Are you wondering which option should you use to expand internationally? Read this to find out.
It can be very daunting for businesses to expand beyond their geographical confine. You’ve done what you can at this stage, and you want to take on the world. The pressure increases as your business become more and more complex and risky. Whether you’re expanding to just one country, a different region, or several countries, navigating the way forward can be very intimidating.
It is natural for an entrepreneur with little to no knowledge of the international market to have many questions. They might not know where or how to start with their planning. You must consider several different aspects and factors if you want to do well when you expand internationally.
Along with a comprehensive business plan that will guide your path towards world domination, it is also crucial to do extensive research on each country or region you’re planning to expand to. Aspects like international competition, language barriers, cultural barriers, etc., all need to be adequately addressed. This will ensure that you don’t end up in a mess. Let’s discuss the answer to which option should you use to expand internationally in this article. Keep reading.
Why Should You Expand Business Internationally?
Entrepreneurs who want to take their business to the next level have found that expanding abroad has become the most practically expansion project. There was a time when the ‘global expansion goal’ was the end game, which was only possible for big companies. Now, with globalization, the international market is accessible for small businesses as well. With the right resources, anyone can run a successful international business.
Many people fail to reach their aim because they are unprepared for the difficulties that may arise. Internalization advantages are worth it in the short and long term, even if it takes some time and work. This article shows the benefits of global growth and explains why organizations want to expand internationally. Despite the challenges that this process may entail.
International Expansion For Increase In Revenue
One of the main benefits of globalization is connecting with every nook and corner of the world if one wishes to. By marketing your product in several different countries, you have access to a huge number of potential clients. This increases revenue.
Global expansion = business growth.
This is not limited to the average income the market you are already established in can offer your company.
International Expansion For Increase In Savings
Along with more profit prospects, expanding your business globally also allows for lower expenses. Doing business overseas is usually less expensive since you may cut manufacturing expenses in more economic countries. Differences in minimum wages across the world may also be an area you could cut costs. One of the reasons Apple outsources its manufacturing processes to China, for example, is to save money on labor.
The international expansion gives you a more extensive customer base, i.e., more growth opportunities.
The words “international expansion” conjure up images of growth and reinvention. In most cases, a product or a handy service that works well in one market will not necessarily work well in another. Some modifications must be made to meet the demands of your new consumer base. These significant changes will almost certainly raise the possibilities of your present product’s growth and development. This will further allow you to invest in and introduce other items or services.
An International Company Has Greater Reputation And Prestige
A solid reputation is essential for every organization since it validates its dependability and creates an appealing brand. Because of the increased prestige that comes with becoming global, international growth is the stamp of approval that demonstrates that your company and product are successful, credible, and of high quality. Because international expansion is a difficult process, if you succeed in establishing global collaboration, your brand becomes known worldwide.
Going International Gives You A Competitive Edge
Companies are compelled to use every edge they have to stay relevant in today’s competitive market, especially in this fast-paced age of innovation as we see in the 21st century. Globalization is the competitive advantage your firm needs to leapfrog your competition in a new marketing arena where competitors have yet to venture. Aside from providing your firm with a name and prestige, globalization also provides you with access to new technologies and industry ecosystems that you can leverage against competitors.
Expanding your business internationally can be a huge challenge. The best way to increase your chances of success is to be as prepared as possible. If you don’t plan and organize your expansion strategy well, your business could lose hundreds of thousands of dollars in an instant. Your brand could also suffer damage to the point that all future expansion plans become even riskier.
Some things to consider when you expand operations to other countries are:
- Who will be my customer?
- Can you afford to expand internationally?
- Hiring employees from different parts of the world
- The way you market and advertise in a different country matters
- Regulations on taxes, labor, and human resources
- Due diligence
- Fulfillment
- Presenting your product to customers
- The face of your money
- Controlling your product quality
- Economic and political volatility
- The geographical distance between the market and home country
- The recognition of your brand
- The price has to be right!
- How will you do your taxes?
- Expense optimization
- In foreign markets, use influencer relationships to your advantage.
- You need to do a LOT of Market-Research
- You have to understand language barriers and cultural diversity
- Employees have to be excited about expanding
Can You Afford To Expand Internationally?
Before deciding which option should you use to expand internationally, one of the foremost things you should think about is how much it will cost you. A whole range of expenses, including office space, travel costs, customs, shipping, production, and manufacturing, need to be accounted for if you plan to operate your business in another country.
