In nearly every way, the world is becoming smaller — and its peoples more interdependent. For companies, the opportunity of globalization and overseas expansion is too great to pass up now that technology has made it possible to reach a worldwide audience, but that doesn’t mean this kind of expansion doesn’t come with some potential pitfalls. Here are six mistakes to avoid as you consider taking your own company to other shores.
1. Not Doing Market Research
Apple has been trying to edge its way into the Chinese market for years, but it seems to have underestimated how much a matter of national pride smartphone brands appear to be. Tesco didn’t make it in the U.S., and Walmart didn’t stake a claim in Germany. So what tools and resources are available for actually conducting this research? Look for:
- Government data on job openings and the current value of the industry you’re looking to enter.
- Published reports, white papers and press releases from competitors about their own market activities and acquisitions.
- You can attend trade shows in the target nation to see what the business community is like and scope out potential rivals. You could even consider taking out a booth yourself in order to test the waters and gauge the potential interest in your product or service. This might also open the door to future collaborations or introduce you to future partners.
- A well-regarded market research company that can help you dig into variables and trends you wouldn’t know to look for otherwise.
This isn’t a full list — you have other primary and secondary sources of market intel, too. Some brand loyalties and shopping patterns run deeper than others and no amount of prior research will help you crack it. This happens. But some of these issues can be avoided through competitor and market research beforehand.
2. Not Having Enough Capital
Splitting your attention across multiple business locations, to say nothing of different continents, is no easy feat. You have to scale up your support systems and infrastructure, including office space, workforce, communication equipment and much more. Suffice it to say, you’ll require capital for your expansion to go smoothly.
Capital isn’t just about money either. If you operate in the computer sciences, for instance, you might find it difficult to secure the talent you need to open yourself to a broader market. You’re going to need managerial talent too. Each one of these segments is an area of consideration as you draw up your plans for overseas expansion in 2019.
3. Expecting Immediate Profitability
Very few businesses will turn a meaningful profit in the days and weeks immediately following their overseas expansion. In fact, one of the biggest ways you can sabotage yourself is by pretending you’ll be earning big right away and that unforeseen expenses won’t creep in as you gain your foothold. Just a few of these expenses include:
- Building new relationships with the regional supply chain
- Establishing a reputation by chasing bids and engaging in marketing
- Analyzing the local market and dialing-in prices
- Adapting business practices to local regulations
- Raising new buildings, performing renovations and updating infrastructure as needed in new business locations
Your financial teams will be able to paint a fairly clear picture of your expansion costs, but you also need to build a buffer into your budget and remember that your earnings aren’t going to be too electrifying until you’ve found your footing.
4. Expanding Without a Clear Competitive Advantage
The free market excels at delivering abundant choice — and therefore redundancy. Part of doing the necessary market research is getting real with yourself about whether your company actually has a competitive advantage over what’s already available.
Unless you can make a convincing case for your product being the best in its class in your new market, you might be better off enjoying the homegrown support you’ve already got. Some of the most memorable stories of failed overseas expansions were due to, more than likely, the company overestimating the power of its name recognition and possibly even the utility of its products and services.