5 Steps for an International Expansion!

Two years ago, I accepted the offer of 3B’s CEO because I found his opinion exciting. He firmly believed that Hungarian companies had tremendous potential and specialised knowledge that would make them successful in the international market. So it was an easy choice to accept the invitation to put every Hungarian company on the global business map that met international expectations and who had owners who were ready for an expansion. It hadn’t crossed my mind that within a year, the sheer number of qualified and eager companies would pose serious organisational challenges for my company! It’s also true that after my American career, I didn’t think I could work at a place where I enjoyed every single minute of my job. But I enjoy 3B’s international market entry projects precisely because of the challenges they pose.

Why is it a hit?

What is behind the enormous interest Hungarian companies show towards international expansion? This intensity is not at all typical in the international business scene. There are always some companies that want to open to foreign markets, even from the USA, but that alone couldn’t make this topic so trendy. It is also quite unusual that when you start talking about international expansion, businessmen are listening with eyes wide open, trying to soak in every piece of information, discover solutions, and jot down the recipes. I have asked Miklós many times about what could cause this phenomenon. By using his thoughts on this matter as a foundation, then building upon them through the experience I have accumulated since, I can now see the entire structure.

One main reason is that the real international scene seemed like an unrealistic dream in Hungary for a very long time. Not to belittle any business success achieved in Slovakia or Serbia, but for an ambitious businessperson, being truly international means going beyond these countries. Expanding a Hungarian business to these countries is the equivalent of expanding a successful American family business to another state. But if someone wants to enter an overseas or Western European market, they will need deep pockets. I had the opportunity to talk to many companies during negotiations who attempted such expansions several years ago, and it cost them several hundred thousands euros. And even if the core business was able to finance such an attempt, the losses were painfully real! These losses explain why interest in a fresh attempt grows drastically after they hear about our calculations for the expected costs of international expansion calculated by us. In the international business scene, expansion is a strategic consultation program. And our approach only plans an actual, physical presence after the first decidedly positive leads have been realised. So it is a development project, the first term of which lasts one calendar year. And it is not about making investments, but paying consultation fees. This way, the company has nothing to lose, as whatever plans it has for foreign expansion, it will need market research, local knowledge, legal information, and internal business development. Well, these are all included in 3B’s expansion projects. That is why many of our current partners say that getting leads or a deal at the end of this process is just the cherry on top. Of course, I’m not in the position to agree with that, as we also have a commission option besides the consultation fees, and that is the real deal for us! We need actual results for that.

The other important reason behind the success of international expansions can be found in Hungary’s economic conditions. We do not want to talk politics, even though it does not depend on the current political direction, but it is a fact that the majority of Hungarian business owners – especially 28-to 45-year-olds – do not feel secure if they only have Hungarian partners. Of course, this desire for diversification is not unique to Hungarians. Every great businessperson, even in the most stable country in the world, thinks similarly, and they are absolutely correct in doing so!

The final (and flattering) reason is that Hungarian business owners are intelligent and plugged in; they can’t be fooled anymore. Gone are the days when big international consulting firms could get them to pay tens of millions of HUF for a nicely compiled strategic plan that lacked a practical implementation guide, which Hungarian managers just ended up storing in a filing cabinet. I wasn’t aware of such practices until I heard about them during personal meetings in which business owners shared their often outrageous stories of failed projects undertaken in co-operation with consulting firms. We noticed a pattern: it was managers from the Individual and Ruler generations under 45 who started saying no to this kind of strategic consultation. They instead gave up on international success, as there weren’t any adequate professionals of this field within their reach. And without true experts, they did not want to move in this direction. I also find it quite interesting that when we talk about the 5 Steps underlying the success of our international expansions, it doesn’t seem like we are saying anything particularly new! They agree with our suggested process, and most of the time they say that it is exactly how they think about it, and the reason why they didn’t let anyone else handle this for them thus far is that the ‘experts’ thought otherwise, so no trust formed. It is also quite obvious that the sheer number of agencies in Hungary trying to sell their ‘expertise’ in this field with clever pitches and seemingly sound arguments has made Hungarian business owners and CEOs extremely cautious. And from what I’ve seen so far, it seems like they should be.

A carefully designed process in 5 steps

In the past four and a half years, I actively took part in the international expansion of nearly 70 companies. Out of these, 38 were my own projects that I led within 3B. Of course, it took some time to convert my experience gained in leadership positions over the years as a government employee in the US to a real market economy setting, but today I have refined a clear and precise process when it comes to international expansion. The tasks involved can be summarised in five distinct steps. There may be other ways to do it, or even better ways to do it, but partly due to my personality, I only recommend things that I have seen work with my own eyes, that I have experienced myself, and that have already helped us achieve great success. We also experimented with skipping certain elements, sometimes overlooking a few seemingly less critical factors at the request of the client, but it never worked. Even if the client bore all the responsibility, it felt like a failure for us too. So we are not as lenient during the negotiations anymore and stick to our steps strictly and clearly because we only want to participate in successful projects, and we know exactly what has to be done to achieve that!

