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Executive Decisions: Operational Perspectives on Entering a New Country
Prioritization: Between Strategy and Execution

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There are a shocking number of direct selling companies that fail to plan appropriately before entering a new country. I know of companies that have even gone so far as to start shipping product by sea to a country and say that they will figure out all the details by the time the product shows up! The pressures to expand internationally invariably come from respected and successful sales associates who claim that they can get the company into the country quickly and effortlessly. The entrepreneurial nature of very successful sales associates can literally know no borders, and in fact, neither may they restrict their sales efforts to countries where your company is "officially" doing business.

I would strongly suggest that as a responsible executive, it is your duty to not play the part of the three monkeys (Hear No Evil, See No Evil, Speak No Evil). If you don't have a strong international growth plan, then some of your sales associates will plan for you, and you may be forced to make up continuous "work around" systems for individual sales associates that will eat up your company resources and put your international reputation at risk.

Product Registration
One of the most important, and often overlooked, elements of taking your product to a global market is international product registration. Most products, and especially those that are used directly on people, such as cosmetics, foods and nutritionals, must be registered with the local ministry or department of health before they can be sold in a given market. Will Halterman, President of Global Trade Services says, "One of the most common pitfalls of many companies is not understanding the regulatory environment of the country they want to do business in. Companies need to understand, or contract with companies who do understand, the regulatory requirements for distributing their products in foreign markets. Without this knowledge, companies face stiff financial penalties, public action and even preclusion from doing business in a given market."

While it makes sense for you to keep different formulations of the same product to a minimum, Mr. Halterman concludes that "Another pitfall many companies fall into is not customizing their product for the country they want to do business in. Just as different people around the world have different tastes and preferences, governments have different formulation requirements for product marketed within their borders. What are the preservative level requirements? What colors are permitted? Are certain ingredients prohibited or restricted in a given country? These and many other questions must be asked when considering the movement of any product into a foreign market."

Testing the Waters
In countries where it is permitted, a Not-For- Resale (NFR) model makes sense for companies that want to test the viability of their formal entry into a foreign market. The NFR model is based upon local "personal import" laws that, in some countries, allow your product to come into the country with its original labeling and formulation for personal use only. Used wisely, this method can slowly build a base of product consumers with whom you can build around when you decide to officially open up for business in that country.

While the NFR model is a very effective tool, company executives must understand that this model is by no means a "catch-all" method of getting your products through customs. There are specific rules and regulations that must be followed, and again, personal imports of your product may not be allowed in the country that you wish to enter. I have been approached many times by companies that say that they are having trouble with their NFR products going into a particular country, and I have to explain to them that it is because there is no such thing as NFR allowed in that particular country. As an executive, be aware of the rules and don't get caught in the trap of assuming that NFR is a type of carte blanche that can be wielded in any country you choose.

Distribution
For the direct selling industry in particular, logistical distribution of your products tends to be unique country by country. Generally speaking, outside of the United States, credit cards are not the preferred method of payment, so several different types of payment collection are needed. In some countries, your customers may not even have a physical address for delivery, so key pickup and payment points may be appropriate. As an executive, address each country as a unique challenge, and try to refrain from automatically copying a method that another direct selling company may be employing. In many countries in Southeast Asia and South America, direct selling companies have formed a habit of having sales associates act as mini-distribution centers whereby they pre-pay for the product and sell it on a retail basis out of their home or office. The advantages are that the direct selling company can distribute their product in areas that don't have reliable services and can collect cash payments. The disadvantages are that your company is severely limited in sales growth by geographic areas and that your company rarely knows who the end consumer actually is. Another big disadvantage is that you end up having a nightmare of inventory and supply chain issues that your IT system may find impossible to track. Take the time to understand the "lay of the land" of each country and spend time with the right people to develop the right distribution method for your company.

Where possible, look into the feasibility of using regional distribution centers in countries such as Singapore and Hong Kong to store your products. In cases where you are able to use the same formulas for several different countries, you can find vendors who will store your product in bulk, then label your product individually with the appropriate country label on demand. Backorders can be the death of momentum in this industry, and the amount of inventory that direct selling companies keep is much larger than other industries because of this fact. Accordingly, if you don't take advantage of regional distribution hubs, then you may find that the money you have tied up in huge inventories in every country you do business in becomes crippling to future growth.

Tax and Legal
Do not make the mistake of starting to do business in a country without consulting country experts in tax and legal services. It is essential that you find the right partners who can help you develop your tax and legal strategies for each country individually, and as a worldwide company as a whole. The right partners can also smooth the way with government officials and can simplify the process enormously. While the right kind of consultants in these areas are relatively expensive, I can't think of a more critical and appropriate use of budgeted funds as you consider the costs of opening for business in a new country.

International Growth
In conclusion, there are no hard and fast rules that can be applied to every country. The temptation to "jump right in" a given country is great, but give yourself realistic deadlines when trying to launch your product in a country. Be aware that in some countries, just the registration process alone can last up to a couple of years, though for the most part can be done in three to six months. The opportunities for growth internationally can literally be exponential, and have made some of the big players in this industry what they are today. With the proper foresight and planning, you can make the operational part of your international expansion a tool in creating an environment where your products are sold smoothly and efficiently.

Charlie Smith has been the Chief Operating Officer of two large
multi-national direct selling companies. He currently is the President and
COO of OpSolution International,an international operational and logistics
provider for the direct selling industry. Charlie Smith may be reached at
www.opsolution.net.

