Feb 16, 2014

shush, we're closed

Altough I'm still working on "how to select a new foreign destination for your international business", I recognize that a hot topic of this years is closing subsidiaries. The statistics on voluntary closures and liquidations are showing values almost equal or bigger than newly registered companies.

There's no doubt that many mistakes can be made during the decision-making process of opening new offices abroad. Insufficient or erroneous information can mislead the top management to believe there is business potential where there isn't actually any.

Or the shareholders tend to lose patience to wait for the subsidiary to reach breakeven point and become able to self support its operations.

The decision to abandon a foreign destination and shut down operations is about cutting costs, avoiding future losses and redirecting resources to more attractive markets.

The question for me is how to handle this type of event from the marketing point of view. The headquarter can see this as a communication pitfall and tend to keep quiet about what looks like a failure in other markets. 

Does this affect the company's image in the other markets of presence?

I believe not. I think such business movements are healthy and come from economic rationales. To me, it shows that a global organization, although complex, is able to receive and process signals and react to them. As long as the company's communication team presents an explanation and puts things into perspective, speaking about a closing subsidiary will not harm the brand's image in its home market.

I've read some press releases on this topic. I wasn't able to find many, although there's a huge number of liquidations happening.

I find that the best ones explain their decision with numbers about the subsidiary's financials and with macroeconomic data about the "abandoned" market and show how discontinuing operations improves the overall health of the group. In some of the cases, further globalization plans were presented, showing the organic evolution of a company who's mitingating risks and seizing new opportunities.
The best ones definitely included transition instructions for their local clients. 

Keeping quiet about such evolution is detrimental and counterproductive, because:
  • you leave room for speculation about your company's strength;
  • you feed your competititors' speech against your company's evolution;
  • you might return to such "abandoned" market when the situation redresses. Your potential clients there will remember that you disappeared without a word in the past. You will have a hard time convincing them of your reliability and stability.

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