“Why You Want to Globalize Your Business”

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Our Guest

Patrick Daly is the founder and Managing Director of Alba Consulting, current chairman of the Irish Exporters Association Supply Chain series and former president of the
association’s Latin America Trade Forum.

Patrick works with many of the top Fortune 500 companies in manufacturing, distribution and logistics services in Europe, Asia and the Americas helping them to achieve dramatic improvements in their logistics capabilities and performance.

Patrick is an accomplished consultant, speaker, trainer and author and has been active in the logistics sector for over 25 years. His new book International Supply Chain Relationships is due to be published by Kogan Page in 2018.

Patrick has delivered training in topics related to supply chain and logistics in Ireland, China, India and the UAE.

Patrick is married with two children and lives in Dublin, Ireland. He is a fluent speaker of Spanish having lived in Spain for 10 years. He is a great fan of learning foreign languages and also speaks French, Italian, Portuguese and German. Patrick is an active sportsman and completed the Dublin marathon in 2011 and regularly plays both tag rugby and 7-a- side-soccer as well as practicing TRX and is an avid gym-goer.

 

Guest Link

http://www.albalogistics.com/

 

Welcome back to another Dr. Nilda Business Foresight Show. Today I have with me Patrick Daly from Ireland very exciting. I want to read you his bio because the topic that he’s going to be talking about today is doing business internationally. He is an amazing person. Patrick Daly is the founder and Managing Director of Alba Consulting. He is also the current chairman of the Irish Exporters Association Supply Chain Series and a former president of the Association of Latin American Trade Forum. Patrick works with many of the top fortune 500 companies in manufacturing distribution and logistics. His services are in Europe, Asia and the Americas helping them to achieve dramatic improvements in their logistics capabilities and performance. Patrick’s is an accomplished consultant, speaker, trainer, and author. He’s been active in the logistics sector for over 25 years. His new book International Supply Chain Relationships is due to be published by Kogan Page, in 2018, which is in Ireland I believe, right?

It’s in London in the United Kingdom.

In the United Kingdom. Patrick has delivered training in topics related to supply chain and logistics in Ireland, China, India and the UAE. Patrick is married with two children and lives in Dublin, Ireland. He is married to a Spaniard woman and he speaks fluent Spanish which was very impressionable to me. He had he lived in Spain for ten years. He is a great fan of learning foreign languages and also speaks French, Italian, Portuguese and German. Patrick is an active sportsman and completed the Dublin marathon in 2011. I tip my hat to you. So, welcome Patrick how are you today?

I’m very well Nilda delighted to be here with you. Thank you for the introduction.

So, this is our morning as you can see but in Ireland you’re actually four hours ahead, right?

Right at the moment it’s five hours because we’ve both moved to daylight saving time.

I’m really excited to have you here Patrick we met a few weeks back because we both share a mentor which is Alan Weiss. You gave a talk about international business and I was quite taken by that because I am bilingual. I am also between two cultures my mom is Peruvian my dad was Puerto Rican and I was born in America. So, I feel like I have all of these different ethnicities and I was very fascinated by your talk. One of the things that you said is that you believe that smaller and medium-sized businesses need to be concerned about international business. I want you to talk to me about that international business and globalization how so?

I was staggered to find on my research that in America in the United States only 1% of companies export outside the United States. There are 30 million businesses in the United States and these figures come from the international trade administration. That compares very unfavorably to other developed countries. For example, in Canada somewhere in the region of 10% of firms in Canada export in the United Kingdom which is our nearest neighbor. It’s also 10 percent maybe 12% and then those countries that are at the top end of exporting so countries like Germany, Japan, my own country Ireland, the Netherlands and countries like that the percentages are even higher. For me there is a huge and latent and untapped well of opportunity for small and medium sized American companies to get involved in working overseas. Whether that’s on the inbound side in terms of sourcing materials or whether it’s the outbound side in terms of developing international markets. So, you say to yourself well the United States the biggest economy in the world something like 18 trillion dollars we’ve got 320 million people you all speak English same legal system from coast to coast why would I bother? The reason you would bother is because of those 1% of American companies that do export. They are more productive. They’re more profitable and they stay in business longer than companies that don’t export in the United States.

