Sri Lanka plans to attract US$ 3 to 4 billion in foreign direct investment (FDI) this year.
It was not so long ago that Sri Lanka talked about an ambitious exports target of US$ 50 billion by 2020. FDI and exports may strengthen country’s financial position.
Internationalising local companies may be a path to achieve this goal. Successful international companies attract investments and generate considerable export revenue to the home country. The Government should help the private sector internationalisation process to encourage its local companies to attract foreign investments and increase exports.
But do Sri Lankan companies have strategies that are bold enough to challenge the future? That will make them successful in international markets? Executing a well defined strategy may make these ambitious targets less targets and more results.
Biggest risk
The World Bank indicates Sri Lanka’s total (goods and services) exports in 2015 were US$16.9 billion, or 21% of its Gross Domestic Product (GDP). In the same year FDI was USD.0.7 billion, or 1% of its GDP. According to 2015 figures, reaching US$3 billion FDI and US$50 billion exports mean approaching FDI target of nearly 4% of GDP and export target of over 60% of GDP respectively.
Facebook co-founder Mark Zuckerberg once said, “The biggest risk is - not taking risk... In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”
Strategy is a word misused heavily in the business world but if used appropriately will provide the focus and drive for the companies to achieve what they want. Strategy will build the personality of the company to take risks to achieve its objectives.
In simple terms, business strategy is a combination of business activities that set limits but help companies to challenge their future to achieve what they want.
When building a strategy, Sri Lankan companies should start by asking themselves why they exist.
Knowing why will help them to understand the purpose of their businesses. Purpose may help them to set broader goals that can focus the business towards that purpose. Goals provide guidelines to set specific objectives. Working towards the objectives will generate key results that make the company successful.
Resources
The European Union’s envoy to Sri Lanka Ambassador Tung-Lač Margue stated early this year that only around 5% of Sri Lankan companies engage in exports.
That indicates most Sri Lankan businesses are domestic market focused may be due to the lack of resources for proactive internationalisation. That means the markets Sri Lankan companies have strengths to serve are limited. Targeting markets they can serve well may help companies to focus their effort and time to gain positive results.
However, identifying the market will not make companies successful. They should identify what they can do better than others or how they can differentiate themselves in that market.
Brand is a promise and what they communicate as a promise will ultimately be their brand. Then the firms should identify the products and services that can prove what they have promised.
Working towards the purpose by defining goals, objectives and expected results may require companies to take new actions and stop some existing actions.
Implementing a bold strategy that challenges the future can be difficult as that may require certain changes in roles, structures, incentives and culture within the company.
In this fast changing world even the best strategy may not work unless the company reviews it continuously to measure the progress and to make improvements.
Strategy
At the end, running a company with a well defined strategy makes its Chief Executive Officer (CEO) great. As the leading strategist Prof. Michael Porter once stated: “the best CEOs I know are teachers, and at the core of what they teach is strategy”.
Building a bold business strategy to be successful in international markets can be easier said than done. It may need resources, experience, relationships and the attitude.
The internationalisation decision may depend on whether the company wants to be successful in international markets. However, a company decided to remain local may lose the opportunities in foreign markets and may also risk losing its local market due to competition.
Thus, it is worthwhile for the Government to build more dedicated platforms and channels to help local companies to be international. - [email protected]
The writer holds a PhD in International Business from the University of Otago (New Zealand). He is a postgraduate visiting lecturer in International Business at the University of Colombo.