Posted by Business reality has its own rules, and one of them is that if a company does not grow and develop, it dies. So, after launching a successful enterprise in one country, entrepreneurs should think about the next logical step: expanding it across the globe.
In a 2018 blog entry, Globalization Partners excerpted part of its own broad study, “Meeting the Challenges of International Expansion: CFO Best Practices for Managing Risk While Supporting Global Growth,” which details some of the largest barriers to expansion into new markets. The most frequently cited are finding talent (52% of respondents), legal compliance (48%), the challenge of setting up a subsidiary (33%) and onboarding (33%), though progress can also be influenced by the historical, political and cultural characteristics of the target region.
Here are five issues virtually every entrepreneur faces in this kind of business journey, and five proven ways to address them.
1. Conducting market research
You need to have conducted detailed analyses in order to go global, with a main goal of establishing whether each market is growing or stagnating, as well as to identify key players and understand whether there are any barriers to entry for new companies.
Over the past ten years, more and more businesses have carried out this kind of research, and as a result, the revenue of the market research industry has doubled. In 2019, it amounted to $73.4 billion, according to Statista, with most of the associated profits (53%) going to American companies (European counterparts taking 26%).
If a team decides to research on its own, the best way to begin is with online and in-depth interviews, which represent the most-used and most traditional qualitative methodology in the industry. Again according to Statista, 41% of respondents stated that they regularly used this method as among their three top choices.
Related: Considering Global Expansion? Now Might Be Your Best Opportunity.
It’s possible to find respondents through cold emails on social networks or by using special services to get users who are open to interviews. For Refocus Online School, for example, we find respondents among graduates, in social media and through targeted advertising.
While online in-depth interviews are a good starting point, other research methods may also be involved, including online focus groups with webcams, in-person focus groups or bulletin board studies. You can also ask for research results from investment funds; they typically share them free of charge.
2. Finding product market fit
According to CbInsights statistics, 35% of startups fail because there is simply insufficient need for what they offer. If you don’t want to be one of them, use the results of your market research to understand how to localize your product. Sometimes a lack of demand can be explained by poor localization, so think carefully about how you can adapt a product or service to a new region.
A good example is KFC‘s entry into the Chinese market. After analyzing the local audience, the company realized that its American menu was not suitable, and so created an exclusive line of products. This is how shrimp sandwiches, matcha ice cream, congee, soy sauce wings and other new items appeared on Chinese menus, and which ultimately became favorites among locals. By 2016, this chain owned 11.6% of the market share in China, compared to 5.6% for McDonald’s, and the key to its success was market research!
The takeaway for business is to analyze any market in detail to understand how to tailor yourself to attract local customers and to identify sales channels. Regardless of whether it’s an offline store or a physical or digital product, make sure you’ve localized it: Don’t offer soy sauce shrimp burgers in America and beef burgers in China.
Related: Product-Market Fit: How to Measure If Your Business Is Filling a Need
3. Penetrating the local business culture
Some companies hold the opinion that if they have a relative or old friend in Poland, India or the United States, then he or she can be entrusted with the development of business in that region. This mistake will cost a company money and time, and we know this from experience; we’ve launched our product in another country and hired a relative as a trusted and interested person there, but a good person doesn’t always mean a good specialist, and so we failed in our effort.
In terms of hiring better, first find a local accountant, tax adviser and lawyer, then look for other local professionals, perhaps on LinkedIn or through networking. The goal is to get experienced advice early — through what can be a murky and unpredictable route.
It’s equally important to explore the local culture to avoid misunderstandings with partners and customers and to increase their loyalty. You may not have a command of the local language, that’s not a reason to design a website using English principally. According to CSA Research, 65% of consumers are more likely to buy products from a website that’s written in their language (even if it’s not perfect), and 40% of customers generally refuse to purchase from sites in languages foreign to them.
4. Estimating the expansion budget
Among the above-mentioned CbInsights stats regarding why startups close, lack of money is ranked first, not surprisingly. Only a few entrepreneurs can enter a new market without making mistakes; during the testing-of-hypotheses stage, many founders face the fact that their assumptions fail, so be prepared to spend a lot of money in vain. In some markets, such as the U.S., the cost of a mistake is very high.
How to best determine how much money is needed? First define one-time, ongoing, fixed and variable expenses. Here are examples of common expenditures in each category:
• One-time: equipment, furniture, permits, licenses
• Ongoing: taxes, rent, insurance, salary, credit payments
• Fixed: lease or mortgage, insurance, utilities, administrative costs
• Variable: shipping, inventory
Keep in mind that founders inevitably have additional and unexpected expenses, so be sure to have a cushion extending for 12 months at least.
Related: 3 Ways to Avoid Marketing-Budget Traps
5. Strong PR
Prepare any market for your appearance, and the most effective way to create awareness is to share the founder’s experience in the media. In launching one company, I tried to give as many comments to the media as possible, and the topics could be completely different, including marketing, how we hire a team and how we calculated our budget: The goal is to make everyone hear about the brand on every corner.
In preparing your media information, create columns detailing the market need you’re addressing and how you will do that (even better if you can detail how you addressed it in other countries). Use good social media marketing and be sure to work with search engine results, and be certain that all PR activities begin long before a launch.
And most importantly, don’t give up! The growth of a company, and perhaps even its survival, depends on detailed preparation, yes, but also perseverance.