I think you might remember the day I spoke in New York and I spoke about this diagram where on one axis I had desire and on the other axis I had need. So, for example you could have a high desire and high needs to internationalize your business so that would be my case because I live in a very small country with a small market and most companies here in Ireland when they grow beyond medium size very quickly they have to become involved in international business. Whether it’s buying property to make their products for sale or buying products to distribute into our markets. Or whether it’s simply to sell their products and grow their markets outside of their home market. In the United States, you don’t have that same imperative because of what I said earlier it’s such a large market with kind of built in customers. Therefore, on the need scale most companies I guess in the United States are going to be on the lower end. Therefore, you have to work on your desire because when I put those companies on a four-quadrant matrix those that have low need to internationalize combined with a low desire I call them complacent. I call them complacent because I want to knock them out of their complacency. But the reality is that they’re giving up the opportunity to be more productive, more profitable and to stay in business longer. I guess the challenge for American companies is if they don’t already have the desire is to develop the desire and become if you like what I call more enlightened in that respect. The big international American names the Facebook’s, the Google’s, Dell these companies got it. They internationalized very quickly. Some of them were even born global. I think that there are many more American companies of medium size and a smaller size say somewhere in the ballpark of 100 million to 500-million-dollar turnover that are missing this opportunity. I think it’s a pity and I think they could do themselves a big favor by looking outside the United States for opportunities.

That’s amazing and this is exactly how you explained it that really attracted me to that concept. I know that you said that there’s low desire because there’s so much work here. So, for a small business or a medium business what would entice them to do this? Explain to me how.

Because it forces them or introduces them to two things. One is diversification and the other is diversity. So, in terms of diversification, there are different aspects to it. So, let’s say you’re an American company and you serve markets at home and you’re going to continue serving markets at home. But you’re interested in diversifying your supply side internationally. What will you get from that? Well you will potentially gain access to new materials that you couldn’t access at home or new products or components that you can use in your in production or in your distribution. You will find sources of cheaper supply maybe outside the United States as compared to what you will find at home. So, for example, if you’re a pharmaceutical company and you are buying certain ingredients perhaps you can purchase the same ingredient in a country like India or China more economically than you can in the United States. Also, if you have a sole supply of certain critical items you will be able to find alternative suppliers in different places and therefore you can leverage better negotiation strategies and on price advantages. You’re not beholden to any single supplier so that makes you more robust and it diversifies your risk and that contributes then to your longevity. The cheaper source of materials and your better bargaining position improves your profitability. If we add on to that then say the demand side so now not only are you sourcing materials and products outside of the United States now you’re looking to sell them outside the United States as well. So, you are going to open new markets in different parts of the world where those countries are at a different point in the economic cycle. Let’s say for argument’s sake there was a downturn in the United States in your sector and you export maybe 50% of your production say to the European Union or to Latin America or to East Asia. Well, the United States economy may decline those economies may be up and vice versa. So, you have diversified the risk on your sales side also because each part of the world is in a different phase in the economic cycle. Now I guess sooner or later they tend to follow each other because the economy of the world is becoming more and more coupled. But, right at the moment, there was a period of time during the Obama presidency when the United States its growth far outpaced the growth in European Union. Notwithstanding the fact that the American economy continues to do well with president Trump. The European Union economy is actually growing faster than the American economy so, Europe has picked up the pace. So, those companies that only work in America are not benefiting from the European recovery. China also some years ago it seemed to be stalling and now it seems to be growing rapidly again. So, those companies that are not involved in Asia are missing out on that. Those are some of the benefits you get that diversification of markets. Also, when you work internationally you pick up on new requirements in products and services. For example, let’s say you’re in the food sector and you’re exporting a product. You’re looking to export a policy into the European Union from the United States and you must adjust that product for the tastes in that country. Therefore you pick up on ideas and innovations that maybe you can bring home and develop or make additions to your home-based products that never would have occurred to you if you hadn’t been working in a foreign place. I guess also simply that the scale for example if you look at companies like Apple and Google they think in a global scale. They don’t think well this is America and there are 330 million people. They think this is the world and they’re seven billion people here. Now we’re talking about small or medium-sized companies but I think they probably need to take the same kind of attitude and the same kind of mindset. So, that’s diversification. The other element is diversity. This is almost inside the company because when you begin to internationalize your company you must diversify your workforce. Your work must diversify your thinking. You must diversify your worldview. That skills degenerate a kind of an internal innovation. You will more than likely start to recruit people from different ethnicities, from different backgrounds, people who have command of different languages and that mix seems to spark innovation inside companies. So, you’ll see that the most innovative companies also tend to be the most diverse companies. Then this, in turn, it’s almost like a virtuous circle. It allows you then to connect better with new places so if you say ok well I’m interested in East Asia. I begin to hire people say with a Korean background, a Chinese background or Japanese background who understand those cultures and those languages. Well then all of a sudden, you’re able to make connections in those places much easier. You get all of this kind of effervescent unexpected synergies and Serendipity’s occurring inside the company. I think all of that contributes to those three things being more productive, being more comfortable and being longer-lasting as a company.

