Is the success of your startup in the domestic market motivating you to explore the foreign markets too?
If you are thinking of expanding your business internationally, congratulations are in order.
Going global offers a ton of benefits to the business. Not only does it promise increased profitability, but it also opens the door to endless opportunities for foreign investment. It provides your business with the ability to help more people, and thus, build a larger and more loyal customer base.
Moreover, it also grants you greater access to talent. You meet new people, build new connections, and explore new markets.
But all these benefits don’t come so easy.
There are only a few businesses that succeed at going global.
Unfamiliar cultures, legal framework, differences in communication styles, workplace diversity, and so on – there are several factors that can prevent you from achieving the most out of your cross-border operations.
To top it all off, there’s the physical distance that prevents you from keeping a strict check on everything.
According to a study published in Harvard Business Reviews, a vast majority of countries selling abroad are unable to achieve even a 1% return on assets for up to five years!
So, you need to measure the depth of the water before diving into this venture head-first.
Here are the top five questions you need to ask yourself when expanding your business internationally:
1. How Strong Is the Local Competition?
This should be a no-brainer.
If your startup was an instant hit in your region, it does not necessarily mean that it will be well received in other markets as well.
Your first and foremost step should be to carefully study the market conditions of the country in which you wish to expand. Know the dominant players in the market, specifically focusing on those companies which can be your close competitors.
Will you be introducing a new product or service in the region? Or do similar alternatives already exist? If not, what’s the closest good or service that the locals use to satisfy a particular need?
This will help you determine whether there’s a demand for your goods or services in the foreign market or not. If there’s a demand-supply gap that you can quickly fill, that’s great news for you! Think about what your plan of action should be.
However, if the demand is being satisfied by your would-be competitors, it might not be the best option to enter a leveled field that you cannot leverage in your own favor.
2. Can You Keep Pace with the Cultural and Religious Differences?
Respecting the customers’ values is amongst the leading factors that determine the success of a business.
You’d be naïve to think that what works in the US and the UK would also work in Australia, China, and so on. In order to connect with the customers on a personal level, you need to understand their culture and traditions as well as their religious backgrounds.
The religious beliefs, culture, and traditions of the target population also influence the way you can carry out various business activities.
For example, in Western countries, effective marketing campaigns usually entail focusing on how the product can improve the lives of the users, future generations, and the world at large. However, in Eastern countries like India and China, people typically associate credibility with past achievements. This is why most of the ads targeted at South Asian communities contain references to their rich cultural heritage.
Moreover, cultural and religious values will also impact the environment of your workplace, especially if you plan to hire local employees.
3. Are You a Dominant Player in the Domestic Market?
Many entrepreneurs think that global expansion should be one of the main goals of every organization. However, I don’t support this idea.
A friend of mine runs a software development company in the UK. They have an office in Singapore for research purposes, but do not serve clients in the region. Now, he has received multiple requests from the workers to start the business in Singapore owing to the massive demand in the island-country. Yet still, he turns them down every single time.
The reason? He believes there are still a lot of opportunities to take advantage of in the UK. And so, whole-heartedly focusing on growing in Europe will increase profitability by a much larger margin than reaching out to customers in Southeast Asia.
Therefore, before expanding your business internationally, ask yourself this vital question:
Would you rather manage a large and successful business in one market, or do you prefer running small-scale companies in different countries instead?
4. Is There a Difference in the Time Zones? Will It Cause Any Hindrance in Business Management?
Depending on the country you are targeting, and where you are currently located, there might be a difference in time zones.
This can prove to be a nightmare for many international businesses. Are you prepared to deal with the difference in time zones and the challenges that this presents?
From securing deals over the telephone, conducting online meetings, and communicating with clients, to marketing the products and offering timely customer support, different time zones can become your nemesis when going global.
Make sure to take the necessary measures to prevent time difference from being a deal-breaker.
5. Do You Have the Budget to Cover all the Extra Expenses?
Regardless of the niche that you are targeting, and the product that you are selling, there is a plethora of costs that arise when setting up a business in another country.
Be it tax returns, export duties, import tariffs, transportation costs, or the documentation required for it all – you will have to pay a significant amount of money to fulfill all the legal responsibilities before you can even start operating in the new region.
Carefully analyze whether you are willing to risk your hard-earned money and cover this expenditure from your current profits, or do you plan to take a loan instead. If going with the latter option, will you be able to cover the costs from future sales or not?
These are the top questions you need to ask yourself when expanding your business internationally. Reach out to well-established businesses in the target country, seek advice from industry experts, and above all, do thorough and extensive research before deciding to become an international firm.