If growing a business internationally was easy, everybody would be doing it. However, thorough due diligence at the outset can ensure you are prepared for the challenges of launching overseas. Here we illuminate 6 major hurdles you might face, and how to successfully overcome each.
Launching in multiple locations is an exciting step for any organisation. But if you want to truly scale your business, you need to look beyond the domestic market to international expansion.
The ability to enter and operate in new geographies is what makes your business scalable – and scalability is what makes it investable. However, launching overseas is far from plain sailing.
For many small startups, the barriers to entry can feel overwhelming but if you can overcome them, the rewards can be huge. Here we look at the main stumbling blocks and how you can navigate them, as well as understanding if international growth is something you should really be setting your sights on.
Is Your Business Internationally Scalable?
Not all businesses are suited to international expansion, so before you commit a great deal of time and resources to the endeavour, it’s worth really evaluating if it’s the right course for you.
Ask yourself these questions:
- Do you have a product or service that is in high demand?
- Do you have high levels of customer satisfaction?
- Do you have healthy margins and stable cash flow?
- Do you have a strong brand identity?
- Do you have time to take your eyes off the day-to-day running of the business?
If you answered ‘yes’ to the above questions then the time could indeed by right for launching in a new international territory. You have established a good solid foundation at home and are robust enough organisationally to pursue growth. The next step is to develop a clear strategy for your expansion, based on solid research.
Deciding on Overseas Markets to Target
The world is a big place with billions of potential customers, but you can’t go after them all. You’ll need to conduct thorough research into each marketplace to understand the potential for your business to thrive there.
It helps to know your existing market and customer base inside out before you start. For example, what is the demographic of your core customer – what age range, education and income bracket do they fall into? Why do they buy from you?
Let’s suppose you are a women’s shoe brand and your customers tend to be well-educated women, aged 25-40, working in professional roles, then you will want to choose a marketplace rich in this type of individual and forecast your potential sales.
Of course, you also need to be aware of the incumbent competition – if one brand is already very entrenched in your sector you might want to think twice about going head to head with them. On the other hand, is there an obvious gap in the market you can fill? With your homework done and your prime targets identified, your plans for international expansion can start in earnest – but the hard work has only just begun!
Here are 6 challenges you’re likely to face along the way and how to tackle them:
Barriers to International Expansion #1 – Language Barrier
This is perhaps the most obvious barrier to entering a foreign market but it shouldn’t be underestimated. Not being able to speak the language (or lingo!) will limit your ability to do everything from understanding how to operate in the country and getting set up to recruiting staff and attracting customers. It can be a massive headache.
It’s highly advisable to hire a consultant native to the country you’re planning on launching in, as well as on-the-ground fixers to help you with logistics. Adding someone to your team in the UK who speaks the language is another great idea. Even if you are expanding into an English speaking country, such as the States or Australia, there will be differences in the way things are done or communicated that make it wise to have locals on board.
And it goes without saying that any marketing copy, product information, shop signs and packaging should be professionally translated – we’ve all had a good laugh at the expense of bad translations.
Barriers to International Expansion #2 – Registration and Compliance Difficulties
When you enter into a new territory you can become entangled in a complex web of foreign business laws and legislation. Levels of bureaucracy vary vastly from country to country (or even state to state), but in many overseas destinations red tape can tie you up for months.
Delays while you get the appropriate licences and vital business infrastructure in place, like bank accounts, are to be expected. It’s important you don’t cut any corners; failure to comply to trading standards and regulations can land you in hot water, and ignorance is not an excuse.
Do hire a lawyer and get professional help with your paperwork, and investigate in advance how long it’s all likely to take so you can plan a realistic timetable. You don’t want to find yourself in a situation where your launch has to be cancelled or pushed back due a vital licence not being granted.
There are official organisations that specialise in helping foreign business get registered abroad, such as the China-Britain Business Council in China, or service provider directories like StartUp Overseas.
Barriers to International Expansion #3 – Trouble with Taxes and Tariffs
Something else you’ll have to get your head around when launching overseas are the taxes, fees and tariffs payable in your new market. This can be far from straightforward, especially since different countries have different rates of VAT, and some countries have more than one.
Even large tax firms can struggle with ensuring your foreign entity is adhering to local corporate policies and procedures. To cover all bases, get local tax advice in the destination, as well as input from your accountants at home.
If you want to sell products in international markets online, you can remove the headache of working out taxes and duty payable by selling through a cross-border sales specialist like Fruugo, which takes care of all the requirements at point of sale.
Barriers to International Expansion #4 – Staffing Problems
Rapidly building a new team in a new country can be tricky. If you don’t have an existing network, the recruiting process can be akin to casting a net in the ocean and hoping you catch something good. Then there’s the business of employment contracts, laws and customs that will be different to what you’re used to.
Appointing an experienced leadership team in your new territory rather than sending existing executives can really speed up the recruitment process since they will already have trusted contacts to bring on board. They will also be better placed to negotiate salaries and contracts, which lets you hit the ground running.
Even if you plan on going over to the new office to conduct interviews and select staff yourself, who will be in charge of building the team and turning them into a cohesive unit? It’s vital to delegate to a trusted leader who understands both the cultures. They can act as a go-between to bridge the gap between head office and the new location to make sure nothing gets lost in translation.
Barriers to International Expansion #5 – Supply Chain Issues
Managing a supply chain that crosses national boundaries can be a real challenge – factors like imports, exports, shipping, and logistics can be hugely time consuming and complex. Any delays you experience – and you will experience delays – can have a big knock on effect.
If a container of your goods fails to show up on time, gets lost or worse impounded, you could end up with empty shelves or unable to fulfil online orders. This impacts on your sales, damages your reputation and leads to higher operating costs.
To mitigate this risk it’s worth considering if you can absorb higher costs by maintaining a buffer stock of inventory. It’s important to have a contingency plan in place for supply chain hiccups and to ensure you can weather them before you try to trade in a new nation.
Barriers to International Expansion #6 – Misunderstanding Marketing Nuances
Hopefully you’ve conducted a thorough market study and established that you have a customer base ready and waiting in your new territory. However, that in itself is not enough – you need to understand how to market to your new audience.
Every culture has its nuances so you can’t simply have your existing campaigns translated – you’ll need to speak to them in a way that resonates (and doesn’t unintentionally offend). Tone deafness of brands entering new markets is well documented. A recent example is a video ad campaign run by Italian luxury brand Dolce & Gabbana in China. It showed a Chinese model struggling to eat spaghetti and pizza with chopsticks and was quickly labelled racist.
Even your company or product names may need to be rebranded to be successful in your new market. Take, for example, the Hyundai Kona, launched in Portugal last year as the “Kauai” due to the fact that Kona sounds very similar to a Portuguese term for female genitalia.
You can avoid potential embarrassment by conducting customer research and focus groups around your proposed marketing and branding initiatives and seeing how well they are received.
If growing a business internationally was easy, everybody would be doing it. However, thorough due diligence at the outset can ensure you are prepared for the challenges of launching overseas. Look closely at your organisational data to decide whether you’re ready for the transition, study customer insights to learn your USPs and core audiences, and interrogate market reports to understand both the risks and opportunities new locations present.
Don’t go to market without input from natives, utilising both on-the-ground experts to help get you established and feedback from your target audience to shape and localise your offering. At the same time, don’t forget in your efforts to go global, the values and characteristics that define you. Keep these at your core and stay true to your brand vision, at home or away.
Need customer insights to inform your big decisions? Get in touch with Attest.