Okay when we’re talking about a company such as mine that is more service, although I do have products but we’re more service oriented, how does international or globalization help a company like mine?

Well I guess in the in the same way. All of the points made about diversification and diversity I think still apply. Perhaps what happens actually is if you’re a small consultancy practice or even what’s called a lone wolf consultancy practice or you’re a solo practitioner you become more diversified in yourself because you get exposure to places and to peoples and cultures. You may if you wish or you’re so inclined or you have the necessity to learn foreign languages as you do that. For example, in our community, my mentor community that I referred to earlier one of the people in that group is Cory Shanahan. Cory Shanahan has a practice in Washington DC and Cory is also Irish. She’s been living in the United States for many years and Cory speaks Russian. So, Cory has clients in Russia and she is able to relate to them. She’s able to roleplay situations with them in Russian. For example, if they were dealing with a consultant that only spoke English they would have to do the role plays in English. Then when they’re thinking about the situation they’re in they’d have to be translating what did Cory say to me. Because she can do it in Russian it’s straight through. As you said I lived in Spain for ten years. My wife is Spanish we live in Ireland but the language spoken inside our house every day is Spanish. Though I can speak in Spanish every day since I was 21 years old which is 31 years ago. So, I traveled comfortably with large multinational clients to places like Puerto Rico, Uruguay, Argentina and Spain. I can interact with everybody in the plant from the shop floor all the way up to the to the site director and that’s the benefit of other language learning at that level. I don’t think it’s imperative depending on what business you’re in, maybe we can talk about language strategies later but, depending on what business you’re in what your objectives are it’s not absolutely necessary to have fluent command of foreign language. But if you do have it can be a great leader.

As a business foresight strategist, the one thing I know about business is those small businesses are really gaining a lot of ground quickly and they’re becoming big companies. If you think about it Amazon eight years ago was being run from their garage. They’re leveraging really quickly and becoming these large well-known names very quickly. With that said what types of companies do you think can gain the most from taking the global view in their business.

I think all types of companies across the spectrum can. That’s manufacturing companies, distribution companies and service companies. I guess different companies will approach internationalization in a different manner. Some of those companies that in essence are internet companies they’re born onto a business platform that has no frontiers.

So, technology?

