International prioritisation

Objective

An increasing number of businesses understand that exploiting international or ‘export’ markets, notably emerging markets, is a key to growth at a time when developed/mature markets face an extended period of economic stagnation. Much of this opportunity is driven by the rapid growth in an emerging middle class likely to account for at least 50 per cent of the total global population by 2050. Faced with the scale and breadth of this opportunity, businesses need to make careful and thoughtful analyses to ensure that international markets are prioritised.

This is not lessened by the impact of globalisation, which with the increasing prevalence of global brands might make internationalisation seem ever easier (take for example the apparent ubiquity of Starbucks and Apple). To the contrary, in fact. Many barriers remain both regulatory and cultural, and to value-conscious consumers brands have to work hard to establish a presence. Note how Samsung has overtaken Apple and how Starbucks has failed in Australia, meaning that dominance should never be taken for granted.

A key leadership objective must be to select target markets carefully within an international strategy.

Context

A frequently ignored or under-rated component of effective leadership is the art of making choices. This might be said to be the hardest part of decision-making. It is generally easier to say ‘yes’ in any situation, and none more so than when you are faced with a business opportunity. Few leaders want to be characterised as lacking innovation or entrepreneurship and may choose to follow opportunity rather than decline it.

But knowing when to say ‘no’ is an extraordinary gift. The greatest example of this is probably Steve Jobs, who is reputed to have delayed the launch of both the iPhone and the iPad because he felt Apple would be taking on too much at once. This applies more broadly, and certainly to prioritisation in international strategy: ensuring that your business doesn’t take on too much at once must be a key challenge and one that it is risky to fail to articulate.

So at the very least, during strategic planning processes your business should take stock of its international business and re-assess its priorities. This is likely to demand analysis of a range of factors, including:

• growth and opportunity in your domestic market;
• scale of opportunity in other markets;
• current scale both internal (cost-effectiveness of infrastructure) and external (market share) in existing international markets;
• existing business familiarity with an infrastructure and/or partners in key international markets;
• availability of capital for growth strategies based on organic development or acquisition;
• an ability to identify, characterise and select between different opportunities;
• an understanding of the risk profile of different markets and how you want to weight your business across them;
• overall management and infrastructure capability to deal with multiple markets.

This is inevitably a simplified list but it highlights how complex the process of prioritisation is. You should aim to have all markets placed in one of four tiers:

• Tier 1 – priorities for investment and acquisition.
• Tier 2 – existing developed markets managed for profit, unlikely to make acquisitions.
• Tier 3 – emerging markets, potential future priorities.
• Tier 4 – low priority, unlikely to merit any investment or infrastructure.

Challenge

The need for, and the benefits arising from, prioritisation seem so evident that it may seem at first sight hard to imagine any serious challenges to the principle. But there are three areas of substantive challenge:

• That prioritisation will exclude legitimate opportunity – this challenge should be met by insisting that the benefits of depth and focus far outweigh the losses arising from not pursuing non-core opportunities; and that, in any event, by adopting the four-tier approach (above) markets will be reviewed constantly and, for example, a significant rise in opportunity might lead to a specific market moving from Tier 3 to Tier 1.
• That prioritisation risks placing too many ‘bets’ in too few places – this is a real concern but the overall process of thinking through the criteria which allocate markets to each of the four tiers should include an estimation of the risk of over-concentration.
• That prioritisation makes it hard to manage markets which are seen as lower priority (especially markets in Tier 2 where acquisition may be excluded, or in Tier 4) – this is a management challenge primarily, and the process of prioritisation means that you will have to have leaders in each market who are suited to their ‘tier’ status (e.g. a natural business developer should not lead a Tier 4 market).

Success

Successful prioritisation will have the following characteristics:

• the need to prioritise is acknowledged and articulated – both as part of the planning process but also as a core way of doing business;
• core product market and business model priorities agreed – choices will have been made between customer segments and the business models for approaching them;
• market attractiveness criteria fixed – a set of criteria will have been established to evaluate markets against each other;
• core priority markets identified – these will have been selected, named and agreed;
• agreed categorisation of existing markets – the categorisation in tiers of all markets (including existing markets) will have been agreed;
• tailored allocation of resources – there will have been a process to match the allocation of capital and human resources to the agreed prioritisation;
• de-scaling or exit decisions made – prioritisation will inevitably lead to a scaling back or exiting from current markets and such decisions will have been made;
• aligned acquisition programmes – targets for acquisitions will be ruthlessly aligned to priority markets;
• re-evaluated corporate infrastructure – the location, scale and nature of corporate resources will also have been reviewed against priorities.

Taken together these actions and decisions will demonstrate that the act of prioritisation is for real and not a theory.

Pitfalls

This really is a case where the pitfalls of prioritisation mirror the success factors, so the characteristics of poor prioritisation would be some combination of:

• no need for prioritisation articluated;
• no agreed core product market and business model priorities;
• no determined criteria for market attractiveness;
• no identified core priority markets;
• no or limited agreed categorisation of existing markets;
• no or partial tailoring of the allocation of resources to prioritisation;
• no or partial decisions about de-scaling or exit;
• no or inconsistent alignment of acquisition programmes to priorities;
• no or limited re-evaluated corporate infrastructure.

A combination of some or all of these will indicate that the belief in prioritisation is half-hearted: either that agreement to the principle is limited and infused with scepticism, or that commitment to the execution is patchy. What this reveals is that successfully prioritising in international markets requires extreme determination and commitment.

Leaders’ checklist

• Be aware from the outset that prioritisation demands a ruthless determination and fixity of purpose.
• Remember that for prioritisation to be taken seriously (like so much else) it needs clear and regular articulation.
• Don’t shy away from setting criteria for prioritising markets and allocating them according to the four-tier principle.
• Remember that for prioritisation to work you must align all activities and resources to it, not simply the obvious ones that relate to market operations.