The Elusive Prize – achieving a Common Corporate Identity when expanding overseas

by Oliver Dowson, CEO, International Corporate Creations Ltd

When expanding abroad – especially when setting up operations like Shared Service Centres that will take over work previously done in-country – there’s always an aspiration to achieve and maintain a common “Company Culture”. Unfortunately, many companies fail. I’ve met with management of many international subsidiaries of multinationals all around the world – and conclude that finding common corporate identity at the human level is disappointingly rare. Often it feels like the only thing that’s common is the logo over the reception desk!
This is nothing new. On my first day at work for a US multinational in London, long ago, I received a telex from my new opposite number in Minneapolis welcoming me and asking me to send him some stats for the UK company. I asked my boss how I should reply, and he screwed up the paper and threw it in the bin. Stunned, I asked “and?”. “And you wait and see if he remembers to ask again. If you get a third reminder, I’ll explain what to do” came the answer. I found out that the London management mantra was that “the money might be American, but here it’s a British company”.
Years later, in a new job, I was reminded of this at the German HQ of a US car manufacturer. Waiting in the lobby for a meeting, I watched a workman put up a new corporate poster – and then carefully stick the German company’s logo over the corporate one. Reversing nationalities, I’ve had executives of the US subsidiaries of two of the biggest German companies tell me that they try to ignore anything coming from Frankfurt or Munich.
Therefore, when I started to take my own businesses abroad, I resolved to make it a priority from the outset to try for “one company thinking”, for which the key is to get everyone respecting each other and working together.
It’s not so hard where the new overseas operation is a sales office, or is dedicated to expand the business with a new market, product or service. The real challenge comes where work is being transferred abroad – for example, taking accounts processing or customer call centres to a lower cost economy. Whilst most companies dedicate effort to inspiring the new overseas workforce with the corporate identity and values, many pay scant attention to staff in existing operations, except those destined to lose their jobs as a result of the change.
Overseas expansion and business change is actually a great opportunity to build global corporate identity at all levels. Staff at the new overseas operation can probably be enthused quite easily, but the home office always needs great care. Even those not affected directly may have negative feelings, perhaps because they have friends in an affected department, perhaps because they fear they “will be next”, perhaps because they think they will end up with more work to do – or perhaps simply just because they are prejudiced (almost certainly unjustifiably) against the country in question.
The approach I’ve used and recommend has several elements. Fundamentally, you need to make your management teams understand that the move will not only make the company stronger, it will make their jobs easier, and they will be able to deliver better results, making them look good.
• When you set up a new overseas operation, don’t just use it to transfer work abroad. Add a small number of staff that will work on exploiting the new base to expand your company’s market, or to deliver extra services back to the home base that are new and valuable.
• In conjunction with that, establish people in both operations – home and abroad – who will need to depend on and communicate with each other every day. Pick individuals who are likely to build a rapport and share a little social chit-chat (this can dictate who you hire for the new overseas operation).
• Hire better-educated staff for your new operation than you actually need
• Consult your management team about the job functions that you may have previously cut out in your home country to make savings, and that have loaded extra work onto them – then re-staff them in the new overseas operation.
• Educate the home office staff (all of them) about the country and city where you’re establishing your new operation, and the people you’re hiring. Admit to making efficiency savings, but also make it clear that your company is deliberately trying to help the development of the country you are moving work to. Give as many of them as possible the opportunity of visiting the new operation – but only once it is up and running smoothly.
• Don’t switch over operations until you have fully QA’d the entire operation. If it doesn’t work perfectly from Day One, you’ll have to climb the mountain again.
• Never forget time differences! Don’t expect overseas staff to always have to work unsocial hours to fit in with the home office – try to compromise on scheduling.
• At least for the first year, directors or senior management should play the role of Company Evangelists, visiting the overseas operation regularly, and spending at least a few days each time getting into details and meeting all the staff – and then spend time reporting back to the home office team when they return.
There’s never a single solution, of course – but all of these ideas have been proven to work. Another set of ideas apply to how you should manage corporate identity in your new overseas operation – but that’s a subject that needs another article!

