Going Global Interview with Poland Go Global Magazine
English version of Poland Go Global Interview with Emmanuelle Ganne, Vice President, Europe, Allam Advisory Group
Original version in Polish published in November 2015. Click here.
- AAG is a global consulting firm that helps companies enter new markets. How does a company know when it is ready to expand to new markets?
EG: There are various ways to expand internationally and various reasons why a company may want to enter new markets. In our experience, doing business abroad is not simply a case of ‘copying and pasting’ the Polish model to a foreign country. There are several factors that can help you decide whether the time is ripe to expand internationally:
First, whether domestic demand is strong or stagnant, international demand may be growing faster. Keep an eye on it! There may be precious opportunities to seize provided you are committed to investing time and money investigating the opportunities and building long-term relationships in-market.
Second, you may have a product advantage in your home country, as well as in other markets. If you sell a product or service that is unique and innovative, you may want to consider going international fairly rapidly, before domestic saturation is achieved and before competitors emerge. This is particularly true in the technology sector and for luxury and design goods.
Third, keep an eye on your competitors and customers! If they are going international, the time may be ripe for you to move quickly so that you’re not left behind and that you can take advantage of opportunities in global value chains. It’s no guarantee for success, but if your competitors successfully enter new markets and/or the number of your international clients is growing, it means that there is market potential and there is a good chance that you can succeed by going international.
Whatever the reason why you want to expand internationally, in order to enter new markets, you need to have an international strategy and blueprint to help you navigate the risks, challenges and opportunities that international expansion presents.
Our CEO and Founder, Omar Allam, often reminds companies wishing to go global that to achieve success in the long term it is crucial “in an ever-changing international environment to be bold enough to take calculated risks via new investments, partnerships and innovative business models.”
- In your view, what are the key issues that SMEs need to consider when going global? What tips would you give to these companies?
EG: Any business wanting to optimise its own development and growth needs to look beyond its national borders and view doing business from a global perspective. Moving from the domestic market into the global one is never straightforward. Every business looking to expand abroad needs to ascertain what the most appropriate strategy is going to be: export only, direct investment in a foreign country, working with partners, or something else – all while keeping in mind the fundamental difference between international trading in products, and that in services.
We know from experience that selling across international borders is an appetising prospect for many companies in today’s rapidly changing global business environment. But if you want your business to be numbered among those that succeed in gaining market shares, there are several critical components that you need to take into account.
It starts with educating Polish companies, helping them develop market entry strategies and navigating business and regulatory issues, finding qualified partners and structuring trade financing and export credit solutions.
Let me use an analogy. Imagine you’re managing a local soccer club. You’ve been doing well nationally and you now want to move to the next level and become an internationally recognized team. What do you need to do to prepare yourself? My tip: think about international expansion in the same way.
First, you need to check and research the facts. You need to have a good understanding of what you have to offer, of your potential and of your limits. You will need to identify and investigate target markets (do you want to play all international tournaments or only some?). What is the potential for expansion in these markets? What do your competitors look like? How do they play? What is their strategy? Do you have a chance to win? Will you need extra financing to support your international move? All these questions are key to look into before deciding to move to the next level.
Second, to have the best chances to succeed, professional sportsmen usually hire coaches. Having a good coach who will guide you and help you get ready for international expansion, who can help you identify your strengths and weaknesses and the markets you could target, who knows these markets well and has local connections, can make you gain precious time and help you avoid some pitfalls.
Third, develop a strategy, a business plan: what team do you need to put in place for a winning strategy? Which tournaments will you play first? What are the rules of the game? The same goes for international expansion. You need to think about the human resources you will require, and you need a plan, a market entry strategy: which markets do you wish to target? What are the economic and political conditions of these markets? What are the risks and opportunities? You will need to dive into legal and regulatory issues to make sure you understand the rules of the game. If you’re thinking about establishing an office, you need to know the various entities that can be established, the pros and cons of each form and the conditions under which they can be established. You need to have a good understanding of tax, labeling, and other regulatory requirements, of customs procedures, etc. You will also need a marketing strategy, and financial and risk management strategies. Planning is key; don’t underestimate it! And last but not least, take time to understand the “culture” of the markets you want to enter. This last point is too often underestimated, while it is one of the keys to success. The best strategy will be doomed to failure if it does not take into account the business culture in your target markets.
