Before breaking into the global marketplace, a company should prepare itself for what lies ahead. Plans should be made in three key areas to ensure international success: create a global business plan, decide how to operate, and choose an organizational structure. Each area is key to the success of an international business.
Anyone with entrepreneurial experience is familiar with the concept of a business plan. The plan lays out how the business will run and how it will succeed. When entering the international marketplace, even a well-founded domestic business should develop and maintain a global business plan. Take for example the case of health and hygiene manufacturer Kimberly-Clark (K-C). K-C was founded over 135 years ago as a pulp and forest products company. In the intervening years, K-C has developed into a $16.7 billion company with 55,000 employees worldwide. Despite all its success, K-C maintains a global business plan and works hard to make the plan a reality (Heffes, 2008).
When planning how the company will operate internationally, several questions must be answered. First, how will the company get its product to the target market. It can choose to use an agent that acts as an intermediary between the company and the market. Or it can choose to sell to a distributor that then handles dispersing the product. Another option available to the company is to set up a production facility in the market and handle sales and distribution directly (Wild, Wild, & Han, 2008).
Another related operational concern is how products will get from the home country to the host country. In the case of direct sales via an in-country production facility, this concern is more about in-market distribution. Nevertheless, transportation of goods is a critical concern to the operation of the business. Just as receiving payment is. If the company chooses a local distributor or agent, it is important for both parties to choose a payment method that is agreeable. If there is a high degree of trust between the company and it’s local representative an open account or advance payment makes sense. If the company is dealing with the distributor for the first time, it makes more sense to contact their bank and arrange a documentary collection or letter of credit. Both methods substantially reduce the risk for both parties but add fees and logistical headaches (Wild, Wild, & Han, 2008).
Finally, the company must decide on an organizational structure. It can choose to be ethnocentric and send its own managers to the new market. This method ensures that the organization is run as the home country would expect, but has the disadvantage of being problematic in countries with strong cultural differences. At the other extreme, the country could choose apolycentric staffing method in which all management is local. This avoids any cultural differences but makes it harder for the company to ensure the local subsidiary is being managed as expected. The final staffing option is geocentric. In this situation, the best qualified managers are sent to manage a facility. Although expensive, this method puts talent where it is needed most and maintains a high level of company cohesion (Wild, Wild, & Han, 2008).
Heffes, E. (2008, January). On Track with Its Global Business Plan. Financial Executive, 24(1), 20-23. Retrieved January 15, 2009, from Business Source Elite database.
Wild, J. J., Wild, K. L., & Han, J. C. (2008). International business: The challenges of globalization. (4th ed.). Upper Saddle River, NJ: Pearson.