In a previous article, I suggested leveraging your multinational clients to drive an international expansion without having to set up a local presence. Below, I share some ideas for guiding this expansion in Europe and Latin America. Asia and the Indian subcontinent will be reviewed in a separate article.
It is worth noting that in order to truly diversify your revenue base and tap the depth of overseas markets, a local presence is necessary. But in an initial stage, you can test the waters, develop a network, and get a realistic picture of which markets hold potential for you by tapping into your existing customer base.
An important first step is to look at the geographic footprint of your multinational clients as the latter will influence the overseas markets that you enter. This initial roadmap will have an impact on both your investment and strategy so it is worth it looking at it carefully. The below ideas are valid for situations when you enter the market leveraging your multinational client base and for setting up a local presence. In addition, the strategies suggested are applicable to programs delivered virtually, live, or with hybrid formats.
The post-Covid19 environment will accelerate the trends towards a hybrid learning environment that combines live and virtual instructor-led training. U.S. training firms that already offer such combinations in their domestic market are best positioned to market their offerings overseas.
Europe is a natural choice for U.S. companies looking to expand overseas. Four of the top ten export markets for U.S. services are in Europe. Europe accounted for 38% of total U.S. services exports in 2018.
The depth and reach of American companies in the continent are unmatched anywhere in the world. European subsidiaries of American companies reached sales of $3.2 trillions in 2018. That is almost 30% higher than total U.S. exports to the world in the same year and half of what U.S. subsidiaries sold globally.
The potential for training services is highlighted by the number of people employed by American subsidiaries: almost 5 million people in 2018. About two-thirds of those work in the service sector and the remainder in manufacturing.
In addition to having excellent connectivity from almost anywhere in the United States, Europe serves as a beachhead to enter the Middle East and Africa. A European base provides easier access to these two regions, which are usually known as EMEA.
Language can help you identify the entry point of your European rollout. You can leverage your English-language content in the Netherlands, Scandinavian countries, Switzerland, Austria, and, to some extent, Germany. Spain, France, Portugal and Italy will require in-language delivery. While it is possible to deliver your content in English in the latter countries, the interactivity and class dynamics will be compromised as the level of English fluency is uneven among sectors and companies.
Building a local operation in Europe
The UK still plays an important role for U.S. companies as an export platform to the rest of Europe. According to the Transatlantic Economy 2020 report from John Hopkins University’s Foreign Policy Institute, U.S. firms based in the UK export more to the rest of Europe than U.S. firms based in China export to the world.
A useful proxy to identify the markets with the biggest potential for training services in Europe is to look at employment levels. The UK, Germany, France, The Netherlands, Italy and Poland account for about 40% of the individuals employed by American-owned companies in Europe in 2018.
Traditionally, London has been the natural base to enter and serve the European market. However, this choice is being revised by companies already operating there due to the ongoing Brexit negotiations. Regulated industries such as finance and some manufacturers might have their operations disrupted after the ongoing transition period, in which the terms of the separation of the U.K. from the European Union are being negotiated, ends on December 31, 2020. Professional services, including training and development, might be less affected.
Brexit has reinforced the attractiveness of Dublin as a European headquarters for American companies. Dublin has a large, educated, and cosmopolitan work force and provides excellent connectivity to the rest of Europe. Companies such as Intel, Pfizer, and Lilly have a long-standing presence in the country and were joined in the 2000s by a tech wave that includes Facebook, Google, and Salesforce. More than 1000 leading multinationals call Ireland home.
Proximity, time zone convenience, and language uniformity make Latin America an excellent choice for internationalizing your training program. There are three sub regions: Mexico and Central America, South America, and Brazil.
Mexico offers an entryway into the market. It is Latin America’s second largest economy and has a solid base of U.S and European multinational companies. In addition, existing trade agreements with the U.S. facilitate operational issues such as financial transfers and logistics.
Latin America is a market that will require in-language delivery to ensure your competitiveness. You can leverage the Spanish-language content you develop for Mexico for the three largest Spanish-speaking markets in South America: Argentina, Chile, and Colombia.
Brazil is South America’s largest market and, depending on the indicators used, the largest market in Latin America. US and European corporations place it within their Latin America regional structure. But because it is a Portuguese-speaking market, the Brazil units tend to duplicate the organizational structure that exist at the regional level. So, it is possible that the Brazil unit might have its own VP of sales and L&D managers, who are peers with their regional colleagues. A sustained presence in Brazil will require content in Portuguese.
Setting up a local presence in Latin America
Chile’s capital, Santiago, is becoming a hub for headquarters of Latin American subsidiaries of American and European companies. In addition, Brazil’s Sao Paulo is also the base for many regional subsidiaries.
I mentioned earlier that Mexico is a smart entry point for the Latin American market. Puerto Rico is another one. U.S. corporations group this Spanish-speaking U.S. territory in different ways. Some include it within the Latin America region, while for others it is part of a sub-region of the U.S. market. This distinction is important as you identify the key contacts within an organization to help sell your training to a Puerto Rican subsidiary.
Accessibility and operational simplicity resulting from Puerto Rico’s use of the U.S. dollar and laws make it an appealing first foray into the Latin American market. It is not a convenient regional headquarters due to its low intraregional transportation connectivity.
While it is feasible to have a sustained international presence by working with only subsidiaries of U.S. or European companies, a long-term strategy requires development of local markets.
The good news is that there is potential to grow. Europe has a formidable base of home-grown multinational companies and they represent a fourth of Fortune’s 2000 Global List. There are names familiar to American consumers among the largest European public companies: Shell, Volkswagen, Allianz, Santander, Nestle, Novartis, and Siemens.
Multilatinas -- homegrown Latin American multinationals whose revenue, operations, and customers are within the region -- offer an opportunity to grow locally. It is interesting to note that they are heavily concentrated in Chile. According to a Deloitte report, companies based in Chile are responsible for 50% of Multilatina revenue. Even bigger countries, such as Brazil and Mexico, have smaller concentrations: 14% and 11%, respectively. America Movil (Mexico), Latam Airlines (Chile), Embraer (Brazil), and Despegar.com (Argentina), are examples of Multilatinas.
Based on my personal experience, it is possible to sustain U.S-level pricing and margins when marketing to European and Latin American multinationals (including the overseas subsidiaries of American companies). That will not be the case when, in a second stage, you target domestic, middle-market firms. Thus, it is important to contemplate, early in the expansion process, pricing power and margins associated with different national markets if you plan to market to smaller, local firms, in the longer term.
Marcelo Morichi is multilingual facilitator with over ten years of experience. He has facilitated Challenger™ sales, coaching, and negotiation workshops in over fifteen countries. He facilitates in English, Spanish, Italian, and Portuguese, and is based in Washington, D.C.