"Regard foreign market development as a secondary activity"Second fail in foreign trade
This method of tapping into a market is sadly another favourite,
and its failure is guaranteed.
Another practical example will illustrate why:
Mr. E from F makes monitoring systems for building surveillance, specialising in surveillance cameras and recording equipment. His systems employ the best technology in the world, and Mr. E., himself an engineer, is justifiably proud of his development.
Indeed, he is so caught up in his pride that he becomes convinced that the whole world has just been waiting for his products and that all he will have to do is present them and they will automatically be snapped up from under his nose. No need for any active sales support, all he has to do is gear up for full production capacity and effective distribution.
As Mr. E has little regard for doing business in small steps, and has read Donald Trump‘s ‚Think Big‘, he sets up seven sales subsidiaries simultaneously: in France, Hong Kong, the UK, the USA, Spain, Hungary and China. I emphasise: simultaneously! You would think that developing just one new market would bind up enough resources and require a considerable time investment. But then this is a problem that you don‘t have when your product is as ingenious as the one that Mr. E is selling.
So let‘s take a trip into the big wide world. The subsidiaries have been set up and the search is now on for sales personnel. Service providers all over the world are assigned the task of finding the right people, who will be trained at lightning speed at the parent company. But will it work? Is it really possible to develop seven countries at the same time in the space of only one year and then be successful?
Well, actually, the answer is yes, but only if your company happens to be listed on the stock exchange and your resources are virtually unlimited. But if this is not the case, then this strategy of globalisation is pretty well doomed from the start.
Developing a new market is far too complex a matter to be devoted only secondary attention. If you believe that all you have to do is distribute your products and they will virtually sell themselves, then you are committing an act of incredible arrogance, which is guaranteed to end in an economic disaster.
Mr. E, too, should have known better. He built his company up himself and it took him years before its success on the market was secured and several more years to become market leader. So how on earth could Mr. E suddenly assume that an international market would not have to be developed the same way? Why is it that so many business people believe that tapping into an international market somehow requires less involvement and application than they expended the first time round on the domestic market?
Mr. E employed more than twenty people in his domestic sales department, and more than twice as many in customer care. But to start with in France, he installed only one sales representative and two technicians. Just like in all the other countries where he was attempting to gain a foothold. In terms of area alone, France is one-and-a-half times as big as Germany, and the manpower required to have a chance of successfully attracting customers would be at least as much as in Germany. With only one marketing man in place, Mr. E has no chance.
The ultimate end was unavoidable: Mr. E was barking up the wrong tree right from the start and failed in his efforts right across the board. The success he had envisaged failed to materialise in any one of the countries, and his half-hearted endeavours ended in economic disaster. Within two years, all of the subsidiaries were liquidated and the resulting financial strain even drove the parent company to the verge of collapse. Everything lay in ruins, just because of an erroneous strategy.
So what was Mr. E‘s commercial error? It was a combination of completely overestimating his own performance capacity and a failure to understand the essential necessities that tapping into an international market involves. These two factors together almost spelled the end of his entire business. If Mr. E had concentrated his efforts on a single country, or at the most two, he would probably have been successful. Many people are not aware of this fact, but what applies at home also applies abroad. If I need ten people in my sales department at home then I should send at least the same number of people to the foreign subsidiary. And you can‘t do that in seven countries at the same time. So the decision not to successfully develop one country after another was completely wrong.
No matter how good your product is, there is no substitute for making a precise analysis of the local conditions and putting together a profoundly detailed business plan.