Welcome to Golden nugget Friday episode where we will be talking about the opportunities, risks and steps involved in taking your business global. Lastly we will highlight a VERY successful private company here in Australia who expanded globally. Lorna Jane design and manufacture active wear and sportswear for women and in 2014 recorded $162.2 Million according the Australian Securities and Investment Commission. With over 215 stores globally + stockist in 54 countries, Lorna Jane will soon be in 100 Nordstrom locations across the USA.
Lorna Jane was quoted saying. “We’re going from fishing in a pond, which is basically the Australian market, to the opportunity of fishing in the ocean. We believe we can double our profits over the next three years."
Let’s take a peek into what inspired this topic. Justin Sires our last guest recently expanded his company PLF Spaces globally. He now resides in the UK and they have locations in Australia and Untied States. In case you missed his episode earlier this week please go back & have a listen to episode 23 time stamp 14:48 when I asked Justin to share his ‘Ah ha’ moment!
Let’s dive a litter deeper into the opportunities and risks for small business international expansion. International growth by going global as an importer-exporter offers many opportunities. Some of advantages for your business successfully growing globally include:
• Finding new markets to sell your products provides advantage of more revenue & scalability with a much broader customer base to generate business.
• Global companies also gain access to new materials, resources as well as talent and have opportunities to form strategic alliances which leads to synergies as new relationships and suppliers are used to strengthen the global brand.
• Global companies can take advantage of earning extra revenue from foreign exchange rates. For example, my company in Canada selling surplus telephone equipment on consignment for the Telco’s. I purchased the equipment in Canadian $ but exported and sold to the smaller telephone companies in USA. This is a while ago when the exchange rates from US to Canadian were 1.5% so if I sold a system for $100,000.00 US I was making $150,000.00 Canadian, makes for great margins when buying the product in Canadian dollars.
• You can reduce your dependence & or risk fluctuation from slumping performance or economic shifts in one country on the markets you have developed in the country you currently do business in. This means that if the economy, supply issues, environment or government regulations in one country negatively affect you, you can still find success in other countries.
• Global companies can exploit corporate technology and Intellectual property in underdeveloped countries where they may not be as advanced.
The number one reason to go global, is to improve your potential for expansion and growth. The obvious opportunities are the markets in USA, Canada, Mexico, Europe, New Zealand and Asia. But those only scratch the surface. There are many other fast-growing, less-competitive markets. However, you must do the research to know which is the right opportunity for your business and determine if going global is the right move for you.
Here are some Questions to Ask yourself to determine if you’re ready or able for international expansion.
Wesley Johnston, Professor of marketing and director of the Center for Business and Industrial Marketing at Georgia State University in Atlanta, highlights the factors that can either make or break your business when you try to grow by going global. Here are key questions to ask yourself:
• Will the product sell well in the targeted culture? Think & do the market research.
• Is your target market familiar with your product or service? If not, be prepared to invest a lot of time and money in consumer education. On the flip side, if you're the first one to introduce a new and exciting concept, "the product then becomes synonymous with your company name or chain," Johnston explains.
• Do you feel comfortable in that country? You'll probably have to travel there a lot or even live there temporarily in the early stages so you'll need a working knowledge of the language and culture. I personally remember a situation when we opened operations in Mexico City and explored the option of expanding into Venezuela. It was quickly decided not to move forward with Venezuela after completing the research and our corporate governance committee stated I was required to have ransom insurance if I travelled there. I did not feel comfortable in a country I needed ransom insurance.
• What is the infrastructure like? Can you get Western-style accommodations and support? How good are the roads? Are your supplies guaranteed? What about the reliability of hot water?
If you don't get the answers you want with the first foreign market you're considering entering, that may not mean your idea is poor-just that you picked the wrong place. "It's a big, big world out there," Johnston says. "I don't think there's any one idea that won't work somewhere."
Here are some of the Risks for Global Expansion
We mentioned some opportunities earlier but going Global also carries a lot of risks and threats that domestic-only business people never see. Below are some of the most common exporting mistakes, according to John E. Cleek, program director at the Bloch School of Business Administration at the University of Missouri in Kansas City.
