“The essence of strategy is in the activities – choosing to perform activities differently or to perform different activities than rivals.” - Michael Porter, Professor at The Institute for Strategy and Competitiveness, Harvard Business School
International business is so much more than merely going to a foreign country and hoping that someone buys your product or service. The art of international business is about adapting your business strategy in an elegant way that will deliver a long-term competitive advantage to your organization. Ultimately, this strategy will determine how and if you enter a certain market. As described below, the best place to start is the PESTCL framework of international marketing strategy. The PESTCL framework will help you determine if there are any trends or facts in your analysis that require further research.
The "P" is for politics. You have to understand who is governing your target market and how that government will affect your business by asking yourself several questions.
- When are the next elections? Does the target market even have elections? Will the government be receptive to your business?
- Does the target market have a history of corruption? What is the role of the government in the private sector?
- What are the current U.S. government travel policies and warnings with respect to the host country?
- Will it be necessary to purchase political risk insurance from the U.S. Overseas Private Investment Cooperation?
The "E" is for economics. You should focus on how your firm have deliver value to customers in the target market.
- Is the target market subject to free trade agreements, bilateral investment treaty, sanctions, quotas, subsidies, state-owned enterprises, antidumping/countervailing duty orders, etc.?
- What is the value of the target market's currency in comparison to the U.S. dollar?
- What is the economic forecast for the foreseeable future? How large is the target market in the host country?
- What is the tax rate for foreign-owned institutions in your industry?
- Will you be able to offer your product at a competitive price?
Resources: Export.gov, Organization of Economic Cooperation and Development, U.S. Department of Commerce - International Trade Administration, U.S. Trade Representative, and U.S. Department of Treasury - Office of Foreign Assets Control
The "S" is for social. Culture is all about what people say, think, and do. You need to understand what is considered to be normal behavior in the target market by focusing on these four aspects of culture.
- Customs - What are the policies around gift giving? Where is the target market on the spectrum of individualistic vs. collectivist? How do you start a formal business relationship?
- Language - How does your brand name and marketing materials translate into the foreign language? How are you going to promote your product in another language?
- Symbols - As described in the video below, can you avoid any cultural symbols that may have a negative interpretation?
- Values - Does your company's values match the values of the target market?
Resources: Geert Hofstede.com
The "T" is for technology. Different countries have different levels and standards of technological infrastructure. You will have to mindful of how the target country's technology will support or prevent the adoption of your product.
- What are each of the steps to get your product from the shipping dock to the end user?
- How will a new customer experience your product or service for the first time?
- What is the level of reliable infrastructure with respect to the Internet, broadband, TV, radio, sanitation, electricity, water, etc.? If you decide to manufacture in a foreign country, how will infrastructure affect your production process?
- How will customers dispose of your product when they are finished consuming it?
Resources: World Bank Doing Business Studies
The "C" is for competition. Competition is destructive when companies are competing over the same market space. Therefore, when you enter a new market, you don't want a fair fight because you will probably be fighting on someone else's turf.
- Conduct a SWOT analysis of your foreign competitors.
- Examine the four "Ps" of marketing within the context of the foreign market - Product, Place, Price, and Promotion
- Apply Michael Porter's Five Forces Model to the foreign market - (1) What is the power of the customer? (2) What is the power of your suppliers? (3) Are there any barriers to entry? (4) Is there a threat of substitute products? (5) What is the nature of the rivalry between competitors in that industry?
Resources: Trade magazines and consultants in your industry
Finally, the "L" is for legal. Being subject to a lawsuit in your home country is stressful enough. Just imagine being involved in a legal proceeding in a foreign country. This is why you have to ask several important questions when you start your research for this component.
- What are the laws with respect to business registration, employment, the environment, transportation, etc.?
- What is the legal framework in the target market (i.e., common, code, Sharia, or a mix of Marxist/Socialist)?
- Will you have sufficient legal recourse with respect to contracts, counterfeiting, intellectual property, etc?
- Does your law firm in the United States have a presence foreign locations? Can they represent you across borders?
*To learn more about International Marketing, check out Doug Ladd's course on International Marketing Fundamentals at Lynda.com.