International business growth is an attractive long-term objective for many company owners. Breaking into the global market could be profitable for your firm, but it's not always suitable for every industry.
How do you know when it's time for global expansion? How long will it take before you see the results? What strategies can you employ?
First, let's look at some factors to determine whether your business is ready for international growth.
IS YOUR BUSINESS READY FOR INTERNATIONAL GROWTH?
To discover if you're ready to expand outside your domestic market, ask yourself the following questions:
- Has your company reached its full potential in your current location?
- Do your services or products appeal to other markets?
- Do you understand the potential complexities and benefits of global scaling?
Let's examine those questions in more detail to see if it's time for you to upscale your business.
Has Your Company Reached its Full Potential in Your Current Location?
Perhaps your firm is successful in your current location. Expansion looks promising if your business generates enough revenue to branch out into another area. However, you need to consider various factors before expanding.
First, determine whether your company profits align with your current objectives. If they do, next, examine your employee satisfaction rate and business operating conditions.
Review Your Employee Retention Rates
Observe your firm's employee turnover rate. If you're having difficulties holding on to staff members at home, you can expect further issues abroad.
Investing in a long-term training plan for your team is essential to scaling your corporation. Retaining talented employees is vital.
Only 53% of small businesses have implemented a wellness program for their employees. Determine what your staff needs to boost motivation, garner satisfaction, and enhance performance.
A 2022 Zippia survey shows that 83% of American employees suffer from business-related stress. Poor work-life balances and inadequate company opportunities are two primary reasons why workers choose to leave a corporation.
If you can't retain highly-skilled, hard-working employees, your firm may be too young to grow internationally.
Check That Your Business Has the Necessary Tools to Expand
Conduct an equipment audit in your firm. Do you have everything you need to ensure your operations run smoothly? For example, are your electronics and business software up to date?
Ensure you have the necessary supplies and tools to improve your company's expansion. After all, if you can't conduct a good business where you are, you'll also have difficulties outside your current market.
Exhausting your domestic markets is another sign it's time to upscale, especially if consumers are expressing interest in international offerings.
Do Your Services or Products Appeal to Other Markets?
According to the CFO, the two primary reasons for business expansion are market share capture and an increasing sales presence.
Assessing whether your services will succeed in an international market is crucial. Just because your products are triumphant in your current market doesn't necessarily mean they'll fare well across borders.
Conduct thorough market research to determine and assess the demand for your products or services. Consider the following:
- Examine the ideal customer for your product or service and what they value or need from you. Discover how to exceed their expectations.
- Determine your potential new customers in the international market. Learn what needs you can and can't meet for them.
- Observe the current factors of your international market, such as environmental, political, economic, and cultural aspects. Compare and contrast your current market with these aspects.
- Is your current market saturated with similar products/services? Survey the characteristics of your offerings and see if they have unique features like lower costs. Determine if that's enough to establish an expansion.
Some businesses find that global growth is their only option if they have production requirements in new markets. Examples include specialized skills or specific manufacturing resources.
Do You Understand the Potential Complexities and Benefits of Global Scaling?
Growing a company globally carries both rewards and risks. So first, understand the complexities and benefits of going global before you commit to expansion.
Ensure you have sufficient resources and a strategic plan to avoid a future financial disaster.
Hiring international talent and acquiring adequate resources are two of the most crucial concerns for expanding companies.
If you find international growth is suitable for your company, remember to be patient. It can take a considerable period for a return on your investment.
For example, it may take five years to achieve a 1% return on assets (ROA), according to the Harvard Business Review. 53% of companies that expand globally also only exceed a 3% ROAs after operating for more than ten years.
It's crucial to plan accordingly and explore every step of your upscaling in detail. Implement a backup plan to reduce insolvency chances that deal with issues like a worldwide health crisis or economic downturns.
Work with dedicated professionals that can steer you on the correct path. You need an expansion partner that deals with everything from hiring skilled employees to adhering to local labor laws.
Not only does international expansion help generate more consumers, but it also increases your brand's awareness and business reputation.
HOW TO DETERMINE THE RIGHT TIME FOR INTERNATIONAL GROWTH
How do you know when you're ready to upscale your firm internationally?
Entering a new business market takes much preparation, planning, and consideration of many external and internal factors. Moving too quickly can have costly consequences.
Before jumping the gun, you should know the precise answers to the following:
- Is your business plan sound?
- Are you familiar with the international market?
- Does it make financial sense to expand now?
Is Your Business Plan Sound?
Can your existing corporation structure quickly adapt to a new marketing plan or strategy? Many company founders draft initial business plans to revise or adjust for global expansion.
Consider aspects like the following:
- Spoken and written translation services
- International labeling requirements
- Legal compliance in new markets
- Local manufacturing and production laws and standards
- Estimated time for a sufficient return on investment
- Daily operations, including training, scheduling, and issue escalation methods
- Advertising methods
- Different employee contracts
Create benchmarks and timelines. Measure your success at frequent intervals so you can make the necessary changes if needed.
Are You Familiar With the International Market?
How familiar are you with your new desired market? There may still be much for you to learn, and conducting formal market research may help.
