It is becoming increasingly common to hear people talking about the topic of internationalisation, a term which simply means that a company is expanding its operations into overseas markets. This concept is by no means a new concept because at the start of the twentieth century several businesses had already expanded overseas. But nowadays, many businesses are embarking on this adventure, not only because these companies have built a name for themselves as exporters, but also because they need to: the huge, and apparently never-ending, financial crisis that looms before us has meant many businesses now view internationalisation as their only means of survival.
Currently, thanks to globalisation, setting up and running a business overseas is getting easier. There are many tools at our disposal that can help us with the task, such as the consultation services offered by different governments or by private consultants who specialise in foreign trade. Amongst other things, these organisations offer: consultation services, information, training schemes, grants, financial assistance to help attend trade fairs, and they also organise meetings with potential foreign clients and manage product placement services in overseas markets.
What is more, although it is recommendable to have a basic understanding of foreign languages, those setting up companies overseas and undergoing the internationalisation process do not need to speak fluently the language/s of the country or countries that they wish to operate in; the university education of professional translators or interpreters means that they are always capable of handling the needs of a professional who speaks the language from the relevant countries. This availability of professional translators makes the internationalisation process much easier and, in many cases, without it the process would be almost impossible as it is such a fundamental part of the process; unfortunately, it is one that is often overlooked.
Helping us to delve further into this matter, we have with us today Juan José Roca, Director of internationalisation programs at the School of Industrial Organisation (Escuela de Organización Industrial – EOI) and co-owner of Roca y Osorno S.L., an agency that provides international trade consultation services and strategic solutions to businesses working globally. Juan José Roca will now share some very useful insights on this phenomenon with us by responding to the questions we have prepared:
At the moment, due to the economic events we are all familiar with, it is almost the only way out for businesses looking to survive, given that the national market is undergoing a serious depression and almost all businesses are being forced to internationalise. In fact, the volume of exportations has increased considerably.
Internationalisation is now a question of survival, and it is therefore essential.
– Is internationalisation really necessary in today’s world?
The internationalisation of businesses, in the context of globalisation, has always presented itself as both an opportunity and as a necessity for national businesses. At this particular time, as already mentioned, due to the economic situation, it is quite clearly a case of survival in the majority of cases. In fact, the companies that had expanded internationally before the financial crisis have been able to withstand the impact and carry on trading with less effort than those companies that had not paid enough attention to foreign markets.
As well as being a necessity, internationalisation will have helped to ensure the business future, growth and profitability.
– What can a business hope to gain from internationalisation?
There are many advantages to be gained: it offers a larger market, it improves the running and profitability within the national borders, it makes an organisation better prepared to deal with change and it makes it more competitive, amongst other things.
But, it is important to mention that the internationalisation process is not something that occurs overnight, it is a long process and there are risks involved, measured risks.
– And what are the possible setbacks a business might face when taking this step?
The typical setbacks are normally the lack of resources needed to undergo internationalisation, but there are institutions in each country (in Spain, Icex [Spanish Foreign Trade Institute] and Extenda [Andalusian Government body to promote Andalusian companies abroad] among others) that can provide financial assistance and consultation services to help with this.
In order to overcome any setbacks that may occur, it is essential to work with a team of professionals who know how the internationalisation process works; they will be able to help you avoid the typical mistakes that are made because of gaps in our knowledge, precisely the sort of mistakes that cost businesses a lot of money and that could lead them to think that the international market is not for them.
– Are the business models we have been so familiar with until now changing?
So many things are changing. What appears to be clear is that the only way to create jobs is via private businesses, as they are the ones who can get us out of the current economic problems we are facing; more and more people are becoming aware of the important role these businesses play in generating wealth.
We must also change people’s perceptions of business; the majority of people tend to think of large multinational companies, but more than 90% of businesses in Andalusia (southern Spanish region) and Spain are independently owned small and medium sized companies that generate employment and wealth in the area they are located.
We must view entrepreneurs, who will later set up companies, as our road to salvation as they will help get us out of this economic depression, regardless of government policy making; and of course, any policies being drawn up by government should be aimed at making it easier to set up and grow a business.
– What steps should a business take before trying to expand overseas?
Firstly, the management must be convinced of the need to expand operations overseas. Little can be done without this commitment.