 

THE ICC DIFFERENCE

by Oliver Dowson, CEO, International Corporate Creations

People often ask me “What’s your USP?”.  I’m increasingly realising that it can be difficult for others to understand how ICC is different to other professional services – and difficult for us to explain concisely!  So I’m going to take a stab here at getting the message across more clearly, specifically for one of our core services of setting up new overseas business operations.

My “elevator pitch” is that, unlike other professional services, we put ourselves in the position of each client, and act as if we are spending our own money, prepared to undertake each step of the process ourselves.  We don’t just tell companies what to do, we’re actually prepared to do it.  So we have to give complete, accurate and practical details.

But that’s compressing a big project into a few words, so for those who are interested (and I hope that includes you, since you’ve read this far), here’s a more detailed explanation.

International Corporate Creations is unique in its approach to helping its clients expand globally through research and implementing the creation of new wholly-owned subsidiary and Joint Venture companies in any country of the world.

  • Before starting each project, we immerse ourselves in understanding our client’s business and their approach and objectives, to ensure that the recommendations we make are those that we would choose ourselves were it our own business.
  • We aim to think of absolutely everything that our clients need to know and act on
  • We always look for the most cost-effective solution, using trustworthy and reliable local service providers and partners in each country and location that our clients want to enter.
  • We’re not a conventional consultancy. We don’t just make recommendations, we’re ready to act on them.  Nothing is vague, everything is detailed.  If a client wishes, we can implement every step to deliver their new international business as a turnkey solution.
  • When we set up a new international operation, we QA every step to ensure that everything will work perfectly from the first day it opens for business.
  • We endeavour to quote firm, fixed prices for our services for each stage of each project. Where we cannot do that, we make that clear upfront, with the best estimates we can.

Setting up a new Overseas Operation

We divide setup of a new operation into three stages.

FIRST STEPS (STAGE 0)

This stage costs nothing, and carries no obligation.  Our objective is to prepare a proposal for the next stages – but if we find that a project won’t work, we’ll be honest enough to say so.  Usually this stage includes:

  • Exploratory meetings with the client, by WebEx or face-to-face
  • Further research and understanding of the client’s business sufficient to ensure that any Proposal that we submit is likely to be suitable
  • Our team brainstorms alternative solutions for the most appropriate and cost-effective solution for the client
  • Exploratory discussions are undertaken with ICC contacts in the relevant country
  • Initial research into legal and regulatory issues, restrictions and competition, to try to avoid any foreseeable hurdles
  • Project evaluation by ICC team
  • Preparation of Report and Proposal
    • Includes fixed price proposal for Stage 1 (next steps) which would be chargeable
    • Includes timeline for performing Stage 1
    • Includes a general indication of Stage 2 (if stage 1 approved)
  • Presentation to Client – findings of Stage 0 and Proposal for Stage 1 – and Agreement on Next Steps

RESEARCH & ANALYSIS (STAGE 1)

This stage creates a complete model, not only of how to create an overseas subsidiary or JV company, but of how it will work in the future.   Depending on country and complexity, this typically takes 6-12 weeks, keeping the client informed of progress on a weekly basis.

