5 Key Points to Consider When You Are Expanding Your Business Globally
Going global is never an easy undertaking. It can have a significant impact on your existing business activities, so you must determine if the positive outcomes outweigh the risks, then make a calculated move.
However, for small businesses, it is never easy to decide when to take the leap into the global market.
What should one consider before launching a business in a foreign country? This is one of the most common questions that growing businesses face. Here are five key points to consider for maximizing the success of your foreign venture.
1. Check your balance sheet.
You should understand that expanding geographically is a costly affair, as you will have to rent a new office, establish human resources, run marketing campaigns to spread brand awareness and more. It is important to know how much capital you need before taking the plunge and entering a foreign market.
Wondering about the cost of global expansion? Well, it depends on the nature of your business and target nation’s legal, regulatory and cultural environment. During the due diligence process, you should check your balance sheet and cash flow statements to determine if you are in the position to handle all the expenses involved in global initiative.
2. Know the new market.
The foreign market can be entirely different from the market in your home country. Even regionally, markets and consumer behaviors can differ drastically. In addition, there can be language and cultural barriers, tax compliance and fierce competition from local brands. You must know the new market before you launch your business there. What you should consider about the new market? Here are some pointers that can help:
- Will the products or services sell in the targeted country?
- Which local players will give you tough competition?
- How can you find the right partners/teams?
- How can I build a foolproof supply chain?
- How will foreign customers receive my ideas?
The better understanding you have of your target market, the less friction you will face long-term in building your brand and footprint.
3. Create a solid business plan.
You need to create a solid business plan to provide direction to your business in a foreign country. Embarking on your business journey in a foreign country without a business plan will be like driving with your eyes closed and expecting to reach your destination.
A perfectly written business plan includes a snapshot of your business, business overview, operation plan, market analysis, competitive analysis, financial plan and business projections.
A common mistake among businesses is adopting a home country business plan for a foreign market. You will have to make changes based on the demands of the local market. The more targeted your business plan is towards the needs of local consumers and businesses in a foreign market, the greater success you'll have on executing. That said, creating a unique strategy for each foreign market is costly and can create additional operation headaches.
4. Make an aggressive marketing plan.
You might have launched the world’s best product or service, but unfortunately, nobody is going to buy unless you explain why you are the best. Marketing is a must to spread the word about your products or services. Without having an aggressive marketing plan, you cannot succeed in your foreign venture.
Be it content marketing, social media marketing, inbound marketing or any other kind of marketing, you need to tailor your strategies according to the local market. Also, you should try to understand local culture or hire a local cultural expert as to avoid making any cultural blunder in your marketing campaign.
5. Have a plan to raise capital.
Needless to say, launching your business in a foreign country is a costly endeavor. Office expenditures, employees’ salaries and various other business expenses can dry out your capital quickly. You might need to raise money to run the growth engine. And, you guessed it, you'll need a plan for that too.
You need enough working capital to sustain between 6 and 12 months, depending on the business. It's always better to have a plan so you can raise money for your business if you face finance burnout. There have been many instances where foreign expansion impacts operations in the home country due to a lack of capital or weak cash flows.
Launching a business in a foreign country is a big step that might have repercussions you never envisioned. Due diligence is a must to avoid possible failures. Having the necessary planning, capital and resources in place will definitely help point your business in the right direction for expanding geographically.