The dangers and opportunities of moving into foreign markets
Why it pays to do your homework
Wednesday 26 May 2010
Nearly six months after expanding his business offering tailored information technology solutions to the financial services sector, Misha Gopaul is pleased with the progress of the venture. But he confesses that he has been surprised by the form the success has taken. “It’s gone completely different to how we expected it,” says the chief executive of London-based Fabric Technologies.
For example, the company – which has seen turnover more than double to nearly £8m in the four years to 2009 – planned to start out in Zurich before expanding into Geneva. In fact, it has done it the other way around through responding to information picked up locally. “It pays to be flexible,” says Gopaul.
Fabric, which was partly prompted to make the move by the fact that some of its customers were setting up operations in the Swiss financial centres, was from the start concerned about keeping within a tight budget. Thanks to its expertise in technology, it is able to do a lot of the work from London. It has also outsourced some routine tasks to local partners.
Fabric also used some of the strong relationships it has developed with some of the IT industry’s biggest players, such as Cisco and Microsoft, to obtain local knowledge of the market and to acquire contacts.
This sort of pre-planning certainly fits with the advice offered by such business figures as the serial entrepreneur Sir Eric Peacock, Lord Digby Jones, the former CBI head and former trade minister, and Kanya King, the founder of the Mobo music business, at a recent round table organised by HSBC commercial banking (see "HSBC Tips For Success" below).
Certainly, Brent Hoberman and his team at the interiors website MyDeco.com have prepared for expanding from the UK into the United States by doing their homework. Drawn by the fact that the US home and home furnishings market is reckoned to be worth more than $120bn (£80bn), they are planning to offer 15 million products and to deal with more than 1,200 retailers – making the site substantially bigger than its UK parent, which was established two years ago.
Hoberman says he was originally attracted to the market when furnishing the house he bought after the sale of lastminute.com, the online travel company he co-founded, at the height of the dotcom boom. He saw an opening for a business that – as he sees it – “democratises design”, giving ordinary consumers access to the same sort of things as the professionals. Increasing US interest in the site has spurred the latest venture.
He acknowledges that it is hard going into the United States, traditionally the graveyard for many British retailers, but the early response to the launch has been encouraging and he hopes that technological advances, such as a 3D room planner and an active social networking community, will provide it with an advantage.
At a time when growth is hard to come by, going international has at least to be considered by any business looking to prosper in the coming years. Moreover, as Noel Quinn, HSBC’s UK head of commercial banking, says, all exporting is good for the UK economy.
HSBC Tips For Success
1. Use every piece of advice available to you, every advisory body, your networks, customers, suppliers and peers to build your knowledge and obtain the introductions you need overseas.
2. If you are looking at overseas markets for the first time, stay initially within your comfort zone by going somewhere familiar or where they speak the same language.
3. Before taking on outsiders, look at how your own people can drive effective internationalisation. They could be great ambassadors.
4. Do your homework before entering a new market. Before you make the leap, it is possible to do a lot of research on the internet, through organisations such as UK Trade & Investment and Chambers of Commerce, and with your bank.
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