In this episode, our Founder & CEO Mark Magnacca is joined by Michael O'Hara and Martin McGovern to discuss what are the key steps to succeed in a new market. They talk about a range of topics you should consider before expansion, including:
1. Why companies expanding to Europe are more scared of violating GDPR than the impact of Brexit?
2. How do you avoid being seen as an easy target with endless pockets - a problem often encountered by American and British companies expanding to new regions?
3. Although the UK, US and Canada share the common language, many companies neglect the fact that they have different cultures - which causes them to painfully fail.
4. China remains a huge market with a completely different digital world.
How do you overcome these challenges?
Click to listen to the episode or read the transcript below!
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Mark: [00:00:00] Hi. I’m Mark Magnacca, the founder and CEO of gigCMO, and welcome today's discussion about entering new markets. With me today I have two of our Fractional Chief Marketing Officers: Michael O'Hara, who is based in the States, and Martin McGovern, who is based in the UK. Michael, would you please like to say hello so people can recognise you?
Michael: [00:00:20] Hi Mark, Martin. I’m delighted to be here, looking forward to our discussion today.
Mark: [00:00:25] Very pleased to have you here today as well. Martin?
Martin: [00:00:26] Yeah, same from me. You know, glad to be here and hope for a good discussion.
Mark: [00:00:31] Fantastic. So, we have an interesting group today because I’m originally from Canada and of course now I live in London. Martin is also from the UK, worked internationally, and Michael’s based in the States. So, we’ve all worked with, in our own careers, with different companies, helping them grow, and most of us have worked internationally and live – lived – around the world in different countries, and we’ve all helped businesses reach their first new market. And one of the challenges for any business, whether they’re selling a product or service, is how do you end up going abroad? You know, when you read a lot of case studies and you hear somebody describe what happened after they had this great plan and they approached and were successful. However, for most businesses that's not how it happens. You know, for most businesses, I think, you know they get their first order from somebody abroad and everybody is happy because they don't know these people that just came in out of the blue; they didn't have to work for it but they've already got an order. Is that your experience, Michael, and Martin?
Martin: [00:01:42] Not my personal experience. I mean, as you suggested no work internationally, but really I guess with mature businesses and the lessons learned from there... but hopefully a lot of those lessons apply to new businesses are also looking to reach out, and I guess for me that starts with questions around, you know, why they’re going internationally. It may be, as you suggested, in response to, you know, a one-off order or a one-off contact or it may well be because, you know, somebody sat down and started to ponder “Where next? Where do we go next? How do we take this business forward?” And, you know, what the criteria are for doing that.
Mark: [00:02:23] I guess one of the challenges is, it also comes back to what size your business is because, you know, you’ve worked at large organisations and, you know, they do have the luxury and the people to ponder things. They think, “Hmm, how do we play this big chess game?” Whereas, early in my career, I was in some small businesses and there was no time to ponder. You are just happy to get an order and if it came from somewhere outside your home market then somebody probably had a bright light and said, “Well, if we sold something, maybe we should make an effort.” What about you, Michael?
Michael: [00:02:56] Yeah, that's much more my experience as well. I... most of the work that I do abroad is smaller companies looking to expand their market and I always ask them, I have to define the real reasons they're going, what's the pain? Because I’d say about half the companies that approach me about coming to the US or the US going abroad, and after we've had that discussion they decide not to do it or to table it for a while because they really haven't examined their intentions. You know, it's... it can be a capital-intensive experience if you're doing M and A rolling up another company versus expanding, or the partnerships, the marketing costs. And so “What's the pain? What's driving you to go abroad?” is really that the fundamental question because that will determine, as you pointed out, smaller companies that are... they don't have the capital, they don't have people that are paid to ponder, and they’d rather shoot first and then aim out of necessity. Whereas bigger companies, you know, have the analysts, they have the resources, the tools, and they probably have better intentions when they're going abroad even though they're like driving an aircraft carrier versus a speed boat.
