I was sitting on the advisory committee of an innovative company with a product of worldwide potential. The company had just launched its product in two American regions, as well as two countries in Europe where it had won two prestigious awards. The founder allocated a major part of his time and resources to its international expansion. The problem was that the company had not yet started to generate a profit in Quebec, their original market, and was facing competitors who copied their products, were profitable and focussed on the Quebec market. Despite our warnings, the founder persisted in his efforts to go international and neglected many weaknesses in Quebec. A few years later, the company filed for protection under the Bankruptcy Act.

 

How does a local business go about becoming national? And how do you break into foreign markets?

 

In the initial phase of expansion, the answer is always, one region at a time. For the first foreign markets, the answer is one country at a time. Even for a continental market such as the United States or China, the answer is one region at a time. As a prerequisite, the company must have consolidated its position in the original market and already made money there.

 

Many companies lost ground when tackling several markets simultaneously. Even major businesses can bite the dust. Remember Target’s nightmare, going outside the United States for the first time by simultaneously opening 133 stores in 9 Canadian provinces. Despite their considerable means, Target Canada put themselves under bankruptcy protection in January 2015, less than 2 years after the initial opening. 

In order to be successful in every new major market, the company must go through not only a difficult learning curve, but also, and it can be surprising, through a complete transformation of the way it operates.

 

To break into a new market, you must understand the local customers’ and consumers’ preferences, be familiar with the networks of influence, break in an operational infrastructure, establish your credibility as a reliable supplier, and position yourself against the already established competition.

 

But there is more, and it’s what most growing companies forget to take into account. The entrepreneur or president must assimilate new management practices. He can no longer ‘manage to view’.

 

He must learn to be efficient at a higher delegating level, which means hiring top managers, sharing his vision with them, implementing new performance assessment systems and trusting. The organizational structure must be reviewed and ensure that adequate resources are in place to support an expanding business, i.e. in customer service, operations and finance departments. In some cases, a new financial system is needed to handle multi-site operations. That’s a tall order.  

 

When I started with Van Houtte, we had initially tried to launch our grocery products in Ontario and in 3 American regions simultaneously. The results were disappointing. We then tried a different approach, one that was focussed and in stages. We targeted the Atlantic Provinces first, a small, less competitive market where we could learn to manage remotely at low risk. Within 6 months, we had taken over 50% of the Arabica coffee market in supermarkets, and had set up a small local team. The following 6 months our development efforts were directed almost exclusively to the western provinces’ market, where we quickly gained a major market share and set up a team there.