GLOBAL INTEGRATION

GLOBAL INTEGRATION


Now that you are ready to launch your international business and you have a well thought-out business operations plan, you must make sure you are ready as a company. The integration of your global business encompasses the integration of your foreign business into the infrastructure that supports your existing domestic business.

The most important determinant of success in your global integration is that your company, at the highest executive management levels, embraces and fully supports your international efforts. The decision to expand internationally was determined from the assessment of its economic potential in relation to the economic benefit of your domestic business and other growth opportunities. That assessment was essential to your decision, but whatever the opportunity signifies to your company, it must be fully supported by the highest executive management level.

Business Strategy Integration

The basis of your business strategy integration will depend heavily on the international market research results. If you are addressing developing countries, that research is generally more complicated to perform and often less comprehensive and accurate then similar results in developed countries. Employing the correct individuals to do that research is critical.

The following areas of your business strategy must be integrated:

Ø Business Model

How you generate revenue, realize profits and incur costs must be integrated and coordinated with your existing business model, respecting both international and local elements. It is important to understand the dynamics of how your new international business plays a role in your overall business model.

Ø Business Objectives and Goals

The business objectives and goals of your new international business must be clear and have a specific role in the achievement of your overall company objectives and goals. Your metrics for revenue achievement, realization of profits and market penetration must be accepted and believed achievable by the entire executive team.

Operational Integration

All of your company’s operational processes, procedures and reporting functions must be changed to accommodate your international business. The international business must be managed at the same level of importance and focus to your company as your domestic business.

A determination must be made as to which operational responsibilities are performed centrally and which ones are performed on site at the foreign locations. The placement is primarily determined by where best the operational decisions can be made and the level of autonomy that you want to give to the international team. Some of the key areas of consideration are authority to:

Ø Make spending decisions
Ø Hire and fire employees and executives
Ø Create policies for the international business entity
Ø Commit pricing and customer obligations
Ø Handle local compensation
Ø Create shareholder obligations

Whatever structure you put in place, there must be clear objectives to be achieved and a reporting structure to periodically monitor progress and escalate issues.

It is important to note that the mere fact of doing business internationally will increase the number of areas where processes, procedures and reporting functions are required. This will add additional support structure to your company’s compliance activities.

The following are the major areas of integration:

Ø Management and Organization

Your management team must incorporate the individuals necessary to achieve your global objectives, at a sufficiently elevated position in your organizational such that they report to those with enough power in the organization to assure the proper attention and action. Your organization must include your international team in a manner suitable to your industry and corporate strategy, integrating the international functions in the appropriate departments within your company. In essence, while appropriately integrating the international functions, the international team must have a voice that will be heard at the appropriate management levels, and understood and treated as required to achieve success.

Ø Human Resources

Integration of the human resources function is a major component of your integration efforts. Company handbooks and policies must be as uniform as possible yet accommodate the legal requirements in each country. Markets are often chosen based on the availability of local talent, the facility and flexibility of hiring and firing, and the degree of employer-friendly legislation. This function is usually best placed within the international locations with overall guidance from the domestic corporation.

Ø Product/Services Development

As research and development efforts are performed at different global locations, it will be important to have competent local management guided by overall delivery and quality objectives from the domestic corporation. This is even more complex when centralized control of design and architecture is desired, and when the international development has to be integrated into work performed at domestic and other foreign locations. As with any successful research and development operation, effective communication and project management is the key to success.

Ø International Marketing Programs

It is vital that you have the correct marketing approach in each foreign operation. Local marketing talent must be employed that can fully understand the particular market, yet embrace your corporate culture and standards. The international marketing messages and programs for your products and services may be quite different than your domestic marketing messages and programs. Your value proposition and customer benefits may have a very different perspective because the buyers’ preferences and criteria may be entirely different. Your domestic operation may be best at providing overall guidance on corporate brand image but leave the product and services marketing to the international team.

Ø Sales and Distribution Channels

Just as with your marketing programs, it is vital that you have the correct sales and distribution channels in each foreign country or region. This is usually best managed by the international operation who knows best how to navigate the local culture and business contacts. They must be integrated at the domestic corporate level for reporting and issue escalation.

Ø Manufacturing

If manufacturing is going to be performed at an international location, you will need local people to manage it. They will be best at dealing with local regulations and suppliers. However, as with sales, requirements and reporting have to be coordinated at the domestic corporate level.

Ø Accounting and Reporting

Dealing with different accounting standards presents a challenge that must be met. Although the trend is to have increasingly universal standards there are still differences. The US has the GAAP standards and other countries have the International Financial Reporting Standards, which vary among countries. It is difficult to achieve uniform financials since each country has different legal systems. Reporting for Sarbanes-Oxley and other compliance requirements apply to your international operations as well. This function has to be pulled together domestically, with representative operations in each of the international locations.

Ø Compliance

There are compliance burdens that affect international business that must be integrated in all of your operational functions. Processes, reporting and education are vital in support of your compliance and necessary for the defense of your company should violations occur. The Foreign Corrupt Practices Act and anti-terrorist legislation must be understood by your domestic and foreign employees and third-party distributors, representatives, consultants and agents.

Although the inclusion of developing countries in your global expansion can contribute to the difficulty and complexity of integration, the appropriate integration of your international efforts is essential for the achievement of your goals and objectives. The ability of your company to adopt and adapt to a global business profile is crucial to your success.