An organisation’s ability to expand internationally will depend on the talent and strength of its leadership. Problems occur when boards ignore questions on resource and capability, opting to plough onwards, bewitched by the promise of growth.
Turning away from obvious opportunity is tough, especially in the current economic climate. And yet carrying on regardless has sent plenty of famous retailers and consumer goods companies crashing into the rocks.
The priority for any business, after assessing the size of the prize in a new market, is to look at the human factor and ask: ‘Do we have the people to execute the plan?’
Giles Daubeney, Deputy CEO of recruitment concern Robert Walters, has seen the business grow over the past 25 years from a single office to 54, spread across 26 countries. “It’s no good having someone up on high calling the shots with no knowledge of the local market − you can make grave mistakes that way,” he says.
“The most important thing is to have the right person to do the job. Not having enough people is one of the biggest constraints to growth.”
For large organisations, there needs to be clear decision making between HQ, regional and local operations. David Comeau, Criticaleye Board Mentor and former President for Asia Pacific at Mondelez International, saw the latter company transform from a country-focused set of independent operating units into a category-focused global organisation. “I think a lot of people struggle with this pendulum swing between how centralised or de-centralised a company should be,” he says.
According to David, it was critical to make changes as rules and responsibilities were not clear. “For example, there was a brand manager for Oreo in Latin America who thought they were growing the brand globally, but there was also a brand manager in each country. We hadn’t addressed how the local teams would be involved or how the new order was going to run; it was difficult to accomplish anything,” he explains.
“We worked with the countries to redesign the organisation and asked their opinion on the best way to accomplish what we were trying to do. Collectively, we designed a structure that would allow us to operate globally but still be effective on a local basis.”
This remains a hugely complex undertaking. Tom Beedham, Director of Programme Management at Criticaleye, warns: “It’s all too easy if you’re based in the head office to say: ‘These are our values and this is our culture.’ But the further out you go you may find the message has changed or the perception is different. Learning from peers about how to approach a new market before you enter will mean you are better prepared and can accelerate faster.”
GSK has been evaluating the make-up of management teams across various countries, explains Kris Webb, Senior Vice President of HR for Pharma across Europe, Emerging Markets, Asia Pacific and Japan: “We’re making decisions to ensure that what is happening in our businesses across the globe is aligned with the values of the whole company.”
Aside from the internal dynamics of organisational design, strategy and competency, companies must also navigate the risk of political volatility, currency fluctuations and rising labour costs – to name but a few. Yet the case for expanding internationally is evidently strong, not least because growth in many domestic markets remains challenging at best.
Mark Collings, Head of International for SME Banking at Santander, comments: “Businesses that trade internationally are more resilient than those that remain in their domestic market, and tend to see higher rates of growth.
“If you’re operating internationally you’re not dependent on one market, so if economic instability hits in one geography, you can rely on your presence in other markets to weather the storm. This can put you in a much stronger position and provide growth, even in uncertain times.”
Just don’t underestimate the importance of people and culture before moving into a new territory.
This article was inspired by the recent Criticaleye Discussion Group, Key Considerations for International Expansion, held in association with Santander.
By Dawn Murden, Editor, Advisory
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Read more from Santander’s Mike Ellwood on the bank’s growth strategy
Don’t miss next week’s Community Update, which looks at the mistakes leaders make when communicating a company’s values.