The companies I typically work with are young Israeli Startups, and as such, are most often characterized as possessing highly innovative technologies that could significantly impact global markets. Whether their CEOs have global experience or not all too often they do not prioritize important characteristics of successful global market entry – beginning with Strategy.
Strategy, simply put, is the company's plan for achieving its long term (3-5 years) goals. With regards to penetrating global markets, it requires first a vision (a view of the desired target), and then a detailed plan for reaching it – including methods and resources.
Vision
The company's vision is its realistic view of its position in the market within the defined period of time. It could include a definition of market share, relative competitive position, size, type and location of local presence, and more. In many cases a Startup's initial vision will be different from its modified vision, achieved after the collection of additional market data.
Methods
There are basically two methods for penetrating the market: Direct and Indirect. The former involves the independent approach of target customers, while the latter includes a more complex variety of options through intermediaries: strategic partners, distributors, OEM partners, agents, and more. Often it makes sense to employ both strategies simultaneously as one might feed on the success of the other (having customers raises the confidence of potential partners and strengthens the Startup's negotiating position, while having partners has the effect of reducing the perceived risk by prospective customers).
Direct Approach
In most cases, early stage Israeli Hi-Tech companies would have an uphill battle trying to penetrate foreign markets directly. The effort requires significant funding and lots of patience, two things that Startups are usually short of. Nevertheless, if this approach is feasible it should also consider how information is collected (i.e. market research about potential customers, preferred geographic presence, competition, pricing, etc.), how prospects should be reached (cold calling, social networks, news releases, trade shows, publications, etc.), what should the sales approach entail (phone conversations, face-to-face meetings, demonstrations, etc.), customer retention and service issues (order fulfillment, training and support, maintenance…), and growth (methods for acquiring and supporting additional customers).
Indirect Approach
I'd be concerned if the CEO of an early stage company did not have very high market presence aspirations, but he or she should also be realistic. One company I worked with defined their goal to establish Tier 1 US Cable Operators as their initial customers. While this may be feasible in some situations, it is mostly unrealistic for an early stage Israeli company to expect that it would first acquire such significant overseas customers with ease. Even if access were granted, the process would likely to be too complex and expensive, and ultimately might not meet customer criteria. A more realistic approach would entail partnerships, which vary and should be matched on a case-by-case basis (agents, OEM, strategic, distributor…). As with the direct approach, here too the company should look beyond the stage of identifying and securing the partnership and also think of methods to successfully manage it so that it reaches its full potential.
Other Considerations
Whether a company chooses the direct or indirect approach, or a combination of both, there are a multitude of additional issues to account for:
- Human Resources: How many employees to recruit, how to recruit them (networks, Head Hunters…), what type (pre-sales, sales, technical support, etc.), where would they be located, salaries and benefits (that match the competitive landscape and legal requirements of their location)?
- Local Presence: Should a local office be established? Where? Following which milestone? Of what size and type?
- Legal Considerations: What are the required legal steps that must be taken to operate in the target market?
- Financial Aspects: Is local banking needed? Are there requirements as to how revenue is collected and reported?
- Certifications: Does the local market require certain certifications, or would it be beneficial to have any?
- Marketing: How would information about the company reach target customers or partners (trade shows, news releases, magazine publications, event sponsorships, etc.)?
- Business Development: What mechanisms could be employed to gain access and create market awareness (supportive organizations, event participation, network utilization, collaborative marketing, etc.)?
Final Notes
The process of penetrating global markets is complex and expensive, but it's obviously doable. Israeli Hi-Tech Startups create amazing technologies and solutions, but often fail to reach their potential because they do not have a clear direction or the resources to back it. While it should not necessarily be the "by-the-book," drawn out and methodical approach that most consultants would suggest, the market-entry process should follow a clear strategy that begins with a realistic vision and includes methods and resources that match the characteristics of the target market.
Ilan
Ilan Friedman
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