Growing a company beyond its original country is a dream for many business owners and managers. Relating their experiences from expanding their businesses out of their original base in the Philippines, two business leaders share their stories, insights and tips for those interested in growing their companies abroad.
In the following interview from Bloomberg Philippines, Rod Nepomuceno asks two Philippine business leaders to share their thoughts on the internationalization of their companies.
- Eric Damagas, President of AJ Pharma, former VP/Director of SMC non-alcoholic beverages Asia-Pacific and former President/COO of Splash Corporation
- Joe Magsaysay, CEO of Potato Corner
Insights for internationalization from Philippine companies
Eric Damagas exposes the two levers of growth for his former company (SMC), one of the top companies in the Philippines, and its top brand the San Miguel beer. The first lever is to identify potential new markets to expand to, and the second lever is to expand their consumer base in their existing markets.
Joe Magsaysay details the international presence of his company, Potato Corner, a fast food chain specialized in flavored french fries, which developed more than 100 stores out of the Philippines, primarily in Indonesia and the US, while also being present in Panama, Thailand and Australia. They are also eyeing expansion in Africa and China.
Strategies for international expansion
Potato Corner initially didn’t intend to expand abroad, but a local partner in Indonesia insisted until they agreed to work with them and expand the brand there. Arriving into a new market as a first mover, they focus on rapid growth to dominate the market and prevent competitors from taking the market. They do not position themselves as a Philippine brand but aim at being perceived as mainstream.
For San Miguel beer, the strategy is to produce locally because beer and beverages are perishable goods that need to be kept and transported properly to retain their qualities. They need a local production base first and then position themselves as a competitor to local beers to target the mainstream market.
Of course one of the most convenient is also to start by expanding regionally, before going further. To that aim, make sure to check our resources to do business in ASEAN.
Selecting markets for international expansion
For Potato Corner, the choice of what markets to expand to depends on the opportunities that present themselves. A local partner pulled them into Indonesia, an American expat in the Philippines led them into the US. Joe Magsaysay stresses the importance of being able to seize opportunities, and to manage them accordingly; in their case franchising provided the best model to reduce costs and risks.
Eric Damagas summarizes his experiences by reminding that market selection depends on the product category and competition. To avoid major competitors, he highlights that Splash Corporation used to target large markets but then moved to targeting less developed countries, because they were free of large competitors.
Succeeding in foreign markets
To succeed in foreign markets, Eric Damagas and Joe Magsaysay highlight the importance of the local partner selection, which must be suitable in terms of character and chemistry but also in his objectives. Eric Damagas also stresses the importance of complying with the local regulation and following the right process to get products available in a new market.
Local cultural specificity need to be taken into account. Besides obvious issues (like alcohol in Muslim countries) companies have to understand what is acceptable or not in their new country. Products or brands names may convey a totally different, and sometimes negative meaning in another country.
However, the critical point is to remain consistent with the brand’s identity and what made it successful in its original market. In the end, success in a new market will primarily come from having a good product. Depending on markets and situations, a company can also adapt its products to the local tastes, such as Potato Corner did with spicy flavors in Indonesia and fried chicken in the US.
Entering a new market is a challenge that newcomers have to face like any local company. To make its product available to consumers, a company has to go through the normal process of passing regulatory hurdles and building its distribution network. For consumer products, this includes costs to deal with retailers before even reaching customers and good local lawyers to properly comply with local regulations.
Tips for success in international expansion
To summarize the insights from Eric Damagas and Joe Magsaysay, here is a list of key tips to keep in mind.
- Have a good product: do not think of expanding abroad if you are not confident in your product’s quality.
- Commit to your expansion project: developing a profitable business abroad is a long-term engagement.
- Screen your local partners thoroughly: their characteristics, the mutual fit between your company and theirs, and the alignment of their long term goals with your strategy.
- Acknowledge that you’re going to make mistakes, learn how to deal with them.
- To avoid big problems, do not shortcut the regular process: follow the rules of the host country.
- Go to your country’s local consulate to ask for advice: they can sometimes give you some useful information, they may know some suitable partners or what to do/not to do.
- Get good local lawyers: it’s an investment, not a cost!
Video from December 2015 by Bloomberg Philippines