Thinking of expanding your business overseas? International growth is an attractive opportunity as it could increase your existing customer base, make your business more competitive plus a range of other benefits.
However, going global doesn't happen overnight. Making the move comes with its challenges which could disrupt your existing business activities. Business leaders should weigh up the potential opportunities and threats before entering new markets, especially when global trading conditions aren’t so predictable.
Here, we'll take a look at the factors to consider and things to prepare for before taking your operations abroad.
Having a process of due diligence in place is a big part of any business expansion, but it's especially important for overseas growth.
You want to make sure that any third parties you plan on working with are honest and legitimate. While you can't know everything about a business, you can collect insights and information about a third party that'll let you know they operate in a reliable, lawful way.
Moving into overseas markets can mean uncertainty and unfamiliarity. But by carrying out due diligence, you can reduce the possibility of fraud, ensure you're on the same page ethically, and help minimise the risk of either party breaking the law.
To help get you started, you'll find more tips and information with our guide on how to conduct supplier due diligence safely and efficiently.
With economic, cultural, governmental and market conditions thrown into the mix, every market is going to be different. That's why it’s important to develop a strategy and business plan, detailing how you'll achieve local success while staying true to your overall business goals.
As part of your plan, you should:
Expanding overseas can provide all manner of opportunities. But without having a strategy in place, reaping its benefits can be a challenge.
In creating a watertight strategy, you can identify what's at the core of your business, where your values and strengths lie, and what your competitive advantage is right now.
Your chosen market needs to include the customers you want to reach. Conducting market research will let you know whether or not there's a market for your services and products in that area.
You'll need to establish decision-making criteria and prepare a structured shortlist of potential markets that will meet the specifications you've come up with.
This might involve looking at the Gross Domestic Product, size and growth of potential markets, consumer preferences, competition, availability of talent, political risk, cultural and language barriers, and a more thorough understanding of the country's compliance and tax environment.
Aside from the direct market opportunity, it may be the case that key staff from your current operation need to relocate. If so, then the new territory's quality of life should also be taken into consideration.
For more tips on market research, check out our guide on how to identify your business's target market.
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Competition can be an obstacle to international expansion. To position yourself in a new market in the best possible way, understanding who is already operating there and how their customers behave is essential.
Speaking with businesses from different sectors that have already seen successes in your chosen market can provide insights into local customer behaviour. Try asking them questions like:
Don't limit yourself to businesses either. When it comes to overseas growth, gaining as much information as possible is key. Have a look at what your competitors are doing:
If you're looking to learn from your rivals (and do it better than them), then our guide to competitor analysis has plenty of insightful, actionable tips.
Are you financially ready to expand and able to deal with any financial pressures that may come your way? A thorough analysis of the cost of your potential expansion, along with how you'll finance it, will show you if you are.
Identifying when your new market expansion will become profitable and how you'll manage stakeholders through uncertainty are two of the most important things you'll need to do before the expansion.
After this, you can look towards financing options. Depending on where you're growing from and how you intend to grow, there are all kinds of export loans, private equity and subsidies available to you.
If bank support isn't possible, then you can always look to alternative financing – whether it's peer-to-peer lending platforms or a fully robust private equity solution.
Your financing options may also be affected by how you plan to enter the market. For instance, creating a joint venture with a local partner may reduce some of the financing costs and risks, though it also means losing out on certain benefits such as a greater share of profits and complete control over decision making.
Every country has its own set of business laws and regulations, so ensuring legal processes are in place to minimise legal issues is important. Likewise, certain government agencies have strict requirements that mandate legal documentation be in place before operating within the country. And although this requires more money upfront, it certainly offsets risks and liabilities in the long term.
While carrying out the above, you should:
Of course, legal issues aren't the only obstacles when entering foreign markets. Cultural differences can end up being among the biggest challenges to your operation.
That means you may have to adjust your marketing and branding to appeal to consumers in the new region. Opening new offices might also require a new workplace culture.
Likewise, language barriers might make effective communication difficult. Attempting to learn the language will help in this regard as will demonstrate respect for local cultures.
By creating partnerships with other businesses in your new market, it's possible to gain a strong competitive advantage over others.
Such relationships allow you to negotiate partner or distribution programmes and develop a range of complementary products and services, while the creation of an internal alliance team can manage and foster inter-business relationships further. Such benefits can help benefit the scaling of your business while keeping financial risks to a minimum.
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