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Internationalisation: A Commitment for the Long Haul
Pelayo Corella, Joint director of the master’s course on International Retail, International Business School, Pompeu Fabra University
Businesses which grew when times were good and did so diligently gained a dimension that can now be very useful for them to continue with this process of expansion into international markets. It’s true that internal demand is taking off again, but let’s not kid ourselves – it will never be what it was. And in fact, it’s better that way, because one outcome of the times of excess is that we have experienced this long path through the desert which is now coming to an end.
So it is better to look for growth in other places, with greater purchasing possibilities and particularly less debt than domestic economies. However, if the commitment is clear, the next question is how can an SME in the distribution sector do it?
Internationalisation is a road without end. Companies that failed to take any step in that direction are now going to find it tricky. Experience and know-how are required, but so too is a certain degree of strategy.
Unless a chance to go global should arise reactively, any company keen to expand in foreign markets must first analyse its capabilities: the availability of its human resources, its financial muscle and, very importantly, its business model.
Let us make one thing clear: taking a company global is a road with no return regarding change and transformation. The whole of the company must adapt to new needs and ways of doing things. Taking on a travelling salesperson to negotiate opportunities wherever they might arise is not enough.
The fact is that without a replicable business model you can forget about expanding abroad, at least in terms of sales. And that raises the question – what is internationalisation? Many businesspeople understand it only partially. They consider it to be about conquering new markets, when it should be seen as something more cross-cutting and two-way.
A company that internationalises is one which uses all of the possibilities a globalised world allows to become more efficient. Going international therefore involves following purchasing trends in the most important cities at any given time, but also covers subcontracting or relocating production from part or all of what we are going to buy.
It’s not about opening new company-owned sales points or franchises, or negotiating corner management in a department store. At least it can’t be about that at first. That is a second stage which we shouldn’t tackle before having first profiled and perfected the business model, tested it on the local market and ensured margins and quality.
Only then will we be in a position to expand into third-country markets. Previously we must have analysed the new environment, the competition and the implementation costs, as these variables are essential for designing an entrance strategy: in some cases, the answer may be a local partner; in others, a corner in a department store, franchises or via a multibrand channel.
There is no one answer to this enigma, but there are many variables to consider, starting with the cost of opportunity and the ability for negotiation. Two companies, two strategies: both valid or one valid and the other not. That’s retail for you. There are no absolute or universal certainties and that is what depresses and discourages SMEs accustomed to short-term periods of expanding local markets: having to embark on a path which is a true adventure, filled with setbacks and problems, some of them unsuspected and which force you to rethink your plans and schedules in order to prosper.