Global Expansion: Unlocking Growth in International Markets
Are you ready to break through the boundaries of your local market and explore the limitless possibilities of global expansion? In a world increasingly interconnected, the promise of international growth is alluring. From unlocking new customer bases to leveraging cost advantages, expanding internationally is an uncharted journey packed with potential. But how do you navigate the complex terrains of foreign markets, laws, and cultural nuances? How do you choose the right strategy for your brand? Buckle up as we delve into the exciting world of global expansion, breaking down the what, why, and how of taking your business to new horizons. Whether you're a seasoned global veteran or just starting, this guide provides the compass you need to unlock growth in international markets.
What is Global Strategy?
A global strategy refers to a business moving its markets to other countries across the globe. Companies that have already expanded across their country may think that they have an advantage and know the ins and outs of expanding internationally. However, there are significant differences between doing business in other countries versus doing business in different regions, states, or provinces. Although it can be challenging at first, there are many reasons why companies wish to expand to international markets. Some of those reasons include:
- Gaining more customers, resulting in higher profits
- Being able to sell a wider variety of products and services, since overseas customers often purchase different items than domestic customers
- Accessing a potentially lower-cost labor pool
- Diversifying to find more financial security, especially in the post-pandemic landscape
- Increasing economies of scale by being able to produce more goods or offer more services
- Business growth sustainability by dramatically increasing the pool of potential customers
Along with these reasons, there are many more factors that drive companies to try to become global brands. However, a business must do research before expanding and becoming a multinational company.
Market Research and Analysis
One of the first things that a business should do before deciding to expand anywhere is to conduct thorough market research and analysis. The global market can be tricky, volatile and difficult to predict. Fortunately, there are some reliable ways that companies can assess potential markets and decide whether or not that market is right for them.
Discovering Viable Markets
It can be quite challenging for a company to find viable markets in their home country, but attempting to find a market in different countries is a whole other ballgame. Executives can find viable international markets by performing market research. Some of the ways to conduct this research include distributing surveys to current and potential customers, asking customers about their experience at the point of sale, and looking at what products sell the most in each of a company’s current locations.
Analyzing Data From Potential Markets
Once managers from a company complete research and compile data, they will want to analyze that data to help them come to a decision regarding their international strategy. Some things that are helpful to analyze include:
- Current industry trends in your desired location
- The well-being of similar businesses in the local market
- What items sell best in a particular location
⠀Analyzing this data helps business owners determine the locations in which they are most likely to thrive and get a good return on their investments.
Making the Decision
After analyzing data, the managers and stakeholders of a company can then decide whether or not it is worth it to open a new international location. One thing to think about when examining the data is the market potential of the company. Market potential refers to the projected amount of sales that a business is likely to have over a certain period of time. Higher market potentials are generally tied to higher profits.
Market Entry Strategies
Once business owners decide to enter the global market, they need to determine their best market entry strategies. There are many variations of market entries to choose from, and the best one to choose depends on the individual company.
A franchising strategy is useful when a company already has overseas branches with the same name. If someone works as part of a franchise, they can look into whether or not their chain does business in the country that they wish to enter. Franchising has many benefits, including not having to spend as much time marketing the business since they have an existing reputation. However, there may be less flexibility for someone opening one of these locations.
Some companies wish to carry their brand around the world and have all locations look very similar to one another. For example, when people go to a McDonald’s restaurant, they can expect similar service and food regardless of the McDonald’s location. However, other companies wish to tailor their brand more toward their audience and adjust their products and services accordingly. This is known as a multi-domestic strategy and carries benefits such as:
- Making customers feel seen and heard
- Being able to use locally made products; for instance, a restaurant using the multi-domestic model can use locally grown produce in all of their locations
- Providing locals with more incentive to connect with the brand
All with all market entry strategies, there are pros and cons to this one, and performing market research ahead of time helps determine whether or not this strategy is right for a particular company.
In contrast to the multi-domestic strategy, the global strategy focuses on providing the same products and services to all markets. One advantage of this strategy is that it enhances brand awareness among customers. Customers looking for a familiar place to shop while out of their home country, for example, are likely to turn to a company using a global strategy in order to find the goods that they need. Another potential advantage of this method is that the company’s supply chain is less likely to be interrupted since the company produces a large number of the same products for shipment around the world. While the global strategy might appeal to business owners who have less of a need to keep a uniform model, those who choose this method for their company should keep in mind that they may have less brand recognition when entering the global market.
