UKRCHAM :: Internationalization

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Internationalization

	Market related success factors

	Key for success is knowledge about the market(s) in which enterprises intend to be active. Market size, growth, potential consumption, competitive situation, size and structure of business relevant costs, structure and profile of competitors and potential customers are important to know, but not always easy to get.

	Governmental related success factors

	Companies not very well versed in international trade are facing new and different challenges, i.e. international contract law, tariff- and non-tariff based trade obstacles, anti dumping customs tariffs, special legal rules and regulations like DTT (double taxation treaty), accounting rules, and so on.

	Socio-cultural related success factors

	Socio-cultural differences between home and guest country conceal many risks. in particular by selecting PR campaigns and marketing strategy, oral and written communication with customers and suppliers and the public. Misconceptions surface very quickly when not taking into account language and lingo throughout the new country, behavioral attitudes and management style.

	Enterprise related success factors

Keys for success are strategic resources like capital, international experience and depth of information. Even when owning or buying externally all these resources it is important to bring in its own share, because cooperation with special advisory bodies or agencies can help but also create new risks of dependency.

Critical is the resource information, it is not the easiest to collect sufficient data in new markets. Either they are hidden in the most unlikely places, or they are very complex to interpret or they are simply not available. Since Western management processes are based upon qualified data, very often easy to get data are preferred than none to make a decision.

	Product/brand related success factors

It seems to be a basic truth that success depends on quality and specification of the product. Less clear seems to be the fact, that these characteristics are very different from country to country, from market to market.

To be clear about: With very few exceptions, products are not interchangeable between markets. A sound analysis of necessary modifications is needed to test the acceptance rate and modifications. Also not to forget the legal side, home country specifications like DIN are not the same as guest country spec’s like former GOST.

	Strategy related success factors

„Green field“ or „brown field“, which way to go, a question that cannot be answered per se. Enterprises with deficits in strategic resources should eye the cooperation possibility. However, this reduces independency and the fate of the partner can become the own. Information could flow uncontrolled, conflicts could hinder growth, and market position can weaken. It is mandatory to enter a joint venture prudent and slow by defining objectives, fields of activities structure of management and enterprise, potential exit strategy very carefully.

	Why ? Potential Reasons for going International

	The world is a village, there is no protected home market anymore, consequently, to safeguard the future enterprises, small or big, must eye international markets. Sooner or later, they will also face the truth, that pure export will not be sufficient anymore, closeness to customers will force the drive abroad. Some driving forces for going international:

		State impediments through trade barriers

		Shipping costs, just in time delivery

		Problems with sales agents, licensees, after sales service

		Intellectual property and patents security

		Raw material and semi-finished goods supply

		Activities of competitors, suppliers or customers abroad (and their success)

		Local developments like market saturations, increasing competitive pressure

		Risk distribution, decreasing of seasonal dependencies

		More effective use of own resources

		Access to foreign knowledge and methods

		Necessity to expand abroad when home market is saturated

		Increasing sustainable market presence

		Easing market entry through joint venturing

		Getting market entry knowledge

	How ? Types of internationalization

1. Trade (Export, Import of raw materials and goods, tolling)

2. Direct Investments

	Sales, Production, Research & Development
	Foreign assembly lines (import of parts, modules, ckd-production)
	Complete production abroad incl. local sourcing
	Research, Development and Production abroad (complete value adding abroad)

3. Strategic alliances abroad (cooperation with synergetic partners)

	Without equity participation
	Joint-ventures with equity participation

4. Licensing and franchising

5. Credits (Supplier credits, loans)