If you’ve asked yourself when is the right time to expand your business globally, the good news is that it has never been easier. Global business expansion has retained its allure over the years.
Wells Fargo’s 2016 International Business Indicator found that “[d]espite concerns about exchange rates and global economic conditions, a majority of U.S. companies expect[ed] an increase in non – U.S. revenue […] as they continue[d] to pursue business opportunities in international markets.”
Furthermore, “87 percent of U.S. companies agree that international expansion is needed for long-term growth, with emerging markets providing the greatest opportunities (69 percent).”
Expand your business globally
Wether it’s Dublin or Dubai, expanding your business globally is one of the most challenging efforts an entrepreneur can experience. In the past year, we grew our company globally. Today we have offices in London, New York, Barcelona, Dubai and Santiago de Chile.
Entrepreneurs with global ambitions have probably seen a good degree of success at home, but it’s easy to lose control of one’s senses when it’s time to expand overseas. Too often, business owners simply stick a pin in the map to justify their first international move and reach their market du jour. This lack of strategy leads to disaster.
You wouldn’t launch a business domestically without careful research and planning on things like barriers to entry, market fit and size, distribution networks, local partnerships, language barriers and scalability potential. So why abandon these principles when you expand your business globally?
International expansion can be widely profitable for your business as long as you consider three key variables.
1. Identify a compelling market need
For instance, a U.K.-based company may have dreams of launching in the U.S., but this is rarely a realistic ambition. The two countries may share a common language, but this counts for nothing if you are operating in a saturated market vertical and want to compete with established players.
Consider Target’s failed expansion into Canada. In 2015, BI reported that they abandoned their $4.4 billion expansion after less than two years and pulled out of Canada after racking up more than $2 billion in losses.
What contributed to their high profile failure? Target’s problems ranged from real estate challenges to botched technology rollouts and poor training. Some analysts pointed out that many Canadians already cross the border into the U.S. to visit Target stores anyway. There simply wasn’t a compelling business case for Target to expand into Canada.
2. Learn local regulations and culture preferences
Some years earlier, Target rival, Wal-Mart attempted a similarly ill-judged move into the German market, which ended up costing the retailer an estimated $1 billion.
Ultimately, they didn’t fully grasp German labor laws and business hours restrictions, which meant Walmart couldn’t operate profitably in the country. In this case, a lack of local knowledge coupled with a misjudgment of the market opportunity proved extremely costly.
Research is vital when you’re ready to expand your business globally. Especially if you don’t have the resources to recover financially from a failed international market entry.
To properly plan expansion into unfamiliar territories, tap contacts that are familiar with the country, leverage their knowledge, and arm yourself with as much information about potential partners and prospects as possible.
3. Build a local network
If you plan to expand your business globally, you may need to make a number of acquisitions to ensure you have premises to operate from, partners, distributors and the like. But knowing who to trust is key.
Start by tapping into your network and find common connections. Credible businesses often have strong relationships with reputable business schools, top financial institutions and industry-leading companies. Otherwise, you’ll want to take a grassroots and more traditional approach by attending events, scouting out similar companies in your industry, and investing in sales and marketing.
Luckily, technology makes this step easier. Social networks mean that we can find out a lot about people and initiate a relationship before meeting them in person. It is even possible to do this with potential business deals and services (not just individuals) now.
For a newcomer with global ambitions it can be really hard to understand local markets and navigate entrenched territorial networks.
The two qualities entrepreneurs need when expanding internationally are a mind open to possibilities, and a healthy dose of realism. Understanding the barriers to entry in each market – whether cultural, regulatory, or simply a lack of a personal network – will save money otherwise spent on a more fragmented globalization approach.
A focused, researched strategy may help you discover a profitable market you didn’t previously consider.
This article has been edited.