Thoughts on internationalisation

Aberdeen-based entrepreneur Richard Selwa has spent the best part of a decade developing a very personal, highly strategic approach to developing overseas business. In this second of a two-part article, he very generously shares some insights on the topic of internationalisation with exportlink readers.

Timescales in international development

“I always like the idea of starting with the low-hanging fruit, the really accessible markets, if for no other reason that making early returns is an excellent base for future growth and diversification. In very broad terms, I would categorise three different types of overseas market:

Readily accessible: I have always found two particular Commonwealth markets to be especially accessible. Canada and Australia are stable, open-minded, culturally very close and with a very similar legal system. Both countries are also passionately pro-Scottish, which helps hugely! I think it should take between 12 and 18 months to get established in either, and you could aim to be profitable about 18 months post-start. Both countries are also excellent bases from which you can leverage.

Accessible: Then you have other Commonwealth states like Nigeria and European countries like Norway and Holland. It might well take two years to get going in these places, but it shouldn’t really take as much as four.

Rest of the world: You might well have to wait three or four years in places like Malaysia or Colombia – but not as long as ten. In these markets there are different mechanics – you’ve to work really hard to get people to trust you and get the whole community to feel your commitment.

For that reason, these markets are either for companies who are big enough to afford the long-haul, or for businesses who are really convinced of their long-term value.

In these countries, people will demand a lot of you, but the worst thing you can ever do is pull the plug on the venture and walk. If you do, you’ll never be able to come back in again – and you’d be better off not going at all!”

Nuggets of advice

Tailor your approach: Always be prepared to be flexible when you are looking to break into an overseas market. Make sure you analyse and understand the market so you can go in with the right package – and that might be very different from your “normal” business structure. But remember - partner management is an art in itself!

Competition: Remember it’s a big world – there’s a lot of money to be made out there! So you shouldn’t necessarily fear competition - your competitor today might be your partner tomorrow! Competition is essentially healthy – at the end of the day business is really all about trading knowledge and experience, every bit as much as products and services.

Finance: If you want to be really international in terms of finance, in my opinion London is the place to be because of liquidity and its political neutrality. Just look at the global origins of all the serious money in London – Russian, American, Middle East and European. It’s all there!

Local culture: I always try to remember when we go into a new territory that we are there not as a teacher but as an integrater. If you can continually demonstrate that you are there to integrate and to contribute, and that you have something to offer the local economy, then you won’t be viewed as a threat and as a consequence you will be more likely to succeed

Know when to draw the line: One of the most difficult skills in internationalising is knowing when to make the brave decision and cut your losses. If things aren’t working out, you have got to be prepared to draw a line beneath the project – and acknowledge that you have learned all you needed to learn from the exercise.

That doesn’t mean the exercise hasn’t been of value. I spent a lot of time looking at the Egyptian heavy oil market, which seemed to have distinct promise for a few months. Technically, I eventually saw it wasn’t going to work out, so I pulled out. But building up our heavy oil skill sets in Egypt saved our company a least a full year in preparation for a subsequent contract in Canada, since we then knew exactly what well configurations to look for.

Remember to look at the big picture: The drivers for the global energy markets are completely different from the UKCS. It’s not the Chancellor who is influencing the new energy markets – it’s the hungry economies like India and China. So when you are internationalising, remember to look at the external, macroeconomic factors as well as the local...

Using agents: To be successful, you have to be able to use every tool in the exporter’s toolbox, and overseas agents can play a very important role in that process. But I think you have got to be absolutely clear about what you want to be, and achieve, in your new market. If you are the UK manufacturer of a widget and you simply want a sole representative, then that’s fine – nothing wrong with that objective at all.

But, whether consciously or not, have you led your new customers into expecting greater commitment from you? It’s vital that you have a clear vision of what you are going to be, and that you don’t mismanage customer expectations.