Fourth, get ready: once you have a plan, it’s time to start implementing it. Put your team in place and make sure all the players are behind the project (what we call “organizational readiness”). Make sure you train appropriately, that your products are ready (“market readiness”), and that you obtain the necessary approvals (“legal and financial readiness”).
Fifth, enjoy playing, give your best, and look back at your strengths and weaknesses after each game to adjust your strategy and continue to win games – or market shares. But remember, being successful in a new league takes a lot of time and efforts. So be patient and stay focused! Stick to your strategy!
- What are the most common mistakes that you’ve seen SMEs make when going global?
EG: The first mistake is not having a clear strategy. International expansion cannot be improvised; it has to be carefully planned.
The second common mistake is misjudging risk. Going international is risky. Potential risks have to be thoroughly analyzed and taken into account in devising the business plan so that they can be mitigated. Politics, for example, can play a significant role in some markets.
The third common mistake is going international for the wrong reasons. Companies frustrated by the lack of growth in the domestic market might be tempted to look at opportunities in other markets. Remember, going international is a long-term investment, not a get-rich-quick scheme. You need to make sure that your company is ready to go international before you make the jump. You need a solid business plan. Improvisation and lack of planning are recipes for failure.
The fourth common mistake is taking the do-it-yourself approach. Many SMEs are tempted to do everything themselves and rely on Google for outdated market information because it’s cheaper. Don’t make this mistake. One cannot be an expert in everything. Although the budget may be tight, don’t cut corners by not hiring seasoned international trade professionals who will help you navigate through all of the complexities of international expansion and help you achieve your goals in the most efficient manner.
The fifth common mistake is to overlook cultural aspects – a point I have already made. If you want to succeed, you need to adequately appreciate what people in other cultures consider respectful, and what offends them. In some countries, you can kill deals by showing up late to a meeting, jumping straight into business without asking about family, wearing colours that might offend, or shaking someone’s hand. Before entering a new market, spend some time familiarizing yourself with the culture of that market.
- In your view, looking beyond European borders, which « exotic » markets seem to be the most promising for Polish companies?
EG: I’m glad you’re asking the question. For the most part, Polish companies have so far chosen to go “European” rather than “global”, which is understandable and logical given the proximity of the European market both in terms of geography and business culture. However, growth in Europe is weak and the market is in many respects saturated. Polish companies looking for new sources of growth should take a serious look at other markets, beyond European borders.
For those Polish companies (big and small) prepared to step out of their comfort zone and take on more entrepreneurial risk, the potential rewards can be substantial.
India, for example, presents interesting business opportunities for Polish companies. The country is booming with a new “Make in India” policy. It is forecast to grow faster than all other emerging economies this year. Its rapidly growing middle-class of 260 million English-speaking consumers is expected to multiply tenfold by 2025, which will create huge demand for construction services, automotive, machinery, natural resources and technology. In these and other areas such as clean tech, aerospace and defence, India needs products, services, technology and training. These are all sectors where Poland has competitive companies and interesting products and services to offer. Companies planning an entry strategy should also look beyond Mumbai and New Delhi to the booming southern states of Tamil Nadu and Andhra Pradesh.
Iran is another “exotic” market that presents interesting business opportunities. After decades of isolation, the country is opening up and is hungry for new investments, products and services in a broad range of sectors. The recent state visit led by Polish Deputy Prime Minister to Tehran is the perfect opportunity for the Polish business community and Government of Iran to strongly reassert Poland’s commercial position with one of the world’s newest exotic markets open for business. For those interested in this market, there is no time to lose, as companies worldwide are getting ready to set foot in this still largely untapped market.
