Entering Foreign Markets – A New Approach
The Internet has undoubtedly made the world smaller and markets more global. With English as your primary language, you can find and attract customers in almost any country in the world.
However, there are still situations where market entry, as well as serious market penetration, requires mastering foreign languages, cultures and having feet on the ground.
The traditional approach to meeting these challenges is to set up a subsidiary and hire local management and staff. The advantage of this setup is the ultimate control it provides. The drawbacks are high cost and high risk. It may sound like a straightforward route to market entry, but experience shows that it is tough to find the right people and that it can be hard to estimate the time it will take to reach break-even.
Another approach is to find an independent exclusive distributor who makes the investments on your behalf. Again, experience shows that it is hard to find someone prepared to invest in breaking a new market for you. And their patience, when the results do not match the plans, is typically shorter than yours. The advantage is the low investment requirement, while the drawbacks are lack of control and high risk of failure.
There is another way
With the growing interest and need for global expansion a new type of service has emerged:
Business Development as a Service
I have spoken with two companies that provide these types of services.
“Breaking ground in new markets requires a wide array of special skills,” says Rick Pizzoli, founder, and CEO with SFE in Madrid, Spain. “Building a team that can do the job is very difficult, in particular when doing it remotely. Plus incorporating and putting them on your own payroll in countries where you are unfamiliar with the legal framework adds a layer of unproductive expenses.”
SFE has developed their value proposition to address the typical headaches associated with foreign market entry directly.
They now have access to a vast pool of people who are specialized in building revenue for companies that have no brand recognition and no local references. And these people prefer to work as freelancers on precisely these types of projects.
“Within weeks of a ‘go,’ we provide our clients a virtual subsidiary, building their revenue streams from scratch,” says Rick, “and we take care of all the legal and HR-stuff. The clients just get a monthly invoice for the services provided.”
“Our clients want to test the waters first. They want to learn how the market reacts to their value propositions and their revenue generation process,” says Jakob Thusgaard, founder, and CEO of YourSales in Amsterdam, The Netherlands. “It really doesn’t matter if you sell directly or want to recruit a network of resellers. Having that virtual subsidiary staffed with an experienced team just makes revenue flow much faster.”
Companies like SFE and YourSales are made possible because more and more business development, marketing, and sales professionals prefer to work as independent contractors. They enjoy the project variety and the better remuneration it offers. They also enjoy working from home, and with the prices of technology dropping, they all have a fully-fledged IT-infrastructure in their study.
“Working remotely and as part of a virtual team is not an issue anymore,” says Jakob. “The technology is inexpensive and readily available through SaaS-based platforms. We mostly hook-up to our clients’ platforms ensuring that all data resides with the client irrespective of whether they continue the project with us or continue on their own.”
The increased pressure of competition requires faster globalization
The falling cost of information technology and the availability of cloud-platforms with global reach has intensified global competition. Time to market is more crucial than ever.
“15 years ago, companies took their time building a strong base at home before venturing into foreign markets,” says Preben Damgaard, investor and board member in the IT-industry. “We don’t have that luxury anymore. The windows of opportunity close very fast today and getting a position in foreign markets before your competitor is critical to the growth required for winning the race for market leadership.”
With the urgency for international market entry and penetration comes the need for new and more flexible ways to test and find the most efficient routes in each country. Although Europe with its’ 740 million people and GDP of $17 trillion sounds like an attractive market, it is spread across 28 countries with 24 languages and at least as many different cultures.
“We were tasked to expand our global footprint in a highly competitive space rapidly,” says Scott Sorochak, Previously SVP at Livefyre (now General Partner at Blarney Ventures). “Without the SFE in-territory team we would not have been able to hit the ground running with relevant local resources nearly as fast had we used the traditional recruitment mode.”
Business Development-as-a-Service seems to be an excellent answer to the need for moving fast in many places at the same time.
If you are interested in international business development then these posts may be of use: