Why do companies expand into international markets?
There are many reasons why companies expand into international markets.
For some, the advantages of expanding a business internationally are borne out of survival as it allows them to stay afloat in an increasingly globalised market. It can also diversify revenue streams so when one part of the world experiences economic downturns or slower growth, the company can rely on different regions.
Other companies expand into foreign markets because they see a gap in the market and want to be the first one there. Regardless, it’s a great opportunity for businesses to expand, increase revenue and grow market share.
Here are 10 steps to mitigating the risks of taking your business international.
Step 1. Plan
What is there to consider when expanding a business internationally? Understanding where you are in the market and planning ahead is imperative to success. Although there are many great reasons to expand internationally, there are also risks that you’ll need to acknowledge and mitigate. Planning ahead of time will allow you to give your business the best opportunity to maximise growth.
One of the most important things to do is to outline your company’s current and future needs in order to determine what sort of international expansion strategy you will need to employ.
- Current needs are: The current budget, type of product you sell, where the business is being run from and so on.
- Future needs might be: What sort of resources you need and how does your product fit within the global market?
Going through these steps while thinking about your business’ needs will help you to decide the best international expansion strategy for you.
Step 2: Update your Online Platform
Before you begin selling internationally, make sure your business has a strong online trading platform that reaches customers from all over the world. Update your ecommerce store so that people from different countries can access your services and make purchases without obstacles.
Great examples of platforms that allow global shipping, global payments and global currencies are Shopify, WooCommerce and Magento. Ensuring that you make the online customer experience a seamless process will make it much easier for you to manage in the long run.
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Going global will also expose your website to a heightened risk of cyber-intrusions, so make sure you have the appropriate security measures in place. If you haven’t already, make sure to secure your website with SSL certificates and ensure any data transferred between you and your customers is encrypted.
Having a firewall, keeping a backup and ensuring your ecommerce website updated are just some other ways you can make sure you have the right security measures in place. Security breaches can bring down businesses entirely and reports show that it can take up to 9 months for businesses to even notice a data breach at all!
Step 3: Understand your Next Target Market
You will need to know if your target market is global or local and what products and services are suitable for international markets. Google Analytics can be utilised to understand the attributes of the traffic coming to your site, and you’ll be able to drill down into which countries customers are coming from.
You should start to expand your company’s presence into one of the top countries first. We suggest analysing your online data to understand what products your current audience demonstrates interest in. From there, you will be positioned to identify your next target market and devise a plan to attract international customers to your brand.
Culture plays a huge part in customer preferences, so once you have your target market in mind, it’s crucial to research shopping behaviours and trends in your target countries.
Understanding the relative demand from your target market will help you decide on a price to make it affordable for them. How they shop will also give you an indication of which channels you should be looking into. For example, China has rapidly integrated their online shopping platforms so that payments are all done through applications like WeChat.
If you want to achieve the same brand perception in different countries, you will need to create brand positioning strategies that focus attention on the attributes that consumers will perceive in a similar way.
Some questions to consider when you’re reviewing your next target market are:
- What words would they use to describe you?
- What could be considered offensive?
- What is the economy like?
- What are people’s spending habits like on products similar to those that your company sells?
- What are the cultural preferences for business interactions and products?
- How expensive are these items or services compared with the average income of the target market?
Before expanding overseas, companies should thoroughly research the market they are considering entering to avoid surprises that could negatively impact their business.
Step 4: Research your Competition
Your business may already have local competitors in your home country. However, it’s important to determine your competition in other countries or regions as the market might be wildly different. Research how similar products and services are provided for people living in your target region.
It’s worth researching other companies who have succeeded and failed in entering the markets you are thinking of entering. That way, you can learn from what they did well and not so well, and shape your international strategy to incorporate good practices and to avoid known pitfalls.
Some easy ways to research your competition include doing an online search of what businesses have attended the area’s trade fairs, and also searching up your type of product in that area’s national language. Analyse these companies and ask the question:
What things have companies done in these markets that worked well and what didn’t go as planned?
Asking these questions will help you decide on the best international expansion plan for you.
Step 5: Understand Customs, Law & Regulations
Possessing some knowledge about local customs, laws and regulations in the global markets you want to expand into will go a long way.
Remember that international shipping laws and regulations are different from country to country, so understanding them is essential for doing successful business overseas. Make sure you’re aware of the items that New Zealand international shipping laws do not permit to be sent at all. Check what items are not permitted to be sent here.
