Why Expanding into International Markets Is Not a Crazy Idea (Part 1)
Is the World Really Your Oyster?
Stock market volatility, plummeting oil prices, China’s economy in crisis. The international stage is a pretty scary place these days isn’t it? And businesses frequently perceive international markets as faraway, risky and full of unknowns.
It’s not just that international markets are foreign and scary, they can also be difficult to work in, which is probably one of the reasons that less than 10% Australian SMEs export or operate internationally.
Nonetheless, even though global markets are volatile and international business expansion is a challenge for most companies, I believe that there has never been a better time to take your business to the world.
In Part 1 of this three-part post I want to outline a few of the key reasons that companies should be looking abroad and considering how they can get a slice of the global pie, rather than just focussing on getting a larger slice of a domestic market. In Part 2, I’ll talk about the three key challenges that you’ll face, as soon as you get out of your comfort zone and into a new market. In Part 3, I’ll talk about the seven questions that I believe you must be able to answer before you get started on the internationalisation process.
If you prefer to watch rather than read, check out the keynote that I gave at GrowthCon in Sydney a few weeks ago (from 3 mins:23 secs).
The Moment is Now! Key Reasons to Internationalise
Why should you consider international expansion in 2016? For one thing, global trade is growing rapidly. There are a number of trends pushing this growth including:
- Digital disruption (the ability to sell stuff on line)
- Cross-border data flows (the ability to move information around the world via the cloud)
- Increased investment in logistics and global supply chains, and
- The liberalisation of international finance and trade (removing trade barriers).
All these factors are creating new global trade flows on an unprecedented scale. and pushing international trade to an all-time high. EY has forecast that by 2020:
- global trade in goods will be valued at $US35 trillion, up from $US14 trillion in 2010, and
- global trade in services will double, reaching about US$1 trillion.
Emerging markets are increasingly contributing to booming international trade. According to EY, global trade will become increasingly centred on emerging markets and by 2020 we can expect the Asia-Pacific region to experience the fastest growth in global trade and Europe’s exports to Africa and the Middle East to be around 50% larger than its exports to US. Given the shape of trade flows in the past, these predicted trends are quite a departure from form.
Demographics are playing a key role in the expansion of global trade.
The rising affluence and influence of middle-income countries is creating opportunities that we would not have imagined just five or ten years ago.
Higher tertiary education rates, relatively inexpensive travel and the rise of internet and smartphone penetration in emerging markets means that consumers are globally connected like never before. And because people are connected to global ideas and trends through technology, their tastes and spending patterns are changing. In 2016, the average 20 year-old in an emerging market wants the latest phone, car or designer handbag just as much as the 20 year-old New York, London or Sydney.
Technology is making it easier and cheaper than ever before to do business internationally.
There are many of examples of how technology has simplified the process of operating internationally – here are just a few:
- The ability to video conference cheaply or for free has massively reduced the cost of working with people in other countries – it is no longer essential to travel to see clients or team members. For example, some of my team operate from Dubai and Riyadh and many of my clients are located interstate – we use Zoom, Skype and Google Hangouts all the time.
- Platforms like UpWork let companies source suppliers (VAs, designers, IT geeks) from other countries for comparatively little. And it lets professionals in other countries provide services competitively to places where services are expensive.
- Businesses can pay people in other markets or receive payment via PayPal, or through other electronic platforms for larger amounts of money. It’s fast, inexpensive and happens with a few mouse clicks. No more spending hours at the bank, standing in queues and filling in forms.
- Platforms like EBay and Alibaba allow you to sell to customers located pretty much to anywhere in the world.
In short, technology enables you to scale your business in ways that just weren’t possible a few years ago.
There’s another reason that now is a great time to internationalise … your competition is doing it. Chinese manufacturers and all those designers, coders and VAs in the Phillipines, Malaysia and Pakistan are part of that savvy demographic I was just talking about and they have the technology that I’ve just mentioned. They’re already operating internationally and in the long term that’s going to be a problem for companies who are not taking that step.
Stay tuned for Part 2, where I will talk about the three big challenges to internationalisation…Meantime, if you have a question about international expansion, please connect with me on LinkedIn.
Dearin & Associates is an international business consulting firm that helps established companies to access opportunities and capital in fast-growing international markets.
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