In my meetings and travels, I am approached by foreign companies seeking U.S. investment or establishing its business here. Depending on its country of origin, the foreign entity has its challenges in competing for customers in an economy well established in marketing products and competition. In contrast, many of these foreign companies might have established a strong domestic base that might not be transferable to the U.S. The key words to expanding operations internationally are the “localization of marketing strategy.” I borrow the word localization from a linguist friend who, at the World Bank, would “localize” the websites and content for each member of the World Bank. Let’s take example of a company from Spain that discussed with me its interest of distributing the milk based, Flan.
Dahl became a major distributor of milk and eggs, which were leveraged to Flan, throughout Spain. The company had established a dominant position that showed during my conversations with them. They had a certain hubris that they would have equal success in the U.S. But the U.S. is not Spain.
First, there were several Flan-type products already squeezing the meager shelf spaces at the supermarkets. I easily noticed a Mexican version and a couple of other flans by well know U.S. manufacturers.
Second, as I recently pointed out in a meeting, the Spanish or Latino market is not so homogenous. Earlier, I referred to Mexican flan, substantially different from Spanish flan. Although the flan is Spain’s favorite dessert, it is not well adopted by other Latino countries. Of 51.9 million Latinos, 63% are Mexican; the second largest population, Puerto Rican at 9.2%, other Hispanics less Cubans, 6.8%, and Cubans, 3.5%. And since the Mexicans prefer their own version of flan, I questioned whether the Spanish version can seize any of that large market share. In other words, this Spanish company had substantial hurdles to cross.
Another group interested in establishing operations in the U.S. is technological. I meet software companies attempting to sell their programming services or products in the U.S. Many have had considerable success in their own markets. Many operate in economies with nascent marketing or have been the frontrunners in their industries. And, with such success in their own markets, they feel that they can enter in the U.S. and have the same track record. Not so easy, cowboys.
Let’s take cybersecurity software. Only a few weeks ago, I attended the RSA conference dealing with Cybersecurity. Every square foot of the Moscone Center was populated by software companies demonstrating their cybersecurity solutions. There were hundreds and, just to attract anyone to visit its booth, each company would give the visitor a “swag” – jargon for a gift or prize. One company raffled a Vespa scooter. Verizon also raffled an expensive foldable bicycle. Every player, big and small, from international telecommunications companies – Telefonica of Spain, Verizon to software development companies – IBM, SAP, CA, invested thousands of marketing dollars to just have anyone visit its booth. In other words, the competition is rigorous and I doubt that their software platforms are in any way weak. The marketing collateral materials are excellent. And they employ well staffed marketing teams.
So any new international entrant into the U.S. Cyber-surveillance markets have to demonstrate equal footing with these competitors to have some chance at success. That new entrant must establish a new U.S. entity and staff it well, knowing that it needs to pump it up with cash to have a decent chance of selling any software in this market. And if this company doesn’t have the appetite to take a big bite, then it should not enter this marketplace.
What are the key ingredients to a successful marketing in another country?
- A website localized to the specific industry and culture. Of course, it must be Search Engine Optimal, more described in an earlier blog.
- Corporate Development – set up an entity to operate locally and hire personnel. It also attracts customers since they prefer local assistance in the same time zone.
- Understand your own technology in relation to the competition – review the competitive environment.
- Product Beta Launch – Attempt to see how local customers view your products.
- Regulatory. Otherwise your competitors will rat you out! – Conform to local laws and regulations.
- Personnel – Hire personnel who know the language and industry and have actual marketing experience.
- Budget – The new subsidiary must have allocated capital to handle its budget. Interestingly, if you are a foreign company doing business there, the Chinese government requires the company to have a business plan and enough capital to sustain itself for a year.
- Monitor – The corporate structure and agreements should have built in restrictions as to the subsidiary’s ability to bind legally the holding company. In one case, a new German manager agreed to purchase expensive Siemens telecom equipment without the holding company’s approval. But since the manager has apparent authority, the holding company would be bound. Yet, salespeople should have to have some leeway to bind new customers.
- Coordination – The new sub must be able to collaborate with other affiliated companies just to increase value. It must take advantage of globalization. One project in Latin America for a technology company, I had set up agreements so that the Latin American affiliates can coordinate their resources. Such strategy makes sense on a regional basis since geography and languages are close to each other.
- Strategy and milestones – set up a vetted marketing strategy and execute it promptly.
Yes – The Internet has fostered global markets and internationalization. It no longer matters where a product is being built, as long you get the information on how to build that product. The Internet does not build products, however. It does facilitate the process. One still has to have boots on the ground to sell or market products within each nation’s boundary. Or expect to lose a lot of money from easily avoidable failures.