  • Detailed market study
  • High-level discussions with client to agree approach to different aspects of the project and understand corporate methodologies and objectives (Finance, IT, Marketing)
  • Analysis of alternative business locations (country and city) and recommendation of the most suitable one(s)
  • Research and analysis of relevant business legal, regulatory and employment issues in sufficient detail to enable fully-informed business decisions to be taken
  • Identification and selection of suitable local business partners (legal, accountancy, real estate, HR, banking, etc), usually located in or near the recommended destination city
  • Analysis of IT infrastructure requirements and any issues
  • Evaluation of employment situation (availability of staff with suitable technical and language skills, local competition and retention risks, salary levels and other employment costs. Recommendation for methodology of recruitment and salaries and benefits to be offered.
  • Evaluation of training requirements and where this would be done (bring trainer to country or take staff to home base)
  • Infrastructure and costs for future client routine visits – transport, hotels with corporate rates, etc.
  • Fully detailed costing for Stage 2 Actual Implementation (as accurate as is possible)
  • Detailed step by step costed operational plan for the first full year of operation, including all necessary bureaucracy, legal documentation, financial plan, recruitment, training, local promotion and marketing.
  • Detailed “Road Map” and proposed timetable for implementation and first year operation. ICC use their skill and experience to identify steps in setup that can be carried out contemporaneously and that therefore make the overall setup process as efficient as possible
  • Stage by Stage client update meetings (usually by WebEx)
  • Detailed business “Model” presented as a fully-illustrated Report on conclusion of Stage 1
    • Exactly what the business would look like on Day One
    • What it will look like after 3 months
    • What it will look like after 12 months
  • “On the ground” presentation – face-to-face meetings at the recommended destination location, with presentation of the detailed business models mentioned above, meetings with suggested local business partners, visits to competitors or similar operations where possible, visits to possible office/property locations, etc. These meetings would be spread over 1-3 days depending on the size of the project, and have the objective of ensuring that ICC’s Stage 1 Report is clearly understood and all client questions are completely answered on the spot.

MAKING IT HAPPEN (STAGE 2)

At the completion of this stage, our client will have a fully-operational overseas company!

  • Research and implement any modifications to the Model developed in Stage 1 as required by the client
  • Agree implementation plan with client – refine timescale to adjust to client needs and objectives and decide “who does what”. ICC are willing to undertake the entire implementation of setting up an overseas operation for a client, but most clients want to be involved to varying degrees, and every country and project is different, so there is no single model for this stage.
  • Carry out implementation of project to set up overseas operation following the step by step plan developed in Stage 1. Typically this will take between 3 and 6 months and include
    • Business legalisation (including company name registration, regulatory matters, tax registration, etc)
    • Banking arrangements
    • Contracts with local business partners for accountancy, legal and other required services
    • Business premises acquisition and furnishing
    • Staff recruitment and training
    • IT infrastructure acquisition/import and installation
    • Communications (telephone, internet, etc)
  • QA – we test every step of the way to ensure that everything works the way it should
  • Complete Transparency Guarantee – When things don’t happen as expected, we consult with our clients immediately and adapt the plan to overcome issues and get back on track as efficiently as possible

At ICC we offer a host of other services revolving around the creation and management of overseas operations of all kinds, in all countries of the world.  We aim to take a similarly comprehensive approach to all of them.

 

Iran is back in the game

by Yvonne Rivera, International Business Strategist at ICC

For many years now, Iran has suffered commercially due to extensive sanctions from the UN, and it was due to this that UK companies were unable to conduct much trade with Iran.  However, last year on 14th July 2015, the E3+3 (France, Germany, UK, China Russia and USA) announced that they had reached an agreement with Iran on a nuclear deal which gave Iran the opportunity to demonstrate to the world an exclusively peaceful nuclear programme, and that as a result many sanctions would be lifted.

Therefore, since 16th January 2016 there are now fewer sanctions due to the International Atomic Energy Agency confirming that Iran had completed all necessary steps to reach “Implementation Day”.  It is important to point out though that some sanctions not affected by the nuclear deal remain in place, in particular those related to human rights and support for terrorism.  Primary US sanctions, including the US trade embargo, also still remain in force.

As far as we know at International Corporate Creations, EU trade with Iran before “Implementation day” already stood at $8bn/year, and this is now expected to multiply by 4 over the next couple of years.  In view of these recent developments, the UK Government is fully supporting the expansion of UK-Iran trade and investment relations, and encouraging UK companies to benefit from business opportunities that may arise.

In my opinion, this is a huge market opening for UK businesses looking to expand internationally.  Iran is the second largest economy in the Middle East after Saudi Arabia, with an estimated GDP of $397bn.  It is also the second largest in population at 80 million.  Opportunities for UK businesses should arise across all major economic sectors like energy, automotive, airlines, manufacturing and consumer goods.

