Publication: International growth for mid-sized enterprises

International growth for mid-sized enterprises – 10-point plan for success!

Experts from STU MANAGEMENT PARTNERS report from the field.

The internationalization of medium-sized German moves forward: Studies show that about one third of the mid-sized enterprises is already active abroad – a steeply rising trend. In addition to entering the market through export, direct investments play an increasingly important role.

The internationalization of mid-sized enterprises is often characterized by a compulsion to act: companies see their local sales opportunities limited, want to amortize the innovation efforts for niche products through further growth abroad or are forced by large customers to internationalization.

Stefan Ulrich, managing partner of the consulting and management firm STU Management Partners, confirms the opportunities to increase the company’s value through the development of new markets, but warns against hasty action: “A foreign engagement does not run by itself! Companies have to shoulder considerable burdens in the initial phase and have to manage a variety of new risks. We therefore recommend an intensive involvement of partners with operational expertise and profound knowledge of the targeted markets.”

STU assists mid-sized companies in the areas of growth / internationalization, operational excellence and restructuring. The managers of STU have many years experience in the successful development of enterprises at home and abroad.

STU experts recommend companies with specific plans for internationalization the consideration of the following 10-point plan:

  1. Starting position
    Check your company’s situation. If the company ist not established successfully in the home market or it does not show a stable operating margin, a self-critical risk assessment in terms of operational and financial feasibility is necessary.
  2. Market and location analysis
    Observe the foreign target market over a sufficiently long period of time and analyze intensively competitors, customers, culture and legal, economic and political conditions. Ensure inter alia, that a stable demand for your products or services exists. A single customer order does usually not constitute the necessary basis for a long-term foreign involvement.
  3. Service and product portfolio
    Check if your current service portfolio can be transferred to the foreign market. Check in particular the need to adapt your product range or properties (including standards-compliance, regional specifics). This may have negative impact on your business model in the target market, while the requirements remain high on the company’s performance and quality of services. Make sure that necessary adjustments can be absorbed. This is essential for competitiveness in the new market.
  4. Network of partners and consultants
    Get access to trusted local partners with intimate knowledge of the country and the target markets. This includes, inter alia, the legal and tax advisors as well as recruiters, who are residents in the target market and ideally speak German fluently.
  5. Organizational Structure
    Reserve sufficient management capacity to implement the foreign activities. Establish appropriate management processes with clear delegation policies across all hierarchical levels and regulate the interaction between foreign and domestic units. Plan the integration of external capacities for the phase of preparation and implementation of the whole expansion project.
  6. Personnel and Culture
    The availability of qualified and experienced personnel is a key success factor. Participating employees must have adequate experience in the target country and speak the local language. Recruit in-country savvy managers and employees who know the specifics of the market. Give the cultural characteristics and personnel planning in the target market enough attention.
  7. Value creation strategy and supply chain
    Check the availability and performance of local partners. Involve your local suppliers and service providers in your plans. Question critically whether your performance requirements are met and anticipate early any necessary adjustment in your value chain.
  8. Business planning and financing
    Create a five-year business plan including a conservative financial planning to cover the necessary investments. Expect significant start-up losses and calculate best case / worst scenarios. Make sure that you have sufficient funds to cover the investment volume. Get early access to long-term and trusted sources of finance at home and abroad – even for the event of unplanned incidents.
  9. Management systems and risk management
    Establish systems for effective control of the foreign unit. Provide for complete transparency about the necessary processes. Also adjust essential tools for early detection and treatment of unforeseen risks, such as customers, staff and suppliers failures. Establish guidelines for the protection of intellectual property and compliance with corporate governance.
  10. Expansion and implementation planning
    Develop a sustainability-oriented expansion plan. Define clear roles, responsibilities, competencies and target dates by measure for your staff and external partners.
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