Several factors propel a business to consider expanding their operations abroad, not least of which is the urge to add international customers and generate additional income. Going global also helps in proactively heading off competitors in some of those markets and in preventing such competitors from entering the local market where they can become difficult to take out once they get entrenched.
Companies established in countries with smaller populations tend to make the leap abroad much earlier in order to take advantage of the market size in countries with a larger population. Going international early also prevents the company from becoming so entrenched in the home market that it becomes difficult to develop the capabilities required to do so at a later stage. However, taking on the international markets before the business is ready may lead to problems that can make the entire process a complete nightmare.
Assessing Your Company’s Ability to Go International
At the heart of any successful international growth effort are clearly defined goals and objectives. The company must know exactly what they want to gain by going international as this helps in identifying success criteria and creating a detailed expansion plan.
Adequate staff must be on the ground to handle technical and marketing issues and the company must have enough management bandwidth to handle the initial demands of a start-up in a new location. A well-trained customer service resource must be available to support the arrangement and ensure that the whole process is seamless.
Expanding operations abroad is a huge task involving various processes, which a business may have little or no experience with, especially if the company is young. Going it alone is not a good option, but seeking the help of experienced experts will likely lead to a successful international expansion.
Another important point to consider early in the process is the product market fit. In deciding which country will be a suitable destination for international expansion, the company must carefully determine if customers in that country will want the product they are selling.
Not only must the product meet the needs of the customer, it must do so in ways that are much better than the competition. Therefore, in readiness for going abroad, companies must subject their products to processes that will enable them to achieve this objective.
Costs Associated with Going International
In choosing a suitable country for international expansion, there are important cost considerations that must be factored in. It is important to evaluate all the costs of expanding operations into the targeted countries so that a business can compare the cost to the benefits expected from each of the countries under consideration.
Cheap labor costs are often a major attraction for companies planning to expand abroad but successful global expansion goes beyond inexpensive labor. The cost of infrastructures, such as suitable office space, utilities, and communication facilities, are some of the other factors to consider. Every county has its own set of rules and regulations guiding business operations within its territory. It may be surprising to find out that common domestic costs such as establishing a legal entity, corporate income tax and the general cost of doing business are prohibitive expenses that can stifle the expected growth.
Will International Expansion Be an Advantage or a Disadvantage?
The dilemma companies face is in choosing between going international and expanding domestically. It is often not an easy decision to make but typically, the return on investment on going abroad is often less than expanding domestically. However, domestic growth invariably reaches a saturation point, so going international becomes more or less inevitable if sustainable growth is to be achieved. At what point should a company begin to consider going international?
How Soon Should You Make the Move?
Every company is different, but a company should be able to sacrifice short-term growth for maximizing long-term value once there are indications of local market saturation. As previously mentioned, the company must ensure that there is a market-fit for its product and that all necessary requirements such as staffing and the cost of carrying out the entire process are in place before making the move.
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