Business Plans for International Businesses

Joan Keston Wednesday, March 05, 2008

When creating a business plan for international business, the basic components of a business plan are followed:

Executive Summary
Company Description
Industry Analysis & Trends
Target Market
Competition
Strategic Position & Risk Assessment
Marketing Plan & Sales Strategy
Operations
Management & Operations
Financials
Additional topics according to particular industry or project characteristics

In each one of these areas, you must consider the impact of the foreign business culture where you intend to do business, or commercialize your products or services. The business environment in developing countries presents a myriad of additional issues, challenges and considerations that must be addressed and analyzed in your business plan.

Developing Countries

The countries that are considered to be emerging markets are: China, India, Mexico, Brazil, Chile, most of Southeast Asia, countries in Eastern Europe, parts of Africa and Latin America. The BRICs (Brazil, Russia, India, China) are the countries expected to grow economically to such an extent that they become part of the group of the largest world economies. Therefore, these countries cannot be ignored when discussing global business in the 21st century, and their unique characteristics in terms of the business environment are an essential part of your business plan.

Developing countries can be placed on a spectrum of development that should be understood before you begin your business plan. This will assist in identifying many of the considerations, issues and challenges that you must analyze and address, and their severity or cost level that will be incorporated into the development of your business strategy. Use of such a spectrum facilitates the comparison of different countries in a given region, and thus provides valuable input for choosing a particular country to establish operations or to achieve regional market penetration.

Market Research

Doing market research in a developing country is more challenging than researching in industrialized nations for a variety of reasons.

Governmental websites are generally not as developed, and the information may be manipulated or deceiving.
Associations may or may not exist, their funding may be much more limited and their function may not include market information.
Consultants in general do not play as important a role in business and are often viewed as superfluous and of little value add, which may affect their role in the information gathering process.
One very important way to get the true picture is to have connections into the specific industry you are researching. This is often difficult to establish, and the general business culture in your particular country may require that you train and educate your contact as to the type of information you need and sensitivity to influencing factors.
Getting the inside information may be very difficult due to language barriers.
Universities may not conduct research or have access to information services, often a source for market research.

Therefore, hands-on type of research is even more essential. Having someone inside the industry and country is vital for getting an understanding of the local business environment. Political connections often can be as important a determinant in the ability to gather information as industry experts. Customers and suppliers, regulators, government officials for example are all necessary resources. In addition financial assumptions and extrapolations must often be relied upon for quantitative analyses and the development of metrics.

Qualifying Issues

Many qualifying issues must be considered or addressed, and a quantifying mechanism developed to assess the weight of those issues in your strategic analysis. Following are some of those issues:

Developing Country Spectrum Analysis – Where is the country in its economic and political development? What is its recent past? Are there secure governing institutions?
Issues that May Make Success Impossible – Is there political and economic stability? How involved is the government in the business environment? What is the attitude towards foreign direct investment?
Time-line – Are you integrating the long-term investment of you venture with the short-term financial results your company may demand?
Financial Investment – Are you committing the necessary funding for this project to foresee all possible impediments and demands for the long haul?
Country Risk – What is the assessed risk of the country in terms of political, economic and social stability?
Learning Costs, Training – How much training and coaching will your management, sales, marketing, operations and regulatory teams require? How much are the free market, capitalistic and democratic concepts a part of the business culture?
Relationship Development Costs – The establishment and maintenance of relationships is vital to your venture, and should be developed before you even begin. What are the costs?
Cost / Benefit Analysis – Various factors must be addressed in your cost/benefit analysis regarding how, where and with whom you will do business that are of significance in developing countries.
Legal – Does Rule of Law and Due Process of law exist? Is there an independent judiciary? What is the corruption index?

Conclusion

Although many of the issues that will affect your business plan may be somewhat difficult to quantify in advance, they must be raised and analyzed and continually assessed as you proceed with the execution of your strategy. Their significance may be the ultimate cause of the success or failure of your international venture.

About the Author

Joan Keston is the Managing Principal of Keston & Associates, Ltd., an international business consulting firm located in Raleigh, NC, and a Partner at Paladin and Associates, Inc. She has 25 twenty-five years of experience with mature as well as entrepreneurial companies, domestically and internationally, coupled with an executive managerial and legal background. Her firm facilitates international business transactions, and assists companies establish, grow and integrate their international operations. She can be reached at (919) 881-7764 and [email]jkeston@kestonassociates.com[/email], http://www.kestonassociates.com.