Mark: [00:04:03] Yes, when people are looking at this and thinking, “OK, what should I do?”, you know, let's say you're a British company and thinking, “Hey, our relationship with the EU is changing”, and even if it wasn't, they probably need new markets. And, you know, a lot of British firms will look naturally across the pond to the US; some of them will consider, “Well, let's start in Canada because if we mess it up there, it's a small – smaller – and distinct market.” And of course American firms, you know, who first went abroad on the back of World War II and their troops and everything like that, for the consumer products, for Coke and different personal care brands, you know, they like to look at the UK as “Well, that’s the first market we should go to” because we all share it... we’re all separated by a common language, as they say. But when they start thinking about that, a lot of times what people do – we all know in this day and age – somebody types something into Google and you get “Oh, here's the top ten list of things you need to consider”. And, you know, some of these that come out... we’ll talk about one. You know, here are the top eight things to do when you want to go abroad. One is franchise your brand. That’s great: hopefully, you own the trademark in the other markets; hopefully, you own the trademark in your own market, that's probably the most important thing. Then they talk about, “Well, let's just export directly”, and in Canada, you have a lot of American firms that just think “OK, you know, what's the difference? It’s just colder but, you know, it’s like Minnesota but they're north of the border.” Then you'll have others: “Well, let's find a partner or maybe a joint venture” – Michael, you were talking about some of this – “And just buying a company, that solves our problem.” But for a lot of businesses, buying another company, you know, isn't really an opportunity. They're just trying to get their own companies as profitable as possible and then piggyback. Maybe you've got a customer who is actually strong in that market that will take you there. Again, oil services companies grew on the back of the oil majors, right, Esso, BP, when these guys went abroad, they brought their supplier base with them. Same with the automotive industry: that whole supplier base moved with them. You can always licence your products. So there are all these different strategies but I think both of you mentioned that it actually comes back... the first thing you should be thinking of before you think “Oh, can I franchise my brand?” is: what are you really doing and why are you doing it?
Martin: [00:06:40] Yeah, and I think another aspect of that is understanding that it doesn't have to be daunting; you don't necessarily have to have that sort of, you know, depth of analysis in house. You know, a really important part of working internationally is the networks that you can back into. I don't mean the sort of virtual networks that we’re all part of, we’re all sort of linked into, you know, a hundred degrees, but that sort of networks that we've all probably got through ten, twenty, thirty years of working internationally, of people who can help you with the insights to gain the knowledge you need to make the right decision, whether that is to export directly or whether that is to partner. So certainly, I think being able to back into real networks of people who’ve collaborated and worked together is hugely powerful.
Michael: [00:07:31] You almost have to partner somehow, someway, regardless. You need to have feet on the ground in the new country that have an understanding of the cultural sensitivities, the marketing, the distribution, so a franchise is very, very difficult because that would assume that you have a brand that's known enough to have a... that brand that you actually franchise it. Licencing can also be similar to franchising in that, you know, you don't generally licence something that's not known because that's the reason people pay or will subscribe to a licence model, but in any case, if you got enough capital to set up your own beachfront, either way, whether you're coming east or going west, you still have to put a team in place. It's easier if you can assume, whether it's for merger and acquisition or partnership, an existing team or partner that has the resources to help you get your feet on the ground more quickly and navigate the process. It's a lot cheaper to pay someone a percentage of the total revenue than it is to establish, you know, some sort of a footprint when it comes to facilities and plant distribution and marketing understanding.
Martin: [00:08:41] Yeah, another key aspect is to ensure that you got some flexibility in terms of how you expand internationally, because invariably there's risk involved and it's a huge learning process for any team any business, so you probably don’t want to bet the farm on day one. And so, flexibility around resources who you partner with, how you arrive at the right marketing plan... I think it's absolutely essential.
