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June 04, 2015 Article 7 min read
Is your company considering an international expansion? Two CEO's recently went through the process — successfully. Here’s what they learned along the way. 

Companies must develop the right international strategies to balance risk with opportunity; there is no one solution that will work for all businesses. Key factors to consider include the market segment you operate in, your overall business strategy, enterprise discipline and value proposition, available capital to invest, risk tolerance, and many others.

To hear firsthand how two companies are growing their international footprint, Plante Moran spoke with Scott Becker, president and CEO of Chromaflo, global provider of pigment dispersions, and Ed Holland, president and CEO of plastics resin distributor M. Holland. Below, they share how they navigated the issues given their unique company attributes and vision and the dynamics of the markets in which they operate.

Ed, you took M. Holland into Canada in 2004, and today Mexico and Central America make up about 8 to 10 percent of your business. Do you want to talk about some of the strategic choices you made?

Holland

In the 1970s M. Holland was a regional Midwest company. During the 1980s and 1990s we expanded nationwide. In 2004 we had an opportunity and opened up M. Holland Canada. At that point, it wasn’t a strategic decision; it was “We have an opportunity,” and that drove strategy. Subsequently, we developed a plan, a strategy, and a vision. We’ve determined that it’s important strategically to expand outside the United States and Canada for a number of reasons: Certain customers moved their manufacturing out of the United States; Mexico, in particular, is developing a first-class plastics industry of its own; and one of the biggest changes is that the shale gas and oil boom is changing the landscape of plastics around the world, allowing us access to export markets.

Scott, tell us about some of the strategic choices Chromaflo made as you expanded overseas?

Becker

We had captured significant share in North America and we knew we had good technology based on who we were selling to in both the thermoset and industrial coatings marketplace. We had blue chip customers (who had operations overseas). We knew we had good technology, and my view was that we really needed to go international because we can do so much more in the world. But we didn’t have the vehicle….In the past we had tried licensing, distribution, co-manufacturing, all the vehicles to try to penetrate international markets. The bottom line for us was, you have to have assets and people on a continent to really gain a foothold. It’s too difficult to try and do it with people who view your business as secondary. Having gone through those other processes, it was clear we had to do something different. For us, that meant taking the risk of taking on significant amounts of debt to generate business in other areas of the globe.

Can you talk about some of the risks you identified as you expanded into other countries and how you addressed them?

Holland

You have to manage the three C’s of risk: currency, country, and customer. We’ve embarked on currency hedging and trade credit insurance which help mitigate some of the risk. We’re expanding in countries that are business-friendly and have good mechanisms in place to do business with the United States and international communities. Those countries need to have stable currencies and business practices that align with our core values. To manage customer risk, the key is to have feet on the street, people who understand the business environment in that country. Regarding M&A in foreign countries, we need to be clear on what an asset is and how it would align with our strategies.

Becker

To me, the risk was when we stepped into private equity and debt… there are a lot of unknowns, we’ve all heard the stories about being involved in private equity but the key to being successful in that realm is picking the right partner. I spent a lot of time — I probably spent five months — finding, vetting, and doing due diligence on the partner we ultimately did business with and eliminated 19 others. That’s a critical aspect; we had the right partner (Arsenal Capital Partners) — everything they told us would happen in terms of supporting our growth strategy has come through, including helping us deal with integration issues. The biggest factor for me at the time we took our big step was believing that we picked the right partner and were doing the right thing by the employees and the business.

It’s one thing to make a strategic decision in a conference room in your home country, quite another to try and implement on the ground in a foreign country. How do you go about it?

Becker

There’s a tremendous amount of work to accomplish. Everything from legal aspects in every country, all the name changes to technology transfer to simple things like signage and business cards, compared to complex things like IT integration, making sure databases can communicate effectively, distribution partner realignment, pricing scenarios, discounts, etc.

Basically what we did is we developed a pretty significant integration plan, everything from communications through sales and marketing, technical, manufacturing, finance, IT, legal, and we created it with key actions in every one of those segments and a time table and responsible parties to handle it and then followed it every two weeks like the bible and drove the process to conclusion. We’ve done that with every acquisition and integration since then. I had a team of people globally working on them, and we broke it down regionally. That’s also a key aspect. We had itemized everything but broke it down on a regional basis, and regional people took care of regional things. Global things like the web page, as an example, we handled in Ashtabula [Ohio].

How do you integrate and suffuse your culture into new operations overseas?

Becker

We are very customer-centric. A lot of people say that, but I can tell you we live and die by it everyday. So what I did right from the get-go until this very day is, I hold biweekly meetings with every region. We talk about three things: customer retention (what issues are out there); customer conversion or new business targets; and integration activities. It gives focus to the most important thing, what I consider the most important thing, which is taking care of customers. You do that for a few months and people see, okay this is real, I have to make something happen and they start to buy in. You don’t want too many meetings to go by without something happening on a particular account. That set the tone for what our focus was going to be. If you think about it, if you take care of customers a lot of the other things fall into line. That’s how we came to a common culture.

Holland

We spend a lot of time on culture. I’m told by our suppliers, customers, and competitors that we live our culture and core values more than anyone they know. The values are a constant reminder and reinforcement of how we’re expected to behave in the marketplace, and that doesn’t change, whether we’re in the United States, Canada, Mexico, or anywhere else.

Probably one of the single biggest dangers in global expansion is that people think everybody thinks like they do. We have to understand what the local culture is and make sure that it aligns with our company culture. If it doesn’t align, our efforts aren’t going to be successful.

How would you summarize your global strategy today?

Becker

We want to be the premier provider of technology solutions to the coatings and thermoset plastics marketplace, that’s our vision. We have three plants in North America, three in Europe, one in South Africa, two in Asia, and technical labs in Brazil, India, and Malaysia. We have 760 employees — it’s pretty exciting. We’re heavily focused on the customer, and our strategy is to continually expand in markets we currently consider growth markets, where we really need to have a larger footprint. So we’re focused on developing manufacturing capabilities in India and in South America and strengthening our manufacturing position in China. Those three markets are getting a lot of focus right now to better understand the dynamics and also developing either a strategy to acquire or create our own facilities. We’ll be focusing on that in the next year.

We’re also looking at new market applications, so right now we have coatings and thermoset plastics, and we’re looking at whether we could we add a third or fourth leg? There are a lot of other markets that use colorant that we don’t participate in that we could. That’s getting a fair amount of focus from our marketing and business development groups.

Holland

Our global strategy is a North-South strategy. The plastics industry in the Americas is a growing industry. These regions — Mexico and Central and South America — will continue to be net importers of plastics raw materials. The United States is going to have the lowest cost feed stocks in the world due to shale gas and shale oil. Within the next two to five years this will become a huge export opportunity for U.S. production. We do some spot trading in Asia, but we don’t have true distribution there now. West and North Africa are additional markets to be looked at in the future.

For more on international strategy, check out Lou Longo's article, "Is your Strategic Plan Missing a Passport?" >>