After identifying a market for expansion, what should a business’s next steps be?
Devise your strategy. Explore the various options. Do you want to go there directly and set up a subsidiary of some sort? That tends to be expensive. Do you want to partner with a reseller or agent? You need to talk to them to see what kind of deal you can set up or find a reputable local company to be your strategic partner in a joint venture.
Those are the three different models. You need to investigate in-country to determine which of the three would be most helpful. Local business experts will be able to give you pros and cons for each.
How can businesses avoid cultural faux pas?
There are major differences in both the business culture and the general culture of other countries, especially in terms of how business relationships are viewed. For example, in some cultures if you go to lunch or dinner with another business person, you don’t talk about business. Eating is the time to get to know each other. You talk about business when you get back to the office.
In some cultures, it is impolite to say ‘no.’ They have other ways of saying no without being impolite. You can find out some of the basics on the Internet. Most American consulates around the world have a commercial attaché. The foreign consulates can be a great source of information. Meet with the attaché and have them guide you on the do’s and don’ts of doing business in that culture.
In certain cultures, how you deal with a man or woman would be different. Do you shake hands or not?
What other advice would you give a company considering international expansion?
Do you homework on whether that is the best place to do business. A lot of people make the mistake of setting up shop somewhere because they hear it is a good market, but don’t find out first if their product is viable in that marketplace.
We do a lot of projects at UCLA Anderson where our students do the reverse — they advise foreign companies who are trying to enter the U.S. for the first time. One small company had developed technology that scans a passport and incorporates it into the system of hotels or casinos in Europe. However, they found out that in the U.S. no one has to present their passport when entering a hotel or casino. So what is a huge need in Europe doesn’t exist in the U.S. You have to make sure you are offering something of value that can be monetized.
Gonzalo Freixes is associate dean, Professional MBA Programs at the UCLA Anderson School of Management. Reach him at [email protected] or (310) 794-6640.