Michael: [00:09:07] You know, and if you're picking a partner, it's so crucial to do your due diligence. I helped a company expand into South Asia recently and when... you need to make sure that you have someone that's going to help you negotiate deals who is from that country. But, you know, people look especially to Americans and, I would expect, to the UK to be fat cats with all kinds of money; money is no object and they might try to take advantage of it, so you've gotta find someone – a partnership or a representative – that you... that you've vetted, you know, through references that you know isn't going to try to take advantage of what they perceive as a company with unlimited resources and I don't want to be pessimistic but it's... it's fundamental.
Martin: [00:09:55] Yeah, and another... I counted a risk again, another encountered risk potentially – again, depends on what sort of business you're in – but if you're in corporate services, if you're into some sort of business support services, then following your client as they expand internationally is another opportunity in terms of working with somebody that you worked with before and, you know, following their flag as it moves around the world.
Mark: [00:10:19] OK. What about in terms of, you know, the cultural differences when you go to different markets? You know, for example, very few British firms actually survived and prospered in the US. There’s a long graveyard of unsuccessful British firms and I know from personal experience when Canadian firms go to the US, they hide as much as possible that they're Canadian. Right? Because that turns off a lot of local bars in the States, because even though Canada’s very close, and on one hand very similar, it's just perceived as different.
Martin: [00:10:58] Yeah, well, cultural differences can be huge: not just between, you know, the US and the UK, but around the world generally, and that again comes back to making sure that you're working with the right people who understand those nuances. It's more potent and more raw in a consumer market possibly than it is in a corporate market in that we have more of a shared life experience in the corporate world, but certainly, on the consumer side, it’s very easy to get it wrong in terms of thinking you could just lift and drop what’s been successful in the home market into, you know, another part of the world.
Michael: [00:11:37] Some of what you just described, Mark, is... could be analysed via market research of perception, so of countries, goods or services, and things like that. I mean I find most Americans love the Canadians and are all anglophiles, love the English and things like that. There are stereotypes but that emphasises the importance not only of the doing the due diligence – research in advance – but having someone recruiting... either it's a partner or if you're building a team of your own with local knowledge, with deep local knowledge of marketing and perceptions, and knows how to research and study things even in primarily English spoken countries, you know, we have a, well, I refer to it as 'dirty American English' with double negatives, and the British English is far more proper [...] that's indicative of a bigger cultural sensitivity that is so absolutely necessary. You can't be... particularly an American firm that thinks that they can go, and I find that American firms that are going abroad are usually more mature, they're going abroad to further expand their market, whereas I find European companies coming to the US are often younger companies trying to establish a beachhead in the United States because of the power that it represents or perhaps the access to capital. That... it doesn't change their requirement for making sure you've got local cultural sensitivities down and you have to recruit a partner for a team that's from that country. It's absolutely imperative.
Mark: [00: 13:14] And at what stage do you think that's, you know... a company doing that should be bringing them in? Should it be an early stage when I've identified, say, for example, you know, we’re in the UK, we've looked at the US market, we think it's ready to go? When do you think you should bring in that third party to give you some assistance: after you really got traction on the ground and got a presence over there or helping to actually look at the approach?
Michael: [00:13:40] Absolutely from the beginning – I'm sorry, Martin, go ahead.
Martin: [00:13:42] No, no, it’s alright, I was gonna – well – I was gonna violently agree. But yeah, I think it’s almost a pre-step. It doesn't necessarily mean that they’re your people. You can outsource that sort of insight piece to a partner, to a consultant, to do whatever, but yeah, absolutely, to Michael's point: whoever’s doing that insight and research and advice needs to be ensconced within that market. I don't think you can do that from over here to over there. As the business grows, you'll bring on more resource, but yeah, really from day one.
Michael: [00:14:19] And that's where they go. The fractional model, I mean, you know, comes in so handy if you're buying a piece of someone that's seasoned; it's the experience that maybe has the research, is built in to get you that fundamental foothold, might then make the decisions of whether or not we're going to create a beachhead from scratch or whether we're going to partner or licence.
