I was recently asked to resolve a heated debate about the ‘correct’ way to internationalise a business. The debate had focused on the key point re markets. Specifically, I was asked whether it was not always the case that the first overseas venture would be where the biggest market was . The company had carried out extensive market research and had a reasonable idea of market size for 6 different international regions.

I considered my answer carefully because, whilst I did not agree with this assertion, I did not want to alienate the individual who was making the valid point that business decisions should be based on good market intelligence. In my experience many companies, particularly SMEs, embark on fairly major business ventures with only rudimentary market knowledge. So, to find someone arguing for sound market led decision making was refreshing.

However, there are often other factors to consider. At the time I thought of a few such as:

  • Distance from home market
  • Political stability Cultural compatibility
  • Legal system
  • Exchange controls
  • Funding availability.

Clearly the size of the market is important, but it may be that a smaller market opportunity is easier to take advantage of and may provide quicker financial returns.

So, I answered the question by moving the debate onto the quality and content of market research. We had a healthy conversation on what market research should contain when needed for internalisation purposes, and the list above quickly emerged as necessary before a well founded decision could be made. Interestingly, other relevant items such as local distribution channels (route to market), language and local taxation issues also made it onto the list. It was also clear that other skills and team members had to be involved to develop the research. In other words, the operations, finance and commercial teams had to get involved along with sales and marketing to generate a complete business case. With everyone in agreement (and the initial debate long forgotten), the company got to work.

The upshot of all of this was that a more balanced conclusion was reached that had the backing of the whole management team. Probably a little unusually, the company chose the 5th largest market to penetrate first, and despite my initial concern that it had taken my ‘balanced approach’ philosophy a little too much to heart, I’m glad to report that this was undoubtedly the best decision with performance outstripping expectations. This business is now the jewel in the crown and has become the template for 2 further overseas ventures with similar success.

Paul Yacoubian
About the author

Paul joined Craig Corporate in 1988 and is responsible for leading its development in both of its key service areas, business management and corporate finance. He...
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by Paul Yacoubian