Step 1: Screening

What do we need to screen? To start with, the company, the product and the management—these are obligatory. And we don’t even have to go beyond that at the beginning, as it provides so much information for the partner about their own business that is not only enough for international expansion, but for domestic business development as well. This is potentially the most challenging step, as it requires the owner or CEO of the company to see their business objectively. If they already have a failed international expansion project behind them, they will get a clear picture of what went wrong. And if it is their first time embarking on such a journey, and they decide to cooperate with us from the beginning, they receive objective feedback on what has to be changed in the future.

We check whether the company has a unique knowledge that would sell abroad. Every company thinks they are unique, but the screening makes it clear whether others think the same. We have to check whether the face of the company is the right person to have the story built around them, since in an international context it is the product that sells, and the product needs to tell a story. Especially now, as idolism has been on the rise in recent years, it is imperative to have a charismatic face at the company that will sell on the international market.

Does the company have a real product? Everyone answers ‘Yes’ without hesitation, but there are only few who have a product that is packaged properly and ready to be sold. That is the Achilles heel of Hungarian companies’ international expansions. Often the knowledge is not defined at all, especially when it comes to selling services. And in the case of selling products, we have yet to see a Hungarian company whose product name, story, and design really resonate with international customers. Not to mention that a successful international expansion calls for a unique product. And in this, Hungarian companies have a  distinguished standing internationally. But the proper branding of a product or service is one of the weakest skills of Hungarians.

Screening the organisation comes next. It is essential to know whether the international expansion is the dream of only the business owner, only the CEO desires it, or the entire company wants to conquer new markets. We have seen many cases where the management was perfectly happy with their domestic presence, and taking an international direction proved to be nothing more than a massive burden to the leaders who were most suitable for stabilisation and the exploitation of their existing markets. For the purposes of reorganisation, we have to know the personalities involved, which we define accurately and appropriately during every development project. This analysis shows us clearly whether the international expansion can be achieved with the current leaders, or we have to start the reorganisation from the top down.

The first step often reveals hidden business development tasks, many of which have been postponed for years. That is why I usually say that this period of the expansion development has the most significant overall impact on the business itself. On several occasions, a business development program took over the initial plans of an international expansion due to this, and we only put international topics back on the agenda more than six months later. It was quite effective, as the business development was conducted with the future expansion in mind.

Step 2: Strategic Market Analysis

While Step 1 involves intensive cooperation with the partner, Step 2 comprises intense, separate work by the consulting team. We define potential target markets based on the expectations gathered from top decision-makers during the discussions. Traditional market analyses are of course an essential part of the process, but we do not consider them the most critical elements of this phase. The markets are examined from several perspectives that are of crucial importance in a modern business strategy aspect. One of these is trend analysis. Consultation agencies often make the mistake of recommending directions, locations, plans for their clients based on the current market situation. They fail to consider the underlying trends that influence the market. Our consultants always analyse at least ten-year-long periods for market trends, which could be as long as 15-20 years in the case of our most thorough consultants, looking at social and political factors present in the target market that could have a significant impact on the actual expansion project. As such, cases like Brexit or Trump’s policies are not to be underestimated, as these can fundamentally determine the long-term prospects of many significant target markets.

We must also be aware of what kind of decision-makers dominate in the given target market. Which generation do the potential clients belong to, and what personalities do they have? After all, they will be the ones who decide whether they want to buy the product or not. We have to be entirely confident in our knowledge of their decision-making mechanisms and points of influence if we are going to be successful.

Once we have these analyses and research in hand, we are ready to determine the actual target markets where the product of our partner can be successful. We can also define the necessary changes to the product – these mostly involve changes in image and communication – to shape them to the decision-makers’ liking. That is to say, we define the most successful product concept. We also determine what kind of uniqueness has to be communicated and what is the exclusive content that has to be highlighted most in the future.

After the examination of the objective factors, we ‘only’ have to evaluate the soft factors. Previously, Hungarian businesses often failed their international expansion by being unaware of the opinions prevailing in the target market. Namely, the Hungarian image. They didn’t consider the way Hungarian products or Hungarians are generally viewed to be important, even though this can fundamentally determine the success or the failure of the project. Many times, businesses made the safe decision of expanding to neighbouring countries, only to have to face historic challenges, which could have been avoided. And there is still hardly anyone who thinks that although it is far away, Hungarian minds are widely recognised in, let’s say, the USA, and in certain states, it is plus if a product is Hungarian, as that means it is smart, unique, and intelligent. We also need to be aware of the everyday life and market challenges in the target market. Unfortunately, only a few take this into account in case of overseas expansions. But the overall quality of life of local decision-makers has enormous significance!