These expenses may differ significantly in different countries and international areas, and other costs are specific to international expansion. For example, customs are unique to international trade. You also have to account for bribery. Though banned in the United States and other countries when bribing government officials, it is common practice in some nations if you want to get things done on time.
The last thing you want to run into is unforeseen cash flow problems. So, make a list of all your expenses. Make sure they balance correctly against the prospective income and profit you hope to make in this new venture.
If you think that you’re in an excellent financial position to take your product or service to the rest of the world, your risk could become a highly successful venture with proper planning.
However, if it appears that expenditures, particularly initial costs if you run a startup, will take years to recuperate, it might make more sense to focus your efforts on local or domestic expansion or product/service diversification rather than joining the overseas market.
If you want to be financially successful overseas, you will need a long-term financial plan. If you don’t have enough capital or seed money for the initial investment, try to figure out where you’ll get the money you need to expand abroad.
Hiring Employees From Different Parts Of The World
To determine which option should you use to expand internationally, you must examine who you will hire for various tasks, whether you want to expand offices worldwide or simply have remote workers in different locations. The talent pool in a worldwide market differs greatly in skills, availability, culture, experiences, and industry knowledge. As a result of this variety, you may find it challenging to recruit the best people for your company. You may also struggle to determine the ideal management style for cross-cultural employees and train them.
Spend ample time getting to know potential employees and ensure that they are the right people for the job when they apply for it. Look them up on job portal sites like LinkedIn and compare candidates based on skills, talents, interests, and experience.
In terms of human resources, you will find that it is probably the best idea to expand operations to a country with an abundance of ideal professionals for your workforce. An HR person from the same country with a trained hiring professional is your best bet to find a good fit for your company.
The Way You Market And Advertise In A Different Country Matters
This may sound self-evident, but you mustn’t overlook this. Even though you get past the mountain of paperwork and legalities, all of it will come to nothing if you can’t convince your new customers to buy your products. When going global, you’ll need to adapt your marketing strategies to match other nations’ expectations (and regulations). The apparent factor is language, but the underlying meaning of messages across cultures has a greater influence on success.
‘Think globally, act locally’ is a marketing rule that converts into a single brand that modifies the message to meet distinct features of the country’s culture you want to expand to. Hiring a local marketing agency may prove to be immensely helpful in presenting your product or service in the best possible light to your new ‘local’ customers.
For example, McDonald’s thoroughly understands that food is very distinct in different countries. They know and understand that the hamburgers they sell to Americans can’t be sold in Japan or India. They do plenty of market research and modify products and marketing strategies according to the palate of the country’s citizens they want to sell in.
Regulations On Taxes, Labour And Human Resources
When it comes to taxes and employment, various countries and areas have distinct rules and regulations. Each different region will have its own set of laws for international businesses, the industry, the product, and the market. The United States, for example, has stringent rules about managing employee safety through OSHA.
Other nations, meanwhile, may have more lenient regulations regarding governing employee safety. And it’s not always as simple as that. For example, in Mexico, there are several distinct authorities in charge of employee safety, each with its own set of rules that are occasionally inconsistent. You will have to navigate all these loops if you want to set up a business there.
It’s a bad idea to regulate this legal paperwork. You can’t afford it. Also, you can’t afford to overlook these regulatory requirements since they influence everything from recruiting personnel in each nation to appropriately completing your tax reports.
You must also evaluate how your home country considers overseas income since this may substantially influence your company’s profitability and gross revenue. When considering an expansion, reduce risk by researching these requirements as soon as possible. These aspects heavily influence your mode of entrance option, so it is strongly advised that you include these rules in your early decision-making process.
Due Diligence
Due diligence is one of the first things you should check off your list when determining which option should you use to expand internationally. There are many ways to account for all of the conceivable outcomes. To obtain a more detailed grasp of the processes in play, you or your staff could spend some time in the nations under consideration. Another option is to hire a local firm to help you expand your business worldwide to make a bigger profit.
You can get firsthand knowledge of the culture of your potential new market, and it may help you determine whether your product answers an issue for local consumers. This can also be highly beneficial in the long term in helping you figure out the price point that would be appropriate for the local economy. It can also help you make decisions about distribution, marketing your product or service, and several other critical elements of global business expansion.
It is possible that at first, you might think this is a costly venture in terms of both time and money. But many successful companies believe that the information is several times more valuable than mere online research.
