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The Contracts / Commercial Role: New Markets

November 19, 2010

Another recent IACCM message board posting that caught my interest was a question regarding new market entry. It came from someone in our fast-growing Indian membership base, who was concerned about his company’s struggle to gain traction in new markets.

My past experience leads me to believe that a remarkable number of companies – in particular small and medium enterprises – attempt to expand their operations on a purely opportunistic basis. That is, they chase bids, rather than plan and manage their market entry. In such cases, it is hard to know whether they are better off winning or losing the bid – because if they win, they suddenly discover the implications in ters of resources and support.

In reality, however, they rarely win and instead they absorb a lot of time and money in abortive efforts. And this is where a strong Commercial department should be showing its value. Commercial Management must be about more than facilitating individual bids and deals; it must also provide coherent insights to market manageent and business development.

My answer to the question was brief and did little more than touch on some of the options that could be considered. The questioner was especially concerned abou the attitude and support of local sub-contractors for major EPC contracts, hence my comments reflect areas of that concern.

“From your question, it sounds as if there may not be a coherent business development strategy. New market entry is never easy or cheap. It mostly depends on building local credibility, which is in part by having strong reference sales. Frequently, companies do this by:

a) seeking opportunities to win business with the subsidiaries or sister companies of existing clients (i,e, situations where they have an established record and credibility).

b) a readiness to establish presence through acting as a sub-contractor or through joint bids. For example, have you sought opportunities to partner in this way with some of the local companies? This offers strong opportunities to build your name and reputation – to a point where local suppliers / contractors may start approaching you for business opportunities.

c) what are the typical terms under which suppliers / contractors in that country operate today? Can you offer better terms, so that those companies not only want to partner with you, but also want you to win? Very often, they will have some influence and contacts. You should be incenting them to actively support your bid.”

The purpose of this post is three-fold. First, as contracts or commercial professionals who care about company performance, risk and profitability, we owe it to management to call out when we see wasted and expensive efforts that have little chance of market success. We must not allow our traditional deal-based focus to blind us to the bigger pricture.Second, we must ensure our comments are accompanied by advice on how to do things better – make sure we are not simply seen as obstructive or negative. And third, what additional thoughts do you have regarding potential approaches to market entry in a situation such as that outlined by the original questioner?

(see this post at https://www.iaccm.com/members/network/coi/?coiid=1&section=forum&post=2087&java)

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