Growing global – maximising the international opportunity

GRANT Thornton’s ‘Grow Global’ report has assessed the approaches taken by 100 privately-owned businesses with the fastest-growing international sales.

Mike Redfern, partner at the accountancy firm, outlines the prospects for overseas expansion for Yorkshire businesses in 2012 and considers businesses first steps internationally, what have they learnt along the way and what they are focusing on in the future.

1. Planning

One of the key lessons to be learnt from Britain’s most successful private exporters is that a well planned strategy is crucial. 

Many of those surveyed based their strategies on detailed due diligence into their choice of territories and route to market, including recruitment and roll-out provisions.

There really is no ‘one-size-fits-all’ approach when it comes to international growth strategies, some are executed according to well laid out plans, while others are undertaken on a purely opportunistic basis.

2. Drivers for overseas expansion

In terms of the territories targeted, the drivers of international strategy are diverse, from the draw of existing clients to research, legislation or sector-specific issues. There are also well-defined and documented barriers to doing business in certain regions.

However, the pursuit of growth is the primary driver for these 100 businesses and, in current economic conditions, it may be a defensive move rather than offensive.

3. Selecting territories

The choice of territories to target is influenced by the needs of clients – actual or potential, as well as the result of detailed analysis into each market. 

Businesses consider whether regions have an advantage to a particular sector, or industry, as well as whether the markets complement the domestic market and what legislation or regulation exists.

For the majority of businesses, the main priority for further growth is driven by geographical considerations. Whether moving beyond the ‘safer’ markets to take on more challenging regions or consolidate their positions in certain regions by growing their presence on the ground, further growth is on the agenda.

4. Routes to market

Most of the businesses interviewed identified that the first choice of route to market is to set up a direct presence. Some of the businesses chose to build their international presence from the ground up while others chose the, often quicker, route of acquiring an established business.

Another important issue for businesses to consider is whether to grow organically, or grow through acquisition or joint ventures. There are higher risks associated with growth via acquisition – it means taking on potentially complex M&A processes, but the risk can provide access to superior returns on investment.

5. Key challenges

Beyond region specific risks, the most commonly cited challenges were related to HR issues. To begin with, the majority of businesses diverted senior management time away from core responsibilities, which is unsustainable in the long-term.

Solutions included taking on new senior executives to oversee international operations, installing a second line of management at home to free up top tier to drive international expansion, or give the international operation autonomy.

Only one fifth of the 100 companies raised external finance to support their growth strategies, but a number reflected afterwards that they had been overly cautious in their strategies and could have been more aggressive in raising debt.

To download the full report, visit:
http://www.grant-thornton.co.uk/growglobal/downloads/GT_International_2011_Report.pdf