Fulfillment
You must have a solid fulfillment strategy in place from the start if your business focuses on creating products for clients and you intend to expand worldwide. An excellent example of this is the car company Hyundai. Before bringing their first car to the United States, boatloads of the parts needed to modify and service their vehicles were imported. Customers had no trouble getting parts when they bought autos, resulting in greater satisfaction for customers. The brand then grew to how we know it today.
Your organization needs swift logistics that are both high-quality and cost-effective, from warehousing through packaging and shipping. Be sure to choose a company that can manage global fulfillment.
Presenting Your Product To Customers
International packaging is another thing you must consider when you expand your product to different markets.
Different countries have different packing regulations, so make sure you’re following them to the T. Or else you’ll get pulled up by authorities, and you may have to pay a hefty fine or even get blocked from the country’s markets. Recognize that packaging must comply with sustainable standards in some locations and that packaging is an essential aspect of your marketing strategy regardless of where you travel. Legal requirements for packaging disclaimers also influence your choices. Many countries may require you to put warnings or be crystal clear when a food product has certain levels of sugar or MSG, while other countries may be more lenient in this sort of regulation.
The Face Of Your Money
No matter the venture, if it is international, you’ll have to talk about money and currency. To begin with, exchange rates fluctuate almost daily. Very often, this fluctuation is very dramatic. Because you can’t peg your prices to the foreign currency rate for an extended period. The risk of expanding your firm worldwide increases greatly. When currencies are extremely volatile, you might end up selling your products or services at a loss or at a price that is much lower than what you might have
More importantly, many countries limit how much money can be taken out of the country. As a result of this, your revenues may be tied to the country in which they were generated. This could greatly limit your ability to use your profits to pay financial obligations outside of the country.
When selling your items on a new international market, keep in mind exchange rates, customs, and other fees. It’s also crucial to think about how you’ll take payments if you’re headquartered in one nation but selling in another, as this is fairly typical in e-commerce/online sales. International transaction options are available through some credit card processors, but you may wind up paying extra. Make certain you understand the impact of exchange rates and other costs on your bottom line.
Controlling Your Product Quality
This should be the foundation of your business – that your products are excellent and up to the mark of the highest standards. Quality must always be a consideration, and growing abroad does not imply a shift in quality priority. When expanding your market, however, imply that your quality standards should be changed in particular cultures, as well as other disparities in demands.
Shipping a product across long distances could very well have an impact on the delivery quality. This may be different from the initial quality when the product left its home nation, i.e., the country it was made in. This is especially true for products with short shelf lives. E.g. Fresh vegetables, dairy, meats, etc. If you go down this international path, set up a quality assurance framework that considers these concerns.
Economic And Political Volatility
If you’re considering expanding your business abroad, be sure you’ve adequately assessed the level of risk involved in the country in terms of political and economic dynamics. The globe is unpredictable both in terms of politics and the economy. Remember – the greater the risk, the greater the reward. But limit your risk by choosing countries with less uncertainty based on current and historical data, as well as projections from experts on the subject in your potential country.
As happened to Ford when the Cuban government evicted all US corporations and took over their assets, expropriation is an example of political risk. Changes in the economic dynamics that drive consumer purchasing power create economic risk. For example, a country like China with a burgeoning middle class gives a fantastic opportunity for many enterprises, yet the unpredictability of a command economy creates additional risk.
Geographical Distance Between The Market And Home Country
When determining which option should you use to expand internationally, geographic distance is a critical factor to consider. You could be tempted to jump in headlong in the beginning by expanding your business to the first country that expresses interest in buying your product or service from you. However, it would be best if you made certain that your new geographically distant venture is a place that is easily accessible. You should be able to supply products to satisfy demand successfully.
For example, many people like to employ from China due to low wage expenses and a large pool of potential personnel. However, China is a long way from European and North American markets, among other factors. That means you’ll have to wait a long time for your products to reach Western markets. If you’re in a faster or younger market, like fashion, you don’t want to wait weeks to receive your products from a far-off country only to realize that by the time it hits the shops, it is already redundant and people have moved on to other trends.
The Recognition Of Your Brand
You will most probably have little to no brand recognition in the country or culture where you plan on expanding your business. This means that you will have to invest a significant amount of investment in advertising your company and creating awareness of your brands. You need this to get your new potential customers to see your product and give you their business.
The Price Has To Be Right!