Secondly, there needs to be a change of mentality and the market needs to be thought in terms of its totality, and not just in terms of what directly affects the company. This is a step that all the staff working for the company must take.
Thirdly, prepare an internationalisation strategy before expanding into foreign markets, and whilst still in the national market, perform an analysis of the internationalisation process to see whether the company is ready to expand its activities overseas; if not, identify which things need to change before undergoing international expansion. This is essential so that the internationalisation process is a success.
– What types of financial assistance and/or grants are currently available in Spain to those businesses that have decided to take such an important step?
As for Extenda, there is still financial assistance, and it appears that in the next few months we may see them being increased. The best idea for those trying to find out information about the types of assistance available is to visit both institutions as they will provide you with consultation services that cover any current business activities.
– What other professional services might these businesses need?
These Spanish institutions offer initial assessments and help with the initial steps, but it is important to then work closely with a expert in international trade so that these initial steps are followed through. This requirement can be covered in many ways to cover all budgets:
One option available to companies is to contract a trainee in the second phase of Extenda (i.e. those trainees who have spent a year working in foreign markets); many small enterprises find they can cover this type of cost. To get the ball rolling, just head to Extenda to find out more about the timeframes and conditions. It is a very interesting option as you will have an expert in foreign trade working inside the company, but at a very affordable price.
Or, you could also contract qualified staff from Extenda who have taken the course “Profesionales para la internacionalización” (Internationalisation Professionals).
You could also choose to work with professionals who have more experience, such as external agencies who act as international trade consultants. These then act as your external foreign trade department, but at a lower cost than having a similar full-time member of staff working in the company. This type of service can solve many of the different problems that relate to foreign trade, from performing specific market research and focus group studies to transport issues and customs documentation, client negotiations, hiring, etc.
– Would you consider a perfect mastery of languages by staff to be a fundamental requisite for overseas expansion?
It is preferable that foreign languages are spoken in the company, and that the language of the destination market is spoken, however there are people who can help us with that, mainly during international business negotiations with foreign clients, who have a mastery of the language and this is a key moment in the exportation process.
It is important that a company is able to answer calls and emails; however, it is essential that when trying to translate the company website or the marketing materials, only professional linguists who understand both the language and cultural characteristics of the country perform this task. The marketing and communications must be produced by professionals who master the language and culture, because if done incorrectly, the company’s image will not be as it should be and this will have a direct effect on sales, making it very difficult to hit targets.
As we can see from the useful information provided by Juan José, internationalisation helps businesses to be more competitive and guarantees their success. These are just a few examples of Spanish companies that have successfully established themselves overseas: INAUXA, INGENA SA, NTRGlobal, BUYVIP and EVERIS.
Furthermore, not only is it essential to use the consultants and professional services to help guide you through the process, you must also pay close attention to your image and branding. We have all heard about cases such as the Mitsubishi Pajero, which had to be launched in the Spanish speaking markets as the Mitsubishi Montero due to the hidden sexual connotations of the term in both Spain and Latin America; or the case of the Nokia Lumia, which was also the centre of controversy because the term “lumia” can mean prostitute in Spanish (the issue was cleared up thanks to some arduous linguistic detective work). If we look further we can find many more examples like these, not only dealing with branding or terminology, but also colours and images that may also need to be adapted to the destination culture. For example, in Europe the colour red represents danger or warning, whereas in China it represents happiness and celebration; the colour white represents purity in Europe, but in Japan and China it represents death and sadness. This process of linguistic and cultural adaptation is known as ‘localisation’.
Often marketing departments are unaware of the cultural peculiarities of the destination market, or there is a lack of awareness about the need to use the services of language specialists (instead of using Google Translate or some friend who has spent a while living abroad) during the preparation of their internationalisation strategy. By not using these professionals, they risk throwing all their efforts down the drain because of the resulting failures in the internationalisation process, as was the case with a well-known Andalusian bakery that is not able to export its product because it is a perishable product and because it was unfamiliar with the product market of destination.
So, we would like to lend our support to all those entrepreneurs out there who have decided to take this leap. If you use professionals, you are guaranteed success. And, if you have any questions after reading this post, or are now thinking about expanding your company overseas, and you need more information, then don’t hesitate to get in touch with us.
Thank you for reading, and also for sharing this post so that it lands in the hands of all those entrepreneurs who have recently found themselves mulling over the idea of internationalisation. 🙂