Step 3: GO / NO GO

You could say that this is the most exciting part of the expansion project – after all, this is when the final decision is made about whether the company wants to go ahead with the expansion based on the gathered information or not. But the truth is that the data collected during the first two steps gives such a clear picture that it takes out most of the excitement of the actual decision. At this point, we already know exactly how we would go on with the process, or if there is absolutely no point carrying on with the given project. By the way, our partners have always accepted our views on this so far. There were unpleasant situations when we had to shatter dreams, but the owner wasn’t surprised, as they could clearly see that they could get a foothold in the international market for some reason. But now at least they know why. There were also a few projects where we advised the client not to begin the process without suitable business development, but that expansion is definitely an option for them in the future. In most cases, however, the process continued, and we pressed on to Step 4 without hesitation.

Step 4: Business Development

It is the most important stage of the process. The concepts defined in the first two steps take their final shape here: the actual products are created. With the right name, message, story and design, we are ready to target the chosen markets and decision-makers. Working on the product concept always means an exciting co-operation and brainstorming with the partners. They are the ones who invented the product, and we have to understand it, then dress it up nicely. In most cases the product content also has to be structured, some functions or features have to be dropped, and some new features have to be introduced. So based on the right product concept, the actual product development begins, which gives the company the long-term knowledge of how they can build a product focusing on the market and the target group in the future.

The next step is to build a database. This is the foundation of lead generation, and as such, it requires intense concentration and specialised expertise. It would be easy if we only had to buy databases relevant to the given target market, but sadly that is not enough. Database creation happens through several channels. First, we have our own database with the actual contact information of over 11 000 decision-makers, who are in interactive contact with us, we can survey their opinion on any given product idea or market entrance any time. The other significant element of the database is LinkedIn, Facebook, and other social media platforms, through which we can reach the decision makers of the potential markets. Of course, data from big database companies is also important, and we also conduct personalised online research in every case. As we will be the ones contacting the clients based on our database, we can’t afford any mistakes in this process, as that would mean ruining our own chances. That is why I can confidently state that we are sure to have the best international database in Hungary, including the products of international database companies.

Preparing the sales materials is an integral part of the process. This means native-level translation and localisation to the given market. The low quality of English-language materials is a recurring problem in the case of Hungarian companies. They are not necessarily wrong linguistically, but we all know that correct grammar is not enough when it comes to sales. You have to speak the language of local businessmen. Looking at the USA – but it is true in the case of every developed market, including the Hungarian one – there is English fluency, and fluency in advanced business English. We prepare our sales materials with the latter in mind.

The last part of the groundwork is actually the first task of the process: preparing communications. You cannot enter the international market cost-efficiently without a perfect social media strategy. Social media is a cheap communication channel. You can reach anyone, from anywhere, you just need the right professional to actually reach the target group. This world is still unknown to many, and our experience is that professional agencies are not yet very good at it in Hungary. But the farther away the suitable target markets are for the partner’s products, the more important it becomes to have professional social media work. For these purposes, we use 3B’s professional team based in Berlin, who prepare the partner’s social media platform for the communications work based on the target group definitions and timelines we created. Of course, this has to go beyond mere planning and requires actual communications work. There is an expert communications team at our disposal in every case, who also create the most suitable marketing texts and sales materials based on the target group. Our partners love this part of the process, as they can apply the knowledge acquired here to their domestic business right away, and in the majority of cases, they ask us later to carry out the communications work specialised to the Hungarian market as well.

Step 5: The Expansion

The time has come, now we have all that’s necessary to begin the successful work! The process always takes a period of one year. We have to deliver the first results within a calendar year, and we never fail to do so. The figure shows the timeline our partners have to consider when planning the project.

I would like to draw special attention to the success criteria. Why is it that this kind of international expansion is more effective than the solutions that were known in Hungary until now? I gave a keynote presentation on this with the CEO of 3B for the leading companies and top managers of the Hungarian IT-Telco scene. The following sentences, warnings, recommendations proved to be very effective there so I would like to share them with you here as well.

Conclusion

Bringing a company to the international market never gets old. I have gone to great lengths to standardise everything, but each company and their products are unique, so no two expansions ever feel the same. Besides, it is impossible to standardise the trust that has to develop between the company and 3B. Owners do not usually open up at first, but once they start seeing real success on the international market, they start talking. Some come from humble beginnings. Others suffer from self-doubt. But all successful owners have one thing in common: they dared to dream, to push past their comfort zones to find real success on the international market. I am not an especially sentimental person, but for me, there is no greater professional satisfaction than helping an owner realise their dreams. It changes them.

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