Yeah, the likes of Facebook, Google and the others that are coming that we don’t know about yet that are being born on the Internet these companies almost are born global. But, as I said even with all of those counted only 1% of businesses in America are exporting their products or services. There are so many companies that are in conventional business sectors manufacturing widgets, distributing food or clothing or whatever it happens to be, delivering services, medical services, accountancy services, professional services, business consultancy and so on. So, there’s a huge middle there is a mass of companies in the 100 to 500-million-dollar range literally millions of them who are not taking advantage of international business and they could. As I said earlier, they can do it in different ways and it can also be a journey. So, you can see a company may be starting to source products or materials overseas and then later they may say ok well we’ve been dealing with some of these foreign countries maybe in Europe maybe in Latin America perhaps we could open a market there on the sales side. So, they progress to perhaps direct export on an opportunistic basis. They might meet somebody at a trade show somewhere let’s say if the company makes I don’t know shovels and they’re at an agricultural trade for somewhere and they meet somebody from Mexico. The guy says well you know I’d to buy some shovels from you. It’s an opportunistic direct sale and then people progress on and they develop export channel partners so they may have to develop distributors in the local markets or resellers or work with some sort of product aggregator to distribute their products. Then naturally over time what tends to happen is they start to look ok maybe we could form a joint venture with a company in Spain or in Colombia. They may say ok we actually have got to a stage where overseas markets are so important we actually need to have wholly owned production and distribution facilities in those foreign markets. Many companies like the in the old days General Electric and Ford Motor Company and all of these companies went through those kinds of stages. But, there are so many companies in the if you like the non-sexy end of the internet spectrum with companies that are making real stuff that needs to move over distances to get into people’s hands and a lot of opportunity.

Fantastic. Hypothetically I want to go global what are the sectors and what are the regions of the world that American companies can readily be embraced? I’ve been hearing a lot about Singapore. My question is if I wanted to start this where would I start? What are the regions of the world that are embracing globalization?

This is important and in the book that you referred to earlier which is being published by Kogan Page and that will publish probably in the second half of 2018. There are two chapters they’re kind of touching what you’re saying there. One talks about how globalization has spread and how it evens out the playing field or level the playing field but at the same time not all places are equal and geography still matters. Physical geography matters and it still matters because there are certain trade routes. There are certain countries. There are certain hubs in the world that make it easier to do business in some places than others. So, from an American perspective I guess the first thing is you want to stack the deck in your favor and you want to try to work in places where you’re going to have an easy entry. I suppose you’re going to have the easiest entry in what’s called the Anglosphere and the Anglosphere are those countries that share common a language with the United States. So, right on your door step you have  Canada with a very important economy. It’s one of the largest economies in the world and you have a free trade agreement with Canada through NAFTA. It’s relatively easy. I guess it’s not a free-trade arrangement as we have in Europe where we have like a common market and we also have a customs union but in relative terms it’s easy to do business between Canada and the United States. I would say then the next country or pair of countries would be United Kingdom and Ireland where there’s a great affinity with the United States and many generations of people from Scotland, from Ireland, and from England. I’ve emigrated to the United States and you can see that people’s surnames there’s a cultural affinity we still speak the same language with certain nuances. So, the United Kingdom is again a very large economy. One of the largest economies in the world. 66 million people or so. Ireland is a smaller country but the important thing about Ireland from an American perspective is that Ireland is the country in the world that receives most foreign direct investment from the United States. More than any other country in the world and Ireland is an ideal platform for American companies that want to access the European Union markets. That will become more so when the United Kingdom leaves the European Union in March 2019. That will leave Ireland as the only English-speaking country inside the European Union and inside the euro currency zone. That Ireland America relationship is going to be well it already is extremely important but it’s going to become I think more important. Then after that within the Anglosphere we have the neighbors down in the South Seas Australia and New Zealand again very close affinity and ease of doing business. All of those countries including the United States share a common law system so things related to contracts and property rights and intellectual property. It’s very similar arrangements with certain differences but quite familiar to Americans who want to do business overseas. Going beyond that then you’re talking about places that are very plugged into the international economy where English is used widely and particularly in business places like Singapore as you mentioned. I would also add to that Hong Kong and United Arab Emirates so places like Dubai and Abu Dhabi. So, these are great hopes for business in Asia and they are important business centers in themselves. After that then I guess we start getting into places where the business culture and the language maybe is different. I guess the ones that would be closer within that difference would be the northern European countries within the European Union. So, I’m talking about places like Denmark, the Netherlands, Germany, Sweden, Norway and Finland and also in Eastern Europe Poland is a country that has a lot of affinity with the United States. Then we mustn’t forget as we move more into foreign languages remember that there’s something like 47 million people in the United States who speak Spanish either as a first or second language. Therefore, the countries of Latin America starting with Mexico, which is actually in North America, and is also part of NAFTA so the same as Canada. Despite the bad press that Mexico sometimes receives it’s a country of 120 million people. It’s the 14th or 15th largest economy in the world. In 20 years’ time, it may be much further up the ranking if they can keep political stability and embed the democracy in all aspects of their society. Mexico, I think is a big opportunity and many American companies are already there in Latin America. I would put Mexico, Colombia, Peru and Chile in a block of the countries that are most open to business. They belong to an alliance that’s called the Pacific alliance which the philosophy there is very business oriented and free trade oriented. Two other big countries in Latin America that are an opportunity, but they’re not as open to business while at the same time being really big interesting markets, is one Brazil. Where the language is actually Portuguese not Spanish. But that’s some 200 million people. It’s the largest single economy in Latin America. Also, Argentina which is a country of somewhere around 40, 44 or 46 million people. Argentina has a lot of issues but, Argentina is one of the countries that has the most advanced agricultural science in the world in terms of precision agriculture. Anybody who’s in that space in the United States, Argentina is a country that’s really on the cutting edge of agricultural technology.

