December 28, 2020

Companies Looking to Expand Globally: How to Expand to the International Market

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.

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.

global business

Benefits of International Expansion

Businesses can tap into new customers, and can even tap into new markets around the world. When companies exploit their growth opportunities at home, they turn to international markets to increase their business. For many companies, international expansion offers the opportunity to explore markets and gain access to millions of customers, thereby increasing turnover.

Read further to find the benefits globalization covers.

Revenue Potential

If you keep your business in your home market, your profit potential may be limited and the burden of market change is a potential for all companies operating in only one country.

Brand Recognition

One of the reasons why companies are expanding globally is to be able to offer reliable service to their international customers. Expansion abroad enables companies to gain brand recognition and establish international credibility. A good global reputation will attract new customers and increase sales and profits. 

New Markets

Another advantage of expanding abroad is that it offers the opportunity to sell your current products and services to a new customer base and introduce new products or services. With a much broader customer base, you can increase sales and generate more value for your business. Do not forget how important it is to research your market first and understand what consumers are asking for and how they prefer to be supplied. You 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.  You can improve your chances of business success if you know there is a market for your products and services. Do some extensive research to turn your business into a self-learning organization so that solutions to problems the research throws up can be solved quickly and proactively.

expand globally

Competitive Advantage

Expansion abroad will allow you to emerge from saturated markets and gain access to markets where your competitors are not active. Expansion abroad gives you the opportunity to market in areas where competitors are not active.

Diversification

If you focus your business internationally, you have the opportunity to diversify your market, which opens up more opportunities for growth and income stability. If your home market slows down, the benefits of the global market will help cushion your business in times of economic weakness.

Wider Talent Pools

The biggest advantage of a global focus is that you have access to a much larger pool of talent. Hiring international talent can bring many benefits, including increased productivity, better customer service, and unique competitive advantage. Moreover, global expansion also allows companies to hire local workers who have the skills to communicate and serve their customers in the same time zone without any complications. 

Savings

Serving a new country can help businesses reduce their operating costs and save money. Many companies find it easier to relocate their production operations to other markets due to lower labor costs.

Strategies for Entering Foreign Markets

Once you have conquered your region, the next logical step is to dive into international markets. When companies enter foreign markets, they have to compete with local companies in those countries. Global companies create a high level of competition between companies, and foreign companies must therefore produce high-quality products to outperform competitors. You also need to perform exceptionally well in terms of delivery and support to be better than your competitors.  To gain a larger market share, you will also need to sell your products at a higher price

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.

Let's face it, no matter how thorough your market research is, you can't guarantee that people will buy what you sell, and being the first to test the waters means that you will be taking multiple risks. If you know that your competitors are considering entering the same market as you, there is no reason to be the first to enter that market. It’s wise to see if they are successful at all in that undertaking and whether they will pave the way to a new market. If you follow your competitors and they succeed, you will know that it is much more likely that there is a market for your business and that local businesses will be willing to work with you.

Market Entry Strategies

Entering a large market requires significant resources, and depending on the market entry method, you may need to invest large amounts of capital or face potential local partners who are unsure whether your product will succeed.

Smaller-scale entry is more likely to attract attention and allow business owners to learn about a new market while limiting financial risks. Careful consideration of all factors surrounding your business is always necessary as this decision could significantly affect your results and long term goals. Read on for the different strategies you can employ when exploring opportunities to expand globally.

global business


Exporting

Export is the direct sale of goods and services outside your country. There are several entry methods you can use, such as direct sales, import / export or direct exports. This is probably one of the best - known - methods of entering foreign markets. It can be costly but also effective if you invest in a production facility in your chosen country and still produce your goods in your home country but send them abroad for sale. When you consider exporting physical products, you need to understand that the costs can increase significantly. Marketing expenditure accounts for the bulk of the costs associated with exports, and you usually need a good understanding of market conditions in the country you want to export..

Piggybacking

Piggyback means that two non-competing companies work together to sell their products and services in their respective markets. This is an attractive option for a lot of companies because it is a low-risk, low-capital method, it involves a high level of trust, and it allows the partner company to take control of marketing the product abroad. 

Joint venture

A joint venture means that two companies co-own a business. One of the owners will be a local company on the local and foreign market, the other on the foreign market. It would consist of a management team that has a share of control over the local operations of the respective companies. They would then equip the new business with management teams, take control of the shares, and hold shares in foreign companies.

Licensing & Franchising

Licensing requires very little investment and can provide a high return, but the licensee must pay a fee to obtain the right to use the property. The property in question is intangible and licensing allows the company in the chosen country to use the property as long as it complies with local laws and regulations. They also cover production and marketing costs in foreign markets and certain components used in production must be respected. 