In addition to this, you must understand all the documents needed to export internationally from New Zealand. Depending on the product you are sending, there may be international customs clearance required, meaning you will need to declare your item and pay the appropriate fees that will be dependent on location, size and weight.
Understanding international custom clearance and international shipping laws and regulations will help you save time and money as you accomplish your goals. Read more about how to declare here.
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Step 6: Work with the Right International Partners
Before entering new international markets, it is advisable for a company to hire a consultant who has previous experience in the particular market(s). Hiring a local can be beneficial as it helps companies better understand cultural preferences and establish relationships which may be helpful when expanding into new markets.
Make the time to find the right partners – there will be individuals and organisations with an excellent global presence who can help promote your products or services all over the world through their connections with retailers, distributors and other businesses that have a global reach.
The most crucial aspect to consider is who will be assisting you with delivery. Many shipping companies offer international freight forwarding services, but not all of them ship to specific countries.
An aspect to consider is how much time you might need to invest in dealing with multiple delivery agents in each country. It’s worth considering a shipping partner that will sort all of the communications for you.
Step 7: Prepare your Workforce for your Global Expansion Strategy
Evaluate what resources and capabilities will be needed to succeed with the new international venture. Make sure you have prepared your staff to help expand globally alongside you by making sure they are well-trained in international business practices.
This will help ensure everything runs smoothly when expanding into global markets. Think about what other resources your business may need – you may need a bilingual workforce to be able to communicate with international consumers.
Step 8: Advertise to your International Audience
There are many different ways companies can market themselves internationally. Businesses can use several different marketing strategies to attract customers in foreign markets, including localisation or translation, changes to the website content for international audiences, and digital advertising campaigns through channels like Facebook Ads.
If combined as part of an integrated marketing strategy, these international expansion methods will be more successful, so don’t just rely on just one approach!
The most important thing to remember is that international marketing requires a significant outlay of time, effort and money. Hence, it is imperative for businesses looking to expand overseas to be as prepared as possible before starting their campaign. Lots of research, careful planning and a detailed strategy that considers all the potential challenges is key.
Step 9: Leverage Financial Investments
The cost involved with expanding internationally is often considered a significant barrier to entry by smaller organizations, especially when compared with local growth which they may already have full control over. Therefore, evaluating how much your company is able to invest is important to your long term international expansion strategy.
There are different types of financial investments that can support businesses in expanding internationally.
The first is to look at your business’ existing resources, capabilities and knowledge of international markets when evaluating your potential for growth overseas.
There will be new investments required in areas such as:
- Upgrading your online platform
- Providing resources for you and your workforce
- 3PL providers holding stock overseas
The second is to examine whether or not there are any third party companies that could be beneficial collaborators as you expand into new territories. You may be able to identify efficiencies you can exploit to minimise upfront or ongoing outlays.
The third type of investment is to help companies better understand cultural preferences and establish relationships which may be helpful when expanding into new markets. This includes activities such as advertising and following any rules or regulations for that country, for example paying any customs or fees required.
Much like any investment, there are risks involved. However, as long as you invest wisely and do not stray from the boundaries of your budget, you will find there are many financial gains to expanding your business internationally.
Step 10: Keep Up-to Date, Motivated and Patient
Keeping up-to-date on global market changes and trends will allow you to make informed business decisions as you pursue international growth.
It takes time to globalise your small business successfully, so it’s crucial that you stay patient and motivated. You’ve got to be passionate about what you do, and have the right mindset to globalise effectively, without giving up halfway through the process.
Setbacks or other obstacles will arise, but if used as valuable learning opportunities, they will help contribute to maturing your business strategy.
Be patient when building up sales from different countries worldwide – especially if they are not top buyers in terms of profitability for your business. Often at the start of your expansion, exposure is the key performance indicator for your success, as opposed to total revenue.
Every market is unique, which means that what works in one region may not work in another. Planning ahead and knowing what to expect from different markets is vital, but so is flexibility as you learn more about each market’s preferences for products and services – both from an ecommerce and bricks and mortar perspective.
Now you know what steps you need to consider to take your business to the world. Your global business strategy should include research into the target market and competition, a budget for international and domestic marketing campaigns, localisation of products and services if necessary, as well as any other resources or support systems required.
Looking for extra advice? Have a chat with us to talk through your requirements.