The Ultimate Guide to International Expansion
If you’re anything like my clients, your story probably goes something like this:
Where do you start?
Expanding internationally seems like a huge, complicated project and you’re not entirely sure about what your first step ought to be.
You know it’s something you need to do, but you’re not clear about what that looks like, or how to make it a reality.
If that sounds like you read on. I’ve created the Ultimate Guide to International Expansion for business owners who want to scale a business internationally and need a little help to get started. In the next little while I’ll show you the three key things that you need to successfully scale a business internationally and the core areas of business that you’ll need to consider as you do so.
Let’s get started.
Three key things that you need to successfully scale a business internationally
and the core areas of business that you’ll need to consider as you do so.
“What Key Areas Do I Need to Consider?”
Now let’s get down to tin tacks and talk about the core topics that you’ll need to address and the key things you’ll need to do as you start to grow internationally, or earlier. Some of these are more exciting than others, but they’re all central to your success.
Before you get started on your international expansion plan, you need to make sure that your company is ready for the ride. This means being clear about what has enabled your company to be successful in the domestic market and having some evidence that you will be able to repeat that success in another country.
You should ensure that all your key stakeholders (board, shareholders, senior managers and life partners) support the international expansion and work with them to map out a shared vision of what success looks like that you can all agree upon, as well as a high-level roadmap for getting there.
As you’re doing this, make time to think about whether your business is resourced to expand internationally. You’ll need some understanding of how much the venture will cost and how you will cover those costs. You’ll need to decide whether your team has the right skills to operate in international markets, especially if you are dealing with a country where the language and culture is very different to your own. And you’ll need to figure out whether you have enough staff to meet the extra work and demands on the team’s time that scaling up the business internationally will create.
To be successful in international markets, you need to be clued in to international cultures – how they are different to your own culture, what values matter to people from those cultures and what kinds of preferences your potential clients in those cultures are likely to have.
Understanding the culture of the country you want to expand to will inform not just what you sell, but how you sell it, and should influence everything from how you run initial meetings with potential clients and suppliers, right through to how you collect payment and supply after-sales service.
Culture is a huge and multi-faceted topic, but there are a few simple things that you can do to begin equipping yourself, even early on. You can read widely on your chosen country, join a relevant chamber of commerce or industry association, get some cross-cultural training, and plan a market visit. When your plans are more evolved you can also create culturally relevant marketing materials and campaigns, translate and localise the company website and hire team members or consultants with experience in the culture of the country you are targeting.
Companies that do best overseas develop a deep understanding of the target country, usually based on a combination of data and personal experience of how that market works. There are a range methodologies for market selection (some more complex than others), the important thing here is that you base your decision on something more than “gut feel” about the potential of a particular market. Don’t be one of the people who goes on holiday somewhere, falls in love with it and decides to set up shop there, only to discover a year and hundreds of thousands of dollars later that there’s no market for their product!
At a minimum, you should have carried out some research on more that one country before choosing a market to focus on. With data on the macroeconomic, microeconomic and industry trends in several countries in hand, you’ll begin to get a sense of where the best opportunities lie for your company. Understanding the circumstances and trends in different markets will also help you to get a handle on where your best return on investment is likely to be and to secure support from your stakeholders, based on something more than guesswork.
Once you’ve decided where you want to expand to, it’s time to choose a mode of market entry, in other words, what model you’ll use for going to market. Your options include everything from online selling, using agents and distributors, licensing and franchising, right through to setting up a subsidiary or wholly-owned company in the new country, or merging with or acquiring a local entity.
It’s important to get this decision right, as it will have implications for the scalability and profitability of your international business in the long-run. It’s also smart to consider different market entry options for the short, medium and long-term. What might work well as a way of demonstrating initial demand or getting early traction, may not be so attractive several years down the track.
As you ponder different modes of market entry, check out what your competition in that market is doing and what seems to be working for them – you may want to replicate some aspects of their model. Also think about whether there are other companies, including clients, suppliers or even potential competitors with whom you could partner to enter the market. A partnership or strategic alliance can reduce some of the risks related to market entry.
Who is your ideal client in your new target market?
You might be thinking that your ideal international client is more or less the same person as your ideal client as your ideal client in the home market, just located in another country, but it isn’t as straightforward as that.
If you run a successful business domestically, it’s highly likely that you know your ideal domestic clients inside out. You understand what makes them tick, what they struggle with and how to satisfy their needs and wants – that’s one of the reasons your company has thrived. But when it comes to doing business internationally, the deep understanding that you have acquired about your clients at home through years of client contact does not exist in the new market. You don’t know your new international clients yet, and they don’t know you.
What’s more, it’s not just a lack of familiarity and established relationships that can be problematic. Clients in different countries can and do behave differently. Different societies can be visibly different in terms of level of prosperity, language, diet, dress, ethnicity and religion. There will be invisible cultural gaps too. Culture can create stark differences in consumer spending habits, attitudes towards youth, respect for privacy and preference for tradition, to mention a few.
