Overseas business challenge: Implications of knowledge transfer

To cope with this challenge, a business has to prepare itself with regard to capital, systems, and people. This can be done through feasibility studies, review and approval. 

But to be successful in making the overseas investment a profitable and viable one, companies need to give high priority to knowledge transfer as a key success factor of the project. This process after the establishment of the project becomes a challenge that could easily cause failure at later stages. 

With different locations in different countries, different laws, culture and competency of people are extremely important success factors of the business. Some pitfalls and wrong mindsets in setting up new operations in other countries are the following.

_ Making decisions from home-based information. It is quite risky to underestimate the variety and complexity of the new frontier. Before drawing conclusions on business issues outside its own country, it is necessary for the business to gather information with in-depth understanding as much as possible. 

_ Trying to save costs from the beginning. During the initial phase of the project, additional expense can be anticipated regarding travel, training, and setting up the business. It is dangerous to apply the same cost-saving perspective from the long-established headquarters operation to the changing environment.

_ Expecting constant and smooth operation. It is almost impossible to experience a problem-free start-up of a new operation. On the contrary, volatility and changing situations should be considered normal. Decisions should be made quickly enough to avoid increasing damage. Sometimes, it is possible to find that changes have to be made at the headquarters as well in response to the changing situation overseas.  

Launching a new business overseas involves developing a reliable and competent local team. As it is not practical for the headquarters to send its own people to take every key position overseas, it is probably a better approach to develop a strong local team instead. This can be done by ensuring that the knowledge-transfer process has been done effectively through proper recruiting – selecting the right people, and developing them from the company’s business philosophy, values and beliefs. 

The following are some important issues to be considered.

_ Business knowledge. Without giving them a clear understanding of what the business does, it is impossible to expect local employees to execute the business plan effectively. Thus it is important to make sure that the local employees obtain the basic knowledge of the business so that they can look from their own perspectives for ways to run it in their environment.  

_ Internal rules, regulations and procedures. It is very important for the local entity to be run under approved procedures that are adjusted to take into account the local culture and laws, and that are practical. To oversee the outside operation properly, the headquarters has to introduce and communicate the rules and regulations to concerned parties according to the expected internal control system. 

_ Communication. As we are aware that working in different countries requires effective communication, there is a risk of misunderstanding and misinterpretation due to different languages or different levels of international language competency. However, the language barrier should not be an excuse for not communicating. Instead, effort should be made to communicate through the channels available.

_ Problem-solving. Different market conditions may require different strategies to gain competitiveness. This requires the headquarters to think creatively when responding to new challenges. Unless the company can effectively find the right solution, a third opinion from others’ best practices or from consultants and experts may need to be sought. 

Penetrating a new market overseas can be successful only with the right business strategies. In the next few years, we might see the evolution of knowledge transfer as a challenge for many companies that wish to make a long-lasting presence in Asean countries.  

 

_ Yanyong Thammatucharee is senior vice president for accounting and finance at Central Marketing Group. He can be reached at [email protected].