Nowadays I hear about international companies from Asia or the Middle East interested in rolling out U.S. technology companies. Yet they do not apply strategic analysis before entering the markets. Well financed, they hire the wrong type of U.S. manager – a programmer or a senior expert in the field to roll out the operations, without developing a strong business plan or hiring a business development manager first. And many fail because of the lack of analytical exploration of the targeted market . A business development manager with roll out experience, with the ability to analyze each nuance of the potential issues can lead to greater success to their endeavors.
A former marketing colleague of mine described to me a recent software project financed by a Chinese company interested in building online education network between China and the U.S. The foreign company hired a former school superintendent, who, as a former employee of a New Jersey school system, had no private sector experience. The long term objective of the business plan was to develop a sophisticated secondary online system to prepare Chinese students for attending U.S. colleges and universities. Now the superintendent did have the experience in preparing a high school academic curriculum. As the superintendent came from New Jersey, he prepared the curriculum based on that state’s requirements. However, not having business development expertise, he skipped a major regulatory hurdle. For the educational on-line curriculum to be certified, the program had to originate from a “brick and mortar” school. As president of the company, he developed the software curriculum without considering regulatory requirements. The Chinese company dismissed the former superintendent on account that he did not evaluate the potential problems. Currently the Chinese company is evaluating the acquisitions of other brick and mortar schools throughout the U.S. How much time was lost by not having done the appropriate regulatory studies aside from the capital invested so far?
I know about another foreign company interested in developing a U.S. market without thinking about the potential local issues. A former colleague has been invited to be a tech co-founder by a Middle Eastern company. Here the foreign investor claims that he has raised the enough capital to develop a U.S. based social networking scheme, which allows the users to extol or post a review the quality of a purchased product to be shared with friends. The foreign investor claims that the considerable success in his country is reflective of the potential growth in the U.S. My first question is, given that the previous success stems from a foreign market, where are the studies that support that conclusion?
The value for U.S. based social network software platforms such as Facebook has dropped tremendously. Networks interested in a potential IPO, for example, Foursquare, have disappointed investors with their revenue. And the competition is fierce. The U.S. has many social networking sites; Wikipedia lists over 80 working social networking sites. I personally have not investigated how many networking sites exists in the foreign investor’s country, but I would say that the U.S. market is extremely crowded and some have sufficient financing to develop a product similar to the proposed one. And the brief description does not reveal any proprietary technology or market that would lead to seizing any sizable market share. So would it pay to enter the U.S. market with this platform?
These are management missteps. International business development handles the most important market analysis factor: understanding a foreign market and its culture. These two companies did not undertake such analysis. Simply they have gone head on into a market without considering the peculiarities of the foreign market. I have also witnessed the same problems when U.S. companies expand internationally. The rule should be that if the software platform or product works in your market, do not automatically assume that it would work in the foreign market. Explore the differences carefully in culture, regulations, econometrics or even engineering. Analyzing these differences beforehand will avoid headaches later on.