Expanding a business internationally is a bold move that can take a company to new heights. However, it’s also a risky investment that can drain time and resources. Several factors must be considered, and business owners must develop a sound strategy to ensure their effort pays off.
Here are a few key points to consider when expanding internationally.
1. Find a Business Partner
One of the critical elements for any international expansion strategy is to find a global partner that knows the target country’s market well enough.
Breaking into local market dynamics can take time for an international business. Competing with more established brands directly on their home turf might not be the best option. Having a business partner to help navigate the ins and outs of the country’s market and help establish infrastructure will go a long way.
2. Consider the Length of Time the Expansion Will Take
One of the most significant factors to consider for international expansion is the time it will take. This will depend on the company, the products and services, and the target country. The research and development phase must last at least one to two years for an international expansion campaign.
The next step is registering the business and setting up a local entity, which can take about six months. This includes establishing branch offices and import and export procedures.
Legal processes can take another three to four months, depending on their complexity. These steps can include fees and certifications the company must obtain to do business in the target country.
3. Conduct Market Research
Market research is the backbone of all strategies to expand business globally. The three metrics businesses must pay attention to are total addressable market, serviceable obtainable market, and serviceable available market.
The total addressable market, or TAM, is the market demand for a service or product. It measures the maximum amount a business can make selling a specific market. In this case, a company would need to see what the revenue projections are for the target country.
Serviceable addressable market, or SAM, measures the portion of the target market a business can acquire while factoring in limitations. Geographic, political and business competition challenges must be considered.
Finally, the serviceable obtainable market, or SOM, measures how many customers would benefit from the business’s services. This metric also takes the business’s limitations into account. What makes SOM different is that it is more focused on customer relationships, including how a product or service appeals to users in the target country and what they think of it.
4. Research the Local Culture
Researching the target country’s culture is essential to any international expansion strategy. Learning about how local culture affects business markets is part of the basics of market research and segmentation.
The target country’s culture will dictate the demand for a business’s products and services. Being in tune with social and political norms will go a long way in obtaining acceptance from the local population.
A company looking to break into an international market should tailor products and services as much as possible to reflect the country’s culture. In addition, observing different nations’ business etiquette can make forging partnerships with local companies easier.
Honoring the culture will also make a business more attractive to local talent and bolster its presence in the area.
5. Hire Local and International Talent
Creating a team to handle the international wing of the business is the next step. These employees should focus on matters regarding the expansion and establish a presence in the country.
In many ways, setting up a branch in a foreign nation is like starting a new company. Finding operators that have experience in international business relations is a necessity.
Business partners familiar with the target market and the country’s business culture can help recruit local talent. Once the brand is established, recruiting directly will become a more viable option. The company becomes more attractive to potential hires with more presence in the market.
Meet the Challenge of International Expansion
There are many factors to consider when expanding internationally — from the local culture to the country’s laws and regulations. Creating sound strategies to grow business globally can be challenging, but the rewards for being successful are lucrative.
