Companies looking to expand globally have a lot to think about. Going global opens up a wealth of new, often emerging, markets.
And whilst in the long term that can bring fortunes beyond many CEO’s wildest dreams, in the short term it requires lots of dedication and long hours to make doing business internationally a reality.
Is Your Company in a Position to Go Global?
Expanding your business to other markets, particularly ones you have no experience of is a big risk. In order to minimize that risk, it is important to make sure your domestic business is sound.
Are there any outstanding debts that the company owes? Be sure to pay these off first. Also, make sure that the company is turning over a tidy profit year-on-year from the business it is already generating.
If your business is struggling through then don’t use going global as a solution to your financial problems.
Be sure to wait a few years, even if you think the market might be starting to get crowded by that point. It is better to have a healthy company with some money in reserve in case not everything on your path to global success goes to plan.
Can Your Product Sell Abroad?
You also need to decide if what you are selling can be marketed in other markets. We are increasingly living in a global world where cultural differences and barriers that would have once stopped a product from breaking through on the global stage are slowly disappearing.
However, there are still a lot of products and services that are simply not suited to certain regions.
One way of solving this problem is to adapt your product or service for another market. But this can be costly and time-consuming. You have to ask yourself whether the return will be worth the investment.
If the answer is yes then it is time to start doing some extensive research and to turn your business into a self-learning organization so that solutions to problems the research throws up can be solved quickly and proactively.
For a lot of businessmen and women, this can be exciting as it is like going back to the very start of their business.
Here are some of the questions you are going to need to answer in your earliest plans for international business expansion:
- What products are already on the market and how will yours fit in?
- Why have other products that have tried to break into that market failed? If the market is saturated how will you make your product stand out?
- What lessons can you learn from those failures and what solutions do you have?
- Who is your target market in that country and can they afford your product? There are many countries in Asia where there is an emerging middle class who you might want to target but remember that a large percentage of developing countries who still live on low incomes compared to the West.
- Does your product rely on the internet? The availability of fast internet connections in the country you are going to sell in will determine whether the locals can actually access your product. In Asia and much of Africa, internet connectivity is growing but it still might not be at a level that can guarantee you high returns.
Get to Know the Locals
Perhaps the most important part of heading a business that is trying to expand into global markets is getting to understand the country you are trying to sell in.
This means not just looking at spreadsheets. It involves learning about the food, history, and politics of the country you hope to do business in. If you don’t understand the people of a country then how can you hope to sell to them?
One way you might achieve this is through moving there for a few months or organizing a work trip to see what the country has to offer.
If you are used to operating in Western markets then, of course, you are used to filling out forms and ensuring compliance with state regulations and the federal law.
But dealing with the red tape of another country can be challenging. The rules might not always make sense and they can change every week. Sometimes there might be regulations that are so under-enforced that it would be counter-productive to follow them.
You also need to think about the geopolitical situation. How will doing business with one country affect your business with the United States? Remember there are some countries - such as Iran - that have sanctions imposed against them. Ensure that your business abides by the law.
Doing business with Israel, for example, might impede your ability to do business with some Middle Eastern countries.
If you're dealing with another country then you are going to have to trade in their local currency. Whilst the dollar, the pound and the euro do increase and decrease in value from time-to-time they do stay at roughly the same value and big changes take place over ten year periods.
Inflation and random political events can affect a currency in the developing world to the extent that you could stand to lose serious money. Your business model must account for these scenarios and you must try to ensure most of your business assets are kept in a strong currency like the US. dollar.
Companies Looking to Expand Globally Should Think Carefully
With the world going global and travel and communication becoming easier than ever before, it is obvious why there are lots of companies looking to expand globally.
But whilst there are lots of benefits to doing business internationally, it can come with lots of pitfalls.
The companies that make the most profit and have long term in-roads in foreign markets are the ones that know their market well and do years of planning. They also have backup plans and plenty of cash-reserves to account for market shocks.
So what are you waiting for? If you’re planning on going global with your business be sure to check out our operations consulting pages today.