Martin: [00:14:39] Yeah, I'll give you a lot an example. I got a call yesterday and it was to do with the UAE in the Middle East. I visited and I've done work in that market over a number of years, but I don't believe I know the market well enough so I WhatsApped somebody that I have worked with closely. I got a call back ten minutes later, but that's based on the relationship going back fifteen years and she's in the market and she can answer that query in a snap. She doesn't have to go out and do a lot of analysis because, you know, it's... it's under her skin.
Mark: [00:15:16] Yes, that's the benefit of, you know, both of you guys with your international experience brings to the table: that you're able to tap into resources that, you know, aren't advertised and people aren’t talking about it, don't know about, but that's what you get when you have that depth and breadth of international experience. What about when firms are coming over here, Martin, especially into the City of London? You know, in the financial services capital of the world on a good day, and on a bad day it’s New York, and they fight back and forth. You know, a long time ago when they had the Big Bang, it was all British firms and then the Americans came in and kind of did things differently, but, you know, they've gone native a little bit. What about, you know, I’ve heard from the continent coming into financial services, perhaps wanting to sell software. What are those approaches that you think there should be taken?
Martin: [00:16:14] I think the challenge for – and I think Michael’s alluded to, in terms of, you know, firms coming to the US and maybe not being successful – I think, you know, it's a tough ask for any business to come into a bigger environment that's got advanced technology, sophisticated marketing, really has a compelling point of difference, so yeah, I... a software provider certainly could come in front from the continent into Europe and carve out space. But it’s got to have worked out what’s its point of difference. You know, we’re not short of software providers or IT providers or financial services providers in London, so yeah, it comes back to the basics of marketing in terms of, you know, who's the customer and why they’re gonna choose you over what's already available to them. So it all comes back down to that sort of hard grind at the beginning of the process to get it right, but certainly, yeah, you can make the space here but you’ve gotta work hard for it.
Michael: [00:17:15] And there’s an enormous difference in approach if it's a CPG, a consumer products, you know, a B2C business versus a B2B business, like you said, selling software technology. I think the risk is far less because you don't have the marketing costs. I mean, marketing in the United States for a European company to come to the United States, we have hundreds of newspapers, we have hundreds of radio and television, we have, I mean, the digital, I think, levels the playing field quite a bit, but it's very different in marketing to the consumer a product which is very expensive versus marketing B2B, which can be done with SDR (Sales Development Reps), a good cadence in your ABM email campaign, you know, PPC and things of that nature. So I think, again, that's part of that establishing, you know, the pain and what the goal is for coming to a new country or going to a new country, whether you're coming east or going west. I find, interestingly enough, there's far less concern about US businesses going to Europe, about the Brexit, which is... which has an extraordinary economic impact, an impact of what you do as there is about GDPR. People are far more concerned about violating a privacy act than they are about the economic constructive of Brexit, and I find that fascinating because I'm a student of the economy and finance but GDPR absolutely terrifies, you know, companies that are going abroad to Europe.
Mark: [00:18:51] So I guess some of that, Michael, is that, you know, with GDPR, that can result in an immediate fine whereas a failed operation in the UK is just a slow drain on resources and there's that, you know, a great quote talking about, you know, slowly, I don't... I can't remember the quote, that’s too bad, it was a great quote. [Laughter 00:19:17]
Michael: [00:19:18] Well, there's just a fear that... there's been such a... matter of fact, a lot of the states of the United States that are creating their own privacy act – privacy rules – are looking at GDPR for guidance, but there's been such a – more than it probably deserves – but an overwhelming amount of attention to the Big Brother that GDPR represents. You know, PII (Personally Identifiable Information) in the United States is your bank account, your Social Security number, your personal cell phone number. If I put any of that out on LinkedIn, I've now given permission to that being, you know, favourable or OK for the world to see. In the UK, in Europe, having someone's LinkedIn profile or using the data from the LinkedIn profile, that's considered PII and you can't use that legally, you can't store that on a server in the United States because that's the same thing as taking that information and bringing it to the States so a violation of GDPR, so it strikes terror in the hearts of people going east.
