Not just for the big guys! - business globalization - includes related articles on successful international companies and on doing business in Canada - Panel Discussion

Chief Executive, The, Sept, 1998 by Peter Haapaniemi, William R. Hill

These days, everyone wants to go global. These days, everyone can.

When we think of globalization, we tend to think of giants - of the GMs and the P&Gs that have the depth of resources to project their presence anywhere in the world. But that's changing. Today, small and medium-sized companies are going global as well. They are capitalizing on today's shortened product lifecycles and extending their reach via new computer and telecommunications technologies and a growing number of strategic alliances and ventures that let them pool resources to tackle large and distant markets. And these companies are finding a lot of reasons to look beyond their own borders, with overseas markets- and especially, emerging markets-offering the potential of high growth rates and early-entry opportunities that can't be matched at home.

But these smaller companies also face significant challenges as they head overseas. Going global means greater investments in technology. It places heavier demands on the time of CEOs and other senior managers as they oversee far-flung operations and alliances. It requires specialized skills to deal with complex tax and currency issues. And it requires greater care to avoid the pitfalls of doing business in different legal and cultural environments.

For a smaller company, then, going global has the potential to stretch financial and human resources to the breaking point. The trick, of course, is to plan and focus those resources where they can do the most good. In international business, knowledge is power, and smaller companies can thrive by taking the time up front to clearly understand the challenges, assess their own resources, and find the right partners and markets. Once their international efforts are launched, they should be prepared to learn and adapt, and apply a "heavy dollop of listening," says Timberland CEO Jeffrey Swartz.

In this Chief Executive roundtable, co-sponsored with Deloitte & Touche, much of the discussion centers around the difficulties of working overseas, from collecting receivables in South America to finding the right managers in Japan. But just as many, if not more, of the CEOs' comments center on solutions and successful approaches to coping with such international challenges - and above all, on the importance and inevitability of moving into international markets. By making a serious, long-term commitment to going global, and "recognizing it for the really strategic step that it is," says Deloitte & Touche's Jim Copeland, small and medium-size companies can play successfully in a global arena - and find a world of new customers.

SMALL COMPANIES, BIG CHALLENGES

Margaret Mulley (Deloitte & Touche): On the surface, all the ingredients for success for small and midsize companies going global are there. But it's not that easy; there are real challenges, and it takes real discipline. Many smaller companies are not necessarily interested in introducing that much discipline into their organizations and their decision making. And when you make a mistake in going global, it can be costly, and smaller companies don't always have the financial wherewithal to withstand those mistakes.

In our observations, these companies often underplan their entry into a market. We worked recently with an investment firm that had decided to go into the brewing business in Eastern Europe and to take their practices and ideas there. What's happened with great frequency is that the locals there will lock out the foreigners who are coming to look after their investment and implement the changes necessary' to move the business forward. It's been a disaster. They underestimated the difficulties of the local business environment and failed to understand who and what they were up against.

William R. Berkley (W.R. Berkley): The biggest mistake I've seen is people thinking that the customer's culture is the same as theirs. In reality, the things that we take for granted can be unbelievably different. In some places, everyone pays their bills in cash. In Indonesia, a company might have no general ledger until the end of the year, when they need to balance the books. There's no electronic payment system any place in Asia that really works, except Hong Kong. The fact is that the differences in the culture and in how businesses work are astonishing.

We sell insurance, and in one place we have messengers that go around house-to-house collecting premiums. That's why we were a success there, because we collected the money. Two of our big American competitors there thought that people would really come in and pay their bills. Just 22 percent paid their premiums to one of our competitors.

Harry E. Gould, Jr. (Gould Paper): You have to consider the culture's relationship to the financial aspects. When I was a chief financial officer, I was looking at this major manufacturer we owned in France. After the obligatory wining and dining and visiting the plants, I said, "Well, we need to look at the books." And the French gentleman said, "Which books do you want to see?" I said, "How many do you have?" He said, "Three - one for my family, one for the revenue collector, and the real one." I said, "Let's start with the real one." [Laughter] Now, he didn't think anything about that. There's a cultural mindset that has no bearing on the reality we are used to here in the United States.