Development of efficient sales channels
For many corporations the step into international markets represents a strategic necessity for the further development of their business activities. However the entry into foreign markets needs careful preparation. A professional market analysis and the use of local networks can thereby provide valuable assistance, as success and failure lie never far apart when investing in foreign markets. Not only planning at company headquarters will determine the ultimate success, but also practical experiences with the local environment on the ground. Already to make the decision as to who of the company employees shall be entrusted with the strategic development of the new market, bears substantial risk. Studies talk about failure rates of international assignments of own company employees between 10 and 40 percent, that is why it is recommended that the person which is assuming responsibility for the internationalization should be accustomed with both worlds – the own culture of the mother company as well as the local culture of the host nation, in order to ensure their maximum compatibility.
Analyses can help where local market knowledge is missing: precise investigations provide upfront information on market accessibility as well as on-site investment conditions. Organisations in Germany as e.g. Germany Trade & Invest offer interested companies comprehensive services. It will be necessary to examine market entry barriers, market size as well as legal framework and to test the suitability of the own product for foreign use:
- Is it suitable for export into the country of destination?
- Does the product offer unique selling points?
- Is the price competitive?
- Which local distribution channels are available?
In-depth analyses need to be prepared in cooperation with local organisations and authorities and reviewed regularly for their effectiveness. For their internationalisation processes companies need personnel which possess market-specific know-how which is systematically refreshed through business trips, participations at trade fairs and conferences as well as through the development of networks and partnerships. To know and adhere to the political and legal framework conditions is of essential nature. Even if corporations do not open a branch office or production facility in a foreign country, in the case of cooperation arrangements they still assume corresponding obligations vis-à-vis their local partners.
In case corporations are not yet known in the market which they intend to enter, or do have only limited financial and personnel resources, a local network or partner will help. In case of product exports without own foreign sales subsidiary or production facility, cooperation with a local sales distributor significantly reduces the risks associated with the market entry. The obvious advantage: from the beginning you have access to established sales channels which allow faster and often more cost-efficient development of the foreign business.
Still partners will also need training on the product portfolio and support of appropriate contact persons who act as interface function at corporate headquarters. Furthermore IT and logistics processes need to be coordinated. In order to limit any potential friction, a local source of information should be identified, which is permanently available as interpreter, advisor and intercultural coach.
It is not unusual that companies who establish an own branch office or subsidiary company abroad are struggling with a shortage of well qualified personnel. All companies are dependent on experienced management for successful market development. It needs to be carefully evaluated whether local market knowledge of a manager in the country of destination or corporate and product know-how of a manager of the country of origin is appreciated higher. The appointment of a mixed management team and their mutual training constitutes for many companies an appropriate solution.