International Business Expansion
Expanding overseas is an exciting prospect for many companies, and a pressing, sometimes stressful, reality for others. International business expansion may bring opportunities for: new markets, new sources of income, high returns on reinvestment, product development reinvigorated. “Globalization” is a strategic maneuver that allows many companies to take a new step and expand their geographical coverage.
However, companies expanding internationally should keep in mind that growth is more of a marathon than a sprint.
What is an overseas expansion strategy?
International expansion strategies are formal, multi-level strategic plans companies follow to enter a foreign market, establish a growing presence there, and quickly become profitable.
Foreign expansion strategies can make growth more structured and sustainable. When well-developed, these plans mitigate expansion risk and enable efficient use of resources, schedules and capital for international expansion.
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What are the elements of an international expansion strategy? Overseas business plans include the following basic elements:
- An internal audit of the company, to ensure that internal variables such as product offerings, types of services and global brands are ready for the market. Internal audits are multi-faceted and tailored to the parent company. These can include SWOT analysis, gap analysis, and market segmentation, which allow companies to understand their current strengths, development areas, and differentiated value propositions.
- A competitive analysis, which assesses your business offerings and activities against industry competition in the new market.
- A market analysis, by studying the situation and the context of the new target market. The in-depth market analysis encompasses market size and its growth potential, consumer habits, consumer attitudes, distribution channel study, market investment analysis, economic situation, etc.
A marketing strategy, including brand positioning, marketing channels, product or service delivery, key performance indicators (KPIs), marketing programs and even pricing based on the environment economics of the new market.
- A localized infrastructure plan, outlining the needs, expectations and methods for establishing a compliant local and regional presence. Infrastructure plans include hiring international employees and executives, sourcing local suppliers, determining legal, regulatory, and tax status, and setting up a physical facility or base if necessary.
- A top-down budget, which starts with six to twelve months of dedicated launch resources, aligned with your overall business plan. Expand this budget to cover at least three years of ongoing expansion support, with budget-based KPIs monitored monthly.
- A timetable, with achievable but competitive deadlines, around which the whole expansion is built. Make sure the timeline aligns with existing business goals and initiatives. You must avoid that your company is too dispersed and that the resources devoted to international expansion take precedence over national resources.
Why do companies expand overseas?
It seems obvious that companies wishing to develop will end up going beyond their respective borders. In the current context of commercial globalization, international expansion is more the norm than the exception.
Companies often neglect to precisely define the foundations of their international expansion strategy. Development itself can be risky. Determining the “why” is key because it guides decision-making and helps you better measure your success. Here are some reasons businesses want to grow:
1. Find new talent or fill talent gaps
Companies no longer have to limit themselves to local talent when it comes to hiring. Communication technologies make it possible to collaborate across borders, often instantaneously and in real time. Document sharing software and project management suites allow international teams to work together and achieve their goals. IT security and network protection strengthen end-to-end connections, so employees can work safely, wherever they are.
All of these tools allow you to expand the pool of available hires beyond your field of action. There are also a few situations where a company finds itself in the need to specifically hire international employees:
- When launching physical products in a new market, which requires a local presence
- When launching services in a new market, which requires a local presence
- When restructuring the company based on the objectives of the overall corporate strategy
By leveraging today’s extensive global professional networks and the pool of more internationally prepared talent they offer to employees at all levels
2. Extend product life
Any product or service follows a life cycle. While the specifics vary by industry, a product typically goes through the inception and launch phase, market maturity, stabilization, and in most cases, decline and eventual elimination.
An overseas expansion strategy resets this life cycle. Companies can thus reinvent the strategic products or services that they believe will be successful in a new market, and even correct the errors of the past. In turn, that foreign country is relaunching products that may be close to maturity in other markets. This results in a whole new source of revenue for the parent company.
3. Diversify your market presence
Successfully expanding a business into international markets allows companies to mitigate long-term risk.
Although companies must take into account the costs and obstacles they will inevitably encounter, successful international expansion can reduce their dependence on the national market. A diversified market presence allows companies to better weather global market fluctuations, with increases in one country offsetting declines in another.
