Did you know there are more than 60,000 multinational companies globally?
Considering that there are over 30 million businesses in the U.S. alone, it’s hard not to wonder why there’s such a small number of multination firms. The answer is simple: while running a domestic business might be easier, global expansion isn’t for everyone.
But here you are, debating whether it’s the right time to expand your company internationally. It’s prudent to assess the current capacity of your business to go global instead of making an ill-advised expansion decision.
In this article, we’re telling you how to know your company is ready to go global and how to implement a global expansion strategy.
When Is My Company Ready to Expand Globally?
There are a number of indicators to monitor when you’re angling for a global expansion. Here’s a brief summary of the top indicators:
Overwhelming Interest in Your Products from Overseas
This is by far the clearest indicator that your business is ready to cross national borders. If a lot of people in other countries are asking about your product and have a genuine interest to make a purchase, it means there isn’t a company offering a similar product in their local markets. If there is, it’s clear they believe your product is vastly superior to local markets.
Keep an eye on where specifically this foreign interest is coming from. Is it from markets (countries) that are bordering the country that hosts your business? Is it from distant nations?
Ideally, you want the foreign interest to be spread across multiple countries. This means you’ll have a bigger global market when you finally expand. It will also help you select the best expansion strategy.
You Have Outgrown Your Local Market
Yes, it’s possible for a business to outgrow its local market.
To know if this is the case, crunch the customer numbers. If your local target market has about 10 million consumers and your business has acquired more than 80 percent of them, there’s only so much acquisition you can do before customer growth hits a plateau.
When this is the case, expanding to international markets might be an option. However, keep in mind that domestic success doesn’t guarantee success in a foreign market. There could be dominant players in those markets as well and you might be unable to shake off their competition.
You Have International Suppliers/Partners
Partnerships are key to the success of a business.
In the course of running your business, you’ve certainly built a handful of partnerships with suppliers, distributors, business technology providers, assemblers, and manufacturers among others.
Have you formed any partnerships with international businesses?
If yes, it could be a sign your company is ready to go global as well. That said, your partnerships with international companies need to provide strategic value to your expansion efforts.
Let’s say your company sells internet routers. However, you don’t manufacture the product locally. You’ve outsourced to a manufacturing company in China.
Such a partnership is ideal when you’re considering international expansion. You can leverage the partnership to increase your production capacity to meet the increase in product demand that could follow a global expansion.
Or perhaps you have a partnership with a professional employer organization with international operations. During a global expansion, you can count on such a firm to help you manage a global workforce.
How to Expand Your Company Globally
You’ve assessed your company’s capacity to go global and given the green light. How do you approach the expansion?
Identify the Most Attractive International Markets
Rolling out a global expansion isn’t a walk in the park. Many businesses have come down crushing trying to spread their wings too far.
To enhance your chances of success, don’t rush into several foreign markets all at once. Start by identifying the markets that are most attractive.
Consider the number of potential customers in a specific foreign market, the buying power of those consumers, and the barriers to entry. Entry barriers include monopolistic markets, unfriendly geopolitical forces, and harsh local regulations.
Ramp Up Your Resources
Global expansion costs money. Your company needs to have adequate expansion capital, as well as technical expertise.
Hire an expert to draw your business’ expansion plan. This is particularly important because the expert will provide a good estimate of the amount of money you need to fund the expansion.
If your business doesn’t have the full capital at hand, find ways to raise it before you embark on the expansion. You could take out business loans, find equity/venture capital, or crowd fund.
While at it, build an expansion team led by someone who has vast experience taking businesses global.
Select the Best Market Entry Strategies
There are different ways to enter a foreign market, including:
- Direct exporting
- Greenfield investments
Each method has its unique pros and cons. It’s your job to find an entry method that best suits your business. However, a lot rides on the nature of your product, market conditions in the country you’re looking to expand to, and your resources.
If you’re a popular fast-food restaurant, for example, it’s a no-brainer that franchising is one of the best expansion methods. If you manufacture your products, direct exporting is the most attractive. Just allow foreign customers to make purchases and ship the product to them.
Expand Your Company Globally the Right Way
Achieving massive business growth is your primary goal. Taking your business global might be what you need to achieve this goal.
However, global expansions aren’t to be taken lightly. You must be sure to expand your company at the right time, and you must know how to implement the expansion. This guide has covered both bases.
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