"Eating the Elephant"
There's an old riddle that asks "How do you eat an elephant?" The answer is, "one bite at a time." The joke is extremely applicable to tactical commercial real estate on the global scale. Taking the first bite of the global market may be challenging, but it'll expand your business into new opportunities. The U.S. represents less than 5% of the world's population and 25% of economic output, and both figures are shrinking. Growing in the global economy means expanding to other countries.
Tactical commercial real estate involves going after the global market one bite at a time. The world has more opportunities than many businesses can take advantage of. Over-expanding too quickly into global commerce can require you to add more to your team and your portfolio too quickly, leading to suboptimal results. Entering one country at a time as you test the global waters is tactically smarter and will help you achieve a better strategy over time.
Local Assistance
In the long run, you cut costs by gaining local assistance. It's hard enough to figure out the market in Billings, Montana when you're in Bangor, Maine. For success in Bangalore or Barcelona, get someone on the ground that can help you. Just like a domestic tenant rep, that person can help you understand where your business needs to be and what it should be paying.
On a larger scale, a local expert can also clue you into what is different about the market. These differences range from expenses to local tax systems and licensure requirements. Being guided into what to do, where to do it and how to do it will save your company from making expensive and unneccessary mistakes.
Take the time to employ the advice of a domestic tenant rep who has familiarity with the local market.
Plan for Transportation Cost and Time
Overseas locations requires the time and capital to transport goods and people to and fro. While the Internet can reduce the cost of data transmission and telephone calls, it can't ship finished products for you nor can it bring an executive in to close a major sale. Managing those needs is a tactical commercial real estate issue.
A good tactical commercial real estate strategy tracks both of these factors. At one level, time and long distance shipping costs make large locations that allow you to deliver products in bulk crucial. Given the higher cost of operating in a foreign market, it is wise to have few larger locations to give you more economies of scale and to make them easier for the U.S.-based home office to manage.
Minimize Losses vs. Maximize Gains
Tactical commercial real estate is all about trimming the fat in your operations. Globally, cutting back on locations is a key part of this. When choosing where to go, there are two equally appropriate valid strategies:
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Minimize losses by putting major locations in large and established markets with strong business communities, legal protections and other American businesses.
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Maximize upside by putting major locations in an up-and-coming market as a pioneer. You may be able to get generous government incentives to come as well as potentially getting a stronger competitive position in that market. On the other hand, you're taking all of the risks of pioneering.
The former has higher costs but will minimize the risk of doing business overseas. While the latter strategy will have lower costs, it has much higher risks. Either is a valid choice. What usually isn't wise is choosing a second-tier location just to save a few dollars.
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