For two decades, the term VUCA (volatility, uncertainty, complexity, and ambiguity) has been part of this strategic agenda. Especially in the last two years, it has become clear just how extreme uncertainty, volatility, and complexity can become—to an extent that was previously almost unimaginable. Against this backdrop, the careful strategic and operational management of internationalization is even more important—and more challenging—than before. For one thing seems to be emerging: the new normal is the abnormal. Fundamentally, the same questions and parameters for shaping the future still apply as before. However, decisions should be based even more carefully on facts, and the focus should be sharpened to avoid getting bogged down and spreading oneself too thin across too many fronts, especially now.
Success Factors for Internationalization
Based on experience gained in numerous strategic planning processes, the following aspects are key success factors for successfully expanding profitable business internationally and thereby securing the company’s future viability.
1. Fact-Based and Self-Critical Assessment of the Current Situation
What is the company’s market position in its existing markets, and has it already crossed the perception threshold? What are the actual profit contributions, taking into account the expenses incurred by headquarters? The “Profit and Loss Source Analysis” (EVQA) is a proven tool for this purpose. It analyzes business units and markets in terms of all expenses and costs, thereby revealing their actual profit contribution based on facts. It is not uncommon for such an analysis to yield surprising results and challenge long-held beliefs.
2. The Organization’s Capacity for Internationalization
Are the organizational dimensions of business units and markets clearly defined? Who has authority over what, and where? The same rules do not necessarily have to apply in all markets, but they should be clear. And, most importantly, the business units should truly be “international”—that is, they should understand the markets in detail and not simply accept the largest domestic market as their sole guiding principle—because that approach does not work. Precisely because of the high degree of specialization in value chains—some of which are highly automated—the requirements for products in Eastern Europe, for example, can be considerably higher than those of the German market.
3. Consider the Maturity Level of Subsidiaries/Markets
From the company’s perspective, markets and subsidiaries/branches are not all at the same stage of maturity. It is advisable to develop market penetration in a modular, phased approach so as not to overwhelm young market organizations, but rather to develop them in a structured manner and allow them to grow.
Business areas, services, or target groups are gradually “rolled out” as maturity increases. In this process, the central functional units provide support through efficiently and modularly delivered strategic elements (e.g., marketing, logistics, application engineering, service, …) and their operationalization. This ensures coherence and efficiency and prevents each national subsidiary from reinventing the wheel.
4. Thinking in Terms of Strategic Country Groups
Practice shows that, from a corporate perspective, international markets can be grouped according to their level of market penetration. To ensure that the organization does not chase every opportunity in just any market—and thus spread itself too thin—these country groups should be assigned strictly defined degrees of autonomy and requirements. The goal of this exercise is to deploy existing resources (management capacity, liquidity, employees) in a targeted manner rather than in a short-sighted, opportunistic way. After all, focus—and thus impact—is what is often lacking.
5. Structured Market Characterization and Prioritization
In the market assessment for further penetration or the planning of a future market entry, markets must be transparently characterized, thoroughly examined, and evaluated through a well-defined process. This standardized approach requires methodological rigor, sometimes temporary resources for characterization, and clear facilitation of the prioritization and selection process. Particularly when addressing this issue, a consistent outside-in perspective is essential for painting a fact-based picture of, for example, potential, dynamics, fit, protectionism, competition, requirements, and opportunities for differentiation. Only this information enables well-founded business evaluation and decision-making. In this context, the neutral perspective and thoughtful scrutiny provided by external consultants are often indispensable.
Conclusion
Internationalization remains the strongest source of growth and thus a key building block for the future viability and resilience of companies, but the demands and complexity have increased significantly in a VUCA environment. In this context, it is helpful to have the international strategy process supported in a structured and methodologically sound manner, thereby safeguarding the company’s development.