Finally, Africa, the world’s second-most-populous continent, has been largely neglected by European companies so far, but deserves special attention. It is growing much faster than any other region and significant efforts are being made at the regional level to facilitate trade, simplify customs procedures, and build or upgrade the needed trading infrastructure. The creation of an African Continental Free Trade Area (CFTA) by 2017 – as decided at the last African Union (AU) Summit in June – will ultimately break existing silos between African markets and give traders access to 1.1 bn consumers, enabling them to take full advantage of the various opportunities across the entire continent.
None of these markets are easy to tap into. They all present risks, but they also offer huge opportunities for those companies that have done their homework.
While these markets are promising for Polish companies, there is no guarantee for success. There is no « one-size-fits-all » approach in going global. A particular market can present a good potential for one company, but not for another. Before moving to a new market, it is therefore key to carefully investigate the potential for expansion in light of the company’s capabilities.
You asked me about “exotic” markets, but I would also note that there are “less exotic” markets that present a good potential.
4) Which “less exotic” markets do you have in mind ?
EG: The United States and Canada. Both these markets are still largely unexplored by Polish companies, while both present interesting opportunities in sectors like IT, agri-food and machinery, mining, medical devices and equipment, chemicals, and furniture, to cite just a few. Because their business culture is closer to Polish culture, these markets are easier to access for Polish companies than the “exotic” markets I just mentioned.
There have been noteworthy developments in the mining sector with the acquisition by Poland’s KGHM Polska Miedz of Canadian company Quadra FNX Mining in March 2012 for the value of US 2.8 billion, but there is still plenty of room for increased trade and investment cooperation.
Canada is a market that presents a particularly interesting potential in my view. Last year, the Canadian government and the European Union finalized the negotiations of a Comprehensive Economic and Trade Agreement (CETA), which once in force – hopefully within the next 12 to 18 months – will open unprecedented opportunities for Polish companies to do business in and with Canada thanks to the elimination of tariffs in sectors like machinery and equipment, chemicals, and some food products.
Polish companies should seriously start looking at how they can leverage these opportunities to enter the Canadian market and through it the US. When thinking about North America, most companies turn their eyes to the US. True, the US is, in itself, a much bigger market than Canada. But the size of the market is only one side of the equation. What about tariffs and other tax and regulatory issues? As a matter of fact, going straight to the US market may not be the most optimal solution. Before going international, it is important to do the math! Thanks to CETA and the free trade agreement between the US and Canada and lower taxes on the Canadian side, using Canada as an entry door to the US may be much more advantageous from a cost perspective.
Polish companies wishing to go international should have a thorough look at the opportunities offered by the North American market and CETA. If they want to be ready to seize the opportunities that CETA will open when it comes into force, they should start planning ahead and thinking about their North American strategy now. Organizations like the Allam Advisory Group, the Canadian Embassy in Poland and the Canada-Polish Chamber of Commerce can help Polish companies looking to export, invest abroad or seek technology and research and development (R & D) partnerships understand the risks and navigate the challenges and opportunities of going global
The global market place offers unlimited opportunities not just for Poland, but for other global and European competitors who have been quick off the mark. The onus is on Polish companies to seize the moment. The Polish Government’s Go Global campaign and the export and investment vehicles in place like the Polish Agency for Enterprise Development, Invest in Poland, and the GreenEvo Accelerator, to name a few, signal a strong Polish commitment to international trade and investment. Think Big. Think Entrepreneurially. Think Globally.
About the Author
Emmanuelle Ganne is Vice President Europe at Allam Advisory Group and an international trade policy advisor who served as counselor to the WTO Director-General Pascal Lamy with over 15 years of experience in international commerce, trade policy, and diplomacy.