Mark: [00:20:24] Well, I think both ways because when you start using the acronyms some people over here don't understand. At the moment, they think GDPR is a higher standard, which I think it is, so it gives you a degree of protection, but I think that reinforces the importance of really going in a systematic manner to a new market wherever it is, whether it's US, UK, the continent, going to Asia. Why don't we talk a little bit about going to Asia? Because very few firms from Europe or North America can actually succeed without a trusted partner on the ground; just the barriers to culture and language and knowing how business is done – and that's what we're really talking about – are so different, it really takes it takes a lot of effort to succeed, and I don't know of many firms who’ve succeeded without taking a systematic approach or going with a partner right even before they step into the country.
Michael [00:21:33] It is so absolutely, fundamentally important, especially when you're going to Asia or to China, which can be the Wild Wild West, or, you know, countries that... now China is exporting to, or... and manufacturing, you know, for. China is now consuming what they make instead of 95% being exported, so it's completely changed the dynamic in the field, but without local knowledge – what you can buy, what you can sell, how you can do it – not only tax implications, but if you're selling technology abroad there are all kinds of rules of what it... you know, for example, an American company can actually sell to China from a soft tech standpoint. I mean, it... you absolutely have to have legal distribution, operational help, in Asia if you're going to be successful and that's part of what I was alluding to about making sure you’re doing your due diligence in reference checking, because you can... if you picked the wrong partner or the wrong representative, it could be very costly.
Mark: [00:22:42] Yeah, so let’s –
Martin: [00:22:42] I’ve – sorry, I’ll go first –
Mark: [00:22:44] Sorry, Martin, go ahead.
Martin: [00:22:45] Yeah, just briefly to say, I've only seen or only been involved in successful ventures in Asia where it has been through partnership rather than a free-standing business, which again plays back to that... you know, it's essential to have, you know, the right introduction and the right solution guide to help you get to the right partner. You’re not going to find it in the Yellow Pages.
Mark: [00:23:08] OK, so let’s just come back and come back to a UK firm going to a new market. OK? And let’s say it's either in Asia or on the continent, so there are cultural barriers and there are language barriers and, you know, it’s a small-medium business, right? So, it's not huge. They’re well established here – probably don't see a lot of growth in this market – and have an opportunity to go abroad. Let's say they're selling services of some sort, OK? What would be the approach that you would suggest to them, OK? So, this is now: they’ve got a CEO, they’ve got a CFO, strong off delivery capability. They’ve got a good brand here; there might be a halo effect from being in the City, you know, somebody might have heard of them in some of these other markets, but what would you be advising them in terms of “here are some things to consider”?
Martin: [00:24:23] For me, Mark, I think the process is not dissimilar whether it is the small-medium- sized business or a larger business. The amount of resource they might have to go through that process may vary considerably and whether they have the expertise in-house or how to bring it in through a partner or through an assistant of some sort, but it starts with, you know, that base analysis in terms of what is that opportunity and how do they scale that opportunity and is it real or what’s their point of difference and how they’re gonna land in that market. Now, that may well be, you know, an opportunity for a group such as ourselves, because we have a lot of that within the fractional CMOs that are part of the network, but, you know, they need to be robust in terms of that early analysis, in terms of “is it the right move?” because it may not be.
Mark: [00:25:12] So part of that is, obviously, then just understand your value proposition and then do you understand that that value proposition is really going to have subtraction or a point of differentiation?
Martin: [00:25:25] In the market you want to go into.
Mark: [00:25:27] So do your homework first?
Martin: [00:25:28] Yeah.
Mark: [00:25:30] Michael?
