Why you shouldn’t be afraid to go global
Global expansion may be just the ticket to sustain the growth of your firm
When Martin McCourt joined Dyson in 1996, it was a £50m UK business. Now it is a £500m global company and sells its products in 45 countries. McCourt, now chief executive, oversaw the migration of vacuum cleaner assembly to Malaysia in 2001, bringing Dyson closer to suppliers. The following year, he introduced Dyson to the US. In less than two years, Dyson became the leading vacuum cleaner manufacturer. The US is now Dyson’s most successful territory, while more than two thirds of the firm’s business comes from overseas.
Certain circumstances will demand international expansion – Dyson’s increased manufacturing cost base and lack of physical space for expansion, for example – but home-grown international opportunists aren’t yet as common as you might think. Hiscox’s recent DNA of an Entrepreneur survey suggested that British businesspeople appear the least interested in going global compared to their transatlantic counterparts.
“There are a lot of misconceptions about companies going international,” says Dan McGuire, managing director of Broadbean, a fast-growing job advert distribution firm, which operates around Europe and is currently in the process of expanding to the US. “So many people I speak to are negative. They say ‘don’t go to the US, you’ll waste a fortune’. But when I talk to those on the international stage, there’s a great feeling around and excitement over British firms. You get a buzz as a new company. People want to hear about you and your story, particularly if you’ve got a good track record in the UK.”
Entrepreneurs shying away from going global might simply be missing an opportunity for growth, but that doesn’t mean it’s going to be easy.
Do your homework
Entrepreneurs often underestimate how time-consuming international expansion can be. “Get the set up right,” advises McCourt. “Take the time to plan that well. It’s not just about launching. You’ve got to launch to sustain in a market. Having just one big bang won’t do it.”
In America, McCourt decided his firm should go as far and as fast as it could. “We didn’t want to go into retailers one by one. It’s about getting your homework right. You can’t ask to only go into east coast stores. You have to deal with them across the States, which means hundreds of stores,” he says.
The US is a particularly punishing market for those not ready to deliver on the big stage, but the principle applies wherever you’re planning expansion. “From your forecasting to your planning, inventory and working capital, you’ve got to have all of your ducks in a row,” says McCourt. “If you get it wrong, they’ll punish you.
“The least of your fears will be the financial penalties. The most significant worry is that if you screw up they’ll chuck you out and won’t let you back in again. Work out how much it’ll cost you, so you don’t get a shock. Doing your homework, particularly when you’re straying beyond your comfort zone, is crucial.”
Make your case
Tony Caldeira, founder of cushion maker Caldeira, agrees: “Do your research. Why is your product or service better than what can be bought in the local market? People are always going to be a bit sceptical about an overseas entrant to a market. You’ve got to have a very good case, a reason you’re the best at what you do and why you can deliver.”
Caldeira also now operates in the States. Having grown the St Helens-based firm to lead the UK market in the supply of home textile products for volume retailers, China’s ascension to the World Trade Organisation in 2001 left his firm suddenly unable to compete. “It was a case of China or bust,” he says.
After opening a manufacturing facility in Yuyue, Caldeira used his Chinese adventure as a springboard for US expansion. “The fact that we could design the products in the UK, make them in China and sell them to the US, the world’s biggest market for cushions, was very appealing,” says Caldeira.
Like McCourt, he found that you have to do something special to win contracts in the States. “It has to be price, quality, service, better products, or ideally a combination of those four things,” he explains. “If you can do that, the rewards are huge. Some of these corporations have literally thousands of stores. If you can catch a fish, it’s normally a big one. But sometimes it’s harder to catch that fish in the first place.”
Keep it simple
The tax issues that entrepreneurs face often complicate international expansion. “The law and tax regimes are often very different, particularly in Europe where they have a civil law code,” says Allan Holmes, director at law firm Dickinson Dees LLP.
Whatever approach you choose, you’re going to need legal help on the ground. Working with local partners can help you overcome this and other challenges, says Caldeira. “We made the conscious decision to look for a business partner in joint venture,” he says. “I did a bit of market research before we came to China and the amount of paper work that was required in Chinese is mind blowing on its own.”
The age old ‘keep is simple’ advice also applies. “It is easy to get carried away and end up with a big, expensive structure when you could have obtained a similar result with something simpler and imaginative legal contracts,” says Holmes.
Beat the red tape
If enthusiasm, hard work and a breakneck pace characterised your growth at home, you may need to take a step backwards to ensure global success. “You have to become much more organised,” says McGuire. “Now, we have to be much more diligent.”
What’s more, getting your head around different rules and regulations in another language can really put the brakes on. “Finding out about different employment laws in different countries has been a bitch,” McGuire concedes. “Holland, for example, is a horrible place to employ staff. You have to give everyone a bonus in June, regardless of their performance. You need new employment contracts and all your service contracts have to be translated. That’s quite scary because you rely on a lawyer to get it right and you can’t check it yourself.”
For an entrepreneur used to taking a hands-on approach to contracts and negotiations, it’s a challenging transition. “In another language, you’ve got to take someone else’s word for it,” adds McGuire. Unsurprisingly, he advises bringing language skills in. “We’ve been making a real effort so that, if possible, everyone we hire has got a language,” he says. “That’s a huge bonus.”
Adapt your product
Martin McCourt’s final piece of advice is to get your product right for the market you’re targeting – and that might mean adaptation. “A great product that’s well designed, well made and does what it’s supposed to do will stand out and be in with an enormous chance of success,” he says.
Under McCourt’s leadership, Dyson developed a new vacuum cleaner for the Japanese in 2004. It is the only profitable domestic appliance sold by a western manufacturer in Japan. “You don’t have to subscribe to local conventions in markets that you’re going into,” he says. “Don’t be afraid of creating turbulence and being disruptive – if it works you’ll stand out more.”