To give yourself the best chance at successfully attracting, engaging and impressing clients in your new target country, it’s important that you get to know as much as you can about the people you want to serve, before you get too far advanced with your plans.
Don’t assume that you know what people want. Building up a client profile on the basis of guesswork is a recipe for disaster, because it’s unlikely to reflect the client’s real desires, goals, challenges and cultural preferences. Although it’s time-consuming, it’s worth making the effort to do your homework. Research your future international clients through secondary sources (market reports, media, social media), talk to potential clients in the target country, speak to associates who understand the market, visit the country yourself and spend time talking to and observing people.
Understanding the people you hope to sell to will give you the best shot at doing so.
In the section above, I talked about how important it was to truly understand your ideal international client. One of the most important reasons for this is to make sure that your product or service is going to hit the mark and that you can get traction in your new international market.
Once you understand your client and his/her preferences, you’ll be able to work out whether your product as it stands will do the trick, or whether you’ll need to modify it in some way. It will also help you to understand whether you can sell your product or service at a price that makes sense.
It’s not enough to understand your international clients and the products that they’re looking for, you also need to understand where your offering fits in the competitive landscape.
One of the common mistakes that I see companies making as they go overseas is that they assume they have no competition. The truth is that even when your offering is very niche or has many unique features, there’s likely to be a competitor of some kind. If you don’t know and understand the competition, you can’t develop a strategy for dealing with them and in the worst case this could mean that the you get knocked out of the market by companies who create something better, sell something similar for less, or offer a more appealing experience for the customer.
The best way to avoid this is to spend some time mapping out the competitive landscape – getting to know who else is playing in your space, looking at what they are doing, understanding where your strengths are … as well as your weaknesses.
Armed with this information, you’ll be able to make better decisions about which areas of the market to focus on, whether to try and compete with existing players or to carve out in a space which no-one else is occupying.
What you don’t want to be is a “me-too” company, which sells the same thing as a hundred other companies (just with different packaging), so take the time to understand who you’re up against, so that you can create a strategy that will allow you to compete effectively.
To get traction in international markets, you’ll need a powerful pitch which resonates with your international clients and partners and a crystal clear marketing strategy that enables you to build influence and credibility on a global scale. Build in a turbo-charged lead generation funnel and you’ll have the leads you need to reach the clients you want.
One of the biggest mistakes that companies make in this space is that they try to “copy, paste” whatever marketing strategy has worked in the home market to the new market. Unfortunately, this approach is often unsuccessful, because each market is different. Language, social cues and tastes vary, social media channels, usage patterns and penetration rates differ and regulations affect how your company can market itself to varying degrees in different places. That’s not to say that if you already have a marketing strategy that works that you should abandon it and start over. By all means take what has been successful and apply it internationally, remembering that you’ll need to make allowances and adjustments to account for the cultural, structural and regulatory specificities of your target country.
When I start talking about regulatory frameworks, I often notice people’s eyes starting to glaze over. It’s hard to make this topic sexy, but it’s important that you really understand the regulatory environment of your international market, because there’s a lot that can go wrong in this space.
Because regulatory stuff isn’t fun, business owners and entrepreneurs are sometimes tempted to skimp on research and keeping up to date on regulatory development. This can be fatal, because regulation touches nearly all facets of your business operation in a new country and will determine to a large extent what you can and can’t do.
Cashflow is oxygen for your business, so it’s vital to understand what kind of financial resources your international venture will require and get them lined up before you need them.
In the excitement of planning an international expansion, it’s all too easy to underestimate the costs of the exercise, or to assume that you’re going to incur the same costs that you incur at home, in a different currency. Failure to resource properly and unexpected contingent costs are two of the big danger areas for companies starting out in the international space, and in order to protect yourself, it’s a good idea to have some financial modelling done by someone who understands international business and to map out and forecasts before you go conducting expensive market visits or outlaying large sums of capital to get set up somewhere.
It also pays to do your homework on the range of funding options available in case you need them as you go. These obviously vary depending on where you are based but include,bank debt, equity, government loans and grants, crowd-funding and angel investment. Start early on this so that if you do need extra sources of capital you’re prepared in advance, not scrambling to build relationships and source money at the eleventh hour.
And finally, team. Having the right people, doing the right things at the right time in your business, is key to your success – even more so once you start expanding overseas. Your people are your most precious asset, but creating and running a team which is spread across multiple countries can be quite a challenge, so it pays to put some thought into how you’ll do this.
Ideally you should have mapped out a process for creating your global team and plan for operating it before you make your first international hire. You’ll also need the right tools to make sure that the team can communicate and function effectively, no matter where they are.
So folks, there you have it. International expansion isn’t a huge, frightening project that only large companies can undertake. With 21st century technology, even small companies can access clients around the world, it just needs some careful thought and planning to turn out well. You too can go forth and change the world … get out there and make your company an international success.
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