Michael: [00:25:31] Well, I think again if you’re going to... let’s take Asia, which is now consuming product rather than just being an exporter of a product; I've mentioned that earlier. It's a completely different world over there when you have China, which is the world's biggest market, consuming goods that are being manufactured or produced or services abroad, whereas before Chinese... the Chinese manufactured everything. They still get it from a textile and apparel business, they still make a substantial percentage of the world’s soft goods, but now they're starting to consume some of it. It's just really changed. I recently helped a company with mergers and acquisitions in China. We ultimately ended up doing it outside of China and Vietnam and Myanmar, because China was consuming more goods and services rather than distributing. It really changed the dynamic of an M&A (mergers and acquisition) deal and I think it's just... then again, that's also the importance of being able to be flexible and question your intentions for going abroad, because once we did the due diligence and the information was gathered, it changed the whole structure of going abroad if it was... they ended up with a completely different result and it was an effective result as a result of the due diligence and the pre-determination of a market and the intention that it just... it was completely... game changer.
Mark: [00:27:09] So, I think just to wrap up the conversation for our listeners to the podcast, it really comes back to applying the textbook that we've all learned, you know, in trying to separate that from the day-to-day when it comes back to, you know, define the market you're trying to serve. Look at performing market analysis; look at what internal capabilities do you have (you know, they can probably do that on their own); look at internal capabilities; and if they don't have that outside perspective, that's when they should be looking into getting a mature, commercially-driven, customer-driven business leader of some sort to help them on whatever basis, to help them then look at, prioritise, and select those markets. And then, when they've done that, and prioritise, you have to choose when to go on... after first, so with that... is help them then to define the market entry options and then you minimise your risk, which is what managing a successful business is all about. To what degree are you going to take a calculated risk? And you want to make that as successful as possible to get the best return on investment. So –
Michael: [00:28:31] So the first... Spot on. So, once you've defined the market, established that there is a pain to go abroad, some direction, then the absolute first and fundamental first step is to find someone there in the market. And it's usually it's a consultant or adviser or a lawyer that can help set you up with that potential partner or team member – that's if you haven't pre-established a merger and acquisition that you're going after so that you already have that footprint – but if you're deciding to expand to a market – regardless of what that market is – you need to have someone that helps you navigate that in the market, local: cultural sensitivity, language sensitivity, legal, taxation, all of the things that are gonna... marketing, which is... can be so expensive, especially in a consumer model.
Mark: [00:29:21] And I... you know, just coming back to our business and what we do to help companies: given our presence here in the UK, our presence in the US and some other markets, it's nice because if you're a UK firm going to the US market, you can have a relationship with us here but also we've got experts such as yourself, Michael, on the other side of the pond; or if an American firm’s coming over here, they've got you there managing the journey with them and you're able to tap in the resources that we have. So that's one of the great benefits of working with gigCMO because we've all been on the client side, we've all had to make this happen in the firms that we’ve worked over in our careers so that... being battle-tested, having that international experience and that really outside perspective that allows companies to succeed, because everybody's, you know, so busy on the day-to-day, and especially during this crisis you're just trying to survive, but, you know, we're just in a new world. So yes, it's tough with social distancing and all this, and yes, there might be a vaccine down the road, but no business can wait for that solution. You have to think “how do I reinvent my business?”, and maybe that's the time to get an outside perspective in.
Michael: [00:30:45] So there’s an opportunity in this pandemic. Pricing everything, I mean it's... now is the time to, if you're going to do something, to do it because it's... the playing field is far more level than it's ever been.
Martin: [00:31:00] And I think also the fact that, you know, there's been a huge leap forward in terms of digital engagement means that, you know, people are more open to working in, you know, remote environments than they've ever been previously. You don't necessarily have to get on a plane every time to develop those relationships, but the fact that we have those relationships born out of, you know, real work, real delivery over a number of years, hopefully, is a real advantage. And then the other aspect, and I think it’s a word we've all used, is that we bring flexibility because
undoubtedly when you're, you know, when you're expanding internationally Plan A isn't always what you end up delivering, so being able to deliver plan A, B, C. and D, you know, is best for all.
Mark: [00:31:49] Great, so thank you, Michael in the US, and Martin in the UK, for joining our conversation today. We hope our listeners have enjoyed our discussion about how to approach new markets wherever they are in the globe and we look forward to seeing you on our next podcast.
Michael: [00:32:12] Thank you, Mark.
Martin: [00:32:13] Thank you.
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