Designing a Global Blueprint (776 words)
The foundation of any successful international venture starts with a solid marketing strategy. Before you begin plotting, ask a simple question: Why do you want to expand? "Your answer will dictate your approach to the international market," says Stephen Miles, former European managing director at Lands' End, who was responsible for the cataloger's entry into the United Kingdom and Germany.
According to Miles, who spoke to the U.S. Trade Mission to Europe headed by International Direct Marketing Consultants this past March, most companies decide to go international for one of two reasons—to boost sales or increase profits. Which reason governs their approach.
A mature business experiencing flat profits and sales will likely expand into international markets to raise profits. A marketer in this situation would likely choose to license its brand. This involves finding an overseas company that sees value in its brand and is willing to pay a percent of its sales to use it.
The advantage to licensing is that you don't incur overhead expenses. Instead, money is earned for providing the use of a brand and some level of support. Control is traded for profit.
In 1994, Lands' End entered into a licensing agreement with Australian-based Myer Direct to sell Lands' End products in Australia, New Zealand and other areas in the South Pacific. Lands' End terminated the agreement in 1996 and currently mails its U.S. catalog to the region. Products are fulfilled from its headquarters in Dodgeville, WI.
A Solo Enterprise
A second reason why a company may decide to "go global" is to increase sales. This may be a mature U.S. company with little or no room for expansion or growth in the domestic market.
Marketers can operate solely from the United States or by setting up an overseas operation. Often a publisher marketing an English-language publication will begin with an English-language package priced in U.S. dollars mailed to multinational lists. This strategy enables marketers to test international waters from its U.S. base using its existing fulfillment system.
Marketers looking to make a long-term investment in the global marketplace or marketing merchandise with a high-rate of return may have to set up shop overseas. This includes renting or building a facility and requires a big investment. However, full control of the operation is retained. Setting up an overseas facility is ideal for companies requiring a high level or particular standard of customer service.
Viking Office Products, an office supplies catalog, opens in-country operations for each new market it enters. In order to compete with local office product retailers, it stocks products for each market in local warehouses and offers either same-day or next-day delivery.
U.S. direct marketers can share both the risks and rewards of international direct marketing by partnering with a local company in the target market. Like a marriage, a joint venture can be difficult to maintain and has a high rate of failure, Stephen Miles points out. Problems often arise when partners have different goals. For example, one partner may need profits while the other is looking to increase sales. Size up a potential partner by comparing your short- and long-term goals. "Make sure you have similar objectives," recommends Miles.
Men's Health Magazine, which partners with local companies in South America and Germany, bases the decision to partner on the market, financial expectations and the company under consideration, according to Jeff Morgan, worldwide publisher of the Rodale title.
A fourth option is to buy a local company in your target market. This too, is an expensive proposition and is likely to be an option for a company looking to increase long-term sales rather than short-term profits.
The second part of the global equation is deciding where to go, which, according to Miles, is "part art and part science."
First, get an idea of the scale of the market. What is its size and potential? What is the maturity of the channel of distribution? If you are a clothing cataloger, this includes looking at the maturity of the catalog market, how big the clothing retail market is and what the competition is like.
Once you've narrowed it down to a few potential markets, you need to do some in-country research to figure out the logistics of how your operation would work. For example: Is competition welcome? Does the infrastructure exist to support your operation at the level you expect it to?
Before making the final decision, you need to consider, as a whole, the market potential, logistics, and then "anything in the market that forces you to do business in a way you are not willing," says Miles.