Transnational companies are businesses that are generally well-established in their home countries, but at the same time, have managers who pay close attention to how well their operations in different markets are performing. Some characteristics of owners of companies that employ the transnational model include:
- The desire to have a competitive advantage over businesses that choose not to expand or that have managers who only haphazardly pay attention to their overseas locations
- The expectation that headquarters and other operations could be moved to another country at any time, as needed
- The assumption that locations around the globe will use the latest technology to communicate with each other, all while remaining aware of things such as time zones and cultural norms around working hours
The transnational strategy often goes hand in hand with the global strategy, although any company can take notes on what transnational companies are doing. Keep in mind that these strategies are not exclusive to one another, and those who run a company may choose to employ one or more of these methods when developing their global business strategy. Some factors that affect what strategy an owner chooses include the end goals that they have for the company as well as the resources that they have on hand. A franchise strategy, for example, generally requires fewer resources than a multi-domestic strategy with its need for more marketing.
Adaptation and Localization
Regardless of which strategy those at the top of a company choose, they will have to deal with the issues of adaptation and localization.
Adapting to the Local Market
In order to succeed in any market, a company needs to tailor its goods and services to the market. This can be especially challenging when operating in a different country for the first time. When operating in a home market, those in charge of a company already have a feel for what people want to purchase. But once outside of that market, managers have to mostly rely on the thoughts and opinions of those who already reside and shop in that market area. Adapting to other markets goes far beyond modifying which products and services to offer, however. International markets can change fundamental business operations. For example, if a company based in the United States were to create a United Kingdom subsidiary, this new business unit would be subject to different intellectual property laws, and its employees would navigate a different healthcare system. Even its social media presence would need a different approach to be effective.
Being Aware of Cultural Nuances and Expectations
Being aware of cultural expectations goes hand in hand with being able to adapt goods and services to a particular market. One example of a company adapting its products to adhere to cultural expectations includes McDonald’s offering more vegetarian options in countries such as India. International businesses need to pay even closer attention to their markets when developing products and messaging surrounding their brand.
Marketing and Branding in International Markets
Unless a company operates under the franchising strategy, chances are it will have to do some advertising in order to gain some market share internationally. Some ways to better advertise on the world stage include:
- Creating advertisements in the local language
- Discovering what celebrities or influencers are popular among the target audience, and trying to bring them in to help promote the product or service
- Requesting the assistance of other local businesses to attract potential customers
⠀A local business can help a new company by displaying brochures or business cards in their establishment. A grocery delivery service, for instance, might choose to advertise in a local grocery store, with permission.
Building Local Partnerships and Networks
Networking and establishing relationships with both complementary and competing businesses in the area goes well beyond the benefits of advertising. It is beneficial for business owners to be aware of what others in the industry are doing, both to keep up with current trends and to differentiate themselves from their competition. Business owners can do this via activities like:
- Joining professional groups in the area and attending industry conferences and gatherings
- Reaching out to local leaders who are well-known in the industry
- Seeing if other business owners wish to host events that would benefit both companies
⠀If a company comes to a location that is outside of its home country, customers residing in its new location may become more willing to patronize that company if they see that the owners are making an effort to be involved in the local community.
Managing International Operations
For all of the benefits of owning an international business, there are many considerations to make when it comes to management and operations. For example, you will likely need to work with customers in another time zone. One way to overcome this challenge is to find employees in the home country who are early risers or night owls who can address concerns outside of standard working hours. Another challenge might involve awareness of cultural norms. Most countries, for example, celebrate different holidays, and managers should be prepared to give employees in each country their expected days off. Lastly, communication can be difficult when working across the world. Investing in software that enables customers and employees to easily share information and ideas should be part of a company’s strategic planning when moving overseas. Good communication is key to making sure customers are satisfied, that employees have what they need to be successful, and that the quality of a product or service is consistent regardless of location.
Risk Management and Legal Compliance
Some of the risks that come with expanding a business globally include:
- Failing to recognize the different laws when it comes to operating in a specific location
- Not taking into account the ways that different currencies can fluctuate against the home currency
- Potentially facing backlash for political or other reasons out of the business owner’s hands
⠀Fortunately, there are resources for those wishing to enter the global market to assist them with making sure they are in compliance with the law and local regulations. Contacting a law firm with experience with global companies and international law can be a good first step to mitigating the risks involved in such a venture.
Companies that go global enjoy greater economic security and a larger consumer market. There are many emerging markets in fast-growing countries like India and China, but there is a lot of work and strategic management involved in expanding beyond the home country’s borders. However, business owners that make a point to partner with other local businesses, do their market research beforehand, and manage their risks can set themselves up on a path to success. Spider Impact is software that helps international businesses achieve their strategic goals. It breaks your big-picture strategy into measurable pieces, and then communicates that strategic performance to everyone in your organization. Contact us today for a free trial or demo on how strategy execution software can help you expand to a global market.
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