It’s critical to get your price correct the first time. To effectively determine your rates, you’ll need a thorough understanding of all your business, support, and product expenses. You’ll also need to think about your rivals’ pricing methods to provide value at a reasonable price. Finally, take into account the changed location. The cost of a product in Los Angeles may differ greatly from Singapore, and Missouri might be drastically different.
How Will You Do Your Taxes?
Make sure you’re aware of your company’s tax obligations while selling particular items or in other countries. Any tax estimates must be factored into the total profit model. It’s a good idea to speak with a tax specialist to figure out how your company’s development may affect your tax burden.
Expense Optimization
It’s an excellent idea to take some time when thinking about growing to make sure you’ve previously streamlined your expenditures. Costs associated with business expansion tend to really pile up. And having an excellent financial strategy always helps in the long run.
Credit card processing is one service that many firms overpay for. You may be overpaying if your processor charges “qualified” and “non-qualified” rates or if you’re on a flat fee model. Consider using a credit card processing comparison tool to get free real-time prices from different processors for your business.
Think about all these criteria while considering whether or not to take your product to another country. You may look at your pricing points, estimated turnover, and income to see how long it will take you to repay your investment and generate a profit if you have a clear grasp of all the costs.
In Foreign Markets, Use Influencer Relationships To Your Advantage.
Look for influencers in the markets you want to enter and build a relationship with them before you start expanding. When seeking these influencers, don’t think small. Look about you and look everywhere else. Make sure you grow your network and use it to produce or source ideas.
Consider whether they’ll be a good partner in your expansion or more of a mentor. If they will be helping you learn how to do business abroad as your connection expands. When it comes to making the ultimate leap, these connections will be crucial.
You Need To Do A LOT Of Market-Research
Hiring an experienced and respected market-research agency is one of the first stages when deciding which market to join. Even though the international market is famous, it may not be home to the clients you’re looking for. With the help of a market research agency, you can determine if your business will be well received in that location and whether there is even a market for your services and goods.
The organization will also assist you in determining how your brand will translate into a foreign culture. It will allow you to investigate current market demands and competitors. This sort of research is tough for most business owners to conduct and is frequently disregarded, so it’s prudent to conduct it.
You Have To Understand Language Barriers And Cultural Diversity
Cultural differences are one of the most difficult challenges to overcome when entering overseas markets. Not only will you have to change your marketing and branding to appeal to customers in a different location, but you’ll also have to consider office culture if you’re creating new offices. Work-life balance in other nations, for example, is substantially different from that in the United States. Professional and personal life frequently collide in the United States. But they are maintained completely separate in other parts of the world.
Language difficulties and cultural differences can make it difficult to communicate successfully while portraying yourself as an industry leader. The most effective strategy to overcome this obstacle is to learn the language. As a leader, this demonstrates your respect for various cultures as well as your desire to continue learning and improving. It also demonstrates that you value meaningful connections.
Employees Have To Be Excited About Expanding
The enthusiasm of your current employees is quite essential for the successful expansion of this business. If you want to expand your business abroad successfully, your current employees need to be on board.
You need them for nearly everything – training new employees, strategizing a new blueprint for the expansion, etc. Ask your employees about their communication, customer acquisition, marketing, and other ideas to get them on board. These individuals are the heart and soul of your firm, and they’re a big reason why it’s been able to expand, so keeping them informed will go a long way.
Conclusion
Global business expansion is not an easy task to handle, and not for the faint-hearted. But remember, the greater the risk, the greater the reward. With a well-thought-out strategy, extensive research, and efficient execution, you can be on your way to becoming a global market leader and producing exquisite results.
Have we missed anything or have any questions? Get in touch
If you enjoyed reading this, don’t forget to share.
You might also enjoy these popular startup growth-related articles What To Consider When Expanding A Business Internationally, International Market Selection For Startups and What Is Market Penetration Growth Strategy? on the same topic.
Scaling Partners – Who We Are
At Scaling Partners, we are experienced at scaling startups.
Scaling Partners helps you bridge the knowledge, process, and gaps in your business. Connected services. Hands-on solutions. Real experience.
We know business growth isn’t easy. But we make it easier. Faster. More sustainable. How do we do that? By partnering you with the processes and insight you’re missing and the people who’ve been through it all before. And because we do it as a service, it’s brilliantly affordable.
Learn more about how we support startups with their growth and International Expansion.
Image by Kampus Production from Pexels
