2008-05-05
Working with Swedish industrial projects in Eastern Europe I came to think of advantages of this form of companies’ international involvement, but also its effects that put them at disadvantage in a longer term.
Like other forms, Project export pursues internationalisation of business which is broadly defined as coordinated actions a company undertakes for penetrating new markets. It is often medium-size companies with superior products or services that engage in Project export. They get to test new markets, customers and partners. Swedish Project export is facilitated by the state-funded support institutions, EKN and UD PES that mitigate the risks a supplier runs in “insecure” markets.
The internationalisation mode a company chooses is determined by its principal position with regards to how much resources it agrees to commit, how high risks it accepts to take, its expectations on return and, last but not least, degree of management control it is able to commit to this business development.
Companies operating entirely through Project export must be aware of its effects and measure those against their own intention with the market presence. Often, project acquisition is driven by the company’s sales force. Sadly enough, once a project is over and proceeds recorded, the lessons learnt still rest with the individuals involved and seldom get disseminated across the company. The Swedish “flat hierarchy” so helpful during the project prevents the learning from reaching the strategic management level.
Neither do ad-hoc engagements allow the management to monitor the market’s dynamics which disables strategic thinking with regards to this market. For Project export-companies exposed to several foreign markets the risk increases exponentially. “Ad-hoc” replaces the strategy. Pursuing it proves a serious management challenge, especially when projects give birth to locally co-owned businesses. Enjoying limited management control of the Swedish parent, the local operators might engage in malpractices and even damage the brand.
Unless handled on the highest executive level, the challenge inevitably causes negative effects. Unsystematic market knowledge makes it difficult to evaluate risks and estimate returns. Once chosen partners might pursue own interests. Low management commitment and absence of strategic thinking do not promote appropriate resource allocation. The vicious circle is closed, internationalisation never happens.
So what should Project export-companies do? Put the issue on the highest executive agenda, adjust the organisation and promote strategic thinking. Ally with other western exporters in the market, in a structured way. Never lose sight of the local partners. Decide on the time-span of your project export strategy, analyse possible scenarios, and set provisional goals. And in the long-term, do not let Project export be your only mode of internationalisation.