Insights

Posted under: Perspectives

The International head of a $200 million consumer products company mentioned to me that they sell their products in over 50 countries. As we discussed further, it turned out that international business is less than 3% of their total business or an average of $120,000 per country per year. This is tiny compared to the size of the category they are in.

It is better not to open a market than to open it hastily and let your brand stagnate.

We, at Omicus, hear things like this often. Some companies are so busy expanding into as many markets as they can, that they forget to pay attention to whether they are truly maximizing market potential. I have always maintained that it is better not to open a market than to open it hastily and let the brand stagnate. A stagnating brand loses respect in the eyes of consumers and trade. It is difficult and expensive to regain this loss of brand equity.

International expansion must be approached strategically – sustainable business growth and increasing brand value is impossible without a sound strategy and effective implementation.

Let’s return to this prospective client. Based on our conversation I could tell that their low levels of international revenues were the result of poor distribution and low consumer demand for the brand. They likely weren’t selling into as many stores as they should, and in the stores where they were present, consumers didn’t identify/respect/engage with the brand.

What should the companies do?

 

Stop making it a numbers game.

The primary KPI for international business cannot be the number of countries in which a brand is present. It needs to be based on the market share of the brand. Opening a country is easier than growing market share there. But market share is the true indicator of brand health.

Attend any trade show and you will have a large number of importers from countries, wanting to sell your products there. Look at the emails coming in through the ‘contact us’ page and you will find potential importers from nearly all the countries asking you to sell them your products. To open a country fast, you can select one of them who agrees with your terms, and promises certain number of containers, and start invoicing – right?

Not quite. This opportunistic way of international expansion does more harm than good. As I suggested above, this approach not only results in gross underutilization of brand potential but also harms brand equity, which has more serious long-term consequences.

Open a new country only with the intent and plan of strategically driving and monitoring market share growth in each country.

The steps taken to drive market share growth will result in sustainable growth for the brand in a country. Doing so in only a few countries will result in higher sales than opportunistically opening 50 countries.

The critical components for driving market share growth are a combination of sound strategy, detailed planning, and effective execution. This approach requires work by the company both from the center as well as locally on the ground. Leaving the hard work of growing market share solely to the distributors is not the best approach. Companies will need to be actively involved in supporting the brands and the distributors, including a presence in the country, either through their own teams, or an outsourced team of experts.

Relaunch existing markets:

In existing markets where your brands are stagnating, develop a relaunch strategy, plan effective execution and catapult the brand to a growth path. This cannot be done passively. Active engagement by the company’s own team or an outsourced team will be needed to get this going.

This work of relaunching the brand in existing countries cannot be done overnight in all the existing countries. An annual plan needs to be drawn up defining the cadence of countries to be taken up over time for this work.

In Summation:

 

International expansion is not about the number of countries you are present in. It is about how well you are driving market share growth in those countries.

International expansion is not about the number of countries you are present in. It is about how well you are driving market share growth in those countries. Expanding into a country with inadequate strategy and attention not only results in poor short-term financials but has a long-term impact on brand equity. Strategic international expansion is a challenge for many companies with limited resources and capability. Attracting the right talent is not only difficult but is unaffordable as well. Engaging outsourced experts can be a profitable alternative.

 

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