Going The Distance

In Good Time

A business's growth at home often triggers the move to expand overseas: Either the business has already established a strong domestic presence, or the market has become so saturated that the only practical prospect for growth exists on other continents. It's a situation that catches some entrepreneurs off-guard. "In many industries, we've found margins are being squeezed and growth rates are declining," says John Minor, vice president of insurance brokerage and political risk consulting firm Aon Trade Credit Inc. in Chicago. "The real opportunity for growth is in new markets overseas. It's not so much `I'm ready to go international'; it's more `I have to look somewhere for more profits.' "

Of course, that's not always the case. Sometimes a move toward globalization can be timed perfectly by evaluating key indicators. According to Joseph Monti, a partner at management consulting firm Grant Thornton LLP in Los Angeles, identifying the primary characteristic that distinguishes your product or service from the competition is the smart entrepreneur's first move. "Is it a brand name?" Monti asks. "Does it establish critical mass? Does it provide access to distribution channels? Is it proprietary technology?" Unless you know the answer, you're clearly not ready to take on any market outside the United States, he maintains.

Comer J. Cottrell's ethnic hair-care products company, Pro-Line Corp. in Dallas, is a good example. When he started the business in Los Angeles in 1970, Cottrell relied solely on domestic sales. But before long, he realized his own competitive advantage--specially formulated shampoos, conditioners, relaxers and other styling aids bearing a `Made in the U.S.A.' seal--could likely tap into a huge segment of the worldwide market. Using the connections he made during his stint in the military, Cottrell initiated Pro-Line's global expansion by getting his products on the shelves of military exchanges in 1970.

"He realized that [African-American] servicemen and servicewomen did not have products to choose from that were specifically formulated for their hair-care needs," says Paul Owsley, Pro-Line's director of international sales. "[Military] stores were stocking general market products, which store managers assumed had crossover appeal. But they didn't, because they weren't adequately formulated." After the products became available in military exchanges, sales skyrocketed; the products eventually made their way into the civilian market--ultimately securing Pro-Line's global position. Today, the $50 million company exports to 40 countries.

Another wise move in timing your global strategy is to find the right partner. Signing a contract with a company you know little about could mean early failure for your international venture. And for many small businesses, rebuilding after an acute financial loss can be difficult, if not impossible.

"[The right partner] is one who doesn't dilute your reason for going international," Monti says. The strength of the relationship often leads back to your business' specialty. A good partner will not compromise or diminish your company's distinct competitive advantage. It may take some time to find the right partner, but don't make a hasty decision: You'll regret rushing into a situation that isn't right from the start.

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This article was originally published in the May 1998 print edition of Entrepreneur with the headline: Going The Distance.

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