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Prioritization: Between Strategy and Execution
by Teresa Day and Curt Craighead

Prioritize: To arrange or deal with in order of importance.

Up until the last century, nature dictated your priorities. You didn't have to decide the order of importance in your tasks. The moon told you when to plant. Your livestock was born in the spring. It got dark earlier in the winter and later in the summer, and your harvest was a function of the season. In today's world, you don't have the luxury of following nature's lead. In your business environment, knowing what to do first is the hallmark of greatness.

If you are fortunate to be working in an organization which has enough funding to execute whatever you can imagine, prioritization will not be an issue for you.yet. No company in the history of the world has enjoyed the ability to fund everything they can imagine forever, including Coca-Cola, including Home Depot, including Microsoft. Witness Montgomery Ward, a retail powerhouse over the course of most all of our lives. When they began to lose market share, they still insisted on funding everything equally-direct mail, print, radio and TV advertising, an extensive product line which included everything from housewares to textiles, home electronics to automotive, along with funding storefronts, a catalog business and lines of credit.

First, they lost sight of their market. Second, their inability to prioritize spread them so thin strategically and financially that they were unable to execute well enough to even survive.

And now they are gone.

In the fallout from the failure of prioritization real? Ask Montgomery Ward.

Without doubt, Montgomery Ward was populated by smart people who strategized well; they also employed people to implement their strategy. The critical missing component wasn't what to do, but what to do first. When a company moves directly from Strategy (where you want to be) to Execution (doing what it takes to get there), prioritization is the critical component that is left out. Unless strategy is followed by prioritization followed by execution, you're simply taking shots in the dark, then claiming whatever you hit as the target.

Misaligned Priorities
Many failing or marginally successful companies (as well as some successful ones!) don't have misaligned priorities, because they don't have a priority list in the first place.

Why?

Because priorities don't leave anyplace to hide. They require commitment, confidence, and a willingness to stake success on what you think will work. The fear of being wrong keeps the list from being focused upon, leaving lots of wiggle room for the incapable.

In leaping from Strategy to Execution and skipping Prioritization, the budget gets very thin across the board. Everything gets funded, but nothing is funded well enough to work. It's like betting on every horse in a race. But with proper Prioritization, your funding gets deep for the top priorities, making things happen in a way that's identifiable to the people around you, the customer and the media. It's putting your money where your mouth is.

A true priority list is stack-ranked, vertical, with only ONE priority occupying the top slot. It's partly a question of courage and partly of ability. Deciding what should be done first necessarily means that something else can't be done first.

The criteria for ranking will be as unique as your company and defined by your business environment, possibly including corporate objectives, new opportunities, opening markets, revenue gaps, industry drivers, marketing strategies, etc.

Once formulated, good implementation attacks the top three priorities with 80 percent of your resources, both budget and personnel. The next three priorities follow with the remaining 20 percent of your resources. As the top priorities are achieved and checked off, the list rotates up, bringing into immediate focus what had been on the back burner. Working in this manner also allows you the time needed to evaluate the remaining list to determine whether the items still warrant funding, long before it has been allocated. For example, you might find the No. 4 slot on your list is inadvertently satisfied in conjunction with another priority, or that No. 2 is no longer valid.

Defining Priorities
This isn't to say that the vertical nature of the list means each priority will just rotate up into the next slot. You may have something you'd like to do that remains No. 6 on the list for months. A stack ranked list allows you to continually reevaluate each priority in relation to the others. Clearly, unknown events can and will affect the list, and your ability to RE-prioritize will make the difference between mediocrity and greatness.

In defining priorities, the only projects that get funded and executed are the ones that support the top priorities. Harmony and balance are achieved at the home office, as it becomes clear what is ego, personal agenda and nonsense, and what is strictly business.

Priority Imposters
But real prioritization has two imposters masquerading around and wreaking havoc on companies and their employees. As we saw above, the only true priority list is vertical, with only one priority occupying the top spot at a time. The first imposter is a horizontal priority list:

While everything on a Horizontal Priority list may be important, nothing is more important than anything else. Budgeting for a list like this inappropriately allocates funds, resulting in a diminished effect for even the best idea. Funding priorities in this manner compromises your budget and compromises your reputation with people who work for and with you. When the message is that nothing is more important than anything else, you are in fact saying, "I don't know what I am doing."

But the worst imposter is a Circular Priority list:

In this model, not only is nothing more important than anything else, the list is in constant flux and can change quarterly, monthly, weekly, even daily. What was important yesterday has been superseded by what is important today. And sometimes, what was important this morning is superseded by what's important this afternoon. Utilizing this model illustrates a complete inability to recognize not only top priorities, but what should be on the list in the first place.

Typically the only personality who has the luxury to operate within the parameters of a circular priority list is a key decision maker, simply because they would never tolerate this behavior from someone who works for them. Operating within this model wreaks operational and budgetary havoc.

First the budget suffers, then the personnel, then the key stakeholders, then the reputation, then the business. Both ineffective and destructive, this "decide as you go" model often results in failed departments, failed divisions and ultimately, failed companies.

A true priority list generates revenue in a meaningful, productive and immediate way. Working from the true priority list, and not from the imposters, offers peace, increased morale, confidence both inside and outside the company, and attends to the first and foremost objective of any organization, which is to maximize profit.

Teresa Day and Curt Craighead write and speak about business issues and the economic value of clear communications. Day is currently serving as Vice President of Sales Training at Home Interiors & Gifts. Craighead is Managing Partner at Best Light Communications. They can be reached at info@bestlightcommunications.com.

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