If you are seriously thinking of making the leap towards internationalisation after reading our previous post Internationalisation: The Future for our Businesses, then you will almost certainly find your head swimming with questions about how to go about it. If this is the case, we hope that today’s post will be of use to you
So, having made the important decision to expand your business overseas, the next step is to determine how.
Firstly, it is essential that you assess the internal procedures of your company whilst also carrying out strategic market research into the business environment and the sector where you plan to expand your business activities. In other words, you should be checking whether your business plan is viable or not.
Let’s start by looking at how to assess your company’s internal procedures. You should be objectively evaluating all of the departments in the company to check whether the internationalisation process will affect them, and if so, how they will be affected. For example, the production department of a delicatessen wishing to expand overseas should assess its production capacity, its production costs for the larger volumes created by potential orders, its ability to produce surplus stock, and whether it will be necessary to buy additional machinery in order to meet an increase in demand. You should also assess whether your company will require any additional departments, such as a department of foreign trade, or whether you will need the services of an external language consultancy. You should also assess the strengths and weaknesses of your company. The aim is to ensure you do not risk harming your business activities whilst embarking on this process, as it may or may not prove profitable in the long run. The goal behind internationalisation it to improve your business, so it is important not to let standards slip elsewhere. For this reason it is important to remember the following: that as production levels increase your staff must also be ready to handle the changes that are taking place; that you will also need to be financially prepared for any expenses this endeavour may create; and you may also have to consider changing your corporate identity in order to localize your product, in other words to adapt your product to your target market.
Now let’s look at your market analysis. You should establish the different factors that will affect your company’s launch in the target market, and also those that may affect your position once you are there. You should also identify any variables that need to be kept in mind so that when you are creating your strategy you ensure it is correctly adapted to the target market and target sector. Here are some examples of the variables that you will need to assess: economic factors, political factors, legal issues, available technologies, geography, and socio-cultural factors (income, religion, population density, customs, etc.). It is also advisable to study the steps that other companies have taken and reflect on their successes and failures. It is all about treading carefully and being fully aware of your company’s capabilities, the risks that you will face, and what you need to do so that you are prepared for them; this is the key to success.
Once the market analysis has been completed, the next step is to study its conclusions and ensure that the company’s strengths outweigh its weaknesses and that the opportunities outweigh the risks. Its strengths should provide a competitive advantage in the target market.
If it is not clear which market is best for the type of industry/business you are in, then you should carry out some market research to establish which market you should enter first in your overseas expansion. This research should initially cover several different markets and countries, which are pre-selected by deciding whether there is a demand for the product you offer, if the economy is strong, if there are any barriers in the way of getting your business set up, and so on. Once you have selected your potential markets/countries, you need to carry out your market analysis to determine which of these potential markets is best suited to your international adventure. It is recommendable to start with a smaller market in order to gain a better market position.
Below you will find a list of criteria that are commonly analysed:
– Cultural affinity
– Market size and maturity
– Safety issues in the country
– Customs barriers, either tariff or quantitative barriers
– Technical barriers
– Overseas operating costs
– Access to distribution channels
– External demand, importations
– Support for attracting and facilitating foreign investment
Once you have selected your market, you need to establish how you will enter it.
Here are the most common ways to enter a foreign market:
– Business cooperation: By setting up links or alliances with businesses in the outbound market in order to introduce a product via a local seller, or likewise via a local business or local representative who is able to help you get in touch with potential clients.
– Direct investment: By setting up a manufacturing site, a subsidiary, or commercial centres in the target market/country.
Finally, in order to guarantee this immersion in the target market is performed correctly and as successfully as you hope it to be, you will need to trust in a foreign trade department (internal or external) or an external language consultancy. This type of consultancy will ensure the language and culture of that market does not present an obstacle by translating all your important documentation (reports, contracts, financial documents, etc.). The work they perform will facilitate any contact with potential clients as they can assist with the following: helping to organize and manage meetings in any language required; sourcing interpreters who then act as your personal assistant whilst abroad; or making your international marketing strategy and products more suitable for your target market by adapting your advertising to its culture and language, thus guaranteeing you success.
So, what are you waiting for?