How to Internationalize

This is a European company that needed funds to expand globally.

In order to support the company in this project, a conventional approach is to conduct a thorough analysis of the company's environment using standard models such as PESTEL analysis, scenarios analysis, industry analysis, lifecycle analysis, competition analysis, benchmarking, and more. After that, one would analyze the company inside out to identify its strengths and weaknesses.

Overall, this process would involve creating a SWOT (Strengths, Weaknesses, Opportunities, and Threats) matrix and presenting strategic options, including an international strategy. The question then becomes what type of strategy to choose.

Another analysis that would be conducted is a geographical analysis using Porter's Diamond framework, which addresses factor conditions, home demand conditions, related and supporting industries, and the overall firm strategy. Market selection would also require a local environment analysis, including an analysis of the competitive landscape. Only after completing these analyses would one be able to determine the type of market entry. And this is all before even considering the financing process, which involves identifying the required capital, determining the financing type and structure, and managing investor relationships. Conducting such a comprehensive analysis would require significant time and resources.

However, in this case, we did not follow this conventional approach for several reasons. Firstly, the company is a typical European company in the low mid-market with limited resources. The company's financial position could not afford the costs associated with conducting such an extensive analysis. Secondly, even if the analysis were conducted, it would be challenging to capture all the information related to all markets in order to determine the most suitable one to enter. Additionally, even if all the information were captured, it would be difficult to distinguish between signals and noise in the complex economic and market conditions. There is a high probability that noise would be included in the analysis. Furthermore, conducting such an analysis would only confirm the CEO's objective of internationalizing the company, and the costs would be high, along with potential damage to the advisor's reputation.

Considering the costs and limited return of the conventional approach, we decided to take a different path. We started by identifying the main issues that the CEO was facing. Recognizing that this analysis would only be through the eyes of the CEO, we determined that it was the best cost-effective option given the CEO's capabilities. we then plotted internationalization options alongside the identified issues and other options, taking into account the overarching objective of investors.

The internationalization options considered were developing the company's own network of operations, franchising, or forming joint ventures. All of these options would require financing, but the question was whether to seek strategic or financial investors. The specific characteristics of the company and its market guided us towards strategic investors, as it was determined that these investors would also help with the international strategy. We confidentially reached out to the main strategic investors to gather early feedback, which turned out to be very positive.

With two international strategies (own operations and franchising) and early support from strategic investors, we believed we had the best chance in the fundraising process…

This project demonstrates that it is possible to develop a customized approach to addressing an issue. Every company and environment is unique, so the approach should be tailored accordingly. Therefore, it is not advisable to replicate the above process.