Franchising, on the other hand, is comparable to licensing, except that intellectual property rights are sold to the franchisee. This type of company has several advantages you can benefit from such as gaining local knowledge of the foreign market so you can decide what you invest in and how to share the profits. The main problems are the lack of access to foreign markets and the high cost of foreign investment.

FDI & WOS

Foreign direct investment (FDI) is the transfer of assets located on a foreign market to a local company for the benefit of the local economy and its citizens, while a wholly-owned subsidiary requires a lot of capital to cover costs such as premises, technology, and staff. Instead of investing money in the company itself, they buy the foreign business directly and it is up to the owner to take control of it. A  foreign direct investment works in a similar way to a private equity company, but it is owned by the company rather than by a venture capital company. Instead of starting a new company, it invests directly in the acquisition of an existing one. 

Issues To Consider Before Going Global

If your business models for international expansion work, then your goals should be the same as in your home country. This could be due to the expansion of the customer base and the refreshing of the product life cycle, to name just a few. With a plan that has these goals in mind, you are preparing for successful international expansion. In this sense, here are the most important factors to consider if you want to have a global reach for your business.

Red Tape

Just because a business practice can be considered legal in one country does not necessarily mean that the same practice is legal in all countries. The laws of different countries have different laws governing business practices. It is therefore important to consult with local lawyers and tax advisors on these laws.

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 sounder-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.

Currency Issues

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.

businessman checking foreign currency

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.

Culture

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. Each country has its own culture, which is deeply rooted and makes each country unique, and you need to know the local culture to effectively promote your product in the business environment.  This means not just looking at spreadsheets. It involves getting to know the locals, 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.

Every measure is important to take into account including the preferences of your local market. Do be careful with your measures so that they do not infringe the rights of other companies in your country, and to be flexible in order to comply with state regulations. This is because some countries do not impose a ceiling on the amount of money that inhabitants of a region can win in a particular competition organized by companies. However, in some districts the level of income is limited and you need to know the rules and requirements before you start your advertising strategy. Another place to consider is that there are countries that have different state rules depending on the region. The budgets that flow into these countries may cost more than expected, owing to the different laws that have to be dealt with. Caution is also required when different actions and activities are carried out in different regions or new areas because the fact that a practice may be permitted in one area does not necessarily mean that it is acceptable in another, even if it takes place in the same country.

Successfully Advertising Your International Business Opportunity

While you may be wondering if there are still enough opportunities, global marketing has become so popular that the answer is a resounding one. Yes. Despite the challenges that arise, it is still a worthwhile endeavor for any global company to make its business more popular and profitable. To successfully promote your organization, consider these examples below of the most popular ways for entrepreneurs to showcase their international business opportunities to investors around the world. 

Email marketing

Many providers now sell email lists for a fee, but the exact amount varies depending on the usage restrictions. Make sure you use a list that actually works for you and your potential customers.

Online Advertising

Let's be honest: millions of people will see you if you advertise your international business opportunities in the right places. Although pop-up ads and banners often get a lot of negative press, the truth is that they work.

Press release

Once, the power of the seller was limited to territory and location, but the Internet has created the ability to extend even simple business far beyond the ocean and even beyond language barriers. If you have international business opportunities, you might want to write a press release that you can send to national websites. Do not send it to business magazines and newspapers, as they are more likely to be affected or missed if you are just starting out with your international business opportunities.

Companies Looking to Expand Globally Should Think Carefully

Global marketing has revolutionized the definition of success and, with the healthy hands of successful marketing, reaches almost every person in the world. The Internet has made it possible to achieve lifelong success, tangible and real, without restrictions, right motivation or energy.

Fortunately, the global pie is indeed big enough to be shared, but how do you get a slice of it? The first and most fundamental step is to invest a little time in researching global trends. No one is meant to be, and what might be hot in your country need not be "hot" globally.

Make sure there is a market for your product in your country, but make sure you serve a niche customer base. Think big and strive for the biggest market you can land on, or at least the biggest market in the country you are aiming for, if not the world.

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.


Our services

Leaders, Organizations, and Individuals come to Universal Creative Solutions with their WHY - their vision for the world, their company, their product, or their path in life.

We help them plan and achieve their WHY by coupling it with the HOW - a pathway to making that vision a reality. We clarify the concepts or objectives, break down the goals into the required assets, stakeholders, and key results, as well as provide or connect them to any needed resources and consulting services every step of the way.

Whether you need a structured plan or a dedicated partner to help you achieve your goals, Universal Creative Solutions is honored to work towards better solutions together.