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Global Expansion

5 Things To Consider For International Expansion

5 Things To Consider For International Expansion
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Do you think it is time for your business to go global? Selling overseas expands your company’s reach. Foreign markets, especially potentially ‘hot’ markets in South East Asia, China, and South America, are tempting opportunities. So it is not surprising that many entrepreneurs identify international expansion as a critical component of their overall growth strategy. However, there are five key factors you need to consider and have in place before you embark on an international expansion program.

Be the star of your own market

The right time to expand is when your market growth and your market share is high. In plain words, when you are a star on your BCG matrix. When you expand your business to a new location, whether locally or internationally, the two things you carry with you are the impression you have built up in your core market and the experience you have gained while doing so. So it is essential that you build a solid foundation for your business at home,and make sure that your business is stable on a day-to-day basis and strongly on a growth path before pursuing overseas markets.

Parallel to this, your base will give you the monetary strength and confidence to enter and tackle the new market. While specific rules and regulations of any sector do vary with political boundaries, they always have common aspects. If you have first-hand understanding and experience of how your business operates in your country, you will be trained to look for it in other countries.

Time it right

The secret to massive adoption is right timing. Even if your product is highly innovative and technologically advanced, it will be adopted only if there is a need for the innovation in that market as well as the necessary infrastructure in place to support it. In other words, the market should be ready for the product. At the same time, you should make sure you aren’t entering a saturated market with lesser demand and too many established competitors. Amazon’s business expansion in India is a good example of this. Despite its global standing and the receptivity of the Indian market, which was leveraged by Flipkart, Amazon stayed its entry into the Indian market up to 2013 until the Indian e-commerce market stepped to its growth phase. While it may have lost the first-mover opportunity, riding on the reputation that the company developed globally over almost two decades, Amazon made up for it by entering the Indian market at the time when it was poised for maximum growth.

Identifying and analyzing competition in the potential market can provide tremendous insights into how to expand into that market. You will have valuable information about the kind and types of products and services already available in that market and the types of innovations required to compete successfully there. It will also give you a grasp of the local culture and its sales implications as well as on the availability and ability of the local talent.The vast difference in the business practices followed by countries such as Japan, the US, and India is a case in point.

These are factors that can have profound implications on your ability to do business profitably in an overseas market. So, while being a first mover does have its advantages, it is essential that you test the market and are sure about the receptiveness before you enter an overseas market.

Understand compliance

While the ethics of doing business do not vary from country to country, the laws pertaining to doing business do. The regulatory mechanisms are a reflection of the receptivity of a country to foreign investment is a particular segment. A thorough understanding of the tax laws, customs laws, import/export restrictions, corporate laws, and liability laws is, therefore, essential as they can be decisive factors in determining whether the cost of market penetration is worth the potential benefits and provide a clear picture of ease of doing business. These regulatory mechanisms also underline the technological maturity and openness of the market.

Read your business objectives right

International expansion is not a single-track movement from location A to location B. Companies enter foreign markets with different business objectives. For instance, a manufacturing company may enter a market for cost-effective production while an e-commerce company may do it for tax savings, and yet another one might do it simply to expand its customer reach. As the reasons vary, so would the modes of entry. You need to determine how your business model translates in the offshore market. Based on this, you need to figure out the degree of expansion you are targeting and your modes of entry.

You also need to work out how you will support the expansion in terms of human resources, technology, and finances. Your teams may need to be centralized, located abroad, or a combination of both, and based on this, you will have to plan which decisions have to be made centrally and which locally. Nuances around customer service, marketing, messaging, etc. also change drastically, especially with respect to language, culture, and time zone. An adaptable, scalable, automated business will be an additional benefit, as it can save on both costs and time.

Fund for the long run

International expansion is just like having another start-up. International expansion takes time and planning before it turns profitable. This waiting period could be much longer than anticipated. So, just the seed fund to make the initial investment isn’t enough; you should also have a long-term financial plan in place so that you are not putting too much pressure on your existing business to fund the expansion. You need to account for fluctuating exchange rates and different business taxes, and define a realistic budget for costs and time.

These are the factors that could be a launch pad for a successful international expansion. They are, by no means, an absolute list; however, missing out on any of these factors could hamper your efforts significantly. 
Edition: December 2016

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