That said, having read articles on this topic, many comment on the multiple challenges that UK companies might be faced with when doing business in Iran such as corruption, bureaucratic delays, inflation or price control.   These are common when starting business in new markets, as unfortunately not all destinations are straightforward, but in my opinion this should not discourage UK companies looking at entering the Iranian market.  Other more complicated factors depend on the type of business activity and a company’s other existing international markets.

Currently travel between the two countries is not as easy as we would hope, mainly due to the visa requirements and the fact that neither the Iranian Embassy in the UK or the British Embassy in Iran offer visa service.   Iranians still need to apply for visas in Abu Dhabi or Istanbul, and British citizens need to apply for visas at the Iranian Embassy in Dublin or Paris.

So if you are looking to expand or invest in Iran, please come and talk to us at ICC where would be more than happy to discuss the specific factors you need to be aware of to help your business succeed, ensuring that the appropriate due diligence measures are taken before engaging in any activity.

To discuss in more detail, call me on +44 20 7278 9210, or email info@internationalcorporatecreations.com

Why Outsource when you can Insource?

by Oliver Dowson, CEO, International Corporate Creations

There’s a general belief that offshore outsourcing is only for big companies, and that Shared Service Centres are only for really big companies.  However, that doesn’t need to be true.  Even quite small operations can be viable.  And importantly, the economic benefits will improve overall business profitability from the very first year – and the enhanced quality of service can accelerate growth.

It’s true that outsourcing probably carries more risks than benefits for the smaller company, unless the work being offshored requires a sizeable existing infrastructure, as is often the case with IT.  The most commonly cited risks are variable quality and poor customer perceptions, but the real problem that emerges for most businesses is lack of control – outsourcing creates a reliance on third-party management and increases certain risks such as IP security.

Every business executive hates “people who tell me what they think I want to hear” – and such people are prevalent amongst the owners and managers of offshore outsourcing operations, which makes this a major concern.  As a result, customer companies often get a distorted view of staff turnover and productivity, and can be badly misled about costs and other matters.

So, if you’re committed to outsourcing, or think it’s the best solution for you, it’s essential to keep a close eye.  Use an independent and knowledgeable audit service (we at ICC can advise) and/or carry out frequent, unannounced and detailed visits of your own.

But I believe there is a better solution.  Most outsourcing risks can be eliminated by setting up a wholly-owned or Joint Venture overseas company (turning it into “insourcing”).  This can be practical and economic with initial staffing of as few as 8-10 employees.  Pick the right local manager, and you don’t need to transfer your own management as “expats”.   Essentially, you’re picking another country to move work you might otherwise outsource, or perform work where skills are scarce and expensive in your home country but relatively plentiful abroad in the destination country.

Businesses that switch from outsourcing to “insourcing” overseas, or creation of an offshore Shared Services Centre – will benefit immediately from taking control.  They also reduce costs through eliminating outsourcing BPO supplier margins, that are usually huge, and dramatically improve staff motivation and retention.

Furthermore, such insourcing brings additional benefits.  Since ownership opens the way to employing higher skilled and qualified staff, businesses can migrate work that wouldn’t be considered for outsourcing, so increasing operational cost savings.   By thinking ahead and choosing an appropriately strategic destination, the new overseas company can also form a base for marketing products and services to the country and regional markets, expanding the company’s global business.

Although most executives would agree these advantages, most don’t proceed further, either because they perceive it would be too expensive, too difficult or both.   But it’s not so expensive if you use the right resources.   And it’s not too difficult if you have the right help.

If you’re unconvinced about the costs, take a look at the chart at the top of this article.  They’re actual figures for similar 8-person clerical operations.  I’ll be writing separately about the cost comparisons between the different countries in another article.

It was my experience of starting small operations from scratch in countries such as India, Brazil and China, overcoming the bureaucracy, cultural, management and economic issues in each, and nurturing each of those operations to a large critical mass, that led me to form International Corporate Creations.  Our mission now is to prove to other businesses that they too can expand abroad, successfully, quickly and affordably, starting small with minimum risks.