It’s pretty broad globalization and I think technology. Speaking to people in real time has really brought the world together. To be able to do business internationally is becoming a lot simpler than it then it used to be.

Yeah, it is and that’s true because what happened is over the last say since the end of World War two there’s been three probably major changes that have contributed to this. One is that there’s been a huge improvement in transport infrastructure and what’s called load unitization. By that I mean the containerization of sea freight and the introduction of standardized air freight has revolutionized the global supply chains. You could imagine in 1890 and the ship pulls up at the docks in Boston and everything inside it’s in tea boxes and cases and it’s packed all over the place. To empty a ship could take a week and a half. The ship will arrive in Boston today with containers on. It’ll be emptied in hours and turned around and on its way. Containerization has revolutionized sink rate and similarly, there have been huge changes in air freight that has enabled supply chains in coal chain and fresh products. I mean you’re in New York so you can go into New York tonight and have a fresh steak from Argentina. You can have Pacific fresh crab from Alaska in New York this evening. Those types of supply chains have been enabled by a revolution in transport technology. The other revolution then has been in information and communications technology. The ability to pick up a phone or get on skype or zoom or any other number of technologies. Then the information technology the big ERP systems and the supply chain management information systems that allow behind all of the fulfillment and the movement and the sourcing of materials that’s been a tremendous revolution that’s ongoing. Then another one that we often miss are the developments in financial services and the deregulation of certain financial services. Now some of those have led to problems with credit crunches and on bubbles and issues with derivatives and so on. But, there’s been a lot of positive developments in financial services and financial technology. Those three things together have come to create what is today a global market. So, it’s never been easier to internationalize which again makes me wonder why so few, as a proportion of the total, why so few in America are taking advantage of that. When just over the border in Canada it’s 10 percent that’s against 1 percent.

I have two last questions. We are reaching here the top of the hour so; Patrick I know that you’re known to be able to help American companies identify and exploit international opportunities. Quickly tell me a little bit about this. How do you do this? Would you work with American businesses to try to make those alliances to try to make those connections?

What we will do is we will help American companies to formulate and implement internationalization strategies. So, it could be on the sourcing side. It could be on the sales side. It could be in terms of identifying markets to enter and to identify the route to those markets. It could be to identify markets that they wish to invest in that they wish to set up operations in whether its distribution or manufacturing. I guess it’s to go right back to basics in terms of the formulation of the strategy and the why of this. Then from the from the why start to develop the how, the where, the what and so on. So, it’s to identify markets, see which products will have acceptance, to see what the supply chain options are, to set up whether we need to develop channel partners, distributors, resellers and so on. To see what the logistic solutions are going to be, what the gistic service providers can bring to the table for us, if they’re looking at putting operations in foreign countries to try to decide where is the best location, which countries offer the best advantages, and what the potential benefits are working with state development agencies in the different countries. For example, here in Ireland probably one of the most successful and national development agencies in the world is called ITA Ireland. Which has been responsible for bringing so much of that American investment here to Ireland. In Mexico, you have a similar organization called Pro Mexico. In Colombia, you have another one I think they call it actually Pro Colombia. To help companies and to develop their corporate language strategies. For example, I’ve been reading some interesting cases when your company begins to internationalize and you’re interacting with people in different countries if you don’t have a language strategy you get this kind of unfettered multilingualism. It can be chaos and so much gets lost. So much gets missed or people lose confidence because they’re not able to work through a certain language or with a certain country. It can be very stop-start. I think one of the early things that companies need to think about is if we’re going to internationalize we need a corporate language strategy and that strategy has to be coherent. It needs to hang together well across the whole network and it needs to be congruent with the business objectives. I’ll just speak about two examples there’s a Japanese internet company that had gone global. The CEO of that company early on he decided that he wanted English to be the corporate language and that’s fine.

