Expanding a company abroad can provide a number of advantages for a company. The sales life of products and services can be extended by finding new markets to sell them in, thereby reducing dependence on domestic markets. Additionally, there is an increased ability to even out sales by tapping into new markets that may have different fluctuations if your business is troubled by seasonal changes or fluctuating demand cycles in the native country. Still, many countries assume that these benefits will be guaranteed immediately following the entrance of their business, and overlook a number of important factors that could have benefited the business. Some common mistakes made when taking a company global are listed below.
1. Not targeting the product correctly
Many businesspeople do not ask themselves the question: will my product actually sell in the market I’m targeting? It is critical to the success of the company to research demand for a particular product in a given country before assuming that it will be totally embraced. Cultural differences may play a large role in whether a country desires the product, and if the product is new to the country, a great portion of initial efforts will have to be focused towards consumer education.
2. Failing to plan market entry
In many cases, small businesses are the ones that are most likely to enter the global business world without a well-defined plan. However, it is also not unheard of for larger businesses to do the same. The problem is clear: if a company does not plan ahead for future complications, it could spend a much longer time fixing them than it would have spent developing a thorough plan beforehand. According to Oxford Economics, the number of small firms operating in six nations or more will have more than doubled by 2016, since its study on international business was published in 2013. By having early expectations and a plan of action for issues that could arise throughout expansion, companies will be more prepared to react in a beneficial manner.
3. Trying to expand too quickly
The business plan that might have been successfully utilized in one country might not necessarily adapt flawlessly to another country’s business climate. Even if multiple countries begin to show interest in a company’s product, a common mistake is not fully developing the business in one location before expanding it to other countries. The sales and marketing efforts in one country could differ from another, and it is crucial that time is spent familiarizing oneself with the business practices of a specific country before attempting to do business in another.
4. Being unfamiliar with the native culture
According to the founder of Etiquette International, Hilka Klinkenberg, less than 25% of U.S. business ventures abroad are successful. Much of this, she believes, is because “Americans don’t do their homework or because they think the rest of the world should do business the way they do business”. She suggests that building a relationship before immediately entering into business discussions can help those wishing to expand abroad. Additionally, not imposing time limits, utilizing an interpreter, dressing with respect and authority, and doing research before entering the business meeting can help prevent costly mistakes.
Expanding abroad can be extremely beneficial to a business. By entering the global arena, businesses can potentially protect themselves against the risk of decline in domestic markets and significantly improve growth overall as demand and economic conditions vary based upon location. However, before entering the global market, businesspeople should take into consideration the potential mistakes listed above and prepare themselves completely for a business experience unique to any they’ve encountered before.