 

Zimbabwe – taking down the barriers to foreign investment?

by Oliver Dowson, CEO, International Corporate Creations Ltd

Most pundits seem to agree that Africa has been neglected by foreign investors and should now be actively considered.  ICC agrees – but Africa is a big continent with many different countries with huge variations in opportunity.  There are some countries almost everyone would steer clear of, and for most of this century, Zimbabwe has been one of them.  But is that true any longer?

I went to find out in December, and started by meeting Richard Mbaiwa, the CEO of the Zimbabwe Investment Authority, in Harare.  He is very sanguine about the damage done to investment by the indiginisation policy applied since 2007, which has required 51% of business assets to be held by nationals.   It seems that this policy is now under serious review and is now being reinterpreted, with a view to restarting essential foreign investment.   So, for businesses in appropriate sectors, now may well be the right time to look again.  One thing I saw clearly was the huge interest from China (although that’s true of almost the whole continent), and it could therefore be a case of getting in while the door is ajar and opportunities still exist.

Mr Mbaiwa told me that Infrastructure is the priority, specifically electric power for agriculture.  Whilst the distribution network is good and surprisingly complete (I went to places way off the beaten track that had mains power), there is a real shortage of generation, leading to frequent power cuts.  Currently generation depends entirely on coal and hydro from the Kariba dam.   As members of the Southern African Power Pool, they sometimes import from Mozambique, sometimes export to Namibia, but there are shortages every week.   Thinking of the results of the Paris Climate Change summit that happened just before my visit, and my work in the energy management industry, it was pretty obvious that solar energy – photovoltaics – is the way to go.   Mbaiwa told me that they are now open  to new generation by independent power producers (implying 100% ownership), or in partnership with Zimbabwe Power Authority.

Another high focus is on encouraging the local refining of Platinum and Chrome.  Whilst mining globally has had a huge downturn in the last few years, Zimbabwe has precious metals and it wouldn’t take much to move the sector here higher.  The Chinese are particularly interested, as one would expect.    There has been a 4-year export ban on Chrome ore, which was partly lifted in November 2015.  The intention of the ban was to encourage smelting and refining of the metal in Zimbabwe itself, but lack of industrial capacity to do that basically haemorrhaged mining too.   With an 85% unemployment rate, this heavy work is seen as a good way of exploiting labour availability and adding GDP value.

For the same reasons, there is emphasis on seeking investment in Manufacturing.  The major product is clothing, but Mbaiwa admits that the technology and equipment are outdated and told me that no factory is operating above 50% efficiency.

The tourism sector is ripe for investment too.   I did the tourist circuit too, and wDSCN0476as struck by how few visitors from outside Southern Africa there are.   It’s a wonderful destination though, and would be easy to promote if there was good enough infrastructure (one reason why there are not so many visitors).  The government is promoting Victoria Falls as a hub for tourism and conferences, and has already put millions into airport expansion.  As I witnessed, it’s a beautiful and huge new airport with very few flights.  One reason is nowhere to stay – no big conferences can be held as there is a hotel room shortage.

Clearly there are a lot of opportunities, but apart from the need to negotiate ownership with the government, investors will continue to have other concerns.  The Big Question has to be what will happen after Mugabe dies – he is nearly 92.  The stock answer I got from Mbaiwa was, unsurprisingly, that “the political situation is stable and elections are always free and fair, so there will be an orderly succession”.  But the truth is that nobody knows – except that everyone knows that there is a lot of infighting in the ranks of potential successors in Zanu-PF.  I witnessed a lot of pent-up frustration at the economic situation in almost everyone I met – and nobody expects a solution before Mugabe goes (and are far from certain there will be one afterwards).    The other key concern for investors has to be local labour costs.  On the face of it, they are low – but a visit to the supermarket illustrates that it’s not a cheap country by comparison with others in Africa, and I’d guess at significant wage inflation over the next few years.

Nevertheless, I came away certain that some smart and brave businesses are going to swallow hard, choose to overcome these issues and make very successful investments in Zimbabwe.  This is the moment.

