The need for strategy

In a remarkable sentence, Ernani Lopes said that the great problem with traditional Portuguese industry is that, instead of selling, one buys from it. And Jorge Moctezuma correctly stated recently that changing this attitude is one of the ways of increasing productivity in Portuguese companies. There is no need to increase the number of shirts manufactured by a factory. There is no need to place a brand and invest in marketing in order to get the added value that is missing.

However, once it has a brand, a company should not place itself in the hands of an importer/agent and become totally and completely dependent. In fact, if one only appoints an importer/agent, instead of carefully choosing the entrance segment(s) into a new geographical area, five disadvantages are implied.

In the first place, the (decision of the) strategy (which market segments to privilege) is left to the importer/agent. Secondly, even if this does not cause a problem, the agent may already have suppliers for certain products and customers, and so our company becomes limited in its penetration capability. Only the remnants, the leftovers, are bought from it.

Thirdly, the importer/agent may vertically integrate upstream and buy a new supplier who is our competitor – thus we become dispensable. Fourthly, a competitor may block our entry into the new market by purchasing our importer/agent. Finally, tomorrow the importer/agent may exchange us for another company either across the street… or in Turkey – it may be x per cent cheaper to catch a plane to Istanbul instead of landing at Sá Carneiro airport in Porto. In short, to restrict internationalisation to an agent/importer is to place ourselves in the hands of third parties.

Then, there is another frequent mistake: to begin at the end. This corresponds to being only one step better than working with an importer/agent, having our own salespeople. But that is all. Nothing else.

We have our products here. We hire a sales force there. The latter receives a commission and the matter is solved. But will it be solved? No, because nothing ensures that our strategy (for example in Spain) should be the same as in Portugal. To assume this is like trying to sell what we produce instead of what the market consumes.

And leaving the definition of strategy (products, customers, etc.) to salespeople is the same as a General delegating strategy definition to soldiers. What else is needed? Promotion, maybe in the form of merchandising in the points of sale, commercial spots on local radio, leaflets distributed in the stores and so on. In short, to put our firm in the hands of an importer/agent (even with a brand), or to go only one step further by merely having a sales force, is to go into a market in the dark.

That is a serious mistake. And it is the companies that make fewer mistakes which are successful in internationalisation, not the large ones. As Lord Arwell said: “Victory belongs to those who make fewer mistakes, not necessarily to the largest armies or companies.” When Toyota, Sony, Mitsubishi, Microsoft, etc. started, they were much smaller than their competitors.

In summary, it is not necessary to be large in order to have a strategy, but one needs to have a strategy in order to become large.