It is commendable that you are thinking about global expansion because of the many benefits that your business will gain as a result, the main one being endless and exciting growth opportunities. However, for optimal success overseas, it’s important that you get your strategies in order right from the outset. There’s no going around the fact that expanding to new markets and dealing with new trade laws, customers, and labor markets is complex. These 5 steps will help you navigate the unique challenges of global expansion.
1. Invest in Corporate Social Responsibility (CSR)
CSR- operating in an ethical and sustainable way- is as important to multinational businesses as profit is. You need to carefully consider the environmental and social impacts of your operations. CSR focuses on the social responsibility businesses have on the communities they operate in. And although CSR is not a legal requirement in many markets, a 2015 study by Cone Communications proved up to 91% of global consumers prefer to do business with businesses that operate responsibly.
There are tons of other clear benefits of CSR, including:
- Better public image, something consumers consider when making purchasing decisions. Supporting local community development programs, for example, can go a long way in boosting your success prospects.
- Boosted brand awareness and recognition. Your target customers will appreciate your brand more when they learn of your commitment to ethical practices. Social influencers will also want to associate with your brand, and this will gradually improve brand awareness.
- Through sustainability, e.g. controlled packaging, CSR can actually help you save in terms of production costs.
- Embracing CSR in a market where many businesses don’t can be the reason your business stands out from competitors.
Note that for CSR to work for you, you need to shout your compliance from the rooftops. Mention it on your social media campaigns, through local media outlets, and even through word of mouth campaigns. You also have to ensure that your ethical audits are conducted by reputable auditors like Sedex Audit – professionally certified auditors who meet internationally recognized audit standards.
2. Finding your target audience
Consumer demand for your products varies from one market to another, and so do growth opportunities and profits. How can you tell if a market is right for you?
– Is there an under-satisfied demand for your products in the market?
– If there are people who would love your products, are they affluent enough to actually afford your preferred prices?
– Are you convinced that the retail segment in the new market is adequately developed?
To get answers to these questions, you have to conduct good market research.
3. Prepare your entry and exit strategies beforehand
It is important that you familiarize yourself with the entry requirements of a potential new market (and abide by those requirements) before starting operations. That includes hiring new staff members, sourcing for funding, localizing your content, bringing onboard new investors, and anything that you need to start operations. Without a solid plan, you can easily fail as soon as you open.
A solid exit plan, on the other hand, will help you address any financial and time constraints that may have a negative impact on your internal resources. Take a market like China, for example. If you intend to exit the market, you might have to wait for a couple of years before you are legally cleared to shut down your entity. Not having an exit strategy in place can turn out to be a costly and time-consuming error.
4. Strategize on your international operations
Strategize on every aspect of your international operations in detail, from customer relations, payment methods, to relationships with local authorities. You can, for example, miss on many businesses leads for lack of a local payment system. And because your new clients aren’t necessarily familiar with your brand, any negative attribute of your sales support can be a good enough reason to overlook your products no matter how quality they could be. Everything has to be up to scratch; better than your standard practices back home.
5. Understand your financial and legal requirements
Plan a short-term budget (one year) and a long-term budget (at least 3 years). Make sure you capture all expansion costs, from shipping and distribution costs, taxes, overhead costs, and any hidden costs that might come with the expansion. Stay within that budget no matter what. Also, be careful not to fall victim to compliance issues, especially in regards to tax and employment laws. Familiarize yourself with the industry-specific regulations and apply for any necessary certifications. Because of the complexity that comes with financial and legal requirements abroad, it would help to partner with local lawyers, audit firms, PEOs, and other professionals right from the outset.
Key takeaways:
- Profits are great, but so is corporate social responsibility. Plan for both when strategizing for your global expansion.
- Not all big markets have an ideal market for you. You have to do your due diligence when choosing your market.
- An entry strategy is important, and so is an exit strategy.
- Your international operations have to be up to scratch if you are to win over international customers.
- Financial and legal requirements are complex, so it is best to collaborate with professionals.