as opposed to opportunistic events that occur.
For more insights on international expansion, view Gregory Newell’s Global Perspectives Summit 2020 presentation here.