 

Mauritius – a tropical paradise for Shared Services & Outsourcing Centres?

Oliver Dowson, CEO of International Corporate Creations, visited Mauritius in October 2015 and met with their Board of Investment to better understand the opportunities for expansion into that country, particularly for Shared Services operations.

Mauritius has emerged as an Information-based economy and is positioned as a regional ICT hub, through investments in infrastructure, intelligence and innovation, coupled with political as well as social stability.

With over 630 ICT-BPO based enterprises and employing over 19,000 IT professionals, the country has one of the richest technology ecosystems in Africa. Mauritius appears to be an attractive location for ICT companies and offers advantages of reduced operations costs, a qualified and bilingual labour force, innovative incentives, training grants of up to 60%, a robust telecoms Infrastructure with rates discounted by 80% and competitive rental rates.   Several leading global companies including Accenture and Ceridian have set up and expanded SSO operations in Mauritius in recent years.  The IT industry has also developed niche capabilities such as the emergence of an embryonic mass in games development and animation technologies.

Companies can be formed very quickly and economically, and the open legal and financial system minimises bureaucracy.

No transfer pricing or minimum profit level rules apply – so my conclusion is that a business set up in Mauritius purely for export of business services, with no local sales, funded entirely by the parent company abroad, could simply trade on the basis of parent remittances to cover costs with the local business trading at break-even.  In any case, tax rates are low at around 15%

Coverage of high speed (>50GB) optic fibre data connections is currently around 60% and anticipated to reach close to 100% within 2 years

Availability of skilled staff is an issue, but does not seem to be a major preoccupation.  The birth rate is low.  Mauritius is trying to position itself as a hub for university education to get more graduates.   Students like living in Mauritius and the Government makes it easy to settle.  Therefore my conclusion is that Mauritius will rely increasingly on migrants in the future to meet business growth needs.

Wage inflation is said to be low, in the range of 3-5%.  Payroll taxes are low, around 10%.  Employees are paid 13 salaries a year.

Normal working hours appear to be 8-5.  Public transport in Mauritius is only by buses – there is an extensive cross-island network, but they stop running around 18.00-18.30h.   I was told that employees think it quite normal to catch 2 or 3 buses in order to go to work and that, unlike India, poor commuting experience is not a common reason for job switching.   Businesses that need staff to work outside normal hours need to provide transport; normally this is by minibus – perhaps 3 or 4 separate routes taking in different parts of the island.

It is not believed that there would be a problem finding employees for shift or unusual hours working in order to accommodate coordination with other time zones, assuming that transport is provided.

The majority of Mauritians work in the services sector (although the definition of services here appears to include the hospitality/tourism industry).  I was told that only about 4-5% work in agriculture and 15% in industry/textiles.

Of course, from all the possible SSO countries, Mauritius is one of the more attractive destinations to visit, especially if you like sun, sea and sand!!  Nonstop flights from the UK are all overnight and take around 11 hours.   Car hire – essential for any business visit – is reasonably priced but the bureaucracy associated with it is quite high.  Cars come with satnav, which is essential, and although the island is small, the time taken to drive between places seems extraordinary.  Almost every 5-star hotel chain is represented with at least one resort hotel, and there is an excellent business hotel in the centre of Port Louis, the capital city.

So if you are looking for a new and attractive base for your global operations, Mauritius could be of interest.   To discuss in more detail, call us at International Corporate Creations on +44 20 7278 9210, or email info@internationalcorporatecreations.com

Welcome to the ICC – International Corporate Creations blog

Our Blog supplements our regular website at www.internationalcorporatecreations.com.  We will be posting a range of items that will be of interest to businesses planning global expansion and those that have existing international operations that they are interested in managing better.

Examples of future content include:

  • Country insights
  • Approaches to exporting goods and services
  • Setting up and managing SSO Shared Services & Outsourcing Operations and GBS Global Business Services
  • Global Marketing opportunities
  • Use of Data Analytics to measure success of international operations

Please keep coming back for new items!  We welcome questions, comments and constructive criticism.