Existing roots like investors, suppliers, and employees in your new market may also be a crucial business advantage.
Familiarizing yourself with your international market allows you to have a firm grasp on your potential new consumers. It enables you to observe their current surroundings, help identify their needs, and address their concerns.
Exploring your new potential market also allows you to watch local competitors and observe any cultural taboos and traditions.
Analyze your chosen international market's growth rate but don't focus solely on its gross domestic product (GDP) as it's a single asset. Watch inflation rates because they play a significant role in determining the cost of setting up a company in the market.
Does it Make Financial Sense to Expand Now?
Undoubtedly, Covid-19 and the Ukrainian-Russian war have had a significant impact on some global industries.
Observe the current worldwide growth or decline in 2022 to determine what industries may impact your planned business expansion.
For example, IBISWorld has reported the following growth in these global industries in 2022-2023:
- Airport Operations: +47.2%
- Hotels & Resorts: +40.6%
- Tourism: +27.4%
- Semiconductor & Electronic Parts Manufacturing: +14%
- Deep Sea, Coastal & Inland Water Transportation: +12.1%
IBISWorld has also reported a fast decline in the following industries in 2022-2023:
- Iron Ore Mining: -14.7%
- Computer Hardware Manufacturing: -3.5%
- Newspaper Publishing: -3.3%
- Magazine Publishing: -2.8%
Consider profitable global industries to ensure your planned upscaling runs smoothly.
HOW LONG WILL IT TAKE TO INTERNATIONALLY SCALE YOUR STARTUP?
There's no way to pinpoint an exact timeframe for global expansion. It can take several months or years, depending on your industry.
Other factors include the location and available resources.Consider the following steps for growing a new business internationally:
- Conduct a new market study: A market survey in your chosen international area may take weeks or months to complete. It depends on how extensive you want the research and data to be.
- Secure investment or capital: If you don't have the money to expand internationally, you may look to seek it via innovation grants, loans, or investors. Work with an established firm like Innovation Park to find customized and viable investment options.
- Establish an entity: If your organization includes a physical location, consider time for acquiring permits, constructing or renovating, and securing an area.
- Open a new bank account in your chosen country: Opening a business bank account in another country may take several weeks or months. The application processes usually require in-depth documentation and physical meetings.
- Familiarize yourself with local tax laws and benefits: With an in-depth understanding of local tax law and an optimized tax strategy, it may be possible to reduce taxes.
- Registration: Thankfully, online portals make the registration process less time-consuming once you have all the necessary documentation.
- Hiring employees: Remember to first familiarize yourself with local labor laws, including employee rights, taxation, and minimum wage. Work closely with an Employee of Record (EOR) before recruiting and training additional staff.
- Business launch: You're ready to launch once you've trained your employees. Your startup process depends on how long it'll take. Don't forget to enquire about any relevant local information that may help determine the best starting time.
- Annual meetings: Does your company have shareholders? Some countries require businesses to hold an annual stockholders meeting.
ENTRY STRATEGIES FOR SCALING YOUR BUSINESS FOR GLOBAL GROWTH
Consider your international market strategy when upscaling your business. The two common approaches are the pioneer and late entry strategies.
A pioneer strategy means your business is the first of a kind to enter the international market.
This promising business strategy allows you the freedom to control crucial aspects like the prices and distribution of your products and services. It does, however, require more work.
It's essential to generate your international growth and expansion through product innovation. A past example of successful pioneering is the Hewlett-Packard Company. The business accumulated 60% of its revenue from new products established in the mid-90s.
Pioneers that succeed in most international industries tend to become powerful businesses. However, they may get complacent and fail to cater to the shifting demands of the ever-changing marketplace.
New entrants with similar products can take advantage of gaps in the services or offerings of these once-prominent pioneers.
Another drawback of the pioneer strategy is that it's a risky move and may not deliver a profitable outcome. It can also become very costly.
There are no other local competitors to observe when tapping into a new market. Therefore, conducting extensive market research beforehand is vital to boost your success chances.
Late Entry Strategy
Consider a late entry strategy if the market contains similar products and services. It allows you to keep in line with competitor prices and offer consumers more than new entry businesses.
Your company may have other advantages, including already well-established and superior customer service levels.
Micro-managing your consumer base also enables you to target specific customers. For example, earmarking high-value consumers who can pay higher prices for your product relative to the incurred costs.
Late-entry companies can also attack high-growth markets when there's a notable shift in that particular industry. Modifications include technological and manufacturing breakthroughs and changes in regulations.
The drawbacks are that you need to meet consumer expectations and prices for your products and services. Working around existing customer loyalties will help you succeed.
UPSCALE YOUR BUSINESS FOR INTERNATIONAL GROWTH WITH INNOVATIVE PARK
Now you understand more about how and when to upscale your business; it's time to consider taking the first step.
Remember to observe profitable industries, have a solid plan to execute, and set reasonable timeframes.
Are you looking to scale your business abroad and connect with investors to achieve global funding? Need help with the legal and tax requirements? We can help.
Are you ready to stretch beyond your current location? Why not book a paid consultation with Innovative Park today? See how far you can go beyond your limits.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.