Small world


Thursday 4 September 2014 by Drew Heatley

An 18th century map of the world.

In the last 25 years, I’ve learned that there’s a big difference between an international business and a global business. But many companies claim to be one or the other without defining what they really mean. It muddies the waters in an area where clarity is everything. So here’s how I see it…

A company conducting international business is one that is firmly rooted in its home country. Employees may travel to different parts of the world to work with partners and clients, but they bring that work and revenue back to the organisation’s central headquarters. This approach to international trading pre-dates the Victorian era; we would travel the world to trading posts, sell our wares and then come home – and other businesses across the world would do the same.

But some organisations realised that if you want to build up brand loyalty and true stickiness in overseas markets, you need a proper base in those countries. You need to operate at a local level and employ local people, infusing native thinking into how you do business and integrating indigenous supply chains. It’s all about operating at a global level, but having a local influence.

Successes

Toyota and Walmart are good examples of global businesses. Walmart trades in 27 countries, employs 2.2 million people worldwide and has localised its operations in multiple geographies, through acquisitions including Asda in the UK and Seiyu Group in Japan.

If you have a range of cultures in your company – in particular your leadership team – you benefit from different perspectives and your business can evolve more quickly. You move towards that “world class” status.

This approach also pays dividends in crisis management. When Toyota suffered problems in the US due to a number of faulty vehicles and questions over the quality of its products, the company turned to local management and leadership. Toyota’s US president led the charge to fix the problem. The firm didn’t enlist one of its Japanese execs to handle things and Americans respected that the problem was resolved at a local level. The episode reiterated that Toyota is a truly global brand.

Challenges

It’s not easy being a global business. HSBC illustrates how hard it is to achieve and maintain that distinction. Despite its worldwide success, the firm was forced to withdraw from consumer banking in Japan in 2012 as it looked to control costs, while its struggles in the US market have dented profits in the past.

While infusing that “local” element throughout its operations has proved tough, HSBC is undeniably a global business; it has three corporate headquarters, in Hong Kong, New York and London, and works with 60 million customers across 80 countries. Interestingly, though, the company dropped its famous strapline, “The world’s local bank”, in 2011 (albeit because CEO Stuart Gulliver felt it focused too heavily on retail banking).

International focus

The flipside of being global is you run the risk of diluting your heritage. If you want to be seen as a British company or a German firm, you have to stay true to your roots and fly the flag. A homegrown image can be watered down if you infuse it with the cultures of all the other countries in which you operate.

The Dutch have certainly chosen to get behind their “home brand” and have been successfully trading on an international basis for hundreds of years. Take DE Master Blenders 1753, the company behind numerous tea and coffee brands including Douwe Egberts and Pickwick tea. The company that started out as a local coffee shop now distributes its products all over the world, taking the number one or two positions in a third of the markets in which it offers products – but it remains firmly and proudly rooted in Amsterdam.

The future

If you think about how business will be conducted 50 years from now, companies need to be more globally minded. It’s inevitable.

As the world becomes ever more connected, the margins for operating on an international basis become increasingly narrow – because communication gives clients and customers more choice. And with the near-ubiquitous internet connectivity in mature markets, even small local businesses are becoming international traders; offering products across the world is no longer a long-term goal, it’s an immediate necessity.

Organisations that want to go further and truly succeed on a global scale must now fully embed themselves in the countries in which they wish to operate. This is one of the reasons why we opened an office in Tokyo earlier this year and recently established a fourth base in Minneapolis. It means we can keep working with clients across the world and maintain those close relationships at a local level. And it’s also one reason why we’re continually looking for new locations around the globe to plant another flag.

Drew has left The Frameworks.

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