• Failing to plan your strategy. "Small businesses are particularly vulnerable to this problem, but larger ones are often guilty of the same mistake," says Cleek. "It takes far more time to extract yourself from problems created by lack of planning than it would to do it right the first time."
• Chasing inquiries, the world over. Just because dozens of countries show interest doesn't mean you're ready to market your product everywhere. Patience is key. "It takes discipline to respond to an inquiry from a country about which you know very little," Cleek says.
• Assuming if it works in your country, it will work anywhere. Not true-you need to tailor your sales and marketing efforts to each country. Don't ignore the cultural differences that shape the marketplace. The same goes for pricing, shipping, payment terms and packaging.
• Assuming business will be done in English. Familiarize yourself with the local language. Says Cleek, "It is the height of ignorance to expect other people to learn our language to buy from us."
Doing business around the world can seem a long way from doing business in your City or Country. But each year countless small businesses make it happen. Going global can be boiled down to a series of steps. Here are the six basic steps to going global:
1. Start your campaign to grow by international expansion by preparing an international business plan to evaluate your needs and set your goals. It's essential to assess your readiness and commitment to grow internationally before you get started.
2. Conduct foreign market research and identify international markets. The Department of Commerce or Export Development Canada & Australia, is an excellent source of information & grants on foreign markets.
3. Evaluate and select methods of distributing your product or services abroad. You can choose from a variety of means for distributing your product & services, from opening company-owned foreign subsidiaries to working with agents, representatives and distributors and setting up joint ventures.
4. Learn how to set prices, negotiate deals and navigate the legal morass of exporting. Cultural, social, legal and economic differences make exporting a challenge for business owners who have only operated in one country.
5. Tap government and private sources of financing-and figure out ways to make sure you are getting paid. Financing is always an issue, but government interest in boosting exporting and centuries of financial innovation have made getting funding and getting paid easier than ever.
6. Move your goods/services to their international market, making sure you package and label them in accordance with regulations in the market you are selling to.
Now let’s highlight a success story the rise of Lorna Jane Clarkson.
Lorna was quoted "Our vision extends beyond the product. We don't just sell Active wear, we sell an active way of life. Our garments encourage women to achieve their best through Active Living and ultimately reach their full potential."
Clarkson says she sleeps perfectly well at night despite the rapid US expansion. She is convinced that a critical mass of stores is the best way to break into a new country. Stores are not the only tools in the kit bag, with attempts to build word-of-mouth before the first US store opened at Malibu in 2012 including “trunk shows" (where Clarkson previewed her wares directly to customers) and “celebrity seeding", with samples being provided to the likes of actress Charlize Theron.
Lorna Jane also has a full-blown digital and social media marketing strategy, complete with Clarkson’s voice on a pedometer app and a Facebook page that’s been liked more than 724,000 times. Clarkson has written 3 books and I have her cook book called NOURISH. It’s delightful and contains amazing simple and healthy recipes as well as inspirational quote and tips.
You can find links to Lorna Jane 3 books on our show notes page.
In Move Nourish Believe: The Fit Woman’s Secrets revealed Lorna Jane Clarkson shares how she turned a passion for creating fashionable and functional activewear into a multi-million dollar international business. Plus she also shares some tips and tricks into how she maintains a fit and healthy lifestyle.
Be inspired to stop dieting and start nourishing using tips from Lorna Jane Clarkson’s latest cookbook release. Nourish will guide you in establishing healthy eating habits, improving digestion, hydration and alkalinity and long term personal nutritional philosophies and life rituals.
From my experience the biggest difference between doing business domestically and internationally is culture. It’s important to build a relationship before you get down to business. Lastly expanding internationally requires funding or financing. Growing globally requires special capabilities when it comes to finances. One of the most popular sources of financing for businesses expanding overseas is the Export-Import Banks. In some countries they are governmental programs however some instances it can be an independent agency. For example, The Ex-Im Bank, in USA has helped finance overseas sales of more than $300 billion in U.S. goods and services since 1934. We will have links on our show notes page with several Export import banks as well as some grant programs.
In conclusion why Go Global?
International expansion may not necessarily the best way to grow your company. However, entering the international arena can protect you against the risk of decline in domestic markets and, most important, significantly improve your overall growth potential.
Export Market Development Grant