Go Global: Quick Guide to Make your Business ready for Global Expansion
Any business, in service industry or manufacturing, always aims at expanding into international markets at some moment. Companies set out to expand their business outside their home country, but proper planning, research and execution of the plan remains a critical task which not all companies are able to pull off. In this article, we share some important points that every company should keep in mind when they decide to expand their business overseas.
1. Localize your Idea, Vision, and Expectations.
Understanding the local culture is essential for any business that has plans to enter that market. Partnering with a local firm who can help you in understanding the culture and the local consumer shall be on top of your list. Even though data available on internet is in abundance, still a local firm, who understands your business and its vision, is one you would not want to miss. There are countries which are extremely conservative for their values system and beliefs. Thus, being respectful towards their culture and values shall play an important role in making your campaigns successful. For example: within the Muslim tradition, the dog is considered a “dirty” animal, so portraying it as “man’s best friend” in an advertisement is counterproductive. Packaging, seen as a reflection of the quality of the “real” product, is considerably more important in Asia than in the U.S., where there is a tendency to focus on the contents which “really count.” Many cultures observe significantly greater levels of formality than that typical in the U.S., and Japanese negotiator tend to observe long silent pauses as a speaker’s point is considered.
The understanding of local system, people and their values, shall give you a great opportunity to attain psychological support of their people. This is what brands like McDonald’s has been doing, they customize their entire menu basis their country of launch, respecting the value system of the country.
Other examples that clearly depicts how can difference in cultures and language leads to failure in building brands or delivering right message:
- Pepsi Cola lost its dominant market share to Coke in South East Asia when Pepsi changed the color of its vending machines and coolers from deep “Regal” blue to light “Ice” blue as light blue is associated with death and mourning in their region.
- When Coca-Cola entered the China market, they named their product something that when pronounced, sounded like, “Coca-Cola”. The only problem was that the characters used meant “Bite the Wax Tadpole”. When they learned of their blunder, they later changed.
2. Market Research: Identify and Investigate Target Markets
Market research is one of the most important exercises that a company must perform once they decide to take their business overseas. Some of the areas where a company should spend good amount of time and money for market research are in finding; best market for your product/service, size of the market, competitors, product specification, local laws & regulations etc.
Market research can affect further steps in building a valuable brand, thus following factors should be taken extra care of, to create the product/service for the target market:
A. Evaluating market for your Product or Service
Key indicators to look at when determining a need for your product are:
- Income levels
- Size and growth of the middle class
- Access to technology, and
- Local Laws and Regulations
B. Analyzing Competitors
- Where are they located and how are they organized?
- Who are the key people and what are their experiences and skills?
- Do they have any strategic partners?
- What are their main products?
- How much of the Market share they have captured?
C. Understand the Marketing Mix (5 P’s)
- Pricing Strategy
- Perception or brand awareness (this has to be created)
D. Legal/Regulatory Constraints and Considerations
3. Study the competition, both past and present:
Before entering into any new market, every business must put in lot of resources into research of the past, current and prospective competition. Study of past competition is necessary to understand the reasons for their failure and not to repeat the same. Comparison of the company’s methodology with the competitors that has tasted success as well as with those who have failed, is an absolute requirement to devise a invincible strategy for entering a new market. While conducting research on your competitors, the company should try to get answers to the following questions:
- Who are my top three competitors?
- Our USP in comparison to our competitors
- What is the range of products and services other companies offer?
- What is their target customer base?
- How long have they been in business?
- What is their customer standing in terms of quality and service?
- Do they have a competitive advantage; if so, what is it?
- What is their marketing strategy and promotional strategy?
- What are their pricing structures?
- Do they operate in the same geographic area?
- Have there been any changes in their targeted market segments?
- What is their size? Revenues?
- What is their percentage of market share?
- How do they rate on: customer service/quality of product/service/hours of operations/pricing, incentives/employees?
4. Determine how your business model translates:
The decision to adopt a business model for the foreign market is another very important decision a company has to make when they decide to expand. There are numerous ways for companies to enter foreign markets, including direct , exports through distributors, joint ventures, licensing and offshore manufacturing. For firms that produce, manufacture or resell goods, exporting by appointing distributors is usually the easiest and least risky method. If you are interested in exporting, don’t overlook indirect exporting, where an intermediary familiar with (and approved by the government to conduct) business in the target country handles the actual transfer of goods. There are various other ways or business models, that you can adopt to enter new market.
- Direct Exporting: Direct exporting is selling directly into the market you have chosen using in the first instance you own resources
- Licensing: Licensing is a relatively sophisticated arrangement where a firm transfers the rights to the use of a product or service to another firm
- Franchising: Franchising is a typical North American process for rapid market expansion but it is gaining traction in other parts of the world
- Partnering: Partnering is almost a necessity when entering foreign markets and in some parts of the world (e.g. Asia) it may be required
- Joint Ventures: Joint ventures are a particular form of partnership that involves the creation of a third independently managed company. It is the 1+1=3 process. Two companies agree to work together in a particular market, either geographic or product, and create a third company to undertake this
- Buying a Company: In some markets buying an existing local company may be the most appropriate entry strategy. This may be because the company has substantial market share, are a direct competitor to you or due to government regulations this is the only option for your firm to enter the market.
- Piggybacking: Piggybacking is a particularly unique way of entering the international arena. If you have a particularly interesting and unique product or service that you sell to large domestic firms that are currently involved in foreign markets you may want to approach them to see if your product or service can be included in their inventory for international markets
- Turnkey Projects: Turnkey projects are particular to companies that provide services such as environmental consulting, architecture, construction and engineering. It is where the facility is built from the ground up and turned over to the client ready to go – turn the key and the plant is operational
- Greenfield Investments: Greenfield investments require the greatest involvement in international business. A greenfield investment is where you buy the land, build the facility and operate the business on an ongoing basis in a foreign market
5. Develop a business plan:
The plans that work successfully in domestic market may not necessarily work in international markets as well. The ideation and approach of running business in local markets is exponentially different as compared to executing same ideas on international platform. Nevertheless, planning your entry is of utmost importance for your business. This may include making a whole new business plan for the target market or tweaking your existing business expansion plan that to be suitable for chosen international market. This decision depends on the industry or sector or products that your company belongs to. There can never be one plan fit all approach. Some of the information that you need to gather that will help you decide your business plan are:
- Potential markets/sources/customers.
- Import/export pricing strategies.
- Initial financing streams and anticipated revenues.
- Additional costs (e.g. marketing; shipping; inventory storage; storefront; travel).
- Legal, regulatory and licensure requirements.
- Potential partnership or investment opportunities, if you are interested.
- Sales model (Internet or location-based).