4. Unique circumstances offering a rare opportunity to grow
Corporate mergers and acquisitions, branch splits or the establishment of new sales offices are important steps for a company, and so is the transition to the international scene. Change management scenarios have an intrinsic dynamic, and international expansion strategies give structure to this dynamic.
By leveraging the momentum of change, corporate branches, spin-offs or newly acquired subsidiaries broaden the reach of the parent company. They simultaneously achieve several of the expansion objectives listed above, such as diversifying market share, extending product life cycles and acquiring international talent.
5. Because it’s the right time
Perhaps the most common reason for expansion is the mere existence of measurable demand. If you see international interest in your products and services, it might be time to take the plunge. Give it a try by starting a small business, which you can quickly scale to take your business to the next phase.
Sounds exciting, right? In effect ! But enthusiasm cannot replace proper planning of activities. You will need an overseas expansion plan that applies many of the same principles to business planning and strategy, but in a new market. Whether it’s market segmentation research, infrastructure development, budgeting, branding, or product or service distribution, your core business strategy should be defined at the core. in advance and in writing.
Tips to consider in an international expansion strategy
When circumstances align and a business is ready to push its limits, you can better ensure your success with the following strategies.
1. Don’t forget to check
An internal business audit is the basis for a smooth and successful expansion. It’s your metaphorical roadmap, dealing with every potential bend, pit stop, and speed bump before your business plunges overseas.
Your internal business audit should be detailed and comprehensive, including stakeholders from across your organization, from operations and sales to finance and IT. Each of these areas will need to evolve and align to help overseas branches thrive. The knowledge and infrastructure of each service must be reviewed, tested for feasibility, and then adjusted to operate in the new market. These steps require time and attention. Copying and pasting national processes onto international processes and expecting identical results almost never works.
Perform the following internal business audits to avoid “one size fits all” expansion issues:
- Market segmentation, identification and then classification of target customer pools in a new country or culture based on values, beliefs, lifestyle and income
- Gap analysis, to see if the products or services provided by your business are currently underserved in a market
- Aligning the value of products and services, navigating cultural nuances to ensure your overseas customers perceive your business in the right way
- A SWOT analysis, giving a quantified overview of the actual sales and revenue potential of expanding the target market
2. Strike while it’s hot
As the saying goes, your reputation precedes you. International expansion is easiest to achieve when your home market share and brand perceptions are stable and strong.
A strong national base is the cornerstone of new initiatives and new efforts. Foreign markets will always have access to your key impressions of the market, your public relations initiatives and how your customers generally perceive the way you conduct your business. Your business has a reputation wherever it goes. Make sure it’s positive.
Note that “hit while it’s hot” does not mean rush. A comprehensive international expansion strategy will require months of preemptive research and work to get started. It will take even longer to begin implementation in stages with defined dates, milestones and checkpoints.
3. The future does not always belong to those who get up early
“First movers” are companies whose products or services are the first of their kind in a new market. This type of expansion can be a never-before-seen good, truly unique and with no clear competition. Or, it can be disruptive, reinventing the way consumers view or interact with an established service.
The plans of earlycomers abroad are often aggressive, fueled by the burden that being first means establishing – and then dominating – international market shares and letting the laggards pick up the crumbs.
However, business innovation is not a formula – which is both good and bad. The best overseas expansion strategies are adaptive and thoughtful – requiring diligence, nuance, commitment, detailed resource planning, and buy-in from executives and cross-departmental stakeholders. Don’t sacrifice these things for speed.
4. Tailor your business model to your mode of entry
Business models include the operational, interpersonal, and revenue functioning of your organization, as well as how its value-added products or services are created. In short, business models show you what drives your organization.
But business models are not monolithic. Processes that go smoothly in your home country will not necessarily be transplanted to another. Additionally, there will be new organizational hierarchies to structure, new product or service resources to identify, and new employees to hire and rank, each bringing a unique culture and expectation to the mix.
All of this means that an international expansion strategy must include a suitable business model that does two things simultaneously:
- Aligns with the projected value of a foreign market (i.e. why you chose to expand there). These reasons may include cost-effective product production, expanded customer base, product lifecycle renewal, or even new market tax incentives, to name a few.
- Aligns with the current culture and practices of this new foreign market.
- A business model with these goals in mind is a business model that will work throughout international expansion.