But he went to the extreme of that in the sense that he changed the corporate language from Japanese to English everywhere even in Japan among Japanese. He mandated that people who were Japanese speak to each other in the company in English not in Japanese. That’s one extreme. IBM on the other hand also adopted English as their corporate language but they also promoted eight other languages. They adopted a strategy that was more nuanced. I’m not saying that one is better than the other. I guess it depends what you’re doing and what your goals are. That’s why I say it needs to be congruent and it needs to be coherent. But what it does need to be is you need to have one. You can’t just leave it to chance because then that would be just chaos. So, helping companies to work out what their corporate language strategy should be and then guiding. I think it’s important that we don’t implement a strategy but we guide and sometimes cajole and encourage the executives of the company to implement the strategy that we’ve helped them to develop. It’s important that they that they own this, that they internalize this and that they roll it out themselves.

I would be remiss as a foresight strategist if I didn’t ask you where do you see the future of globalization and internationalism? In terms of, are you hopeful that Americans will be able to join what is already happening globally? I think Americans are the ones that are lagging most behind.

Yes and no in the sense that on the political front America has been the motor behind many of the post-world War two political developments that have driven globalization, the World Bank, the International Monetary Fund and to a certain degree the United Nations. All of these supranational bodies we’re driven in the early days by America. America on the political front has always been I think, I won’t say always but, has been at least since the end of World War two has been very global in its focus. That changes from administration to administration and perhaps the administration that we have at the moment tends to be more of an inward-looking administration. But the cycle will return. I think the big arc of history is more towards an outward-looking America than an inward-looking America. It may turn in from time to time but I think in the long run it will come back out. I think in terms of trade and what private companies and private individuals do I think regardless of the political movements the ebbing and flowing of that global focus. Businesses are always looking for opportunity and the opportunities are there or real. If the politicians put obstacles in the way business people will find ways around them and they’ll absorb the costs or they innovate to get around the costs. But, I think the irony from an American point of view is that it really is the American lead companies that are the most global but at the same time it’s the American medium and smaller companies that perhaps are the most inward looking. So, you have both things going on at the same time. So, what I’m talking about is trying to get then the big middle of the smaller to medium-sized American companies switched on to the opportunities of internationalization. You know the Facebook’s, the googles and the Twitter’s got it already and it’s the other guys.

Fantastic so, I want to thank you so much Patrick for sharing this information which I think is fascinating. I always say that if nothing else to be able to broaden the mind of the audience and to help them to start thinking differently. I’m quite fascinated by this I’m very fascinated by international and I think that’s because again I’m half South American. I’ve always loved to travel. I love languages. I love cultures but doing business has been something that I’ve always dreamt of but never quite taking that step. This is what I’m looking for in the future but I think it’s fascinating that people start thinking this way. I always feel that if I can at least give them information and start jarring their minds to just start thinking this way the next steps just make it that much easier. So, I want to thank you so much for being here and taking your time, I know I’m smack in the middle of your day so, thank you for taking the time to be with us. When you have that book I would love to have you back to talk about the book to revisit this idea.  

I’d be delighted to do that and thank you very much.

 

#Interview With PatrickDaly “WHY YOU WANT TO GLOBALIZE YOUR BUSINESS”

 

#DrNildaShow #BusinessForesightShow #DrNildaBusinessForesightShow #PatrickDaly

#WHY YOU WANT TO GLOBALIZE YOUR BUSINESS